4 California Wage and Hour Rulings for Employers to Note

​Many HR professionals in the Golden State have spent the last few years adapting to changes prompted by the COVID-19 pandemic and complying with related workplace orders. So, they may have missed other key employment law developments.

"I find that I have forgotten employment law since 2020," said Brenda Kasper, SHRM-SCP, an attorney with Kasper & Frank in Carlsbad, Calif. She was speaking at the SHRM Employment Law & Compliance Conference in Washington, D.C., on March 29.

Kasper said she's been so focused on COVID-19, masking and vaccinations that she needed a refresher on what else happened in the California employment-law space since 2020—and she thought other HR professionals might need a refresher, too. 

She noted that California employers generally should look to state law before federal—but when there are differences between federal, state and local law, the general rule is to apply the law most favorable to the employee.

Employers should ensure their policies and practices are compliant with key legal developments, she said, such as the following four wage and hour rulings from California courts.

1. Workers May Be Owed Pay for Call-In Shifts

In Ward v. Tilly's, Inc., a California appeals court held that employees in the state must be paid for certain "on-call" shifts if they are required to check in to see if they're needed for a scheduled shift but are told not to report to work. According to the court, calling in triggers the state's reporting time pay requirements, even though the employee is not actually required to go to work.

2. Payout May Be Required Despite Unlimited PTO Policy

In McPherson v. EF Intercultural Foundation, Inc., a California appeals court ruled that under an employer's unlimited paid-time-off (PTO) policy, an employee actually accrued vacation days as she worked and was entitled to be paid for unused days when her employment ended. The court, however, limited the ruling to the facts of the case and said that, if done properly, an employer may be able to construct an unlimited PTO policy that will not obligate the employer to pay for unused leave.

In this case, the employer did not have a written policy and implemented the rule with an implied cap, Kasper noted. Furthermore, employee schedules precluded taking vacation, so employees didn't reap the benefits of the policy.

3. Rounding Meal Periods Is Not Permissible

In Donohue v. AMN Services, LLC, the California Supreme Court ruled that employers in the state are prohibited from rounding time-clock punches for employee meal periods.

Additionally, the court said, if time records show evidence of noncompliant meal periods, the court will assume a violation was committed unless the employer proves otherwise.

Employees must receive premium pay for violations of timing requirements, no matter how minor, Kasper explained.

"The ruling is significant," said Mark Payne, an attorney with Troutman Pepper in Orange County, Calif., to SHRM Online. "It provides a clear direction that any kind of rounding practice related to recording meal periods is prohibited."

4. Missed Break Premiums Must be Paid at 'Regular Rate'

Businesses in California must provide employees with meal and rest breaks or pay workers a premium equal to an hour of pay. In Ferra v. Loews Hollywood Hotel, LLC, the California Supreme Court ruled that the extra pay must be calculated at the employee's "regular rate of pay," which is the formula used to determine overtime premiums under the state labor code. The "regular rate of compensation" under meal and rest break rules "encompasses not only hourly wages but all nondiscretionary payments for work performed by the employee," the state high court found.

The key takeaway is that employers must calculate premium pay for missed meal and rest breaks in the same way that they calculate overtime pay, said Jim Evans, an attorney with Alston & Bird in Los Angeles, to SHRM Online.