This month’s key employment law cases address meal periods and payment of wages.

Kaanaana v. Barrett Business Servs., Inc., 29 Cal. App. 5th 778, 240 Cal. Rptr. 3d 636 (2018)

Summary: Absent valid on-duty meal period, shortened meal periods trigger additional hour premium and minimum wage for time employer required employees to work.

Facts: Plaintiffs, a class of belt sorters, worked for defendant staffing company that provided employees for two recycling facilities contracted by the Los Angeles County Sanitation District. Defendant had a policy which required class members to return to their stations from three to five minutes before the end of their thirty-minute meal periods. Based on this policy, plaintiffs alleged (1) failure to provide meal period premiums for meal periods that lasted less than thirty minutes; and (2) failure to pay for all time worked, including the minutes the belt sorters spent returning to their work stations (although not actually performing work). They argued that class members should be entitled to thirty minutes of pay at the minimum wage for each short meal period, waiting time penalties for failure to pay those wages, and civil penalties. Defendant claimed the minutes plaintiffs spent returning to their work stations was de minimis and not compensable. Defendant also claimed that the one-hour meal period premium under Labor Code section 226.7 could not form the basis for waiting time penalties or PAGA penalties under section 558 for noncompliant meal periods. The trial court found that section 226.7 provided the exclusive remedy for the shortened meal periods. Because no back wages were due, no waiting time penalties were awarded. However, the trial court awarded PAGA penalties but reduced them to thirteen percent of the full amount, approximately how much of their thirty-minute meal periods employees lost due to defendant’s policy.

Court’s Decision: The California Court of Appeal reversed. First, the remedy for defendants’ improper shortening of plaintiffs’ meal periods consisted of (1) an additional hour of premium pay for every shortened meal period, as provided under section 226.7, and (2) payment of wages for actual time worked during the shortened meal periods. Plaintiffs were not entitled to be compensated for that part of the meal period time during which they were free from employer control, nor were they entitled to a full thirty minutes of pay for a shortened meal period. Second, because plaintiffs were entitled to payment of minimum wages for the actual time they were required to work during their meal periods, defendants were subject to waiting time penalties. Third, defendants were subject to civil penalties under section 1197.1 for payment of wages less than the legal minimum. Finally, while defendant was subject to PAGA penalties for violations of both section 512 (the meal period claim) and section 1194 (the minimum wage claim), under section 2699(e)(2), the trial court could award a lesser amount than the maximum civil penalty amount specified if, based on the facts and circumstances, to do otherwise would result in an award that was unjust, arbitrary and oppressive, or confiscatory.

Practical Implications: California employers must be mindful that shortened meal periods not only can trigger the additional hour premium but may entitle employees to at least the minimum wage for the time the employer required them to work even if the working time was de minimis.

Gerard v. Orange Coast Memorial Med. Ctr., 6 Cal. 5th 443, 240 Cal. Rptr. 3d 757 (2018)

Summary: Industrial Welfare Commission had authority to adopt wage order permitting health care employees to waive second meal period for shifts exceeding twelve hours.

Facts: Plaintiffs were employed by defendant Orange Coast Memorial Medical Center, and regularly worked more than twelve-hour shifts. Defendant had a policy that allowed employees who worked ten or more hour shifts to voluntarily waive one of their two meal periods, even if their shifts lasted more than twelve hours. Plaintiffs admitted they signed such waivers. However, they sued defendant claiming that the second meal period waivers violated the Labor Code. Defendant claimed that the meal period waivers conformed to Industrial Welfare Commission (“IWC”) Wage Order No. 5, moved for summary judgment, and argued that there were no triable issues because plaintiffs were provided with meal periods as required by the wage order. The trial court granted the motion and a subsequent motion to deny class certification. After an initial round of appeals on an issue of statutory construction, the California Court of Appeal affirmed, holding that when an amendment to Labor Code section 516(a) was adopted, the IWC had already adopted a valid exemption to second meal periods for health care workers.

Court’s Decision: The California Supreme Court affirmed, concluding that the amendment to Labor Code section 516(a) did not invalidate section 11(D) of Wage Order No. 5, thus permitting health care workers who work more than eight hours to waive a second meal period. While the Legislature may generally determine that the waiver of a second meal period for employees who work more than twelve hours in a day is contrary to public policy, the Legislature did not intend to second guess the IWC’s determination in this specific instance that allowing health care employees to waive a second meal period is consistent with promoting their health and welfare.

Practical Implications: This decision is an important ruling for California health care employers, as it answers a question that has worked itself through the courts for the last ten years.

Donohue v. AMN Servs., LLC, 29 Cal. App. 5th 1068, 241 Cal.Rptr.3d 111 (2018)

Summary: Rounding policy was lawful where credible expert witness testimony established it was neutral and fair, and did not result, over a period of time, in failure to compensate employees for all time actually worked

Facts: Plaintiff brought a class action wage and hour suit against her former employer, defendant AMN Services. While employed as a nurse recruiter, time of non-exempt employees was tracked through a computer-based timekeeping system which rounded punch times to the nearest ten-minute increment. The trial court certified six classes of employees. The parties filed cross-motions for summary adjudication of various issues, the one relevant here being whether defendant’s timekeeping system—in particular its rounding policy—complied with California law. The trial court granted summary adjudication in favor of defendant because the rounding policy was facially fair and neutral and did not result, over a period of time, in the failure to compensate employees for all time actually worked.

Court’s Decision :The California Court of Appeal affirmed, determining that the methodology employed by defendant’s expert witness (who analyzed time records logged by 311 employees with more than 500,000 work-hours) was more credible than plaintiff’s expert who only analyzed uncompensated time as a result of short and delayed lunches. Thus, the trial court did not err in disregarding plaintiff’s expert testimony because he did not consider evidence that class members may have gained (and, in fact, did gain) compensable work time by the rounding policy, and therefore he did not offset the amounts of uncompensated time by amounts of time for which class members were compensated but not working.

Practical Implications: Rounding of time is lawful in California as long as policies are facially fair and neutral and, when averaged out, do not undercompensate employees. However, employers should consider rounding the shortest increments of time possible to reduce legal risks.