Ferra v. Loews Hollywood Hotel

Filed 10/9/19
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
JESSICA FERRA et al., B283218
Plaintiffs and Appellants, Los Angeles County
Super. Ct. No. BC586176
v.
LOEWS HOLLYWOOD HOTEL,
LLC,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Kenneth R. Freeman, Judge. Affirmed.
Moss Bollinger, Ari E. Moss, Dennis F. Moss; Law Offices
of Sahag Majarian II and Sahag Majarian II for Plaintiffs
and Appellants.
Altshuler Berzon, Michael Rubin, Eileen B. Goldsmith;
Haffner Law, Joshua H. Haffner, Graham G. Lambert;
Stevens L.C. and Paul D. Stevens 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 and David Fishman for Defendant and
Respondent.
Blank Rome, Laura Reathaford, Brock Seraphin;
Lathrop Gage and Laura Reathaford for Association of Southern
California Defense Counsel as Amicus Curiae on behalf of
Defendant and Respondent.
_________________________
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
1 Unless otherwise indicated, all subsequent statutory
citations are to the Labor Code.
2
(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.
3
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.)
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
4
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.) 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) (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
5
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.) 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.)
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
6
“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
intent.’ ” (Murphy, supra, 40 Cal.4th at p. 1103.) We must
“give[ ] significance to every word, phrase, sentence and
part of an act.” (Flowmaster, Inc. v. Superior Court (1993)
16 Cal. App. 4th 1019, 1028.) “ ‘Wage orders are quasi-legislative
regulations and are construed in accordance with the ordinary
principles of statutory interpretation.’ ” (Vaquero v. Stoneledge
Furniture, LLC (2017) 9 Cal.App.5th 98, 107.) We should avoid
a construction of the wage order or statute that renders any part
meaningless, inoperative, or superfluous. (Ibid.; Shoemaker v.
Myers (1990) 52 Cal. 3d 1, 22.) “[S]tatutes governing conditions
of employment are to be construed broadly in favor of protecting
employees. [Citations.] Only when the statute’s language
is ambiguous or susceptible of more than one reasonable
interpretation, may the court turn to extrinsic aids to assist
in interpretation.” (Murphy, at p. 1103.)2
2 Murphy concluded that the remedy provided in section
226.7 was a premium wage, not a penalty. (Murphy, supra,
40 Cal.4th at p. 1102.)
7
“Where 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.” (Briggs v. Eden
Council for Hope & Opportunity (1999) 19 Cal. 4th 1106, 1117.)
Ferra argues that the two phrases have the same meaning
because both include the words “regular rate.” Ferra thus urges
us to construe only the phrase “regular rate,” as used in the
Labor Code and the federal Fair Labor Standards Act (FLSA),
29 United States Code section 201 et seq., and to disregard
the additional language because “pay” and “compensation”
are interchangeable.3 But that would render meaningless the
Legislature’s choice to use “of compensation” in one statute and
“of pay” in the other. If the Legislature had intended meal and
rest break premiums to be calculated the same way as overtime
premiums, it would not have used “regular rate of compensation”
when setting premiums for missed meal and rest breaks, and
“regular rate of pay” when setting premiums for overtime work.
We assume the Legislature intended different meanings when
it did not simply use “regular rate,” but added different qualifiers
3 For example, Ferra cites Walling v. Hardwood Co. (1945)
325 U.S. 419, 424, for its use of “regular rate of compensation,”
but, there, the Court construed federal overtime provisions,
and was not quoting statutory language. (See Walling v.
Harnischfeger Corp. (1945) 325 U.S. 427, 430 [same]; Local 246
Util. Workers Un. v. Southern Cal. Edison (9th Cir. 1996) 83 F.3d
292, 295 [same].) Ferra also cites 29 United States Code section
207(e), the federal overtime statute, for its definition of “regular
rate,” and associated federal regulations. Again, these federal
authorities do not answer the question of what “regular rate
of compensation” means in section 226.7.
8
in the statutes and wage orders establishing premiums for
overtime and for missed meal and rest periods.
Ferra also points out that sections 226.7 and 510 were both
enacted in 2000, and both used “regular rate”; but the legislative
decision to add “of compensation” to the first statute, and “of pay”
to the second, works against Ferra’s argument that the words
do not matter, because surely the Legislature meant something
different when it used different language in two statutes enacted
at the same time.4 “[I]f the Legislature carefully employs a term
in one statute and deletes it from another, it must be presumed
to have acted deliberately.” (Ferguson v. Workers’ Comp.
Appeals Bd. (1995) 33 Cal. App. 4th 1613, 1621; see Murphy,
supra, 40 Cal.4th at p. 1108 [“That the Legislature chose to
eliminate penalty language in section 226.7 while retaining the
use of the word in other provisions of [Assem.] Bill No. 2509 is
4 “ ‘Pay’ is defined as ‘money [given] in return for goods
or services rendered.’ (American Heritage Dict. (4th ed. 2000)
p. 1291.)” (Murphy, supra, 40 Cal.4th at p 1104.)
“Compensation” is defined as “[s]omething, such as money, given
or received as payment or reparation, as for a service or loss.”
(American Heritage Dict., supra, at p. 376.) When an employee
misses a meal period or a rest period, he “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, at p. 1104.) The “central purpose” of
overtime pay is to pay employees wages for time spent working.
(Id. at p. 1109.) A section 226.7 action, however, is “not an action
brought for nonpayment of wages; it is an action brought for
nonprovision of meal or rest breaks.” (Kirby v. Immoos Fire
Protection, Inc. (2012) 53 Cal. 4th 1244, 1257.)
9
further evidence that the Legislature did not intend section 226.7
to constitute a penalty.”])
b. Legislative history does not compel the
conclusion that “regular rate of compensation”
and “regular rate of pay” are synonymous
and interchangeable
Although we do not believe the statutes’ use of different
definitions for the different premiums is ambiguous, we note
that Ferra’s resort to the legislative history does not require us
to conclude that “regular rate of compensation” is the same as
“regular rate of pay.” Ferra acknowledges the legislative history
does not define the two phrases, but points to the regulatory
history of the wage order revisions in which the IWC adopted
the hour premium for rest and meal period violations, quoting
the use in Murphy, supra, 40 Cal. 4th 1094, of a commissioner’s
statement at a “June 30, 2000 hearing at which the IWC
adopted the ‘hour of pay’ remedy.” (Id. at pp. 1109-1110.) The
commissioner stated: “ ‘This [meal and rest pay provision applies
to] an employer who says, “You do not get lunch today, you do
not get your rest break, you must work now.” That is—that is
the intent. . . . And, of course, the courts have long construed
overtime as a penalty, in effect, on employers for working people
more than full—you know, that is how it’s been construed,
as more than the—the daily normal workday. It is viewed as
a penalty and a disincentive in order to encourage employers
not to. So, it is in the same authority that we provide overtime
pay that we provide this extra hour of pay.’ ” (Id. at p. 1110.)
