Ferra v. Loews Hollywood Hotel, LLC

• Citation: 280 Cal.Rptr.3d 783,11 Cal.5th 858,489 P.3d 1166
• Decision Date: 15 July 2021
• Docket Number: S259172
• Court: United States State Supreme Court (California)
• Parties: Jessica FERRA et al., Plaintiffs and Appellants, v. LOEWS HOLLYWOOD HOTEL, LLC, Defendant and Respondent.

11 Cal.5th 858
489 P.3d 1166
280 Cal.Rptr.3d 783

Jessica FERRA et al., Plaintiffs and Appellants,
v.
LOEWS HOLLYWOOD HOTEL, LLC, Defendant and Respondent.

S259172

Supreme Court of California.

July 15, 2021

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

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

Capstone Law, Melissa Grant, Ryan H. Wu and John E. Stobart, Los Angeles, for Bet Tzedek as Amicus 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.

Seyfarth Shaw, Jeffrey A. Berman, Los Angeles, Brian T. Ashe, San Francisco, and Kiran A. Seldon, Los Angeles, for California Employment Law Counsel, Employers Group and Chamber of Commerce of the United States as Amici Curiae on behalf of Defendant and Respondent.

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

Opinion of the Court by Liu, J.

Under California law, employers must provide employees with overtime pay when employees work more than a certain amount of time. ( Lab. Code, § 510, subd. (a) ( section 510(a) ); all undesignated statutory references are to this code.) To calculate overtime pay, section 510(a) requires an employer to compensate an employee by a multiple of the employee's "regular rate of pay." California law also provides for meal, rest, and recovery periods. If an employer does not provide an employee with a compliant meal, rest, or recovery period, section 226.7, subdivision (c) (section 226.7(c)) requires the employer to "pay the employee one additional hour of pay at the employee's regular rate of compensation."

The question here is whether the Legislature intended "regular rate of compensation" under section 226.7(c) to have the same meaning as "regular rate of pay"

280 Cal.Rptr.3d 786

under section 510(a), such that the calculation of premium pay for a noncompliant meal, rest, or recovery period, like the calculation of overtime pay, must account for not only hourly wages but also other nondiscretionary payments for work performed by the employee. We hold that the terms are synonymous: "regular rate of compensation" under section 226.7(c), like "regular rate of pay" under section 510(a), encompasses all nondiscretionary payments, not just hourly wages.

I.

From June 16, 2012, to May 12, 2014, defendant Loews Hollywood Hotel, LLC (Loews), employed plaintiff Jessica Ferra as a bartender. Loews paid Ferra hourly wages as well as quarterly nondiscretionary incentive payments. We use the term "nondiscretionary payments" to mean payments for an employee's work that are owed "pursuant to [a] prior contract, agreement, or promise," not "determined at the sole discretion of the employer." (Division of Labor Standards Enforcement (DLSE), Update of the DLSE Enforcement Policies and Interpretations Manual (rev. 2019) § 49.1.2.4(3), p. 49-3 (2019 DLSE Manual), citing 29 C.F.R. §§ 778.211, 778.213 (2021) ; see C.F.R. § 778.211 (2021) [a payment is discretionary if "both the fact that payment is to be made and the amount of the payment are determined at the sole discretion of the employer ... and not pursuant to any prior contract, agreement, or promise causing the employee to expect such payments regularly"]; see also Alvarado v. Dart Container Corp. of California (2018) 4 Cal.5th 542, 561, 229 Cal.Rptr.3d 347, 411 P.3d 528 ( Alvarado ) ["[I]t is the court's task

489 P.3d 1169

to construe how ‘regular rate of pay’ should be calculated in the circumstances presented here."]; CACI No. 2702 [noting that court, not jury, determines appropriate rate of compensation for overtime].) If an hourly employee was not provided with a compliant meal or rest period, Loews paid the employee an additional hour of pay according to the employee's hourly wage at the time the meal or rest period was not provided. If the employee earned any nondiscretionary payments in addition to an hourly wage, like Ferra's quarterly incentive payments, Loews did not factor these payments into the calculation of premium pay owed under section 226.7(c).

