California Meal Premium: Everything Employers Need To Know
While most employers are familiar with terms like “minimum wage” or “overtime,” California meal premium pay is another essential subject that shouldn’t be overlooked.
California state law takes meal premiums seriously, and so should you.
Ignoring California meal premium requirements can trigger many negative outcomes, impacting worker morale, productivity, and, ultimately, your company’s bottom line.
In this article, we’ll demystify California’s meal premium pay requirements, helping you ensure California breaks compliance in your business without hassle.
What is Premium Pay in California?
If you're unsure of the potential penalties for missed meal breaks, try out this California meal break penalty calculator to see how they might impact your business.
In a broad sense, premium pay refers to the higher pay rate employees receive for working outside their regular hours or under special conditions.
But what does premium pay mean when it comes to California employment laws?
In this context, it refers to the extra pay workers are entitled to if they do not receive a compliant meal or rest break.
Is There a Premium Pay for Meal Periods in California?
Yes, there is. If an employer doesn’t provide an employee with a compliant meal break, they must pay a meal period premium, also known as meal premium pay.
Essentially, you’ll need to pay one additional hour of the employee’s regular rate of pay for each workday of a non-compliant meal period.
But keep in mind that this rule doesn’t stand for missed meal breaks only - you’re also required to pay the rest break premium: a premium pay for not providing your employee with paid ten-minute rest breaks in the way mandated by California law.
What is Premium Pay in the California Labor Code?
According to the California Labor Code Section 226.7, an employer that fails to provide a mandated meal or rest period must pay the employee one additional hour of pay at the employee’s regular rate for each workday that the meal or rest period is not provided.
This is legally termed “premium pay” in California labor laws.
The same rule applies to recovery periods, granted to employees who perform physical labor in hot conditions and need breaks to cool down.
What Is the Difference Between Overtime Pay and Premium Pay?
It’s easy to confuse overtime pay with premium pay, but these are two distinct categories.
Overtime pay is the additional payment employees earn for working more than a standard workweek or workday. In California, unless you’re following an alternative work schedule, this usually means working over 8 hours in a workday or 40 hours in a workweek.
On the other hand, meal premium pay is a penalty the employer incurs for not allowing employees their legally mandated meal breaks. It’s not related to the number of hours an employee works but rather to providing meal breaks.
Bear in mind that employers must calculate premium pay for missed meals and rest breaks in the same way that they calculate overtime pay, using the regular rate of pay instead of the employee’s base hourly rate.
This is the key takeaway of Ferra v. Loews Hollywood Hotel, LLC California Supreme Court’s decision that the “regular rate of compensation” under meal and rest break rules encompasses hourly wages and all nondiscretionary bonuses for work performed by the employee.
Moreover, as this ruling is retroactive, employers should audit their pay practices.
What’s the Regular Rate of Pay, Anyway?
Calculating the regular rate of pay correctly is crucial as it forms the basis for other pay calculations like overtime, double time, and meal and rest break premiums. It’s essential to get it right to avoid legal complications.
How do you calculate the regular rate of pay?
- Total Compensation. Sum up all the earnings an employee receives in a workweek. This includes their hourly wages, salary, commissions, and piecework earnings. However, discretionary bonuses and gifts that aren’t tied to performance or hours worked are not part of this calculation.
- Total Hours Worked. Calculate the total number of hours the employee has worked during that workweek.
- Calculate the Regular Rate. Divide the total compensation by the total hours worked. This will give you the regular rate of pay for that specific employee.
For example, if an employee earns $500 in a workweek and works 40 hours, the regular rate of pay would be calculated as follows:
$500 ÷ 40 = $12.50 per hour
How Much is Premium Pay in California?
So, the missed break premium pay is calculated as one additional hour at the employee’s regular rate of pay. If you pay an employee $12,50 per hour and fail to provide a compliant meal or rest break, you would owe that employee an additional $12,50 for that workday.
An employee can receive up to two hours of premium pay per workday. So, if you don’t provide them with a meal break and two rest breaks during an 8-hour shift, you must pay an additional $25 premium for each day the violation occurred on the next payday.
Meal Premium in California: Legal Consequences for Non-Compliance
Paying no heed to California meal premium requirements isn’t just a risky gamble — it’s a surefire way to land yourself in hot water legally and financially.
The implications are far-reaching, from immediate monetary losses to long-term damage to your business. Here’s a breakdown of what you might be up against:
Fines and Penalties
California doesn’t take these meal and rest break violations lightly. Fines can range from minor penalties per employee per pay period to much more substantial amounts depending on the severity and duration of the violation.
What It Could Look Like:
- Minor infractions might entail fines in the hundreds of dollars per employee.
- Repeated or egregious offenses could escalate into the tens of thousands or even more.
Class-Action Lawsuits
If multiple employees are affected by your non-compliance, they could band together to file a class-action lawsuit, making the situation exponentially more severe.
What It Could Look Like:
- Legal fees for defending against a class action can quickly climb into the hundreds of thousands of dollars, not to mention any settlement or judgment costs.
Reputational Damage
News travels fast today. A tarnished reputation can have long-term impacts on your business, from deterring high-quality talent to losing customer trust.
What It Could Look Like:
- Negative reviews on employment websites could deter future hires.
- Publicized legal troubles could result in lost partnerships, sponsorships, or contracts.
A Domino Effect on Talent Acquisition
Top talent is attracted to companies that treat their employees well. Non-compliance with labor laws can signal a red flag, making it challenging to attract and retain the best in the industry.
What It Could Look Like:
- A decline in applications for open positions.
- Increased turnover as existing employees seek better work environments.