While Ferra argues that this means the hour premium for
meal and rest break violations should be calculated like overtime
pay, Murphy used the commissioner’s statement to differentiate
10
the two payments, pointing out that although the IWC used
the word “ ‘penalty’ ” at times to refer to meal and rest period
payments, “the Legislature’s occasional description of the meal
and rest period remedy as a ‘penalty’ in the legislative history
should be informed by the way in which the IWC was using the
word; namely, that like overtime pay, the meal and rest period
remedy has a corollary disincentive aspect in addition to
its central compensatory purpose. [¶] We conclude that the
administrative and legislative history of the statute indicates
that, whatever incidental behavior-shaping purpose section 226.7
serves, the Legislature intended section 226.7 first and foremost
to compensate employees for their injuries.” (Murphy, supra,
40 Cal.4th at pp. 1110-1111, fn. omitted, italics added.) Section
226.7’s “ ‘additional hour of pay’ . . . is a premium wage intended
to compensate employees, not a penalty.” (Murphy, at p. 1114.)5
Murphy recognized that the occasional use of “penalty” in the
legislative history did not require the court to conclude that
section 226.7 was intended to be a penalty, noting that “the
Legislature chose to eliminate penalty language in section 226.7
while retaining the use of the word in other provisions . . . [which]
is further evidence that the Legislature did not intend section
226.7 to constitute a penalty.” (Murphy, at p. 1108.) Here,
the occasional equating of the purpose of providing overtime
premiums with the premiums for missed meal and rest breaks
does not require us to conclude that the premiums must be
5 The court also noted that judicial references to overtime
pay as a “penalty” did not transform overtime pay into a penalty
for the purpose of the statute of limitations. (Murphy, supra,
40 Cal.4th at p. 1109.)
11
calculated identically, especially in light of the Legislature’s
choice to use “regular rate of compensation” in section 226.7
and “regular rate of pay” in section 550.6
It is the Legislature’s choice to use different phrases that
must be construed to mean that the statutes mean different
things. Ferra and amicus California Employment Lawyers
Association point out a few occasions on which the Division of
Labor Standards Enforcement used the phrases interchangeably,
but the Legislature and the statutes did not, and it is the
Legislature’s choice of different descriptions of the premiums
that governs our analysis. While in common parlance “pay”
and “compensation” are sometimes used interchangeably, the
Legislature did not do so in choosing the language of the statutes.
c. Persuasive federal opinions favor construing
the phrases differently
No published California case distinguishes “regular rate
of compensation” as it applies to missed meal and rest periods
from “regular rate of pay” for overtime purposes. We therefore
look to “analytically sound” reasoning in federal opinions,
and “[a]lthough not binding precedent on our court, we may
consider relevant, unpublished federal district court opinions
as persuasive.” (Futrell v. Payday California, Inc. (2010)
190 Cal. App. 4th 1419, 1432, fn. 6.)
6 Assembly Bill No. 60 (1999-2000 Reg. Sess.), which
amended the overtime statute, used the phrase “regular rate
of pay” eight times, including in its amendment to section 510
(Stats. 1999, ch. 134), without ever using “regular rate of
compensation”; Assembly Bill No. 2509 (1999-2000 Reg. Sess.)
section 7, which added section 226.7, does not use “regular rate
of pay.”
12
A number of federal district courts have concluded that
the use of “regular rate of compensation” in section 226.7 means
that the premium for missed meal periods must be paid at the
regular rate of compensation (the base hourly rate), rather than
at the regular rate of pay applicable to overtime premiums. In
Bradescu v. Hillstone Restaurant Group, Inc. (C.D.Cal., Sept. 18,
2014, SACV No. 13-1289-GW) 2014 U.S. Dist. Lexis 150978
(Bradescu), the court agreed with the defendant that “payment
of any meal period premium at Plaintiff’s regular rate of
compensation—as opposed to her regular rate of pay—
was appropriate” under section 226.7, subdivision (c), and
Wage Order No. 5-2001, subdivision 11(B). (Bradescu, at *14.)
“[T]here is no authority supporting the view that ‘regular rate
of compensation,’ for purposes of meal period compensation,
is to be interpreted the same way as ‘regular rate of pay’ is for
purposes of overtime compensation. The Court consequently
agrees with [defendant] that the legislature’s choice of different
language is meaningful, in the absence of authority to the
contrary, and therefore rules in [defendant’s] favor on this point.”
(Id. at *22.) In Wert v. United States Bancorp (S.D.Cal., Dec. 18,
2014, No. 13-cv-3130-BAS) 2014 U.S. Dist. Lexis 175735 (Wert),
the court agreed with Bradescu, that the use of different
language in the meal period and overtime statutes was
meaningful: “The plain language of §§ 226.7 and 510 does
not suggest that the phrase[ ] ‘regular rate of compensation’ is
synonymous to and may be used interchangeably with ‘regular
rate of pay.’ ” (Wert, at *10.) In denying the plaintiff’s motion for
reconsideration, the court reiterated: “[T]he legislature’s choice
of different language is meaningful, and . . . the relief under
§ 226.7 is not necessarily or logically the same as the relief under
13
§ 510 insofar as the ‘regular rate’ language is involved.” (Wert v.
U.S. Bancorp (S.D.Cal., June 9, 2015, No. 13-cv-3130-BAS) 2015
U.S. Dist. Lexis 74523, at *7; see Van v. Language Line Services,
Inc. (N.D.Cal., June 6, 2016, No. 14-CV-03791-LHK) 2016 U.S.
Dist. Lexis 73510, at *54.)
Two years later, Brum v. Marketsource, Inc. (E.D.Cal.,
June 19, 2017, No. 2:17-cv-241-JAM-EFB) 2017 U.S. Dist. Lexis
94079 (Brum) agreed with Wert and Bradescu and rejected
the reasoning in Studley v. Alliance Healthcare Services, Inc.
(C.D.Cal., July 26, 2012, SACV No. 10-00067-CJC) 2012
U.S. Dist. Lexis 190964 (Studley, discussed below). Brum
acknowledged the plaintiff’s argument that California
cases have used “regular rate of pay” and “regular rate of
compensation” interchangeably, but pointed out that none of
these cases addresses the difference between the two terms
as they appear in the statutes. (Brum, at *13-14.) More recently,
in Frausto v. Bank of America (N.D.Cal., Aug. 2, 2018, No. 18-cv-
01983-MEJ) 2018 U.S. Dist. Lexis 130220, the plaintiff alleged
that her premiums for missed meal periods “were inadequate
because they were only based on her straight time rate, not her
regular rate of pay that includes all bonuses earned.” (Id. at *12.)
The court cited Bradescu, Brum, and Wert to conclude “there
is no legally tenable argument that section 226.7 payments
should be paid at the ‘regular rate’ used for overtime purposes,”
as section 226.7 “ ‘uses the employee’s rate of compensation.’ ”
(Frausto, at *14.)
As Ferra points out, Studley reached a different result,
reasoning that premiums for missed meal periods were like
overtime pay, and like the overtime statute, section 226.7 used
the term “regular rate.” Studley concluded that “regular rate
14
of compensation” in section 226.7 and “regular rate of pay”
in section 510 should be interpreted the same, because “the
operative word or phrase in each section is not ‘compensation’
or ‘pay’ but rather ‘regular rate,’ ” and the meanings of
“compensation” and “pay” were essentially identical. (Studley,
supra, 2012 U.S. Dist. Lexis 190964, at *14 & fn. 4.)
Two later cases agree. In Ibarra v. Wells Fargo Bank, N.A.
(C.D.Cal., May 8, 2018, CV No. 17-4344-PA) 2018 U.S. Dist. Lexis
78513 (Ibarra), the court declined to compare the language of
section 226.7 to section 510. The employees were mortgage
consultants whose “normal compensation was not comprised
solely or even primarily of pay calculated at an hourly rate,” “the
hourly pay was stated to be only an advance on commissions,”
and the employees “could receive compensation based on
commissions such that the hourly rate was essentially
irrelevant.” (Ibarra, at *7.) Under those circumstances, “[t]he
Court is not persuaded that the ‘regular rate of compensation’
for all class members should be an hourly rate that did not
actually determine the compensation received by most of
the class members.”7 (Id. at *7-8, italics added.) The court
acknowledged the cases finding significant the language “regular
rate of compensation” in section 226.7 and “regular rate of pay”
7 Using the hourly rate to calculate the premiums would
result in class-wide damages of $24,472,114.36, and calculating
the premiums by including all forms of compensation, including
commissions and other nondiscretionary pay, more than
quadrupled the damage award to $97,284,817.91. (Ibarra, supra,
2018 U.S. Dist. Lexis 78513, at *5 & fn. 3.) Ferra does not argue
that Loews’s compensation system would result in similarly
disparate damages.
15
in section 510, but agreed with Studley, that the operative
language in both statutes was “regular rate.” (Ibarra, at *9-10.)