In 2015, Ferra filed a class action suit against Loews. Among other claims, Ferra alleged that Loews, by omitting nondiscretionary incentive payments from its calculation of premium pay, failed to pay her for noncompliant meal or rest breaks in accordance with her "regular rate of compensation" as required by section 226.7(c). The trial court granted summary adjudication for Loews on the ground that calculating premium pay according to an employee's base hourly rate is proper under section 226.7(c). The court agreed with Loews that "regular rate of compensation" in section 226.7(c) is "not interchangeable" with the term "regular rate of pay" under section 510(a), which governs overtime pay. In light of this holding, the court held that Loews's due process challenge to section 226.7 was moot. The court granted summary judgment to Loews on Ferra's remaining causes of action.

The Court of Appeal affirmed, holding that "regular rate of compensation" in section 226.7(c) and "regular rate of pay" in section 510(a) are "not synonymous, and the premium for missed meal and rest periods is the employee's base hourly wage." ( Ferra v. Loews Hollywood Hotel, LLC (2019) 40 Cal.App.5th 1239, 1246, 253 Cal.Rptr.3d 798 ( Ferra ).) Justice Edmon dissented on this point. Tracing the history of sections 510(a) and 226.7(c) and the

280 Cal.Rptr.3d 787

meaning of "regular rate" in case law and legislative usage, she concluded that " ‘regular rate of compensation’ has the same meaning as ‘regular rate of pay,’ and thus ... includes nondiscretionary bonuses ‘[that] are a normal and regular part of [an employee's] income.’ " ( Ferra , at p. 1255, 253 Cal.Rptr.3d 798 (conc. & dis. opn. of Edmon, P. J.).)

We granted review.

II.

Section 226.7(c) provides: "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." Similar language appears in a wage order promulgated by the Industrial Welfare Commission (IWC). (See Augustus v. ABM Security Services, Inc. (2016) 2 Cal.5th 257, 262, fn. 5, 211 Cal.Rptr.3d 634, 385 P.3d 823 [IWC is empowered to promulgate "legislative regulations specifying minimum requirements with respect to wages, hours, and working conditions"].) IWC Wage order No. 5-2001, which applies to hotel workers, bartenders, and similar workers, says that if an employer does not provide a compliant 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 work day that" the meal or rest period is not provided. (IWC wage order No. 5-2001, §§ 11(B), 12(B) (Wage Order No. 5-2001); see id. , § 2(P)(1)–(2); Gerard v. Orange Coast Memorial Medical Center (2018) 6 Cal.5th 443, 448, 240 Cal.Rptr.3d 757, 430 P.3d 1226 ( Gerard ) [wage and hour claims, including meal and rest break claims, "are ‘governed by two complementary and occasionally overlapping sources of authority,’ " i.e., the Labor Code and wage orders].)

" ‘When construing the Labor Code and wage orders, we adopt the construction that best gives effect to the purpose of the Legislature and the IWC.... Time and again, we have characterized that purpose as the protection of employees — particularly given the extent of legislative concern about working conditions, wages, and hours when the Legislature enacted key portions of the Labor Code. ... In furtherance of that purpose, we liberally construe the Labor Code

489 P.3d 1170

and wage orders to favor the protection of employees.’ " ( Troester v. Starbucks Corp. (2018) 5 Cal.5th 829, 839, 235 Cal.Rptr.3d 820, 421 P.3d 1114, citations omitted.) In construing a statute or wage order whose language is susceptible of more than one reasonable interpretation, we consider "the ostensible objectives to be achieved by the statute, the evils to be remedied, the legislative history, public policy, contemporaneous administrative construction and the statutory scheme of which the statute is a part." ( Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1105, 56 Cal.Rptr.3d 880, 155 P.3d 284 ( Murphy ).)

The question is what the Legislature meant when it used the phrase "regular rate of compensation" in section 226.7(c). Neither the Labor Code nor Wage Order No. 5-2001 defines the term, and the words by themselves may reasonably be construed to mean either hourly wages, as Loews contends, or hourly wages plus nondiscretionary payments, as Ferra contends. Central to the parties’ dispute is a comparison of the term "regular rate of compensation" in section 226.7(c), which addresses premium pay for meal, rest, or recovery period violations, with the term "regular rate of pay" in section 510(a), which addresses overtime pay. Did the Legislature intend "regular rate of compensation"

280 Cal.Rptr.3d 788

to be synonymous with "regular rate of pay," a term long understood to encompass not only hourly wages but also nondiscretionary payments?

The Court of Appeal answered no, relying on the principle that " ‘[w]here different words or phrases are used in the same connection in different parts of a statute, it is presumed the Legislature intended a different meaning.’ " ( Ferra , supra , 40 Cal.App.5th at p. 1247, 253 Cal.Rptr.3d 798.) But...