The bottom line is this: non-compliance is a costly path, both in terms of immediate financial repercussions and longer-term setbacks like a damaged reputation and a demotivated workforce.
A stitch in time, or in this case, a proactive approach to compliance, really does save nine—perhaps nine hundred thousand!
How Can I Prevent Paying Premium Pay in California?
Understanding the key California meal and rest breaks regulations is the first step in avoiding unnecessary premium pay.
Ensuring that you’re meeting these minimum break requirements can go a long way in preventing the need to shell out premium pay for non-compliance.
- In California, employers must provide non-exempt employees with a 30-minute unpaid meal break if they work more than five hours daily. For those pulling a longer shift of more than ten hours, a second 30-minute meal break is required.
- Ensure that your employees are relieved of all work-related activities during meal breaks and can leave their workplace if they want to.
- Time rounding is not an option when it comes to tracking California meal breaks following the 2021 California Supreme Court ruling in the case of Donohue v. AMN Services, LLC.
- Regarding rest breaks, California law mandates that employees must receive a 10-minute paid rest break for every four hours worked or “major fraction thereof,” which means more than two hours. Rest breaks should ideally be provided in the middle of the work period and cannot be waived, unlike meal breaks.
- Waivers come into play with meal periods. If both the employer and the employee agree, the first meal period can be waived for workdays not exceeding six hours. For shifts not longer than 12 hours, the second meal period can also be waived, but only if the first one was not skipped. It’s crucial to note that these waivers must be voluntary; employers cannot pressure or coerce employees into giving up their meal periods.
- In May 2022, the California Supreme Court delivered a crucial ruling in the Naranjo v. Spectrum Security Services, Inc. case. The court determined that meal and rest period premiums should be classified as “wages” under California law. This means employers could face legal consequences if they fail to pay and accurately report these premiums to their employees timely. So, premium payment must be included on the regular paychecks for the period when the break violations occurred and included on wage statements.
- If you willfully fail to pay out premium pay owed when an employee leaves the company, it may result in costly waiting time penalties.
California Meal Premium: Tips for Employers
Navigating the complexities of California’s meal premium laws isn’t just about understanding the legal jargon; it’s about practical application in your day-to-day operations.
To avoid the complications and costs associated with non-compliance, consider these best practices:
1. Create and Establish a California Meal and Rest Break Policy
Having a formal, written policy about meal and rest breaks is not only a good practice but also serves as a first line of defense in case of legal disputes.
A well-articulated policy sets clear expectations for employees and provides a standardized protocol for managers to follow.
Action Steps:
- Draft a comprehensive meal and rest break policy following the legal advice of experts well-versed in California employment laws.
- Include the policy in your employee handbook and ensure all new hires receive a copy during onboarding.
- Conduct regular training sessions to review the policy and discuss any updates or changes in the law.
- Post the policy visibly in common areas like break rooms and the HR department, making it accessible to all employees.
Check out our article to learn more about creating the California Meal and Rest Break Policy, or download a free template and adjust it to your business needs.
2. Implement a Robust Tracking System
An excellent tracking system isn’t just about clocking in and out; it should be comprehensive enough to track California rest and meal breaks separately from regular hours.
This makes it easier to audit your compliance and can serve as evidence in case of disputes.
Action Steps:
- Evaluate various time-tracking software options that include features for logging meal breaks. We’ve compared the best California break tracking apps offered at the market today, so feel free to check them out.
- Train your employees and managers on how to use the system correctly.
3. Educate Your Team
Knowledge is power. The more your team knows about California meal and rest break laws, the easier it is to avoid accidental violations.
Action Steps:
- Conduct workshops or training sessions focusing on California employment laws, especially those related to meal breaks and premium payments.
- Make resources like quick-reference guides available to help employees understand their rights and responsibilities.
4. Periodic Audits
Laws change, and your business evolves. Routine audits help ensure that you remain compliant amidst these changes.
Action Steps:
- Set up a bi-annual or annual review process where you assess your company’s compliance with meal break laws.
- Consult with legal experts to get an external perspective on your policies.
5. Establish Clear Communication Channels
Employees should feel comfortable addressing their concerns about meal breaks without fearing repercussions. Clear communication channels can make this possible.
Action Steps:
- Establish an anonymous reporting system for employees to voice concerns.
- Assign a go-to person within HR or management where employees can direct their queries.
6. Make Compliance Part of Your Culture
Compliance shouldn’t be a one-off thing; it should be ingrained in your company culture. When everyone takes it seriously, the chances of violations are significantly reduced.
Action Steps:
- Include meal break compliance in your employee handbook and onboarding process.
- Recognize and reward managers and employees who actively contribute to maintaining a compliant environment.
How Can Timeero Help Me Stay Compliant?
So, how does Timeero help Californian businesses with meal and rest period premiums?
Timeero’s California Meal and Rest Break tracker is designed to help Californian employers meet the state’s break requirements.
The feature is very straightforward to use - you just need to choose the California Breaks option in your settings and assign it to the employees using these breaks.
When assigned to this policy, California employees must fill out and submit the Daily Sign-Off form before clocking out from work. The form includes questions about the meal and rest breaks and calculations on how much break time they were expected to use vs. how much they’ve actually used.
By completing the form, they will confirm whether they’ve used the breaks following the California law requirements. If an employee is not compliant, they must also enter the reason for non-compliance.
The system will immediately alert you of non-compliance so you can take the necessary actions and include the California meal premium pay on the next paycheck.
But Timeero offers much more to Californian employers. We’ve mentioned the overtime and double-time wages above - California Overtime Rules are integral to the Timeero software.
To learn more about how Timeero can benefit your business and ensure compliance, read our detailed Timeero review.