Legislative history did not clearly support either side, and
interpreting section 226.7 to require premiums at more than
the base hourly rate comported with construing the labor laws
in favor of worker protection. (Ibarra, at *12-14.) One recent
district court opinion, Magadia v. Wal-Mart Associates, Inc.
(2019) 384 F. Supp. 3d 1058 (Magadia) required Wal-Mart to
factor in a nondiscretionary quarterly bonus in calculating the
“regular rate of compensation” under section 226.7, noting it had
adopted Ibarra’s conclusion that the regular rate of compensation
included the base rate of compensation and other forms of
qualifying compensation. (Magadia, at pp. 1077-1078.)8
Most recently, and just after we heard oral argument in
this case, the court in Valdez v. Fairway Independent Mortgage
Corporation (S.D.Cal., July 26, 2019, No. 18-cv-2748-CAB-KSC)
___ F.Supp.3d ___ [2019 U.S. Dist. Lexis 126013] (Valdez) stated:
“The Court does not agree with the reasoning behind cases
Defendant relies on that find the two terms interchangeable,
as those cases either narrowly construed such a finding to the
specific circumstances of that case or rejected the difference in
language without explanation. [Citations.]” (Id. at *14, citing
Ibarra, supra, 2018 U.S. Dist. Lexis 78513, at *11 and Magadia,
supra, 384 F.Supp.3d at pp. 1077-1078.) “The Court is more
persuaded by the reasoning behind the cases acknowledging the
distinction between the two terms and Plaintiff's assertion that
the overwhelming weight of authority supports the position that
8 Both Ibarra and Magadia have been appealed to the Ninth
Circuit Court of Appeals.
16
‘regular rate of compensation’ is not synonymous with ‘regular
rate of pay.’ [Citations.]” (Valdez, at *14-15, citing Wert, supra,
U.S. Dist. Lexis 175735, at *10-11; Frausto, supra, 2018 U.S.
Dist. Lexis 130220, at *14; Murphy, supra, 40 Cal.4th at p. 1113;
and Brum, supra, 2017 U.S. Dist. Lexis 94079, at *13-14.)
“Having considered both positions, the Court agrees with
Plaintiff's assertion that ‘regular rate of compensation’ is
not equivalent to ‘regular rate of pay’ and likewise finds the
legislature's distinction of the two terms significant.” (Valdez,
at *15.)
We conclude that equating “regular rate of pay” and
“regular rate of compensation” would elide the difference between
requiring an employer to pay overtime for the time an employee
spends working more than 40 hours a week, which pays the
employee for extra work, and requiring an employer to pay
a premium for missed meal and rest hour periods, which
compensates an employee for the loss of a benefit. We agree
with the dissent that the statutes are to be construed in favor
of protecting employees. Requiring employers to compensate
employees with a full extra hour at their base hourly rate for
working through a 30-minute meal period, or for working through
a 10-minute rest break, provides a premium that favors the
protection of employees.
2. Loews’s rounding policy and practice is lawful
Ferra and other Loews hourly employees clocked in
and out of work using an electronic timekeeping system which
automatically rounded time entries either up or down to the
nearest quarter-hour. In addition, the Loews Attendance Policy
stated: “A seven (7) minute grace period, prior to the beginning
of a shift, and a six (6) minute grace period, after the scheduled
17
start time, is incorporated into the timekeeping system and
provides the team member with a degree of flexibility when
clocking in. A team member who clocks in after the (6) six
minute grace period is considered tardy for work.”
“In California, the rule is that an employer is entitled to
use a rounding policy ‘if the rounding policy is fair and neutral
on its face and “it is used in such a manner that it will not result,
over a period of time, in failure to compensate the employees
properly for all the time they have actually worked.” ’ ” (Donohue
v. AMN Services, LLC (2018) 29 Cal.App.5th 1068, 1083, quoting
See’s Candy Shops, Inc. v. Superior Court (2012) 210 Cal. App. 4th
889, 907 (See’s).) In this case, Loews’s “policy is neutral on
its face. It ‘rounds all employee time punches to the nearest
quarter-hour without an eye towards whether the employer
or the employee is benefitting from the rounding.’ ” (AHMC
Healthcare, Inc. v. Superior Court (2018) 24 Cal.App.5th 1014,
1027 (AHMC), quoting Corbin v. Time Warner Entertainment-
Advance/Newhouse Partnership (9th Cir. 2016) 821 F.3d 1069,
1078-1079 (Corbin).) “Employers use rounding policies to
calculate wages efficiently; sometimes, in any given period,
employees come out ahead and sometimes they come out behind,
but the policy is meant to average out in the long-term. If an
employer’s rounding practice does not permit both upward and
downward rounding, then the system is not neutral and ‘will . . .
result, over a period of time, in failure to compensate the
employees properly for all the time they have actually worked.’
[Citation.] Such an arrangement ‘[p]resumably’ does not
‘average[ ] out.’ ” (Corbin, supra, 821 F.3d at p. 1077.) And the
grace period policy means that if the clock shows the employee
18
clocked in before the end of the six-minute grace period, the
employee is not considered tardy.
Although Ferra challenges the accuracy of the data before
the trial court, she also claims the data shows the rounding policy
was not neutral as applied.9 Ferra’s time records showed she lost
time by rounding in 55.1 percent of her shifts, gained time in 22.8
percent, and the remaining shifts were not affected by rounding,
during the relevant time period (June 17, 2012 through April 29,
2014). For a sample group of Loews employees, in 54.6 percent
of shifts paid time was reduced, paid time was added in 26.4
percent of shifts, and the remaining shifts were not affected by
rounding, during the relevant time period (June 2012 through
9 Loews’s expert analyzed data provided to her by Loews
from punch records for Ferra, and for a sample of Loews
employees (sorted by last names). Ferra calls the employee group
“seemingly randomly selected members of the [Loews] work
force.” Ferra claims the data “did not provide evidence of the
number of employees hurt overall by rounding as opposed to the
number benefitted overall by rounding, nor did it break down the
differences between beginning of shift and end of shift rounding.”
Nevertheless, Ferra argues on appeal that the data “clearly
establish that the work force is harmed by rounding” and “proved
systematic under-compensation.” Ferra also used the data in
her first amended complaint to allege that during approximately
50 percent of her and the class’s workweeks, she and the Loews
employees were not paid for all time worked. Her opposition
to the motion for summary judgment relied heavily on the
data (which she included as undisputed facts), and in granting
summary judgment the trial court stated, “Loews’ evidence is
undisputed with respect to how the rounding policy and grace
period actually operated.” We therefore rely on the expert’s
declaration and supporting exhibits.
19
December 2015). The rounding data did not break down the
time gained or lost by employee (except for Ferra, whose time
was analyzed separately).
This is not sufficient to show that the rounding policy
“ ‘systematically undercompensate[s] employees.’ ” (See’s, supra,
210 Cal.App.4th at pp. 901-902.) Although in See’s the majority
of employees were overcompensated, See’s does not “stand[ ]
for the proposition that a rounding policy is unlawful where
a bare majority of employees lose compensation.” (AHMC, supra,
24 Cal.App.5th at p. 1024.) AHMC described two unpublished
federal district court opinions involving quarter-hour rounding
systems which “concluded that the fact that a slight majority
of employees lost time over a defined period was not sufficient
to invalidate an otherwise neutral rounding practice.” (Ibid.)
The first case showed that 53 percent of employees lost time over
a five-year period, and the second showed that 55.8 percent of
employees (including the plaintiff) suffered minor losses
over a three-year period. (Id. at pp. 1025-1026.) Both courts
concluded that summary judgment in favor of the employer
was nevertheless appropriate. (Ibid.) “ ‘[R]ounding contemplates
the possibility that in any given time period, some employees
will have net overcompensation and some will have net
undercompensation. Given the expected fluctuations with
respect to individual employees, shifting the time window even
slightly could flip the figures.’ ” (Id. at p. 1025; Utne v. Home
Depot U.S.A., Inc. (N.D.Cal., Dec. 4, 2017, No. 16-cv-01854-RS)
2017 U.S. Dist. Lexis 199184, at *11-12 (Utne).) “Although the
data analyzed here—from October 22, 2012 to September 1, 2015
—did not average out to 0, Defendant’s expert calculations are
sufficient to establish that the practice does not systematically
20
undercompensate employees over time.” (Boone v. PrimeFlight
Aviation Services, Inc. (E.D.N.Y., Feb. 20, 2018, No. 15-CV-6077-
JMA-ARL) 2018 U.S. Dist. Lexis 28000, at *28.)
