Court of Appeal Clarifies
Proper characterization of
Meal and Rest Time Premiums
The Confusion That Existed
Most
employers are aware that failing to comply with meal and rest time
provisions may require the employer to pay an additional hour of pay to the
employee for each day that a violation occurred. Specifically, Labor Code
section 226.7 provides that
[I]f an employer fails to provide an
employee a meal period or rest period in accordance with an applicable
order of the Industrial Welfare Commission, the employer shall pay the
employee one additional hour of pay at the employee’s regular rate of
compensation for each work day that the meal or rest period is not
provided.
Unfortunately,
the "additional hour of pay" language of section 226.7 has been
the source of some confusion. The focus of the confusion is whether the
additional pay should be treated as wages or, instead, a penalty.
Certainly, a literal reading of this language allows the conclusion that
additional wages are being paid. An argument can therefore be made that the
provision seeks to reimburse the employee for breaks he/she was supposed to
receive. On the other hand, given that the meal time provision only require
a thirty (30) minute period of time and required break times are only ten
(10) minute periods for every four (4) hours of work, the additional one
(1) hour of pay required under section 227.6 does not appear to reflect
actual time worked. From that perspective, the extra pay does not resemble
wages, but rather a penalty.
Adding
to the confusion, the California Division of Labor Standards Enforcement
(DLSE) and the Courts have provided conflicting interpretations. In June
2003, the DLSE took the position that the meal and rest break payments were
a premium wage and not a penalty. Later, the DLSE changed its position in
June 2005 (Case Number 12-56901RB), stating that it is a penalty. In
contrast, a federal court, interpreting California law, Tomlinson v. Indymac Bank, FSB (C.D.Cal.
2005) 359 F.Supp.2d 891, concluded that the meal period sanction was not a
penalty.
Fortunately,
in December 2005, the California Court of Appeal, First District, clarified
the issue in Murphy v. Kenneth Cole Productions, Inc. (2005) 134
Cal.App.4th 728. The Court of Appeal issued a ruling that clarified that
the sanction for missed meal and rest periods stated in Labor Code 226.7 is
a penalty – and not compensation. The Murphy Court explains,
That payment is not compensation for
labor performed, but is an arbitrary amount imposed on the employer in
addition to the salary already paid during the time the employee was not
eating or not resting. It is not overtime pay for an allowed work period,
but a penalty for violating the law that prohibits work during those times.
Significance of Extra Pay as a Penalty
The
significance of the Murphy
Court's ruling is more than academic. It can have
a real impact on the actual value at stake for both the employer and
employee in a wage dispute involving meal and rest time issues. Most
notably,
- The statue of
limitations for recovery of a penalty is only one (1) year under
C.C.P. § 340. The window of recovery for meal and rest time period
violations has therefore been significantly reduced, given that claims
for unpaid wages are generally subject to a three (3) year statute of
limitations under C.C.P. § 338(a).
- As a penalty, an
employee cannot seek to recover this amount in an Unfair Business
Practices Act lawsuit under Business & Professions Code §17200.
Section 17200 claims have become more common in employment cases
because they carry a four (4) year statute of limitations and also
allow, in certain instances, a means for a claimant to seek recovery
on behalf of other similarly situated employees. In the wage and hour
context, section 17200 claims can only seek money in the form of
restitution of unpaid wages. As meal and rest time penalties are not
wages, they are arguably exempt from a section 17200 claim.
- On a practical
level for employers, this payment should not be treated as
compensation for overtime calculations and regular rate of pay
calculations.
The
DLSE has made clear that the maximum penalty that can be levied for meal
time and rest time violations is one (1) per day for a meal time violation
and one (1) per day for a rest time violation, even if more than one rest
period was mandated for that day. Notwithstanding, meal time violations and
rest time violations are treated separately, so a maximum of two (2) hours
per day is possible if both meal time and rest time violations occur on the
same day.
Summary of Meal and Rest Time Requirements
Meal
Periods
Each
Wage Order promulgated by the Industrial Welfare Commission (except Wage
Order 16) contains the same requirements for meal times. First, an employee
who works more than five (5) hours in a shift is entitled to a meal period
of not less than thirty (30) minutes. An exception exists if the work
period is not more than six (6) hours, in which case the meal period may be
waived by mutual consent of the employer and employee.
Unless
the employee is relieved of all duty during a thirty (30) minute meal
period, the meal period is considered an "on duty" meal and
counted as time worked. An "on duty" meal period is only
permitted when the nature of the work prevents an employee from being
relieved of all duty and when by written agreement an on-the-job meal
period is agreed to. Such an agreement must expressly provide that the
agreement may be revoked at any time.
An
employer may not employ an employee for a work period of more than ten (10)
hours in a workday without providing a second meal period. The second meal
period may be waived if the total number of hours worked are no more than
12 hours and the first meal period has not been waived. (Labor Code § 512;
DLSE Enforcement Manual § 45.2.3.)
Employees
in certain health care industries or subject to collective bargaining agreements
may be subject to variances of these requirements.
Rest
Periods
All
employees are required to take a paid rest period at the rate of ten (10)
minutes net rest time per four (4) hours of work or major fraction thereof.
This does not apply to work schedules of less than three and one-half (3 ½)
hours in duration. The DLSE takes the position that the language
"major fraction thereof" refers to time in excess of two (2)
hours. (Opinion Letter 1999.02.16.)
Some Helpful Reminders
An employer should always maintain accurate records of the hours
actually worked by an employee.
Often
the employee does not have an accurate record of the specific days and will
instead describe general practices from which a conclusion can be reached
that meal times were not given. An employer will not make much headway by
arguing that it has no records regarding whether or not an employee took
meal time breaks. If a current system is not in place to track hours
worked, it may be time to update the employer’s system.
Do Not Rely On Employees to Self-Police Their Meal/Break Time
Periods.
Similarly,
relying on employees to self-police their own meal time and break time
periods is simply a bad idea. It is the employer’s responsibility to ensure
that meal time periods and break time periods are taken in accordance with
law. Some sort of system should be in place to document when meals and
breaks are taken. If a time-clock system is used, employees should punch in
and out for meal times. For break time periods, even though an employee is
being compensated and therefore will not clock out, a notation should be
required by the employee on the time card reflecting when they took their
break and when they returned. Whatever system is in place, the records
should be reviewed regularly by supervisors with an eye toward spotting
violations and correcting them.
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