40 Cal.App.5th 1239
Cal. Ct. App.2019Background
- Jessica Ferra (bartender) sued Loews Hollywood Hotel alleging (1) meal/rest-break premiums under Labor Code §226.7 were underpaid because Loews paid them at the base hourly rate and excluded nondiscretionary incentive pay, and (2) Loews’s electronic timekeeping rounded punches in a way that systematically shaved time.
- Parties stipulated Ferra worked June 16, 2012–May 12, 2014 and that Loews paid missed-break premiums at employees’ base hourly wage.
- Trial court summarily adjudicated whether the §226.7 phrase “regular rate of compensation” meant the same as the overtime phrase “regular rate of pay”; it ruled they differ and that §226.7 premiums require only the base hourly rate.
- Trial court separately granted summary judgment on rounding, holding Loews’s quarter-hour rounding with a grace period was neutral on its face and did not systematically undercompensate employees.
- The Court of Appeal affirmed both rulings: (1) “regular rate of compensation” is not synonymous with the overtime “regular rate of pay” and (2) Loews’s rounding policy was lawful and not systematically prejudicial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of “regular rate of compensation” in §226.7 | Ferra: same as overtime “regular rate of pay” — include nondiscretionary bonuses and other nonhourly pay when calculating the extra hour premium | Loews: different term; means the employee’s base straight-time hourly wage (no bonus/incentive inclusion) | Court: Terms are distinct; §226.7 premium is the base hourly rate (not the overtime-style regular rate of pay) |
| Lawfulness of electronic rounding policy | Ferra: rounding data show a majority of shifts lost time → systematic undercompensation | Loews: rounding is neutral on its face, allows upward and downward rounding plus grace period; any losses are de minimis or average out | Court: Rounding policy is fair and neutral and does not systematically undercompensate; summary judgment for Loews |
Key Cases Cited
- Murphy v. Kenneth Cole Prods., 40 Cal.4th 1094 (Cal. 2007) (meal/rest-break premium is a compensatory hour of pay; statute’s purpose is compensatory not punitive)
- Alvarado v. Dart Container Corp. of California, 4 Cal.5th 542 (Cal. 2018) (regular rate of pay for overtime includes shift differentials and per-hour value of nonhourly compensation)
- Brinker Restaurant Corp. v. Superior Court, 53 Cal.4th 1004 (Cal. 2012) (framework for interpreting IWC wage orders; Wage Order No. 5-2001 applies to hospitality employees)
- See’s Candy Shops, Inc. v. Superior Court, 210 Cal.App.4th 889 (Cal. Ct. App. 2012) (rounding policy lawful if fair and neutral and does not systematically undercompensate)
- Corbin v. Time Warner Entm’t–Advance/Newhouse P’ship, 821 F.3d 1069 (9th Cir. 2016) (quarter-hour rounding can be neutral when applied without bias)
- AHMC Healthcare, Inc. v. Superior Court, 24 Cal.App.5th 1014 (Cal. Ct. App. 2018) (a small majority of shifts losing time under rounding does not necessarily invalidate a neutral rounding scheme)
- Walling v. Harnischfeger Corp., 325 U.S. 427 (U.S. 1945) (under FLSA the "regular rate" includes nondiscretionary bonuses/incentives)