This week, the California Supreme Court agreed to review the decision in Gerard v. Orange Coast Memorial Center, No. G048039 (February 10, 2015), where the California Court of Appeal partially invalidated the Industrial Welfare Commission (IWC) wage order provision that allows employees in the health care industry to waive one of two required meal periods on shifts longer than eight hours. The Court of Appeal reasoned that the wage order provision conflicted with a state meal period statute prohibiting employees from waiving a second meal period when the shift extends beyond 12 hours. In granting review, the California Supreme Court will consider whether the health care industry meal period waiver provision originally adopted in 1993 remains lawful under Labor Code section 512, which was added to the Labor Code in 2000. In what will be of great interest to health care industry employers who have relied upon the waiver provisions for over 20 years, the Supreme Court will also consider whether the Court of Appeal’s decision invalidating the waiver should be applied retroactively. Of course, a retroactive application of a ruling invalidating the waiver may expose employers to considerable exposure for meal period violations.

Background

Orange Coast Memorial Center had a policy that allowed health care employees who worked shifts that were longer than 10 hours to voluntarily waive one of their two meal periods—even if the employees’ shifts lasted longer than 12 hours. Several of the hospital’s former employees, who had signed second-meal period waivers, filed suit against the hospital. One of the employees sued on behalf of herself and others under the Private Attorneys General Act of 2004 (PAGA), and two other former employees sought class certification.

The workers claimed that they were scheduled to work shifts longer than 12 hours and were required to work for periods longer than 10 hours without a second uninterrupted 30-mintue meal period. The health care employees argued that the hospital violated the applicable IWC orders and section 226.7 and 512(a) of the California Labor Code. In particular, the workers argued that section 512(a) allows second-meal-period waivers only if the total hours that the employee works is not over 12. On the other hand, section 11(D) of IWC Wage Order No. 5-2001, the employees argued, sanctions second-meal-period waivers for health care employees who work shifts that are longer than 12 hours and thus that section 11(D) is partially invalid as conflicting with section 512(a). The lower court granted summary judgment against the PAGA plaintiff and denied class certification on the other two plaintiffs’ claims.

The Statutory Scheme

California Labor Code Section 512(a)

Section 512(a) of the Labor Code entitles employees to a second meal period if they work more than 10 hours per day. If such employees work “no more than 12 hours,” the second meal period may be waived by mutual consent as long as the first meal period was not waived.

California Labor Code Section 516

Section 516 states that, “[e]xcept as provided in Section 512,” the IWC may adopt or amend working condition orders with respect to meal periods.

IWC Wage Order No. 5-2001, section 11(D)

Section 11(D) states that health care employees who work shifts in excess of eight hours in one workday “may voluntarily waive their right to one of their two meal periods.”

The Court of Appeal’s Ruling

The principal issue before the appellate court was the validity of section 11(D). The court first rejected the hospital’s argument that the language in section 11(D) and 512(a) was consistent. The court found that “there is a conflict between the plain language of section 11(D) and the plain language of section 512(a).” In this respect, the court found, section 11(D) contravenes section 516’s limitation (“[e]xcept as provided in Section 512”) on the IWC’s authority to adopt or amend working condition orders.

The court’s analysis relied on the legislative history of the statutory provisions and wage orders. The hospital argued that Wage Order No. 5 was adopted in June of 2000—before section 516 was amended to limit the IWC’s authority, which occurred just a few months later in September of 2000. The hospital argued that because Wage Order No. 5 was adopted first, the amended version of section 516 must be irrelevant. Instead, the court reasoned that Wage Order No. 5 is subject to the amended section 516 because it became effective (as opposed to merely adopted) in October of 2000.

The court also noted that although the 2008 Supreme Court of California decision in Brinker Restaurant Corp. v. The Superior Court of San Diego County recognized the conflict between 11(D) and 512(a), it “did not discuss, let alone decide, whether the IWC exceeded its authority by enacting section 11(D).”

Thus, the California Court of Appeal ruled that section 516 does not authorize the IWC to enact wage orders inconsistent with section 512 and that the IWC may not create additional exemptions from the meal period requirement beyond those provided by the state legislature. As a result, the court held that the IWC exceeded its authority, and the court declared that section 11(D) was partially invalid to the extent that it authorized health care workers to waive their second meal periods on shifts lasting longer than 12 hours. Furthermore, the court ruled that the issue of whether the partial invalidation of section 11(D) must be given retroactive effect must be litigated on remand.

Practical Impact

The California Supreme Court’s decision to review this case is a welcome development because the appellate decision relies upon some questionable analysis of the impact of the state statute, effective in 2000, on the longstanding wage order provision, which has been in place and followed by hospital employers since 1993. Most significantly, the Gerardcourt held that its interpretation partially invalidating the wage order provision was to have retroactive effect, thus exposing hospital employers to possible liability for failure to provide a second meal period under the wage order, notwithstanding the fact that the wage order itself does not even require a second meal period! Since review was granted, the appellate decision may not be cited in support of the position that the health care industry meal period waiver is unlawful. Healthcare employers should confer with counsel in determining how to proceed until further guidance can be provided by the Supreme Court on this issue.  It may be several years before the California Supreme Court issues its decision in this case.