Bad News For Employers: The California Supreme Court Disallows Rounding Meal Periods And Creates A Presumption That The Meal Period Law Is Violated When Time Records Show Late, Interrupted, Or Missed Meal Periods

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Background:

Under California law, employers must provide non-exempt employees with one 30-minute meal period that begins no later than the end of the fifth hour of work and another 30-minute meal period that begins no later than the end of the tenth hour of work. Cal. Lab. Code § 512; IWC Wage Order No. 4-2001, § 11(A). If an employer does not provide an employee with a compliant meal period, then “the employer shall pay the employee one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal . . . period is not provided.” Cal. Lab. Code, § 226.7; Wage Order No. 4, § 11(B). Employers must pay this penalty, also known as a “meal period premium,” every time a non-exempt employee takes a late meal period, is interrupted by work during a meal period, or misses a meal period. Should an employee voluntarily decide to forgo the employer-provided meal period, the employer need not pay a premium. However, if an employee is entitled to two meal periods and waives the first, the second meal period cannot be waived. Cal. Lab. Code § 512.

This requirement poses practical challenges for large employers with many non-exempt employees who need to take simultaneous meal periods for business efficiency purposes. If employees must exit for lunch in file, and/or clock out on a limited number of machines, not all meal periods will begin exactly on the hour. Similarly, if employees are left, literally, to their own devices, e.g., cell phones, to clock out, it is inevitable that not all employees will clock in and out precisely on the hour. In addition, requiring California employees to use personal cell phones for any work-related purpose, including simply clocking in and out, implicates employer reimbursement obligations. See Cal. Lab. Code § 2802. Prior to the Court’s decision in Donohue, employers programmed time keeping software to “round” to avoid this dilemma. For example, if a worker clocked in at 6:56am and clocked out at 12:02pm, the timekeeping software would “round” this time worked on the employee’s time records to reflect a 7:00am to 12:00pm shift.

In the seminal case, Brinker Restaurant Corp. v. Superior Court, 53 Cal.4th 1004 (2012), the California Supreme Court first held that if an employer’s records show no meal period for a given shift over five hours, a rebuttable presumption arises that the employee was not relieved of duty and no meal period was provided. The Court reasoned that this was consistent with an employer’s recordkeeping obligation with respect to meal periods. In other words, “the burden is on the employer, as the party asserting waiver, to plead and prove it.” Id. at 1052-53. The Court explained that this burden lies with the employer because “where the employer has failed to keep records required by statute, the consequences for such failure should fall on the employer, not the employee.” Id. at 1053.

The California Supreme Court Decision in Donohue v. AMN Services, LLC:

In Donohue v. AMN Services, LLC, the California Supreme Court decided two issues of law relevant to meal periods. First, the Court held that employers cannot round time punches, i.e., adjust the hours that an employee has actually worked to the nearest preset time increment, in the meal period context. Second, and far worse for employers, the Court held that time records depicting noncompliant (late, interrupted, or missed) meal periods raise a rebuttable presumption of meal period violations, including at the summary judgment stage of litigation.

In Donohue, the Court explained: “Donohue does not dispute that the rounding policy overcompensated the class by 85 work hours, as AMN’s expert concluded, when considering only compensation for time worked. Instead, the issue is whether AMN’s rounding policy resulted in the proper payment of premium wages for meal period violations.” Id. at 8-9. Per the Court, “The practice of rounding time punches for meal periods is inconsistent with the purpose of the Labor Code provisions and the IWC wage order. The text of Labor Code section 512 and Wage Order No. 4 sets precise time requirements for meal periods.” Id. at 12. The Court also noted that it had similarly “scrupulously guarded against encroachments on” 10-minute rest periods, id., at 12-13 (citing Troester v. Starbucks Corp., 5 Cal. 5th 829, 844 (2018)), concluding, “the same vigilance is warranted here. Given the relatively short length of a 30-minute meal period, the potential incursion that might result from rounding is significant.” Donohue at 13. The Court also reasoned that “[t]he premium pay structure…confirms that rounding is inappropriate in the meal period context” because employers are required to pay the same premium whether the violation is significant (e.g., a missed break) or minor (e.g., a one-minute late lunch). See id. at 13.

Reasoning that the “affirmative defense” of waiver goes to the merits of the case, the Court in Donohue held, “the presumption goes to the question of liability and applies at the summary judgment stage, not just at the class certification stage.” Id. at 24.

Why This Matters:

First, meal period premiums can be significant.

Example: If a company employs 100 non-exempt employees who work 8 hours per day, 5 days per week, all earning minimum wage ($14/hour) and each employee clocked out 1 minute late to lunch, or clocked back in 1 minute early from lunch, only 2 days per week, after only one month, the employer would pay $11,200 in meal period premiums (100 employees x $14/hour penalty x 2 lunches x 4 weeks), in addition to its regular payroll. In one year, that would be $134,400.

Second, if timekeeping records depict late, interrupted, or missed meal periods and the employer fails to pay the required premiums, in a class action alleging the same, the court now presumes the employer violated the law. The employer has the burden of rebutting this presumption.

What To Do Now?

As a practical matter, in the wake of Donohue, employers must ensure that all employees receive at least 30 minutes of uninterrupted, off-duty meal break time as required. If the time clock reads one or two minutes short, employers must either pay the premium or fight an uphill battle in court.

One way employers might protect themselves is by re-orienting work schedules to provide for 35+ minute unpaid meal breaks. This will not cost employers additional money because the meal period is unpaid. And, it would allow additional time for employees to clock in and out, significantly reducing the number of meal period premiums employers must pay any time a timesheet lists a late, interrupted, or missed meal period.

Regarding individuals who opt to forgo employer-provided breaks, employers cannot force breaks and must pay them for all time worked. As such, employers should require all individuals who voluntarily waive breaks to sign declarations attesting to the same.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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