We agree with the trial court that Loews’s rounding policy
does not systematically undercompensate its employees over
time.10 As AHMC states, a “fair and neutral” rounding policy
does not require that employees be overcompensated, and
a system can be fair or neutral even where a small majority
loses compensation. (AHMC, supra, 24 Cal.App.5th at p. 1024.)
Ferra did not demonstrate that Loews’s rounding policy
systematically undercompensated employees over time.
10 Like the trial court, we therefore do not address the
de minimis argument Loews made in its motion for summary
judgment. (See Troester v. Starbucks Corp. (2018) 5 Cal.5th 829,
848) [California has not incorporated the de minimis rule in the
FLSA and California de minimis law does not apply to rounding
policy violations].)
21
DISPOSITION
The judgment is affirmed. Costs are awarded to
respondent Loews Hollywood Hotel, LLC.
CERTIFIED FOR PUBLICATION
EGERTON, J.
I concur:
LAVIN, J.
22
EDMON, P.J., Concurring and Dissenting.
I agree that Loews’s policy of rounding time entries up or
down to the nearest quarter hour is lawful. However, I
respectfully disagree with the majority’s conclusion that “regular
rate of compensation” as used in Labor Code1 section 226.7
means an employee’s base hourly rate. Instead, I would conclude
that “regular rate of compensation” has the same meaning as
“regular rate of pay,” and thus that it includes nondiscretionary
bonuses “[that] are a normal and regular part of [an employee’s]
income.” (Walling v. Harnischfeger Corp. (1945) 325 U.S. 427,
432.
1. Interpretive principles
“In statutory construction cases, our fundamental task is to
ascertain the intent of the lawmakers so as to effectuate the
purpose of the statute. (Day v. City of Fontana (2001) 25 Cal. 4th
268, 272.) ‘We begin by examining the statutory language, giving
the words their usual and ordinary meaning.’ (Ibid.; People v.
Lawrence (2000) 24 Cal. 4th 219, 230.) If the terms of the statute
are unambiguous, we presume the lawmakers meant what they
said, and the plain meaning of the language governs. (Day v.
City of Fontana, supra, 25 Cal.4th at p. 272; People v. Lawrence,
supra, 24 Cal.4th at pp. 230―231.) If there is ambiguity,
however, we may then look to extrinsic sources, including the
ostensible objects to be achieved and the legislative history. (Day
v. City of Fontana, supra, 25 Cal.4th at p. 272.) In such cases, we
‘ “ ‘select the construction that comports most closely with the
apparent intent of the Legislature, with a view to promoting
rather than defeating the general purpose of the statute, and
1 All subsequent undesignated statutory references are to
the Labor Code.
avoid an interpretation that would lead to absurd
consequences.’ ” ’ (Ibid.)” (Estate of Griswold (2001) 25 Cal. 4th
904, 910–911.)
Contrary to the majority (maj. opn. ante, at p. 10), I believe
“regular rate of compensation” is ambiguous because it is
susceptible of more than one interpretation. (See Jones v. Lodge
at Torrey Pines Partnership (2008) 42 Cal. 4th 1158, 1163
[statutory language is ambiguous if it “ ‘permits more than one
reasonable interpretation’ ”].) The plain meaning of
“compensation” is “payment, remuneration,” and the plain
meaning of “regular” is “constituted, conducted, scheduled.”
(Merriam-Webster’s 11th Collegiate Dict. (2008) p. 253, col. 2,
p. 1048, col. 1.) On its face, therefore, “regular rate of
compensation” could mean either an hourly rate plus
incentive/bonus pay or an hourly rate alone. I therefore would
conclude that resort to extrinsic sources and principles of
statutory construction is necessary to determine legislative
intent.
As discussed below, I find three principles of statutory
construction relevant to interpreting section 226.7. First, the
state’s labor laws are to be liberally construed in favor of worker
protection. Second, courts must presume the Legislature was
aware of judicial construction of existing law and intended the
same construction to apply to related laws with identical or
substantially similar language. And third, where statutes use
synonymous words or phrases interchangeably, those words or
phrases should be understood to have the same meaning. Each of
these interpretive principles leads to the same conclusion: that
“regular rate of compensation” and “regular rate of pay” are
2
synonymous, and thus that section 226.7 should be interpreted
consistently with section 510.
2. Liberal construction of labor laws in favor of worker
protection
Our Supreme Court has directed that to determine the
Legislature’s intent in enacting wage and hour legislation, our
analysis must be guided by “[t]wo overarching interpretive
principles.” (Alvarado v. Dart Container Corp. of California
(2018) 4 Cal.5th 542, 561 (Alvarado).) First, the obligation to pay
meal and rest break premiums reflects a state policy that meal
and rest periods are essential to worker health and safety.
(Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal. 4th
1094, 1105.) Second, “the state’s labor laws are to be liberally
construed in favor of worker protection.” (Alvarado, supra,
4 Cal.5th at p. 562; see also ZB, N.A. v. Superior Court of San
Diego County (2019) 8 Cal.5th 175, 189 [“Because statutes
governing employment conditions tend to have remedial
purposes, we ‘liberally construe’ them ‘to favor the protection of
employees.’ ”].) Therefore, in deciding whether to factor a
nondiscretionary bonus into an employee’s meal and rest break
premium, “we are obligated to prefer an interpretation that
discourages employers from [depriving employees of meal and
rest breaks], and that favors the protection of the employee’s
interests.” (Alvarado, at p. 562.)
Interpreting “regular rate of compensation” to include
nondiscretionary bonuses unquestionably encourages compliance
with meal and rest break requirements because it raises the cost
to employers of noncompliance. Accordingly, the presumptions in
favor of worker protection and enforcement of meal and rest
3
break requirements weigh strongly in favor of construing section
226.7 consistently with section 510.
3. Consistent construction of similar statutory language
on the same or analogous subjects
“ ‘Where . . . legislation has been judicially construed and a
subsequent statute on the same or an analogous subject uses
identical or substantially similar language, we may presume that
the Legislature intended the same construction, unless a contrary
intent clearly appears.’ (Estate of Griswold[, supra,] 25 Cal.4th
[at pp.] 915–916.)” (Moran v. Murtaugh Miller Meyer & Nelson,
LLP (2007) 40 Cal. 4th 780, 785.) In other words, “[w]e presume
the Legislature ‘was aware of existing related laws’ when it
enacted [section 226.7], and that it ‘intended to maintain a
consistent body of rules.’ (People v. Superior Court (Zamudio)
(2000) 23 Cal. 4th 183, 199.) We also presume the Legislature
was aware of judicial construction of those laws and that it
intended the same construction to apply to related laws with
identical or substantially similar language. (Moran v. Murtaugh
Miller Meyer & Nelson, LLP (2007) 40 Cal. 4th 780, 785.)” (In re
R.G. (2019) 35 Cal.App.5th 141, 146.)
When the Legislature adopted section 226.7 in 2000, it did
so against the backdrop of longstanding federal law that defined
overtime pay in terms of an employee’s “regular rate,” and
existing state law that defined overtime pay in terms of an
employee’s “regular rate of pay.” Both phrases had been
repeatedly construed to include nondiscretionary bonuses and
incentives, in addition to base hourly pay. The historical use of
these terms is essential to understanding the Legislature’s intent
in adopting section 226.7, and thus I summarize that use in some
detail here.
