New Wage and Hour Ruling Welcomed by Employers

The California Court of Appeal recently overturned a class certification order in a lawsuit brought by a group of hourly, non-exempt employees who claimed that they were denied rest and meal periods and were forced to work off the clock.  In a key ruling, the court held that employers “need not ensure meal breaks are actually taken, but need only make them available.”  The court also held that the employer’s practice of providing an “early lunch” within the first hour of an employee’s shift did not violate California law, even where the employee might then have to work in excess of five consecutive hours without an additional meal period.  The court found such “rolling five-hour” meal periods to be inconsistent with the plain meaning of the Labor Code.  In addition, the court found that employers are liable for off-the-clock work only if they “knew or should have known” employees were working.

Finally, the court agreed with several recent decisions holding that individualized issues predominate in meal, rest period and off-the-clock claims. In such cases, individualized issues will predominate, for example, where it must be determined whether employees missed meal breaks as a result of supervisor coercion or the employee’s uncoerced choice to waive a meal break and continue working.  Brinker Restaurant Corp. v. The Superior Court of San Diego County, No. D049331, California Court of Appeal (July 22, 2008).
 
Factual Background

Brinker Restaurant Corp. (BRC) operates 137 restaurants in California, including Chili’s Grill & Bar, Romano’s Macaroni Grill and Maggiano’s Little Italy.  The company also owned Cozymel’s and Corner Bakery Café, but those chains were sold in 2003 and 2006, respectively.

Under the company’s written policy, employees are entitled to a 30-minute meal period for shifts that exceed five hours.  With regard to rest breaks, employees that work more than three and one-half hours during one shift are eligible for one 10-minute rest break for every four hours worked.  The policy also provides that any violation “may result in disciplinary action up to and including termination.”

The BRC handbook further states that it is the employee’s responsibility to clock out for every shift and that “[w]orking ‘off the clock’ for any reason is considered a violation of Company policy.”  According to the handbook, employees must immediately notify a manager if they forget to clock in or out or if they believe that their time records are not recorded accurately.

A group of hourly employees filed suit against BRC for failing to provide rest and meal breaks and forcing employees to work “off the clock” during their meal periods. The employees alleged that BRC violated California law by providing early meal periods (i.e., within the first hour of their shift), and not providing additional meal periods for each five hours worked thereafter.  The trial judge certified a class of nearly 60,000 workers, finding that “common questions regarding the meal and rest period breaks are sufficiently pervasive to permit adjudication in this one class action.”  BRC then asked the California Court of Appeal to review the trial judge’s decision.

Legal Background

Under California law, most employers are required to provide meal and rest breaks to their hourly, non-exempt employees.  California Labor Code section 512(a) provides that “[a]n employer may not employ an employee for a work period of more than five hours per day without providing the employee with a meal period of not less than 30 minutes.”  An employee may waive his or her right to a meal period, however, if the employee does not work more than six hours in a workday.  Section 512(a) also provides that an employee is entitled to a second 30-minute meal period if he or she works more than 10 hours in a workday.  This second meal period can be waived only if “the total hours worked is no more than 12 hours” and the employee did not waive the first meal period.  The Industrial Welfare Commission (IWC) wage order for the restaurant industry (5-2001) contains a similar requirement.

IWC Wage Order No. 5-2001 also provides that employers “shall authorize and permit all employees to take rest periods, which insofar as practicable shall be in the middle of each work period.”  Employees are entitled to one 10-minute paid rest break for every four hours worked (or “major fraction thereof”) and the total number of rest breaks is “based on the total hours worked daily.”  Thus, if an employee works an eight hour workday, he or she is entitled to two rest breaks (in addition to a 30-minute unpaid lunch period).  A rest period need not be provided, however, to employees whose total daily work time is less than three and one-half hours.  These provisions also are incorporated in the state regulatory code (Regulation 11050(12)(A)).

Legal Analysis

The workers argued that BRC violated state law by failing to provide them with a 30-minute uninterrupted meal period for every five consecutive hours of work.  Thus, if workers were required to take their meal periods soon after they arrive for their shifts (usually within the first hour), they should be entitled to a second meal period five hours after they return to work from the first meal period.  The workers also claimed that BRC had an affirmative duty to ensure that they were relieved of all duty during their meal period.

The California Court of Appeal rejected the workers’ meal period claims.  First, the court held that employers need only make meal periods available to employees, not “ensure” that they are taken.  Second, the court found the so-called “rolling five-hour” requirement was inconsistent with the plain meaning of Labor Code section 512 and the applicable wage order.  According to the court, “Section 512(a) . . . plainly provides that an employer in California has a statutory duty to make a first 30-minute meal period available to an hourly employee who is permitted to work more than five hours per day, unless (1) the employee is permitted to work a ‘total work period per day’ that is six hours or less, and (2) both the employee and the employer agree by ‘mutual consent’ to waive the meal period.”  To hold otherwise, the court continued, would render the term “per day” in the first sentence of Section 512(a) “surplusage” as would the phrase “[a]n employer may not employ an employee for a work period of more than 10 hours per day without providing the employee with a second meal period.”

The workers also claimed BRC unlawfully failed to provide them with rest periods.  The Court of Appeal first noted that the phrase “per four (4) hours or major fraction thereof” does not mean that a rest period must be provided to workers every three and one-half hours.  According to the court, “rest breaks must be given if an employee works between three and one-half hour[s] and four hours, but if four or more hours are worked, it need be given only every four hours.” 

Moreover, the court held that employers are only required to authorize and permit rest periods (which may or may not occur in the middle of each work period depending on the nature of the work or the circumstances of a particular employee).  An employer may not, however, impede, discourage or dissuade employees from taking rest periods.  Based on this interpretation, the court concluded that BRC was not required to provide workers with a first rest period before the first scheduled meal period.

Finally, the court acknowledged that an employer can only be held liable for “off the clock” work if the employer knew or should have known the employee was working off the clock.  Furthermore, as with the rest and meal period claims, the workers’ off-the-clock claims “are not amenable to class treatment because, once the elements of those claims are considered, individual issues predominate.”  Thus, the order certifying the class was vacated.

Practical Impact
 
According to Douglas Farmer, a shareholder in Ogletree Deakins’ San Francisco office: “The Brinker case provides important relief for employers with large workforces, or employees not in regular contact with the employer during the workday.  Employers now need only ‘make available’ meal and rest periods, and need not ‘ensure’ they are taken.  While employers still cannot ‘impede, discourage or dissuade’ employees from taking rest and meal periods, gone are the financial incentives that have encouraged employees to violate company meal break policies in order to receive extra compensation for violations of California’s meal and rest period laws.  As a result, employers can expect to see fewer class action meal and rest period cases certified due to the highly individualized inquiry surrounding why the meal or rest period was not taken.  A demanding job, standing alone, will no longer support a claim for meal and rest period violations.”

In light of these developments, employers should consider taking the following proactive steps:

• Immediately review meal and rest period policies to ensure they are consistent with the decision.
• Personnel policies should expressly “authorize and permit” meal and rest periods as required by state law.
• Personnel policies should emphasize that no employee may be impeded, discouraged, or dissuaded from taking required meal and rest periods.
• Employers should be alert to specific policies or practices that discourage or dissuade employees from taking meal and rest periods.
• Employers adopting practices authorized by the decision, such as “early lunching” in the first hour of employment, permitting a first meal period after the first 5 hours in a workday, and not providing meal periods for extended periods after an “early lunch” has taken place, should closely monitor the continuing validity of the case in light of possible Supreme Court review.

  Note: This article appeared in the August 18, 2008 issue of the California eAuthority.