Ferra v. Loews Hollywood Hotel, LLC

• Decision Date: 09 October 2019
• Docket Number: B283218
• Citation: 40 Cal.App.5th 1239,253 Cal.Rptr.3d 798
• Court: California Court of Appeals Court of Appeals
• Parties: Jessica FERRA et al., Plaintiffs and Appellants, v. LOEWS HOLLYWOOD HOTEL, LLC, Defendant and Respondent.

40 Cal.App.5th 1239

253 Cal.Rptr.3d 798

Jessica FERRA et al., Plaintiffs and Appellants,

v.LOEWS HOLLYWOOD HOTEL, LLC, Defendant and Respondent.

B283218

Court of Appeal, Second District, Division 3, California.

Filed October 9, 2019

Moss Bollinger, Ari E. Moss, Sherman Oaks, Dennis F. Moss, Los Angeles; Law Offices of Sahag Majarian II and Sahag Majarian II, Tarzana, for Plaintiffs and Appellants.

Altshuler Berzon, Michael Rubin, Eileen B. Goldsmith, San Francisco; Haffner Law, Los Angeles, Joshua H. Haffner, Marina Del Rey, Graham G. Lambert, Los Angeles; Stevens L.C. and Paul D. Stevens, Los Angeles, for California Employment Lawyers Association and Jacqueline F. Ibarra as Amici Curiae on behalf of Plaintiffs and Appellants.

Ballard Rosenberg Golper & Savitt, Richard S. Rosenberg, John J. Manier, Glendale, and David Fishman for Defendant and Respondent.

Blank Rome, Laura Reathaford, Brock Seraphin, Los Angeles; Lathrop Gage and Laura Reathaford, Los Angeles, for Association of Southern California Defense Counsel as Amicus Curiae on behalf of Defendant and Respondent.

EGERTON, J.

Does "regular rate of compensation" for calculating meal or rest break premium payments mean the same thing as "regular rate of pay" for calculating overtime premium payments, and does facially neutral "rounding" of employee work time systematically undercompensate Jessica Ferra and a class of employees of Loews Hollywood Hotel, LLC (Loews)? We agree with the trial court that the phrases have different meanings, and Loews’s facially neutral rounding policy does not systematically undercompensate Loews employees.

BACKGROUND

On October 7, 2015, Ferra filed a first amended complaint against Loews on behalf of herself and three alleged classes of hourly Loews employees extending as far back as June 26, 2011. Among other causes of action, Ferra alleged Loews improperly calculated her premium payment when Loews failed to provide her with statutorily required meal and/or rest breaks, in violation of Labor Code section 226.7,¹ and Loews underpaid Ferra by unlawfully "shaving or rounding time from the hours worked by Ferra."

The parties stipulated that Ferra worked as a bartender for Loews from June 16, 2012 to May 12, 2014, and Loews paid (and continued to pay) meal and rest period premiums to hourly employees at their base rate of compensation (their hourly wage), without including an additional amount based on incentive compensation such as nondiscretionary bonuses. The trial court ordered that, on those stipulated facts, it would summarily adjudicate under Code of Civil Procedure section 437c, subdivision (t) "[w]hether meal and rest period premium payments paid to employees pursuant to Labor Code § 226.7 must be paid at employees’ ‘regular rate of compensation,’ i.e. their regular hourly wage, or at their ‘regular rate of pay,’ " and if it concluded the premium must be at the "regular rate of pay," whether section 226.7 was void for vagueness under the due process clause of the federal Constitution.

After briefing and a hearing, on February 6, 2017, the trial court issued an order granting the motion for summary adjudication, concluding: "[T]he terms ‘regular rate of compensation’ and ‘regular rate of pay’ are not interchangeable.... [R]est and meal period premiums under § 226.7 need only be paid at the base hourly rate. As is consistent with the legislative history of §§ 226.7 and 510, it is apparent that the terms in both statutes are different, and have different purposes. [¶] ... [¶] [M]eal and rest period premium payments paid to employees pursuant to Labor Code § 226.7 must be paid at employees’ ‘regular rate of compensation,’ i.e., their regular hourly wage, and not at their ‘regular rate of pay.’ " Loews’s due process claim therefore was moot.

Loews also filed a motion for summary judgment on Ferra’s remaining causes of action, arguing that Loews’s "rounding" policy and practice did not result in underpayment of hourly employees, and any alleged underpayments were de minimis. After briefing and a hearing, on April 24, 2017, the trial court issued an order granting summary judgment, concluding that on the undisputed facts, "Loews’s [rounding] policy is neutral on its face and as applied" and did not "fail[ ] to compensate the employees for hours worked." The trial court declined to address as unnecessary Loews’s alternative argument that any underpayments were de minimis.

