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Issue 1 - 2012 Newsletter

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    In This Issue:
  • Brinker Restaurant Corporation v. Superior Court (Hohnbaum): California Supreme Court Clarifies Meal and Rest Break Requirements
  • Mandatory Form for All California New Hires - Developments

Brinker Restaurant Corporation v. Superior Court (Hohnbaum): California Supreme Court Clarifies Meal and Rest Break Requirements

Background

On April 12, 2012, the California Supreme Court issued its long-awaited decision in Brinker Restaurant Corporation v. Superior Court (Hohnbaum) (Case No. S166350). In its unanimous decision, the court held that an employer must relieve an employee of all duty for the designated meal period, but need not ensure that the employee does no work during break periods. Further, an employer is obligated to provide a first meal period after no more than 5 hours of work and a second meal period after no more than 10 hours of work. Regarding rest breaks, an employee working 3.5 hours or more is entitled to 10 minutes rest for every four hours of work, or major fraction thereof (i.e., more than 2 hours). Employers have a duty to make a good faith effort to authorize and permit rest breaks in the middle of each work period, but may deviate from that preferred course where practical considerations render it infeasible.

Brinker Restaurant Corporation ("Brinker") operates a number of restaurants in California. Brinker had written policies regarding rest and meal breaks, as well as working off the clock. Under Brinker's written policy, employees were entitled to a 30-minute meal period when they worked shifts longer than 5 hours, and a 10-minute rest break for each 4 hours worked when an employee worked over 3.5 hours. Moreover, Brinker's "Hourly Employee Handbook" provided that employees were required to clock in and clock out for every shift they worked, were not allowed to begin work until they had clocked in, and were prohibited from performing off-the-clock work for any reason.

In 2002, the Department of Labor Standards Enforcement (DLSE) commenced an investigation into whether Brinker was complying with its meal and rest break obligations. After Brinker settled with the DLSE, Adam Hohnbaum and other named plaintiffs filed a class action, seeking to represent hourly employees who staffed Brinker's restaurants. Hohnbaum alleged that Brinker failed to provide employees with meal and rest breaks, and that employees were required to work off-the-clock and engage in time shaving. Class certification was sought for approximately 60,000 current and former Brinker employees in subclasses for each of the three claims: rest periods, meal periods, and off-the-clock work.

Rest Periods

Regarding the scope of an employer's duty to provide rest periods, the court addressed two issues: (1) the amount of rest time that must be authorized; and (2) the timing of rest periods. Brinker's rest periods duties were defined solely by the industry-specific Wage Orders issued by the Industrial Welfare Commission (applicable here, Wage Order No. 5). The court found that the text of the Wage Order was dispositive and clearly defined how much rest time had to be authorized. Under the rest break provisions in Wage Order No. 5, the court held that employees are entitled to 10 minutes' rest for shifts from 3.5 to 6 hours in length, two 10 minute rest periods for shifts of more than 6 hours up to 10 hours, three 10 minute rest periods for shifts of more than 10 hours up to 14 hours, and so on. An employee scheduled and working less than 3.5 hours for the entire day is not entitled to a rest break.

As to the timing of rest periods, the court held that employers have a duty to make a good faith effort to authorize and permit rest breaks in the middle of each work period, but may deviate from that preferred course where practical considerations render it infeasible. While the court declined to suggest specific considerations sufficient to justify deviation from middle-of-the-day rest breaks, the decision did provide that "shorter or longer shifts or other factors that render scheduling impracticable" may alter the general rule. As a general matter, however, one rest break should fall on either side of the meal period.

Meal Periods

In determining the scope of an employer's duty to provide meal periods, the court addressed two issues: (1) the nature of an employer's duty; and (2) the timing requirements. Significantly, the court ruled that under Wage Order No. 5 and Labor Code section 512(a), an employer must relieve the employee of all duty for the designated period, but need not ensure that the employee does no work. The employer satisfies its meal period obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break. An employer is also obligated not to impede or discourage an employee from taking his/her meal break. Additionally, an employer is not obligated to police meal breaks and ensure no work thereafter is performed. Bona fide relief from duty and the relinquishing of control satisfies the employer's obligations, and voluntary work performed by a relieved employee during a meal period does not thereby place the employer in violation of its obligations and create liability. However, keep in mind that rules regarding meal periods may vary depending on the industry or occupation and the corresponding Wage Order.

As to the timing of the second meal period, absent a waiver, Labor Code Section 512 requires a first meal period to start no later than the end of an employee's fifth hour of work, and a second meal period to start no later than the end of an employee's tenth hour of work. There is no requirement that work intervals be limited to five hours following the first meal period. Additionally, while an employee's first meal period must start after no more than five hours, employers may schedule meal periods at any time during the first five hours of work. Accordingly, employers have flexibility in scheduling meal periods between the time an employee's shift starts and the end of the fifth hour.

Off-the-Clock Work

With regard to the off-the-clock claim, the court ruled that no substantial evidence supported the trial court's certification of the off-the-clock subclass. While the rest period claim involved a Brinker policy that was allegedly in conflict with the legal requirements of the Labor Code and the governing Wage Order, Brinker's off-the-clock policy disavowed such work and was consistent with California law. Additionally, there was no evidence that Brinker pressured or required employees to perform off-the-clock work.

