Court Of Appeal Raises The Stakes On Breaks: Meal Period And Rest Break Liability Doubled

Wage and hour class action lawsuits, including those focusing on meal periods and rest breaks, continue to be a source of significant exposure for California employers. Unfortunately, the specific rules are not easily navigable and often present a moving target for employers trying to develop compliant policies. In particular, employers should be aware that a California Court of Appeal as well as the U.S. District Court for the Central District of California recently held that nonexempt employees are entitled to up to two premium payments when an employer fails to provide both a meal and a rest period. In light of the high liability potential involved in these types of matters, employers are encouraged to work closely with employment counsel to ensure that their policies reflect current best practices.

In 2007, the California Supreme Court ruled in Murphy v. Kenneth Cole Productions, Inc.,1 that the one hour of pay assessed for missing a meal or rest break under California Labor Code Section 226.7 was construed as a premium payment, and thus subject to a three-year statute of limitations. Following this ruling, most employers (and even the California Chamber of Commerce) understood the potential exposure for missed meal periods and rest breaks to be a maximum of one hour of premium pay per workday in which one or more meal periods or rest breaks were not provided. Indeed, in Murphy, the California Supreme Court noted that Mr.Murphy frequently had not received either a meal period or a rest break, yet nowhere did the court indicate that Mr. Murphy was entitled to anything more than “one additional hour of pay” for any particular workday (emphasis added). A similar conclusion was reached by a federal court in Corder v. Houston’s Restaurants, Inc.,2 stating that the “plain wording of Section 226.7 is clear that an employer is liable per work day, rather than per break not provided.”

In an apparent departure from Murphy and Corder, the Court of Appeal in United Parcel Services, Inc. v. Superior Court recently ruled that employers will be responsible for up to two hours of premium pay per workday for each non-exempt employee who misses both a meal period and one or more rest breaks. While the increase in potential liability may not appear to be significant when limited to a single individual, it can be dramatic when determining potential exposure limits for class claims. For example, assume an employer is held liable for failing to properly provide meal periods and rest breaks to nonexempt employees, who each earn $25 per hour ($52,000 per year). Exposure in this instance under Labor Code Section 226.7 could be as high as $39,000 per employee—a total of approximately $1.9 million for an employer with 50 employees.3