4
a. Historical use of “regular rate” in federal and
state overtime provisions
i. The Fair Labor Standards Act
As adopted in 1938, section 7(a) of the federal Fair Labor
Standards Act (FLSA), 29 U.S.C. section 201 et seq., required
employers to compensate employees for all hours in excess
of 40 at one and one-half times the “ ‘regular rate at which he is
employed.’ ” (149 Madison Ave. Corporation v. Asselta (1947)
331 U.S. 199, 200, fn. 1, italics added.)
The FLSA initially did not define “regular rate,” and
litigation over the meaning of the phrase ensued almost
immediately. In 1944, the Supreme Court held that “ ‘regular
rate’ . . . mean[s] the hourly rate actually paid for the normal,
non-overtime workweek.” (Walling v. Helmerich & Payne, Inc.
1944, 323 U.S. 37, 40, italics added; see also Walling v.
Youngerman-Reynolds Hardwood Co. (1945) 325 U.S. 419, 424–
425, italics added [“The regular rate by its very nature must
reflect all payments which the parties have agreed shall be
received regularly during the workweek, exclusive of overtime
payments. It is not an arbitrary label chosen by the parties; it is
an actual fact”].) The following year, the court held that “regular
rate” necessarily included not only the base hourly rate, but also
nondiscretionary bonuses.2 It explained: “Those who receive
2 The court provided the following example: “An incentive
worker is assigned a basic rate of $1 an hour and works 50 hours
a week on 15 ‘time studied’ jobs that have each been given a
‘price’ of $5. He completes the 15 jobs in the 50 hours. He
receives $50 basic pay plus $25 incentive pay (the difference
between the base pay and 15 job prices). In addition, the worker
receives $5 extra for the 10 overtime hours. This is computed on
5
incentive bonuses in addition to their guaranteed base pay
clearly receive a greater regular rate than the minimum base
rate. . . . The conclusion that only the minimum hourly rate
constitutes the regular rate opens an easy path for evading the
plain design of § 7(a). We cannot sanction such a patent
disregard of statutory duties.” (Walling v. Harnischfeger Corp.,
supra, 325 U.S. at pp. 431―432, italics added.)3
By the 1950’s, Congress had amended FLSA section 7(a) to
include a definition of “regular rate” consistent with that
articulated by the Supreme Court, as follows: “As used in this
section the ‘regular rate’ at which an employee is employed shall
the basis of 50% of the $1 base rate, or 50 cents an hour
premium. Actually, however, this worker receives compensation
during the week at the actual rate of $1.50 an hour ($75 divided
by 50 hours) and the overtime premium should be computed on
that basis, giving the worker a premium of 75 cents an hour or
$7.50 for the 10 overtime hours.” (Walling v. Harnischfeger
Corp., supra, 325 U.S. at p. 431, fn. 3.)
3 In so concluding, the court rejected the employer’s
contention that incentive bonuses were not part of the “regular
rate” because they could not be calculated or paid
contemporaneously. The court explained: “[Employer] also
points to the fact that the incentive bonuses are often not
determined or paid until weeks or even months after the semi-
monthly pay-days, due to the nature of the ‘priced’ jobs. But
[FLSA] Section 7(a) does not require the impossible. If the
correct overtime compensation cannot be determined until some
time after the regular pay period the employer is not thereby
excused from making the proper computation and payment.
[FLSA] Section 7(a) requires only that the employees receive a
50% premium as soon as convenient or practicable under the
circumstances.” (Walling v. Harnischfeger Corp., supra, 325 U.S.
at pp. 432–433.)
6
be deemed to include all remuneration for employment paid to, or
on behalf of, the employee.” (See Mitchell v. Adams (5th Cir.
1956) 230 F.2d 527, 532, fn. 10.)
Although the FLSA has been amended many times, the
statute in its current form continues to require overtime pay as a
multiple of an employee’s “regular rate,” and to define “regular
rate” as “all remuneration for employment paid to, or on behalf of,
the employee,” subject to exceptions not relevant here.
(29 U.S.C., § 207, subds. (a)(1), (e), italics added.) Federal courts
interpreting this section have consistently held that “regular
rate” includes, among other things, nondiscretionary bonuses and
incentives. (E.g., Local 246 Utility Workers Union of America v.
Southern California Edison Co. (9th Cir. 1996) 83 F.3d 292
[supplemental payments to disabled workers were part of the
employees’ “regular rate”]; Featsent v. City of Youngstown (6th
Cir. 1995) 70 F.3d 900, 904 [shift differentials and hazardous
duty pay may not be excluded from the “regular rate”]; Reich v.
Interstate Brands Corp. (7th Cir. 1995) 57 F.3d 574, 577 [bonus
must be included in the “regular rate” unless it is entirely
discretionary with the employer].)4
4 Interestingly, federal courts interpreting the FLSA
section 7(a) have frequently described “regular rate” as an
employee’s “regular rate of compensation.” (E.g., Walling v.
Youngerman-Reynolds Hardwood Co., supra, 325 U.S. at p. 424
[“The keystone of § 7(a) is the regular rate of compensation. On
that depends the amount of overtime payments which are
necessary to effectuate the statutory purposes,” italics added];
Walling v. Harnischfeger Corp., supra, 325 U.S. at p. 430 [in
determining whether employer properly calculated overtime pay
under FLSA, “[o]ur attention here is focused upon a
determination of the regular rate of compensation at which the
7
ii. Pre-2000 Wage Orders
In 1913, the California Legislature established the
Industrial Welfare Commission (IWC), to which it delegated
authority for setting minimum wages, maximum hours, and
working conditions. (Augustus v. ABM Security Services, Inc.
(2016) 2 Cal.5th 257, 263 (Augustus).) The IWC began issuing
industry- and occupation-specific wage orders in 1916.5
incentive workers are employed,” italics added]; United States
Department of Labor v. Fire & Safety Investigation Consulting
Services, LLC (4th Cir. 2019) 915 F.3d 277, 280–281 [“To
determine whether [employer’s] payment scheme violated the
FLSA, we must first decide what constitutes the ‘regular rate’ of
compensation actually paid to the Consultants, as that rate
establishes the proper overtime compensation due,” italics
added]; Local 246 Utility Workers Union of America v. Southern
California Edison Co. (9th Cir. 1996) 83 F.3d 292, 295
[“Employees working overtime must be compensated at not less
than one-and-one-half times the regular rate of compensation.
29 U.S.C. § 207(a)(1),” italics added]; Walling v. Garlock Packing
Co. (2d Cir. 1947) 159 F.2d 44, 46 [“It is urged upon us . . . that
there is no relationship between the bonus or premium paid and
the amount produced or the time worked by the employee, and
therefore that the bonus is not part of the regular rate of
compensation. But this argument is not convincing,” italics
added].)
5 The IWC has promulgated 18 wage orders: Twelve of them
cover specific industries, four cover certain occupations, one is a
general minimum wage order, and one applies to industries and
occupations not covered by, and all employees not specifically
exempted in, the wage orders in effect in 1997. (Huntington
Memorial, supra, 131 Cal.App.4th at p. 902.) Although the
Legislature defunded the IWC in 2004, its wage orders remain in
effect. (Mendiola v. CPS Security Solutions, Inc. (2015)
60 Cal. 4th 833, 838, fn. 6.) In California, wage orders “are
8
California’s current wage orders are closely modeled after
section 7(a)(1) of the FLSA. (Alcala v. Western Ag Enterprises
(1986) 182 Cal. App. 3d 546, 550.) From the early twentieth
century, the IWC’s wage orders required employers to pay
employees premium wages for overtime work (California Grape,
etc. League v. Industrial Welfare Com. (1969) 268 Cal. App. 2d 692,
703), and by at least 1968, wage orders defined the overtime
premium with reference to an employee’s “regular rate of pay.”
(See Rivera v. Division of Industrial Welfare (1968) 265
Cal. App. 2d 576, 598, fn. 35, italics added [employees could not be
employed “more than eight (8) hours in any one day nor more
than (5) days in any one week unless the employee receives one
and one-half (1½) times her regular rate of pay for all work over
forty (40) hours or the sixth (6th) day”].)