Record-Keeping Remains Important

Notwithstanding the court's decision, employers should remain attentive of their rest and meal break policies. Employers must take affirmative steps to minimize potential liability, including maintaining diligent records of meal breaks. Indeed, the concurring opinion reminds employers that if their records fail to show a meal period for a given shift over 5 hours, a rebuttable presumption arises that the employee was not relieved of duty and no meal period was provided. Moreover, if an employer relieves an employee of duty but the employee waives the opportunity to take a break, it is the employer's obligation to prove such circumstances existed.

Company Policies & Compliance with California Law

On all three of the claims, the California Supreme Court relied heavily on Brinker's company polices in deciding whether the claims should be certified and proceed as a class action. Specifically, the court found that because Brinker's company policies regarding meal breaks and off-the-clock work were compliant with California law, the class allegations could not be substantiated through common proof. On the other hand, the court ruled that the rest period subclass could continue as a class action because of Brinker's rest break policy. Brinker's uniform corporate rest break policy failed to account for the "major fraction" language of the Wage Order. As a result, the decision places an increasing amount of importance on establishing company policies that are in compliance with applicable law and imposed company-wide. Employers should have written policies regarding rest breaks, meal breaks and off-the-clock work, and must remain vigilant in keeping employee handbooks up-to-date. Note, however, that the court's holding also placed significance on whether evidence existed that the employer pressured or required employees to violate company policy. While maintaining compliant meal and rest break policies is a factor, it is important to ensure that such policies are not undermined by pressuring employees in ways that impede or omit breaks.

It is incumbent that all employers have their policies reviewed for legal compliance with the applicable Wage Order requirements and to clearly specify that off-the-clock work is not permitted. Managers should be trained as to proper implementation of the policies. Although policies cannot guarantee that an employer may not be sued by a disgruntled employee, properly crafted and implemented policies can act as a barrier to class action lawsuits.


Mandatory Form for All California New Hires - Developments

California's Wage Prevention Theft Act (the "Act"), Labor Code Section 2810.5, took effect on January 1, 2012. On December 30, 2011, the last business day before the Act became effective, the California Labor Commissioner posted on its web site 15 "frequently asked questions" ("FAQs") about the Act and the Labor Commissioner's responses to the FAQs appear to significantly expand employers' obligations.

Penalties for non-compliance include: a civil penalty pursuant to Labor Code Section 2699(f)(2) of one hundred dollars ($100) for each aggrieved employee per pay period for the initial violation and two hundred dollars ($200) for each aggrieved employee per pay period for each subsequent violation.

The Act requires employers to give covered, non-exempt employees a customized notice at the time of hire with the following specific information about their wages and other employment-related information upon hire:

  • The rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission, or otherwise, including any rates for overtime, as applicable;
  • Allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances;
  • The regular payday designated by the employer in accordance with the requirements of the Labor Code;
  • The name of the employer, including any "doing business as" names used by the employer;
  • The physical address of the employer's main office or principal place of business, and a mailing address, if different;
  • The telephone number of the employer;
  • The name, address, and telephone number of the employer's workers' compensation insurance carrier;
  • Any other information the Labor Commissioner deems material and necessary.

All non-exempt, private sector employees are covered by the Act for purposes of receiving the notice, except employees covered by a collective bargaining agreement that provides premium overtime rates and an hourly wage that is at least 30 per cent more than minimum wage. The notice must be provided to employees "in the language the employer normally uses to communicate employment-related information with the employee."

On December 29, 2011, the Labor Commissioner issued a template Wage Disclosure Notice form that employers may use, which can be found at www.dir.ca.gov/dlse/Governor_signs_Wage_Theft_Protection_Act.... The website includes translations into in five languages: Spanish, Vietnamese, Chinese, Korean, and Tagalog.

Going forward, if any of the above required notice information changes, the employer must provide the employees notice of these changes within seven days by: (1) providing a written amendment to the statement; (2) issuing an entirely new notice; or, (3) via paycheck stub, if the updated information is contained on the paycheck stub.

The Labor Commissioner also posted responses to Frequently Asked Questions

In the original FAQs, the Labor Commissioner stated that "The notice should be given to all current employees then to all new employees at the time of hire." (Original FAQ 2.) However, the Act itself talks only about "at the time of hire" and says nothing about giving the notice to current employees. Fortunately, the Labor Commissioner deleted this purported requirement in its current FAQs.

An important "addition" from the FAQs that is unchanged is that the notice must be a standalone document. This is quite important as some clients have indicated a desire to simply put the information in an offer letter and the statute was silent on this issue.

The FAQs are also very specific about requirements for electronic notice. If your company provides the notice electronically, there needs to be a system where the worker can acknowledge the receipt of the notice and print out a copy of the notice.

Another new point from the FAQs is that a signed notice does not constitute a voluntary written agreement between the employer and employee to credit any meals or lodging against the minimum wage. Any such voluntary written agreement must be contained in another separate document.

The FAQs failed to address many, significant unanswered questions about the notice form. These include: what does it mean for an employee to be employed pursuant to a "written" or "oral" agreement and what is meant by the Labor Commissioner's reference to businesses or entities that "administer wages or benefits." Accordingly, please contact employment counsel if you have any questions about how these or any other provisions of the notice apply to your company's particular situation.