Good morning, welcome to my latest edition of my Monday Morning Briefing. I hope most of you had a better football playoff weekend result than my team did, but I will say congratulations to the Los Angeles Rams, who somehow found a way to beat Tom Brady.
No New Changes to the COVID Protocols This Week – But Do Keep Up Your CPPs!
There have been so many changes to the federal, state and local COVID guidelines that it actually feels like news when there are no changes. Here is a real handy chart that Cal/OSHA put together that summarizes the Isolation and Quarantine timeline I set forth last week. This should match the same protocol timeline that we see in both LA County and the State (CDPH), but I want to emphasize that you should ALWAYS check your local county to confirm that they are not enforcing a more restrictive protocol. Even though we seem to be seeing some plateaus on these COVID numbers this week, we should never assume that anything is stable with these rules anymore. This virus is constantly shifting, and as it does, so too, will the health orders in an attempt to respond.
Speaking of shifting, I reminded you weeks ago that just like employee handbooks, you all should be updating your COVID Prevention Plans that have been required by Cal/OSHA since the end of 2020. If you need help with this, my team is doing this on a regular basis, so we are here to help. And if you are reading this and saying to yourself “what COVID Prevention Plan?” – I know, sometimes these laws slip by us. It’s better to be late to the party than miss it altogether. Contact me and I can help you get started.
Regular Rate of Pay – A Reminder by the California Supreme Court this Summer in Ferra v Loews Hollywood Hotel
Okay, I promised you all a discussion of something besides COVID, and a few clients have recently brought up this issue of regular rate, which we did not have time to address at our recent webinar. This is a very complicated topic which could fill a lengthy article, so I will only hit the high points.
Both state and federal law use the term “regular rate” in laws governing concepts like overtime. What this means is that employers need to factor in more than just the “straight time” of the employee when determining the overtime rate; they need to take into account additional compensation as well, such as income from bonuses, or service charges or surcharges or commissions that may also be paid to the employee. The problem is, employers must add back in not only the additional compensation paid during the same workweek as the hourly rate, but income that may be paid monthly, or quarterly, or even annually. So how is that done? By taking the bonus or other compensation, once it is known, and doing a recalculation over the entire bonus period to come up with a new regular rate, then recalculating the overtime using the new rate of pay and paying out the difference – every time such bonus is paid.
None of this is new law. It dates back to the 1930s and 40s, when these federal and state wage and hour laws were born. What is more recent is the application of the concept of “regular rate” to other laws, such as the payment of meal and rest break premiums, which is what the Loew’s case addressed. Now, we have been counseling clients to apply the regular rate to the payment of break premiums all along, because that is what the law says. The lawyers in Loew’s challenged this, because the statute uses the term “regular rate of compensation” rather than “regular rate of pay.” The California Supreme Court confirmed that the terms are interchangeable and California law has always required employers to pay meal and rest break premiums at the regular rate, rather than straight hourly rate of pay.
What does all this regular rate stuff mean for you? First, determine if you pay any extra compensation to your non-exempt employees – bonuses, commissions, money from service charges or surcharges, any money in addition to an hourly rate. Or, do you pay different hourly rates in the same work week? Also, do you have any piece rate employees? (By the way, this is prohibited for garment employers in California as of 2022). In ALL of the above circumstances, you need to calculate the regular rate by determining the average rate of pay divided by the number of hours worked in the applicable pay period. If you are looking at a bonus, as I said, you may have to recalculate the regular rate over the length of the bonus period, once the bonus is determined. For a commission, if the commission is paid monthly, the same would apply. If it’s a service charge that is paid over a pay period, it may be as simple as calculating the regular rate for that pay period. But once that amount is known, the regular rate has to be determined and applied, and if appropriate, recalculated and shown on the paystub.
Two important points. First, regular rate is not just paid for overtime and break pay. The term “regular rate” is used in other areas of the law in California, such as sick pay and reporting time pay. It is VERY IMPORTANT that when doing any retro pay calculations, employers recalculate the regular rate for these items as well, especially sick pay, which all California employers will have. On the other hand, you do NOT use regular pay for split shift pay, which by statute is paid out at minimum wage. Also, most of our policies dictate that vacation pay is paid at straight time (although if you have PTO, remember that PTO is a combination of sick and vacation pay, so most likely would have to be paid at regular rate.)
My second point is, I have not gone into detail about the calculation for regular rate. That would be the subject of an equally long article, and this one is already making most of your eyes glaze over. This is very heady, technical stuff, and we can help walk you through this if you staff needs assistance.
Okay, I’m already running up against noon, and I am trying to stay true to my morning timeline. I know that was a lot, but we get lots of lawsuits on these issues. Stay safe this week; it’s still a jungle out there.