Although the California wage orders added a modifier to
the federal definition—referring to an employee’s “regular rate of
pay,” rather than his or her “regular rate”—California authorities
consistently have concluded the two phrases are synonymous.
Significantly, the Division of Labor Standards Enforcement
(DLSE), the state agency that enforces wage and hour laws
(Ward v. Tilly’s, Inc. (2019) 31 Cal.App.5th 1167, 1176), has said
that “the failure of the IWC to define the term ‘regular rate’
indicates the [IWC’s] intent that in determining what payments
are to be included in or excluded from the calculation of the
regular rate of pay, California will adhere to the standards
constitutionally-authorized, quasi-legislative regulations that
have the force of law.” (Dynamex Operations W. v. Superior Court
(2018) 4 Cal.5th 903, 914, fn. 3, citing Cal. Const., art. XIV, § 1;
§§ 1173, 1178, 1178.5, 1182, 1185; Industrial Welfare Com. v.
Superior Court (1980) 27 Cal. 3d 690, 700―703.)
9
adopted by the U.S. Department of Labor to the extent that those
standards are consistent with California law.” (Dept. of
Industrial Relations, DLSE, Chief Counsel H. Thomas Cadell, Jr.,
Opn. Letter No. 2001-01-29, Calculation of Regular Rate of Pay
(Jan. 29, 2003) p. 2, fn. 1.) And, as specifically relevant in the
present case, the DLSE has drawn on federal authorities to
conclude that “regular rate of pay,” like “regular rate,” includes
nondiscretionary bonuses and incentives. (Dept. of Industrial
Relations, DLSE, Chief Counsel H. Thomas Cadell, Jr., Opn.
Letter No. 1991-03-06, Calculation of Regular Rate of Pay (Mar.
6, 1991) p. 1; see also Huntington Memorial Hospital v. Superior
Court (2005) 131 Cal. App. 4th 893, 902―903 (Huntington
Memorial) [citing advice letter].)6
6 In a March 1991 opinion letter, the DLSE considered
whether “sporadic incentive bonus payments made to employees
for the performance of work ancillary to their primary duties”
were part of the “regular rate of pay” for purposes of determining
overtime pay. The DLSE responded that the “answer, under both
federal and California law, is, yes.” It explained: “The
enforcement of the California overtime requirements follow[s]
federal precedent where applicable and where the federal
precedent is patterned on language which is similar in intent to
the California law. . . . [¶] Bonus payments, with certain
exceptions [fn. omitted], are included in the calculation of
overtime. Bonuses based on incentive must be calculated into the
employee’s wages to determine the ‘regular rate of pay.’ ” (Dept.
of Industrial Relations, DLSE, Chief Counsel H. Thomas Cadell,
Jr., Opn. Letter No. 1991-03-06, Calculation of Regular Rate of
Pay (Mar. 6, 1991) p. 1; see also Huntington Memorial, supra, 131
Cal.App.4th at pp. 902―903 [citing opinion letter].) The DLSE
similarly opined several years later, advising that “as with
federal law,” a bonus based on a piece rate “must be figured into
10
b. Current law
i. Wage Order 5-2001
The IWC adopted wage orders in their current forms in
2000. Consistent with prior versions, Wage Order No. 5-2001,
which governs the present case (see Brinker Restaurant Corp. v.
Superior Court (2012) 53 Cal. 4th 1004, 1018), provides that an
employer is obligated to pay an overtime premium for work in
excess of eight hours in a day, 40 hours in a week, or for any work
at all on a seventh consecutive day. (Wage Order No. 5-2001,
subd. 3, Cal. Code Regs., tit. 8, § 11050, subd. 3(A)(1).) Such
work must be compensated at 1.5 times the employee’s “regular
rate of pay,” or double the “regular rate of pay” if the employee
works in excess of 12 hours in a day or in excess of eight hours on
a seventh consecutive working day. (Cal. Code Regs., tit. 8,
§ 11050, subd. 3(A)(1)(b).)
Wage Order 5-2001 also included, for the first time, a
provision requiring premium pay for employees deprived of the
ten-minute rest breaks or 30-minute meal breaks required by
statute. Specifically, Wage Order No. 5-2001 provides that an
employer who does not allow an employee a rest period or meal
period “shall pay the employee one (1) hour of pay at the
employee’s regular rate of compensation” for each workday the
rest period or meal period is not provided. (Cal. Code Regs.,
tit. 8, § 11050, subds. 11(B), 12(B), italics added.)
Although the IWC thus used slightly different language to
describe the premiums due for overtime work and for missed
the formula for determining the ‘regular rate of pay.’ ” (Dept. of
Industrial Relations, DLSE, Chief Counsel H. Thomas Cadell, Jr.,
Opn. Letter No. 1994-06-17, Regular Rate of Pay (June 17, 1994)
p. 2.)
11
meal and rest breaks (“regular rate of pay” versus “regular rate of
compensation”), nothing in the regulatory history suggests the
IWC intended the two phrases to have different meanings.
Indeed, the regulatory history suggests exactly the opposite. In
its explanation of the basis for adopting meal and rest break
premiums, the IWC said: “During its review . . . , the IWC heard
testimony and received correspondence regarding the lack of
employer compliance with the meal and rest period requirements
of its wage orders. The IWC therefore added a provision to this
section that requires an employer to pay an employee one
additional hour of pay at the employee’s regular rate of pay for
each work day that a meal period is not provided.” (IWC
Statement As to the Basis, p. 20, italics added,
[as of Oct. 9,
2019], archived at .) In other
words, the IWC itself appears not to have distinguished between
the phrases “regular rate of pay” and “regular rate of
compensation”—a telling indicator that it intended these phrases
to be applied interchangeably.
ii. Sections 510 and 226.7
At about the same time the IWC enacted wage orders in
their current forms, the Legislature added provisions governing
overtime premiums and meal and rest break premiums to the
Labor Code by adopting sections 510 and 226.7. Like the
analogous provisions of the wage orders, section 510 requires
overtime pay to be calculated on the basis of an employee’s
“regular rate of pay,” and section 226.7 requires meal and rest
break premiums to be calculated on the basis of an employee’s
12
“regular rate of compensation.”7 Section 510 does not define
“regular rate of pay,” and section 226.7 does not define “regular
rate of compensation.”
Nothing in the legislative history of these enactments
suggests that the Legislature intended “regular rate of pay,” as
used in section 510, and “regular rate of compensation,” as used
in section 226.7, to have different meanings. To the contrary, the
legislative committee reports describe the proposed meal and rest
break premiums—which in every version of the bill were based
on an employee’s “regular rate of compensation”8—in terms of
7 Section 510, subdivision (a) provides: “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. Any work in excess of 12 hours in one
day shall be compensated at the rate of no less than twice the
regular rate of pay for an employee. In addition, 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.”
Section 226.7, subdivision (c) provides: “If an employer
fails to provide an employee a meal or rest or recovery period in
accordance with a state law, including, but not limited to, an
applicable statute or applicable regulation, standard, or order of
the Industrial Welfare Commission, the Occupational Safety and
Health Standards Board, or the Division of Occupational Safety
and Health, 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.”
8 See, e.g., Senate Amendment to Assembly Bill No. 2509
(1999―2000 Reg. Sess.) June 26, 2000, section 12; Senate
13
rates of pay or wages. For example, the Senate Committee on
Industrial Relations described an early version of the bill as
requiring employers to pay an amount “twice the hourly rate of
pay” (Sen. Com. on Industrial Relations, Analysis of Assem. Bill
No. 2509 (1999―2000 Reg. Sess.) as amended June 26, 2000, p. 5,
italics added); the Senate Judiciary Committee described the bill
as creating employer liability for “twice the employee’s average
hourly pay” (Sen. Com. on Judiciary, Analysis of Assem. Bill No.