The court granted in full Loews’s motion for summary judgment. Judgment was entered May 11, 2017, Loews served notice of entry of judgment on May 19, 2017, and Ferra filed this timely appeal from the summary adjudication and summary judgment.

DISCUSSION

If after an independent review of the record and the applicable law, we agree with the trial court that undisputed facts show there is no triable issue of material fact and Loews, as the moving party, was entitled to judgment as a matter of law, we must affirm the trial court’s grant of summary adjudication and summary judgment. ( Code Civ. Proc., § 437c, subds. (c), (t) ; Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 860, 107 Cal.Rptr.2d 841, 24 P.3d 493.)

1. "Regular rate of compensation" means the employee’s base hourly wage

Section 226.7, subdivision (c) states: "If an employer fails to provide an employee a meal or rest or recovery period in accordance with a state law..., the employer shall pay the employee one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal or rest or recovery period is not provided." (Italics added.) The Industrial Welfare Commission (IWC) Wage Order that applies to Loews and its employees also states that if an employer fails to provide an employee a meal or rest period, "the employer shall pay the employee one (1) hour of pay at the employee’s regular rate of compensation for each workday that the [meal or rest] period is not provided." (IWC Wage Order No. 5-2001, subds. 11(B), 12(B) ( Cal. Code Regs., tit. 8, § 11050, subds. 11(B), 12(B) ), italics added.) This additional hour is a "premium wage." ( Esparza v. Safeway, Inc . (2019) 36 Cal.App.5th 42, 52, 247 Cal.Rptr.3d 875.) The wage orders entitle employees "to an unpaid 30-minute, duty-free meal period after working for five hours and a paid 10-minute rest period per four hours of work. ( Cal. Code Regs., tit. 8, § 11070, subds. 11, 12.) If denied two paid rest periods in an eight-hour workday, an employee essentially performs 20 minutes of ‘free’ work, i.e., the employee receives the same amount of compensation for working through the rest periods that the employee would have received had he or she been permitted to take the rest periods. An employee forced to forgo his or her meal period similarly loses a benefit to which the law entitles him or her. While the employee is paid for the 30 minutes of work, the employee has been deprived of the right to be free of the employer’s control during the meal period. [Citations.] Section 226.7 provides the only compensation for these injuries." ( Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1104, 56 Cal.Rptr.3d 880, 155 P.3d 284 ) ( Murphy ).)

Section 510, the statute governing overtime, states in subdivision (a): "Any work in excess of eight hours in one workday and any work in excess of 40 hours in any one workweek and the first eight hours worked on the seventh day of work in any one workweek shall be compensated at the rate of no less than one and one-half times the regular rate of pay for an employee," and "[a]ny work in excess of 12 hours in one day ... [and] any work in excess of eight hours on any seventh day of a workweek shall be compensated at the rate of no less than twice the regular rate of pay of an employee." (Italics added.) The overtime provisions in Wage Order No. 5-2001, subdivision 3(A) mirror the statutory language, stating that overtime work must be compensated at either one and one-half times or double "the employee’s regular rate of pay for all hours worked." (Italics added.) "[T]he extra amount a worker must be paid, on top of normal pay, because certain work qualifies as overtime" is also called a premium.

( Alvarado v. Dart Container Corp. of California (2018) 4 Cal.5th 542, 550, 229 Cal.Rptr.3d 347, 411 P.3d 528.) In the overtime context, "[s]ignificantly, an employee’s ‘regular rate of pay’ for purposes of Labor Code section 510 and the IWC wage orders is not the same as the employee’s straight time rate (i.e., his or her normal hourly wage rate). Regular rate of pay, which can change from pay period to pay period, includes adjustments to the straight time rate, reflecting, among other things, shift differentials and the per-hour value of any nonhourly compensation the employee has earned." ( Id. at p. 554, 229 Cal.Rptr.3d 347, 411 P.3d 528.)

California case law does not define the meaning of "regular rate of compensation" in section 226.7, subdivision (c) and Wage Order No. 5-2001, subdivisions 11(B) and 12(B), which address rest and meal periods. The trial court agreed with Loews that "regular rate of compensation" means the additional hour premium is calculated as one hour of the employee’s base hourly wage. On appeal, Ferra argues "regular rate of compensation" means the same as "regular rate of pay," so the premium must be calculated as an additional hour at the employee’s base hourly wage, plus an additional amount based on her nondiscretionary quarterly bonus. We agree with the trial court and with Loews, however, that the statutory terms "regular rate of pay" and "regular rate of compensation" are not synonymous, and the premium for missed meal and rest periods is the employee’s base hourly wage.

a. The statutes’ plain language differentiates "regular rate of compensation" from "regular rate of pay"

The basic principle of statutory construction is "that we must look first to the words of the statute, ‘because they generally provide the most reliable indicator of legislative...