A federal district court in California has ruled that when calculating the additional one hour of pay at the regular rate for missed rest periods under California Labor Code 226.7, an employer must include not only base pay, but also commissions, incentives, and bonuses. A group of 4,481 home mortgage consultants filed a class action lawsuit against their employer. They claimed they weren’t able to take their rest breaks as required by California law, so they were entitled to one hour of extra pay for each day it happened. The company agreed, but wanted to use the workers’ minimum hourly base rate to calculate the extra one-hour payment. The court said no, pointing out that most of the employees earned enough in commissions that their hourly base wages were irrelevant. As a result, the court ordered the company to pay a whopping $97 million in wages to compensate employees for their lost rest breaks (Ibarra v. Wells Fargo Bank, N.A., CD Cal, May 2018).
Tips for Employers
California employers are required to ensure that nonexempt employees (i.e., those eligible for overtime) have the opportunity to take their full rest and meal breaks without interruption. If work demands cause an employee to miss a rest or meal period, be sure you have a way to document that in your recordkeeping systems; this way, you can promptly pay the affected employee an extra hour for that day. If employees receive commissions, incentives, or bonuses, make sure you include this additional pay in your calculation of the amount due.
This website presents general information in nontechnical language. This information is not legal advice. Before applying this information to a specific management decision, consult Vigilant or legal counsel.