The ability of hospitals to use meal period waivers was called into question by a 2015 Court of Appeal decision in Gerard v. Orange Coast Memorial Medical Center (Gerard I), which held that the provision in Wage Order 5 allowing waivers even when employees work over 12 hours was invalid. Following two more years of litigation, we can now inform you that the three-member panel that reached the 2015 decision in Gerard I, reversed itself on March 1, 2017 in Gerard II. In its new opinion, the Court of Appeal adopted Sheppard Mullin’s argument and confirmed that the special meal period rules for health care employees in Wage Order 5 are, in fact, valid.

While the case is not yet entirely over, because of the impact this decision has on all hospitals that use meal period waivers for employees who work long shifts, we believe it is important to share this significant news. We also suggest that you review all meal and rest period policies, practices, waiver forms, on-duty meal period agreements, collective bargaining agreements and related documents as soon as possible in light of this development and the Supreme Court’s recent decision in Augustus v. ABM (12/22/16). Below is more detailed information about the case and its development over the past nine years.

Background

The case involved nine years of litigation and a journey that passed through the Legislature as well as the Superior Court, the Court of Appeal and the California Supreme Court before the March 1 decision in Gerard II was released. The decision will allow hospital employees who work 12-hour shifts to enjoy the scheduling flexibility they desire and confine their work schedules to a span of 12 ½ rather than 13 hours. Likewise, hospitals will no longer face the threat of tens of millions of dollars in liability for meal period violations for simply relying on the California Industrial Welfare Commission (IWC) regulations, called Wage Orders, that allow health care employees to voluntarily waive one of their two meal periods when they work long shifts. Hospitals with collective bargaining agreements (CBAs) are also relieved of the disruption and problems that would have been caused whenever negotiated CBA provisions tracked the provisions in the Wage Order to allow meal period waivers.

The lawsuit began in 2008 with sweeping allegations of wage-hour violations by a respiratory therapist and two RNs who sought class certification and the opportunity to pursue representative claims under the Private Attorneys General Act (PAGA). The case included meal period, rest period, overtime, reimbursement, pay stub, final pay and unfair business practice claims. After we twice succeeded in defeating class certification before different judges and obtaining summary judgment on the PAGA claims, the plaintiffs appealed. They limited their challenges to the meal period issues in the case, asserting that the Wage Order authorizing health care employees to waive one of their two meal periods on long shifts, even if they slightly exceeded 12 hours, conflicted with the meal period statute and was thus invalid.

Gerard I

We encountered a three-judge panel on the appellate court that was persuaded by the plaintiffs’ misdirected arguments. In February 2015, that court reversed the summary judgment in Orange Coast’s favor, holding that the IWC’s special meal period rules for health care employees working 12-hour shifts were invalid. The decision raised enormous problems for the entire industry. In effect, any hospital that relied in good faith on the meal period regulations found invalid faced huge liability.

These issues were significant enough to seek and obtain review from the California Supreme Court and spearhead a legislative effort aided by the California Hospital Association (CHA) and designed to mitigate the problems for the industry. The Legislature passed urgency legislation later in 2015 that we helped CHA draft, SB 327, that supported our position by repudiating the court’s February 2015 holding and clarifying the statutes. However, because courts are charged with responsibility to interpret statutes, the matter did not end there and the California Supreme Court directed the Court of Appeal to reconsider its 2015 opinion.

Gerard II

On March 1, 2017, the same three-judge panel that issued the unfavorable ruling in 2015 acknowledged that the arguments we had pressed from the inception of the case were correct. In an unusual acknowledgement, it openly conceded its mistakes, found the regulations valid, reversed its 2015 ruling and affirmed the trial court’s rulings granting Orange Coast’s motions for summary judgment and the denial of class certification. This not only produced a great victory for our client, Orange Coast, it is a wonderful outcome for all hospitals and thousands of nurses and other health care employees who covet their scheduling flexibility. It simultaneously extinguished exposure to liability projected in the hundreds of millions of dollars for hospitals on a statewide basis.