Effective Jan. 1, 2000, Assembly Bill 60 implemented a number of changes to California’s wage and hour laws. Many employers and their lawyers focused on the statutory restoration of daily overtime pay, which the Industrial Welfare Commission previously had abolished in several of its Wage Orders. As it turned out, though, AB 60’s sleeper issue was the relatively small section of the law devoted to meal periods. AB 60 codified existing regulations mandating meal periods. However, the Legislature determined that employers were not following the rules because there were no financial consequences. So, AB 60 included a requirement that employers pay one hour’s wages to employees who were not given a timely meal period in accordance with the law.

The potential liabilities – one hour of pay per employee per day – are huge. Penalties aside, payroll costs increase about 12 percent (an extra hour of pay assuming an eight-hour shift) for each employee who misses a couple of minutes of a meal period, starts it too late or answers the phone during the designated time off. But the California Supreme Court decided that the meal period “premium” was a wage and not a penalty. As a result, employers must add possible penalties for underpayment of wages, prejudgment interest and a statute of limitations of up to four years. The cost of non-compliance approaches a level for which the word “ginormous” was added to the dictionary.

Employers have spent millions of dollars in settlements and defense costs related to meal-period claims. Employment lawyers have written articles, conducted seminars and given copious advice. But eight years after AB 60 took effect, long after the novelty of the penalty provision should have worn off, meal-period litigation continues. Are employers merely stubborn? Are they not paying attention to the advice? Is there a collective desire to starve employees seeking sustenance?

No. A simple, well-intentioned law has turned into a hyper-technical gotcha game. Employers who have no objection to the concept of meal periods have been surprised by claims that the law demands exactitude regarding something as banal as when to eat lunch. There also are a number of exceptions to the law, each of which creates more potential for mistakes. Here are the rules, the pitfalls and a look into the future.

The Basic Meal-Period Requirement

Labor Code Section 512(a) contains the basic meal-period requirement: “An employer may not employ an employee for a work period of more than five hours per day without providing the employee with a meal period of not less than 30 minutes.” And “an employer may not employ an employee for a work period of more than 10 hours per day without providing the employee with a second meal period of not less than 30 minutes.”

The statute requiring compensation is contained in Section 226.7: “If an employer fails to provide an employee a meal period or rest period in accordance with an applicable order of the Industrial Welfare Commission, the employer shall pay the employee one additional hour of pay at the employee’s regular rate of compensation for each work day that the meal or rest period is not provided.”

These provisions are duplicated in the Industrial Welfare Commission Wage Orders applicable to most employers, subject to a few exceptions and modifications. Employers therefore must comply with the applicable Wage Order’s provisions, with the statutes quoted above providing a “floor.” Of note, Section 512 exempts certain employees in the baking and motion picture industries who are covered by collective bargaining agreements and whose employment satisfies certain other conditions.

Waivers and Exceptions

Employees may “waive” their right to meal periods, but only under the narrow circumstances allowed in the statute and Wage Orders. Employees who work fewer than six hours may voluntarily waive the meal period. Employees entitled to a second meal period (for working more than 10 hours) may waive it, but only if they work fewer than 12 hours, and if they took the first meal period in compliance with the law. Employees working “in the healthcare industry,” as defined in Wage Order 5, may waive one meal period if they work over eight hours. Some waivers must be in writing. Employees have the right to unilaterally cancel them with little or no notice.

Working through a meal period ordinarily is not permitted. However, if the “nature of the work” precludes the employee from taking a meal period, the employee can agree to an “on duty” meal period, for which the employee is paid, but no penalty is due.

Meal-Period Litigation

A primary litigation topic is whether the employer must force an employee to take a meal period of at least 30 minutes and before the end of five hours of work. Employees have claimed the employer must actively ensure the meal period occurs. Employers counter that it is enough to make the meal period available, and that the employee’s voluntary decision to forego it, take it late or cut it short should not result in the extra pay.

The courts have issued conflicting decisions so far. The Court of Appeal in Cicairos v. Summit Logistics, 133 Cal.App.4th 939 (2005), suggested that the employer is obligated to ensure the meal period is provided. Yet, the Court of Appeal in Bell v. Superior Court, 158 Cal. App. 4th 147 (Cal. App. 2d Dist. 2007), upheld denial of class certification in part because the employer did not prevent or forbid meal periods. And more than one district court has held that the employer’s only duty is to make a meal period available. See, e.g., White v. Starbucks Corp., 497 F. Supp. 2d 1080 (N.D. Cal. 2007).

Another frequently litigated issue is the “on duty” meal period. The law provides no guidance regarding the circumstances under which the “nature of the work” prevents an employee from taking a meal period. If an employee works alone is that sufficient, or must the employer bring in relief for 30 minutes or pay the extra meal-period premium? Is it enough that an employee volunteers to “work through lunch” because of a deadline or because a business is short on staff on a given day? The Division of Labor Standards Enforcement has advocated a rigorous standard that would permit on-duty meal periods only when the employee’s absence would cause serious damage to property or persons.

The law does not address a number of other issues that have been submitted to courts. These include whether a second meal period must occur within five hours of the end of the first meal period, and whether the initial meal period may be scheduled at any time during the first five hours of work.

Will the Legislature Step In?

Employers and their lawyers have criticized the meal-period law since the class action wave was a mere swell. This year, however, the Legislature appears ready to take some action to clarify the law. Senate Bill 1539 simply reads: “This bill would declare the intent of the Legislature to enact legislation to address issues related to meal periods in employment.” Assembly Bill 2530 would exempt certain truck drivers from the meal-period requirements. Assembly Bill 2719 would exempt workers’ compensation fraud investigators undertaking surveillance duties. Assembly Bill 1711 would specifically define when employees could take an “on duty” meal period without earning the one-hour penalty.

The most significant action the Legislature could take to curb excessive litigation would be to expressly provide that employers are not liable for paying the meal-period premium unless employees are forced to forgo a compliant meal period. As the courts have pointed out, employees should not be able to earn a whole hour of pay when they voluntarily, or even intentionally, forego a 30-minute, unpaid break, or take a 25-minute lunch or begin the meal period after five hours of work by their own choosing.

It is too early in the session to predict whether any new legislation will pass and be signed by the governor. Until then, employers seeking to avoid expensive additional pay and penalties employers must ensure they have an affirmative policy authorizing employees to take meal periods as required under the Wage Orders and Section 512. Managers must also be trained to ensure employees take meal periods timely when possible, just as they are trained to manage overtime.