Labor Code section 226.7

coffee breakCalifornia Labor Code section 226.7 provides that employees are entitled to receive premium wages in the form of one additional hour of pay at the employee’s regular rate of pay for a missed meal or rest break.

An employee who works more than three and one-half hours per day must be permitted to take a paid 10-minute rest period — during which the employee shall not be required “to work” — per every four hours of work or major fraction thereof.  An employee who works at least five hours must also be given a 30-minute unpaid meal break, during which the employee must be “relieved of all duty” if the meal period is not to be counted as time worked.

As the California Supreme Court recognized in Augustus v. ABM Security Services (2016), employers how cannot provide the required meal or rest breaks to employees have various options to comply with the law.  The Court stated:

Several options nonetheless remain available to employers who find it especially burdensome to relieve their employees of all duties during rest periods — including the duty to remain on call. Employers may (a) provide employees with another rest period to replace one that was interrupted, or (b) pay the premium pay set forth in Wage Order 4, subdivision 12(B) and section 226.7. (See Brinker, supra, 53 Cal.4th at p. 1039.)

As recognized by the Supreme Court, employers may consider voluntarily paying premium wages when it is questionable if an employee did not receive a compliant break or if they in fact missed the break.  Here are five issues employers should understand about the option of paying premium pay voluntarily1.

1. Employers potentially only owe two premium pay hours for each day worked.

The court in United Parcel Service, Inc. v. Superior Court (2011) concluded that the employer is liable up to two hours of premium wages – one hour for a missed meal break and one hour for a missed rest break – per day.  Even if the employee missed two rest breaks and one meal break in one day of work, the employee would only be entitled to one hour of premium pay for the missed rest breaks, and one hour of pay for the missed meal break, for a total of two hours of premium pay for that day.

2. Voluntarily making premium payments establishes that employer has effective open door policy.

By paying premium pay to employees who are not able to take breaks or complain that they have not been able to take breaks establishes that the company has an effective complaint procedure employees should utilize when any problems arise.  This presents an effective argument against any claims by employees after-the-fact that they were unable to take their breaks, and assert claims against the employer well after their employment ended.

3. Voluntary payment reduces potential liability.

The premium pay mentioned above is the penalty that is provided to the employee if they miss any of their required breaks.  Therefore, if the employer voluntarily pays the premium when the employee did not receive proper breaks, this will reduce the total potential liability owed to employees if sued.

4. Establishes that employer understands its legal obligations.

In making premium payments to employees who are arguably not able to take meal and or a rest break, establishes to any governmental agency or a plaintiff’s counsel that the company understands it obligations under the law and treats the obligations seriously.

5. If paid, it should be listed separately on employees’ paystubs to record payments.

It goes without saying that if the employer is taking this affirmative step, it needs to record the payments in a manner that makes it clear to the employee that the premium pay is being paid when breaks are missed.  In addition, the employer needs to have a record to establish all premium paid that could possibly be asserted by an employee has been paid out.

In Augustus v. ABM Security Services, Inc., the California Supreme Court issued a ruling on employer’s obligations to permit employees to take “off-duty” rest periods.  The Court’s ruling ends 2016 with a major ruling on issues surrounding rest periods under California law.

The plaintiffs worked as security guards for defendant ABM.  The employer required to the guards to keep their pagers and radio phones on at all times, even during rest periods, and to potentially respond to calls when needed.   The guards’ duties included when a building tenant wished to be escorted to the parking lot, a building manager had to be notified of a mechanical problem, or the occurrence of emergency situations.

The trial court “reasoned that a rest period subject to such control was indistinguishable from the rest of a workday; in other words, an on-duty or on-call break is no break at all,” and granted Plaintiff’s motion for summary judgment.  The trial court awarded approximately $90 million in statutory damages, interest, and penalties.    ABM appealed the trial court’s ruling, and was successful in having the trial court overturned, but the California Supreme Court granted review of the case.

The company argued that it provided the required rest breaks under California law because it only required that the guards keep their radios and pagers on in case they were needed to respond to a call.  For the last Friday’s Five article of 2016, here are five key lessons for California employers from the Supreme Court’s decision:

1. Generally, what are employer’s obligations to provide rest breaks under California law?

Employer’s obligations to provide rest breaks is found in Labor Code section 226.7, enacted in 2000.  As enacted, subdivision (a) provided:  “No employer shall require any employee to work during any meal or rest period mandated by an applicable order of the Industrial Welfare Commission.”  The Wage Orders generally require that employers must provide a 10-minute rest period per every four hours worked and the break should, whenever practicable, fall in the middle of the work period. (See Wage Order 4, subd. 12(A).  The rest period must also be paid, and the law does not require that employers record when the employee takes the rest period (unlike an employer’s obligation to record when 30-minute meal breaks are taken).

2. Does California law require employers to authorize off-duty rest periods? 

Yes.  The Supreme Court held that employers must provide employees with a paid rest break in which the employee is relieved from all work-related duties and free from employer control.  The Court examined the wage order at issue in the case, Wage Order 4, which provides, “Every employer shall authorize and permit all employees to take rest periods…. Authorized rest period time shall be counted, as hours worked for which there shall be no deduction from wages.”

The Court ruled that:

The most reasonable inference we can draw from the wage order and its context is instead that we should give the term its most common understanding – a reading consistent with requiring that employers authorize off-duty rest periods…. So, ordinarily, a reasonable reader would understand ‘rest period’ to mean an interval of time free from labor, work, or any other employment-related duties.

We accordingly conclude that the construction of Wage Order 4, subdivision 12(A) that best effectuates the order’s purpose and remains true to its provisions is one that obligates employers to permit –– and authorizes employees to take –– off-duty rest periods.  That is, during rest periods employers must relieve employees of all duties and relinquish control over how employees spend their time.

