Over the past several years, class-action litigation challenging employer meal and rest period practices exploded in California courts. Although some employers view meal- and rest-period rules as technical and insignificant, the truth is that these claims can be financially devastating. Last year the U.S. District Court for the Northern District of California approved an $87 million settlement in a meal- and rest-period class action lawsuit filed against a major courier and logistics provider. With lawyers soliciting new plaintiffs that could represent a class of workers every day, California employers need to understand the rules and take affirmative steps to protect their companies against liability for meal- and rest-period violations.
Meal Period Rules
In general, California law requires that all nonexempt employees receive a 30-minute unpaid meal period for shifts exceeding five hours. The meal period must be provided within the first four hours and 59 minutes of the work day. If the employee works a shift that exceeds 10 hours, the employer must provide a second unpaid meal period of at least 30 minutes. This second meal period must be provided within the second four hours and 59 minutes of work. Several significant exceptions exist to these basic rules, two of which warrant special emphasis:
Meal-Period Waivers: An employee who works a shift of six hours or less may voluntarily agree to waive the right to a meal period. Similarly, if an employee works a shift of 12 hours or less, the employee may voluntarily agree to waive the second meal period (if the first meal period has not been waived). A valid meal-period waiver must be in writing and explicitly state that the employee can revoke the waiver at any time.
On-Duty Meal Periods: An employee may voluntarily agree to take a paid “on-duty” meal period (i.e., a meal period in which the employee is not relieved of all duty) if the nature of the employee’s work prevents the employee from being relieved of all duty. A federal court recently determined that security guards employed by Guardsmark were properly offered “on-duty” meal periods due to the nature of their work and the difficulty in providing security guards with off-duty meals. (See the July 2008 issue of California Employer Update for more about this case..) As with meal-period waivers, a valid on-duty meal period agreement must be in writing and must explicitly give the employee the right to revoke at any time.
For employers in the health-care, manufacturing, group homes and transportation industries, there may be slight modifications or exceptions to these basic meal-period rules. Employers with questions about the meal-period rules applicable to their specific industry must consult with a human resources specialist or experienced employment law counsel.
Rest Period Rules
The Wage Orders adopted by the California Industrial Welfare Commission (IWC) state that employers must “authorize and permit” rest periods for all nonexempt employees whose total daily work time is at least 3.5 hours. These mandatory rest periods must be offered at the rate of 10 minutes for every four hours worked. So in the typical eight-hour workday, the employee would be entitled to receive at least two 10-minute breaks. An employer must treat rest periods as “hours worked,” and must pay employees during their breaks. Because employees receive compensation for rest periods, they can be required to stay on the employer’s premises during their rest breaks.
Much like the meal-period rules, several industry-specific exceptions and modifications exist to the rest-period requirements. Employees in group homes, certain unionized employees and employees of construction, drilling, logging or mining operations may have slightly different rest period requirements. As with the meal period rules, employers must seek professional assistance to determine which rules apply to specific industries.
Penalties
California employers face stiff penalties for violating the meal- and rest-period rules, and recent court decisions only increased the potential for large financial fines. Pursuant to California Lab. Code §226.7, statutory damages for meal- and rest-period violations are calculated at one hour of additional straight time pay for each employee for each work day the employer is out of compliance. Until recently, the Division of Labor Standards Enforcement (DLSE) and most appellate courts interpreted these statutory damages as “penalties,” subject to a one year statute of limitations.
Last year, in Murphy v. Kenneth Cole Productions, 40 Cal.4th 1094 (2007), the California Supreme Court held that employees’ damages for violations of Lab. Code §226.7 are “wages” subject to a three-year limitations period. Still other courts have permitted employees to file wage and hour class actions under California’s Unfair Competition Law (UCL), which allows plaintiffs to challenge “unfair” business practices going back four years. See Cortez v Purolator Air Filtration Prod., 23 Cal.4th 163 (2000).
A simple calculation illustrates the significance of this expanded limitations period. Consider an individual employee who makes $10 per hour, and who does not receive meal periods as required by law. With a one year statute of limitations, the employee’s maximum recovery would be roughly $10 x 5 (violations per week) x 52 (weeks per year), or $2,600.00. With a four year statute of limitations, the number quickly jumps to $10,400.00. If you expand these numbers to cover a class of 100 or 1,000 employees, these seemingly technical violations can add up to millions of dollars in potential fines.
Enforcement Obligations
One of the hottest issues in employment law during the past year is whether an employer is obligated to “authorize” or “require” employees to take meal and/or rest periods. The DLSE took the position that rest-period rules differ from meal-period requirements.
Since 2001, the DLSE’s enforcement position has been that employers have an must ensure that employees take timely meal breaks, and that employees are actually relieved of all duty and are not performing any work during the full 30-minute meal period. In contrast, the DLSE will not find a rest-period violation if an employee is “authorized and permitted” to take a rest break, even if the employee makes a decision (without coercion or encouragement) to waive the right to take a 10-minute rest period.
In 2006, a California appellate court applied the DLSE’s interpretation in the context of a meal- and rest-period class action. In Cicairos v. Summit Logistics, Inc., 133 Cal.App.4th 949, 963 (2006), the Court agreed with the DLSE and ruled that employers “have an affirmative obligation to ensure that workers are actually relieved of all duty” during meal periods. This standard imposes a significant burden on employers not only to adopt valid meal-period rules, but also to police the workplace and discipline employees who fail to take meal periods as required by law.
More recently, however, a number of federal district court cases have taken a different view and interpreted California Lab. Code §§ 512 and 226.7 as requiring only that an employer offer meal breaks, not that it actively ensure that workers are taking these breaks. See White v. Starbucks Corp., 497 F.Supp.2d 1080 (N.D. Cal. 2007); Brown v. Federal Express Corp., 2008 U.S. Dist. LEXIS 17125 (C.D. Cal. Feb. 26, 2008); Kenny v. Supercuts, Inc., 2008 U.S. Dist. LEXIS 43073 (N.D. Cal. June 2, 2008). As expressed by the Court in Brown, there is a public policy rationale underlying these federal decisions: “Requiring enforcement of meal breaks would place an undue burden on employers whose employees are numerous or who … do not appear to remain in contact with the employer during the day. It would also create perverse incentives, encouraging employees to violate company meal break policy in order to receive extra compensation under California wage and hour laws.”
The resolution of this debate could have a dramatic impact on an employer’s obligations to enforce its meal and rest period policies. If adopted by the California courts, the interpretation of California Lab. Code §§ 512 and 226.7 offered by the White court would require employers to simply adopt a valid written meal and break policy, and ensure that employees have the opportunity to take meals and breaks if they choose to do so. Ultimately, however, until the California Supreme Court (or the Legislature) weigh in on this issue, employers are advised to follow the DLSE’s current interpretation; i.e., take affirmative steps to ensure that employees take timely meal periods and that they are relieved of duty for a full 30 minutes.
Enforcement mechanisms should include maintaining accurate time records, including clocking “in” and “out” for meal breaks, and keeping notations for rest periods. Employers should also train their supervisors on meal- and rest-period enforcement guidelines, regularly audit time records for meal- and rest-period compliance and be prepared to discipline any employee who fails to comply with the employer’s written meal- and rest-break policy.