Employers may be exposed to three years of liability for failure to provide meal or rest periods

In the unanimous decision of Murphy v. Kenneth Cole Productions, Inc., the California Supreme Court recently held that employers may be exposed to three years of liability for failure to provide meal and/or rest periods.

Background and Holding

From June 2000 to June 2002, Plaintiff John Paul Murphy (“Murphy”) worked as a store manager in one of Defendant Kenneth Cole Productions, Inc.'s (“Kenneth Cole”) retail stores, where he rarely took uninterrupted, duty-free meal or rest periods. In 2002, Murphy resigned from his position with Kenneth Cole and successfully sought relief against the company for overtime violations in an action before the Labor Commissioner. Kenneth Cole appealed the Labor Commissioner's ruling to the San Francisco Superior Court, at which point Murphy asserted additional claims for meal and rest period violations. The trial court agreed with the Labor Commissioner regarding the overtime violations, and also concluded that Kenneth Cole improperly failed to provide meal and rest periods in violation of Labor Code section 226.7. In doing so, the trial court concluded that the remedy provided by Labor Code section 226.7 for failure to provide meal/rest periods is a wage subject to a three-year statute of limitations and not a penalty subject to a one-year statute of limitations. Kenneth Cole appealed. The Court of Appeal reversed the trial court's ruling with regard to meal and rest period violations and concluded that payments assessed under Labor Code section 226.7 are penalties subject to the one-year statute of limitations. The California Supreme Court granted Murphy's petition for review.

California law requires employers to provide meal and rest periods to employees who work a certain number of hours in a day. If an employer fails to provide meal/rest periods, Labor Code section 226.7 states that “the employer shall pay the employee one additional hour of pay at the employee's regular rate of compensation for each workday that the meal or rest period is not provided.” Prior to the Murphy ruling, California courts disagreed as to whether Labor Code section 226.7's “one additional hour of pay” remedy resulted in a wage subject to Code of Civil Procedure section 338's three-year statute of limitations, or a penalty subject to Code of Civil Procedure section 340's one-year statute of limitations. On April 16, 2007, the Court ended the debate when it unanimously concluded that the remedy constitutes a wage or “premium pay” governed by the three-year statute of limitations.

In reaching this conclusion, the Court analyzed Labor Code section 226.7's statutorily “ambiguous” language, administrative and legislative history, and the functional “compensatory” nature of the remedy. Assembly Bill No. 2509, the predecessor to Labor Code section 226.7, initially proposed a dual payment structure: (1) a $50.00 civil penalty paid to the Labor Commissioner for each violation, and (2) a separate payment to the employee equal to twice the employee's average hourly rate of compensation for the full length of the meal or rest period during which the employee was required to perform any work. After amendments, the $50.00 penalty provision was deleted. This deletion, the Court concluded, is evidence the Legislature did not intend the remedy to be a penalty, but instead intended a wage payable to the employee. The Court further explained that, had the Legislature intended the remedy to be a penalty, it could have done so by labeling it a penalty as it has in other statutes, e.g., Labor Code section 203's waiting time penalties.

Next, the Court undertook a “functional” analysis of the statute and swiftly rejected Kenneth Cole's contention that the remedy should be considered a penalty because it seeks to shape employer behavior in addition to compensating the employee. Other Labor Code provisions, such as those addressing overtime pay and split-shift pay, serve a similar dual function and are not considered penalties. The Court rejected Kenneth Cole's contention that the remedy is a penalty because it is imposed without reference to actual damage since an hour of pay is owed whether the employee missed an unpaid 30-minute meal period, two paid 10-minute rest periods, or some combination thereof. The Court opined that the monetary value of the harm to employees who do not receive meal and/or rest periods is difficult to ascertain. As a result, the Legislature is free to select a set amount of compensation without converting that remedy into a penalty.

Following the Court's decision in Murphy , employees may now seek damages under Labor Code section 226.7 for three years of meal and rest period violations.

What Should Employers Do?

•  Update all employee handbooks and other new hire materials to include meal and rest period policies which identify the number and length of each break; verbally reiterate these policies during orientation; regularly redistribute these policies to existing employees and counsel managers to enforce the policies

•  Require all non-exempt employees to take meal and rest periods and monitor whether employees actually do so for the requisite period of time , e.g., at least 30 minutes for each meal period; if possible, schedule and stagger these breaks for each employee

•  Include a rest period acknowledgement statement with each timecard or time sheet indicating that the employee was permitted to take all authorized rest periods on each work day for the requisite period of time; ensure that all non-exempt employees clock out during their meal periods

•  In the event an employee misses a meal or rest period, pay the employee the one-hour wage premium set forth under Labor Code section 226.7

•  Insist upon a second meal period waiver form for all employees who work between ten and twelve hours in a day

•  Retain all timecards, acknowledgment forms, and other related records for four years; although employees generally have three years to file a meal/rest period claim under Labor Code section 226.7, the Unfair Competition Law (Business and Professions Code section 17200 et seq. ) may extend related claims to four years

 

 

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Please note that the information contained in this newsletter is not intended to provide specific legal advice. You should consult with an attorney and not rely on any information contained herein regarding your specific situation.