3. Can employers satisfy the obligation to relieve employees from duties and control during rest periods if the employer requires the employee to remain on call? 

No.  The Court ruled that “one cannot square the practice of compelling employees to remain at the ready, tethered by time and policy to particular locations or communications devices, with the requirement to relieve employees of all work duties and employer control during 10-minute rest periods.”  The Court made clear that the employee must be “free from labor, work, or any other employment-related duties.  And employees must not only be relieved of work duties, but also freed from employer control over how they spend their time.”

4. If employees are required to carry a pager or phone during a rest break and must monitor the device during the rest break, is the employee provided a compliant rest break? 

No.  If an employee “must fulfill certain duties [such as] carrying a device or otherwise making arrangements so the employer can reach the employee during a break, responding when the employer seeks contact with the employee, and performing other work if the employer so requests,” the employee does not have the freedom to use the rest period for their own purpose.  The court used examples that employees should be permitted to take “a brief walk – five minutes out, five minutes back,” take care of personal matters like “pumping breast milk… or completing a phone call to arrange child care.”

5. Is there some flexibility for employers to reschedule rest breaks when needed?

Yes.  The Court provided, “[n]othing in our holding circumscribes an employer’s ability to reasonably reschedule a rest period when the need arises.”  However, the Court failed to provide any other clarification of what is reasonable in rescheduling a rest period.  The Court did explain, however, that employers have “several options” when employers find it burdensome to relieve their employees of all duties during rest periods.  As examples of these options, the Court stated that employers can provide employees with another rest period to replace the one that was interrupted, or pay the premium pay of one hour at the employee’s regular rate of pay for missing the rest period.

Looking for more information about California employers obligations to provide rest and meal periods?  See my prior post on five reminders about rest breaks here, and the timing of meal and rest breaks under California law here.

As many California employers know, ignoring or failing to comply with the requirements of providing meal and rest breaks in California can create huge liability for companies. California law does allow for “on-duty” meal periods, whereby the employee takes a meal break, but while still working. Employers sometimes view this exception as an easy alternative to having employees clock out and leave the company’s premises for meal breaks. However, the on-duty meal break exception has been interpreted to apply only in a very limited set of circumstances, and needs to be carefully examined before implementing in a workplace.

Pursuant to Labor Code section 226.7 and the Wage Orders (for example Wage Order 4-2001, section 11(b)), each failure to provide the specified meal period entitles the employee to receive an additional compensation premium equal to one hour of pay.

The Wage Order provides for an “on duty” meal period that is an exception to the required meal break if the following requirements are met:

An "on duty" meal period shall be permitted only when the nature of the work prevents an employee from being relieved of all duty and when by written agreement between the parties an on-the-job paid meal period is agreed to. The written agreement shall state that the employee may, in writing, revoke the agreement at any time.

Wage Order No. 4-2001(a)(emphasis added). Unfortunately, the definition of the “nature of the work” is not clear, and the only real guidance California employers have on this issue is a Department of Labor Standards Enforcement (“DLSE”) opinion letter. Click here to download the opinion letter.

In the opinion letter, the DLSE addressed the issue of whether a shift manager in a fast food restaurant working the night shift would be allowed to take a “on duty” meal period. The DLSE began its analysis in stating that the off duty meal period is the default requirement, and any exceptions to this requirement should be narrowly construed.

The DLSE set forth factors it considered in determining whether the nature of the work prevents the employee from taking an off-duty meal period. The factors included:

  • the type of work
  • the availability of other employees to relieve the employee during a meal period
  • the potential consequences to the employer if the employee is relieved of all duty
  • the ability of the employer to anticipate and minimize these staffing issues such as by scheduling employees in a manner that would allow the employee to take an off-duty meal break and
  • whether the “work product or process” would be destroyed or damaged if the employee were given an off-duty meal period.

The DLSE concluded that based on the facts presented in the situation of the fast food restaurant, the nature of the work in the restaurant should not prevent the shift manager from being relieved of all duties for 30 minutes, and therefore the on-duty meal period would not be valid in this context.
In the class action setting, the issue of on-duty meal breaks has resulted in varying opinions. For example, the Ninth Circuit appellate court in Abdullah v. U.S. Security Associates, Inc. upheld the lower court’s granting of class certification on whether a security guard company’s use of on-duty meal period agreements was valid. Alternatively, a California appellate court, in Faulkinbury v. Boyd & Associates, Inc., upheld the denial of class certification for a case also involving on-duty meal period agreements for security guards. Implementing an on-duty meal period agreement in California needs to be approached with caution, and should only be done with assistance from knowledgeable counsel.

California Labor Code section 226.7 provides that employees are entitled to receive premium payment in the form of one additional hour of pay at the employee’s regular rate of pay for a missed meal or rest break. As the appellate court admitted in UPS v. Superior Court, this Labor Code provision is amenable to the two different interpretations offered by Plaintiff and Defendant.

Labor Code section 226.7 provides:

(a) No employer shall require an employee to work during any meal or rest period mandated by an applicable order of the Industrial Welfare Commission. [¶] (b) 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.

Plaintiff argued that section 226.7 allowed the recovery of two hours of premium wages if a meal and a rest break were not provided. Defendant argued that the language of section 226.7 only allowed Plaintiff to recover one hour premium wage, regardless if the Plaintiff did not receive both a rest and a meal break. The appellate court reviewed the legislative history and administrative history of the applicable Industrial Welfare Commission wage orders, and concluded that the employer is liable up to two hours of premium wages – one hour for a missed meal break and one hour for a missed rest break – per day.