2509 (1999―2000 Reg. Sess.) as amended Aug. 7, 2000, p. 8,
italics added); and the Senate Rules Committee said failure to
provide meal and rest periods would subject an employer to
paying a worker an additional “hour of wages” (Sen. Com. on
Rules, Analysis of Assem. Bill No. 2509 (1999―2000 Reg. Sess.)
as amended Aug. 25, 2000, p. 4, italics added). Similarly, the
legislative reports describing the overtime pay provisions of
section 510 refer in places to an employee’s rate of
“compensation.” (E.g., Bill Analysis, Assem. Bill No. 60
(1999―2000 Reg. Sess.) as amended July 1, 1999, p. 3, italics
added [under existing law, wage orders require “the payment of
time-and-one-half compensation for work exceeding eight hours
per day, 40 hours per week”]; Sen. Com. on Industrial Relations,
Analysis of Assem. Bill No. 60 (1999―2000 Reg. Sess.) as
amended May 27, 1999 [same].)
Amendment to Assembly Bill No. 2509 (1999―2000 Reg. Sess.)
August 7, 2000, section 10; Senate Amendment to Assembly Bill
No. 2509 (1999―2000 Reg. Sess.) August 25, 2000, section 7.
14
iii. Judicial interpretations of section 510
Like the DLSE, state courts have drawn on federal
authorities interpreting the FLSA to inform their understanding
of “regular rate of pay” within the meaning of the wage orders
and section 510. (E.g., Kao v. Holiday (2017) 12 Cal.App.5th 947,
960, fn. 5 [“California adheres to federal standards for calculating
the regular rate of pay to the extent those standards are
consistent with state law”]; Huntington Memorial, supra, 131
Cal.App.4th at p. 903 [“federal authorities . . . provide useful
guidance in applying” section 510]; Advanced-Tech Security
Services v. Superior Court (2008) 163 Cal. App. 4th 700, 707
[adopting federal definition of “regular rate” for purposes of
determining that “regular rate of pay” does not include premium
holiday pay: “ ‘Our Supreme Court has “frequently referred to
such federal precedent in interpreting parallel language in state
labor legislation” ’ ”]; Alcala v. Western Ag Enterprises (1986)
182 Cal. App. 3d 546, 550, fn. omitted [“California’s wage orders
are closely modeled after (although they do not duplicate), section
7(a)(1) of the Fair Labor Standards Act of 1938. (29 U.S.C. § 207
(a)(1).) It has been held that when California’s laws are
patterned on federal statutes, federal cases construing those
federal statutes may be looked to for persuasive guidance.”].)
Last year, our Supreme Court concluded that, like an
employee’s “regular rate” for purposes of the FLSA, an employee’s
“regular rate of pay” for purposes of section 510 “is not the same
as the employee’s straight time rate (i.e., his or her normal hourly
wage rate).” (Alvarado, supra, 4 Cal.5th at p. 554, italics added.)
Instead, the “[r]egular 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
15
per-hour value of any nonhourly compensation the employee has
earned.” (Ibid.)
c. Analysis
When the Legislature adopted section 226.7 in 2000, it for
the first time required employers to pay a premium to employees
who were not permitted to take statutory meal and rest breaks.
But while the premium pay requirement was new, the statutory
language used to describe it was not. Instead, as I have
described, in adopting section 226.7 the Legislature used a
phrase—“regular rate”—that long had been part of the labor law
lexicon, and which had, through many years of judicial
interpretation, become a term of art. The Legislature did so,
moreover, without indicating an intention to deviate from the
well-understood meaning of “regular rate.” Under these
circumstances, I believe the Legislature’s use of “regular rate”
indicates its intent that meal and rest break premiums should be
calculated on the basis of an employee’s base hourly rate plus
bonuses—i.e., the employee’s “regular rate”—not the base hourly
rate alone.
It is undoubtedly true, as the majority notes, that section
226.7 uses a modifier (“of compensation”) that does not appear in
federal or state overtime provisions, and further that established
rules of statutory construction suggest that courts should attempt
to give meaning to every word in a statute to avoid rendering
language surplusage. (E.g., Berkeley Hillside Preservation v.
City of Berkeley (2015) 60 Cal. 4th 1086, 1097 [courts should avoid
“interpretations that render any language surplusage”].) But
although a construction that renders part of a statute surplusage
generally should be avoided, “ ‘this rule is not absolute and “the
rule against surplusage will be applied only if it results in a
16
reasonable reading of the legislation” [citation].’ (Park Medical
Pharmacy v. San Diego Orthopedic Associates Medical Group,
Inc. (2002) 99 Cal. App. 4th 247, 254, fn. 5; see Sturgeon v. County
of Los Angeles (2015) 242 Cal. App. 4th 1437, 1448 [‘[T]he canon
against surplusage is not absolute.’].)” (MCI Communications
Services, Inc. v. California Dept. of Tax & Fee Administration
(2018) 28 Cal.App.5th 635, 650.)
Here, attributing controlling significance to the modifier “of
compensation” leads to an entirely unreasonable conclusion—
namely, that the Legislature used the phrase “regular rate” in
section 226.7 without intending the meaning “regular rate” had
acquired over the course of more than 60 years. To paraphrase
our Supreme Court, I find it “ ‘highly unlikely that the
Legislature would make such a significant change [in the
meaning of “regular rate”] without so much as a passing
reference to what it was doing. The Legislature “does not, one
might say, hide elephants in mouseholes.” ’ ” (Jones v. Lodge at
Torrey Pines Partnership, supra, 42 Cal.4th at p. 1171.)
I find the majority’s analysis particularly unpersuasive in
light of the nearly simultaneous enactment of sections 510 and
226.7. Reduced to its essentials, the majority’s reasoning is as
follows. In 1999, “regular rate” was widely understood to mean
base hourly rate plus bonuses. Although the Legislature modified
the federal language when it adopted section 510, the Legislature
intended “regular rate of pay” to have the same meaning as
“regular rate.” But although the Legislature modified the federal
language in a similar (although not identical) manner when it
adopted section 226.7, it intended an entirely different
meaning—and although it nowhere articulated that intended
meaning, it expected parties and the courts to infer the meaning
17
by its use of the word “compensation,” rather than “pay.” I am
not persuaded.
The majority urges that the Legislature’s use of “regular
rate” in section 226.7 was not a departure from established law
because it added a qualifier—“of compensation”—that does not
appear in the FLSA. While it is true that “of compensation” is
not present in the FLSA, neither is “of pay.” Nonetheless, our
Supreme Court has held that, like “regular rate,” “regular rate of
pay” “includes adjustments to straight time rate, reflecting,
among other things, shift differentials and the per-hour value of
any nonhourly compensation the employee has earned.”
(Alvarado, supra, 4 Cal.5th at p. 554.) I would reach the same
conclusion with regard to “regular rate of compensation.”
4. The Labor Code uses “pay” and “compensation”
interchangeably
Although courts sometimes attach significance to the
Legislature’s use of different words or phrases in related statutes,
where statutes appear to use synonymous words or phrases
interchangeably, courts have not hesitated to attribute the same
meanings to them. (See, e.g., People v. Frahs (2018)
27 Cal.App.5th 784, 793, fn. 3, review granted Dec. 27, 2018,
S252220 [defendant “attempts to draw a distinction between
‘deadly weapon’ and ‘instrument,’ but the terms are used
interchangeably within the statute”]; Vector Resources, Inc. v.
Baker (2015) 237 Cal. App. 4th 46, 55 [“The italicized words in
Labor Code section 1773 show that the terms ‘determine’ and ‘fix’
are used interchangeably and have the same meaning in the
statute”]; Alcala v. City of Corcoran (2007) 147 Cal. App. 4th 666,
672 [attributing same meaning to statute’s use of “public agency”
and “public entity”: “Unless the two terms are read
18
interchangeably, the statute makes no sense”]; International
Assn. of Fire Fighters Union v. City of Pleasanton (1976)
56 Cal. App. 3d 959, 976 [“We perceive no basis for distinguishing
between the term ‘consultation in good faith,’ as used in
[Government Code] section 3507, and the ‘meet and confer in
good faith’ process defined in [Government Code] section 3505”];
Midstate Theatres, Inc. v. County of Stanislaus (1976) 55
Cal. App. 3d 864, 872 [“Applicants argue that the statute uses the
words [advise and represent] interchangeably and that in popular
usage no valid distinction can be drawn between them. There is
merit in this contention”]; see also People v. Johnson (2015)
61 Cal. 4th 674, 692 [“Because ‘term’ and ‘sentence’ have been
used interchangeably, and ‘term’ clearly has more than one
meaning in the statute, we cannot be confident that ‘sentence’
has a consistent meaning throughout the statute. In any event,
the presumption that a term has an identical meaning
throughout a statute ‘is rebuttable if there are contrary
indications of legislative intent.’ ”].)
