Compliance impact and how modifications can affect business practices

Path to PayTech

Knowledge Share by Thomas Rafferty, PayTech Senior Consultant

As payroll professionals with substantial experience, we often help businesses with scenarios where research, adjustments, and implementation of new regulations are needed quickly to remain in compliance.  My expertise has aided organizations in realizing compliance impact and where these modifications could affect additional business practices.

There have been many cases involving missed meal periods in California.  If an employee misses a meal period, the employer is to pay the employee for one (1) hour of work.  However, in a recent case, Ferra v Loews Hollywood Hotels, California missed meal period regulations have been updated to address this ongoing issue.  Employers were paying employees based on the employee’s hourly rate of pay. 

With the recent revision to the law, the employer should, now and retroactively, be paying the employee based on their regular rate of pay.  “In general, the regular rate of pay is an hourly pay rate determined by dividing the total regular pay actually earned for the workweek by the total number of hours worked” (APA Payroll Source, 2021).  Regular pay includes regular earnings, nondiscretionary bonuses, shift differentials and piece work to name a few.

The regulation is very new with the addition of regular rate of pay.  However, with the assistance of a PayTech Consultant, reconciliation and reviews of previous payments can be completed to support compliance. If a client has been paying at the employee’s hourly rate versus the regular rate of pay, these audits can be documentation of the issue, and a solution to make the employee whole.  This service can also reduce the liability on the employer and help to create controls that will assist with the calculations going forward. 

Another area would be to review the current set up of the client’s payroll systems.  If the system is not currently calculating at the regular rate of pay, the consultant, client and payroll vendor could work together on creating an appropriate setup.

Other areas clients may want to review are their incentive programs.  These programs may be changed or even eliminated to ensure further compliance with the California missed meal periods premium payments.  The client may also consider waiver programs to allow employees to voluntarily waive their breaks.  Finally, the employer may also incorporate an attestation program.  This would provide appropriate documentation of the employee’s meal break.

The penalties with California missed meal period can become costly to any company, however, it can be avoided with the appropriate guidance and support of a PayTech Consultant.

The article below goes into detail on the California Supreme Court’s decision on Premium Payments for Meal, Rest, and Recovery Break Violations:
California Supreme Court’s Decision on Premium Payments for Meal, Rest, and Reovery Break Violations

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