As the Supreme Court has noted, the Legislature “has
frequently used the words ‘pay’ or ‘compensation’ in the Labor
Code as synonyms.” (Murphy v. Kenneth Cole Productions, Inc.,
supra, 40 Cal.4th at pp. 1103―1104 & fn. 6.) This is not
surprising, as “pay” and “compensation” are synonymous as a
matter of common parlance. Webster’s dictionary defines
“compensation” as “payment, remuneration” (Merriam-Webster’s
11th Collegiate Dict. (2008) p. 253, col. 1), and it defines “pay” as
“something paid for a purpose and esp. as a salary or wage;
remuneration” (id., p. 910, col. 2). “Pay,” “compensate,” and
“remunerate” are identified as synonyms. (Id. at p. 910, col. 2.)
19
The Legislature’s interchangeable use of “pay” and
“compensation” is evident throughout the Labor Code generally,
as well in those provisions of the Labor Code that describe
overtime and meal and rest break premiums specifically. For
example, with regard to meal and rest breaks, section 226.7
requires an employer to “pay” an employee deprived of a meal or
rest break for an additional hour at the employee’s “regular rate
of compensation.” (§ 226.7, subd. (c), italics added.) The very
next section sets out a limited alternative to this requirement for
nonexempt employees holding safety-sensitive positions at a
petroleum facility—namely, that if such an employee is required
to interrupt his or her rest period to address an emergency, an
additional rest period shall be provided or the employer shall pay
the employee “one hour of pay at the employee’s regular rate of
pay.” (§ 226.75, subd. (b), italics added.) Had the Legislature
intended the meal and rest break premium for employees at
petroleum facilities to be calculated differently than other meal
and rest break premiums, it presumably would have said so
explicitly.
Similarly, with regard to overtime, section 510 provides
that employees who work more than eight hours per day shall be
“compensated” at the rate of one and one-half times “the regular
rate of pay.” (§ 510, subd. (a), italics added.) The sections that
immediately follow provide that in some circumstances
employees may work alternative workweek schedules (four 10-
hour days) without being entitled to “payment . . . of an overtime
rate of compensation,” and that the IWC “may establish
exemptions from the requirement that an overtime rate of
compensation be paid” for certain categories of employees.
(§§ 511, subd. (a), 515, subd. (a), italics added.) And, section
20
204.3 provides that, as an alternative to overtime pay, an
employee may receive compensating time off at a rate either of
not less than one and one-half hours for each hour of employment
for which overtime compensation is required or, if an hour of
employment “would otherwise be compensable at a rate of more
than one and one-half times the employee’s regular rate of
compensation, then the employee may receive compensating time
off commensurate with the higher rate.” (§ 204.3, subd. (a); see
also § 751.8, subds. (a)―(b), italics added [smelters and other
underground workers may work more than eight hours in a 24-
hour period “if the employee is paid at the overtime rate of pay for
hours worked in excess of that employee’s regularly scheduled
shift,” but all work performed in any workday in excess of the
scheduled hours established by an agreement in excess of
40 hours in a workweek shall be compensated “at one and one-
half times the employee’s regular rate of compensation”].)
In short, the Legislature uses “pay” and “compensation”
interchangeably throughout the Labor Code, including in
provisions that describe the overtime and meal and rest break
premiums. I would conclude, therefore, that the principle that
the same meaning should be attributed to substantially similar
language in related statutes (Moran v. Murtaugh Miller Meyer &
Nelson, LLP, supra, 40 Cal.4th at p. 785) supports the conclusion
that the Legislature intended “regular rate of compensation” to
have the same meaning as “regular rate” and “regular rate of
pay.”
5. The majority’s reliance on a single canon of
construction is unpersuasive
The majority’s conclusion that “regular rate of
compensation” means an employee’s base hourly rate is grounded
21
almost entirely on a single canon of statutory construction—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.’ ” (Maj. opn. ante, at p.
8, citing Briggs v. Eden Council for Hope & Opportunity (1991) 19
Cal. 4th 1106, 1117.) But while canons of statutory construction
are intended to “provide guidance in interpreting a statute,” they
are “ ‘ “ ‘merely aids to ascertaining probable legislative intent.’
[Citation.] No single canon of statutory construction is an
infallible guide to correct interpretation in all circumstances.”
“[The canons] are tools to assist in interpretation, not the formula
that always determines it.” ’ ” (City of Palo Alto v. Public
Employment Relations Bd. (2016) 5 Cal.App.5th 1271, 1294; see
also Stone v. Superior Court (1982) 31 Cal. 3d 503, 521, fn. 10
[principles of construction “are merely aids to ascertaining
probable legislative intent.”].) Accordingly, a court must “ ‘ “be
careful lest invocation of a canon cause it to lose sight of its
objective to ascertain the Legislature’s intent.” ’ ” (People v.
Superior Court (Cooper) (2003) 114 Cal. App. 4th 713, 720.)
In the present case, I believe the majority’s reliance on a
single canon of construction has led it to a conclusion the
Legislature did not intend, and that the canon does not support.
As a logical matter, if the canon applies, it may suggest what
section 226.7 does not mean, but it cannot give insight into what
the statute does mean. In other words, if the canon applies, it
might suggest that “regular rate of compensation” does not mean
the same thing as “regular rate of pay”—but it does not lead
22
logically to the conclusion that “regular rate of compensation”
means straight hourly rate.9
6. Conclusion
The majority’s analysis assumes that when the Legislature
adopted sections 226.7 and 510, it intended parties and the courts
to understand—in the absence of any clarifying language in the
statute or legislative history—that “regular rate of pay” has the
same meaning as “regular rate,” but “regular rate of
compensation” means something different. I cannot conclude that
9 Indeed, because elsewhere the Labor Code refers to an
hourly wage as “straight time” or “base hourly rate,” a consistent
application of the interpretive principle on which the majority
relies would lead to the conclusion that “regular rate of
compensation” cannot mean a straight hourly rate. (E.g.,
§ 1773.1, italics added [per diem wages: “Credits for employer
payments also shall not reduce the obligation to pay the hourly
straight time or overtime wages found to be prevailing.”];
§ 1773.8, italics added [“An increased employer payment
contribution that results in a lower taxable wage shall not be
considered a violation of the applicable prevailing wage
determination so long as all of the following conditions are met: .
. . (b) The increased employer payment and hourly straight time
and overtime wage combined are no less than the general
prevailing rate of per diem wages.”]; § 204.11, italics added [“For
any employee who is licensed pursuant to the Barbering and
Cosmetology Act . . . , wages that are paid to that employee for
providing services for which such a license is required, when paid
as a percentage or a flat sum portion of the sums paid to the
employer by the client recipient of such service, and for selling
goods, constitute commissions, provided that the employee is
paid, in every pay period in which hours are worked, a regular
base hourly rate of at least two times the state minimum wage
rate.”].)
23
the Legislature “would have silently, or at best obscurely, decided
so important . . . a public policy matter and created a significant
departure from the existing law.” (In re Christian S. (1994) 7
Cal. 4th 768, 782.) Instead, I would conclude that when the
Legislature used the phrase “regular rate” in section 226.7, it
intended the phrase to mean what it has always meant:
guaranteed hourly wages plus “bonuses [that] are a normal and
regular part of [an employee’s] income.” (Walling v.
Harnischfeger Corp., supra, 325 U.S. at p. 432.)
EDMON, P.J.
24