Under California law, employers have an obligation to relieve their employees from work and provide them with one uninterrupted 30-minute meal period that begins no later than the end of the fifth hour of work and another uninterrupted 30-minute meal period that begins no later than the end of the tenth hour of work. If an employer fails to fulfill its obligation to provide an employee with such a meal period, then the employer must typically compensate the employee with an additional hour of pay at the employee’s regular rate of pay for each workday a meal period is not provided. Although these requirements seem straightforward, as many California employers know all too well, lawsuits alleging meal period violations are rampant and only seem to be increasing in frequency.
On February 25, 2021, the California Supreme Court issued its decision in Donohue v. AMN Services, LLC, S253677, resolving two separate questions of law relating to an employer’s obligation to provide meal periods. First, the Supreme Court held that employers cannot engage in the practice of “rounding” – i.e., adjusting the hours that an employee has actually worked to the nearest pre-set time increment – in the meal period context. The Supreme Court held that rounding unlawfully permits employers to avoid paying a one-hour premium penalty for missed or late meal periods. Second, the Supreme Court ruled that time records showing noncompliant meal periods raise a rebuttable presumption of meal period violations. Thus, if time records show a missed or late meal period, an employer, if sued, must show that it provided its employee an opportunity to take a 30-minute meal break before the end of their 5th hour of work but the employee chose not to take the meal break or chose to take a late meal break. Perhaps the only good news is that the Supreme Court gave guidance on how an employee’s certification of accurate time records prior to pay periods also can provide a defense to wage claims.
In Donohue, employer AMN used an electronic timekeeping system to track its employees’ compensable time. Specifically, the employees used their desktop computers to clock in and out, including at the beginning of each day, the beginning of lunch, the end of lunch, and at the end of each day. Notably, the timekeeping system rounded the employees’ time punches, including with respect to the beginning and end of their meal periods, to the nearest 10-minute increment.
In addition to tracking employees’ compensable time, AMN also used its electronic timekeeping system to manage potentially noncompliant meal periods. Prior to September 2012, AMN assumed a meal period violation if the time records showed a missed meal period, a meal period shorter than 30 minutes, or a meal period taken after five hours of work. Following the California Supreme Court’s decision in Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal. 4th 1004, AMN added a feature to its timekeeping system to present employees with a drop down menu whenever the time records reflected a missed, short, or delayed meal period, prompting the employees to select one of three options: (1) “I was provided an opportunity to take a 30 min break before the end of my 5th hour of work but chose not to”; (2) “I was provided an opportunity to take a 30 min break before the end of my 5th hour of work but chose to take a shorter/later break”; (3) “I was not provided an opportunity to take a 30 min break before the end of my 5th hour of work.” If the employee chose either of the first two options, AMN assumed the employee had been provided a compliant meal period. If the employee chose the third option, then AMN assumed a meal period violation and paid the employee accordingly.
In addition to the drop down menu, employees were also required to sign a certification at the end of each biweekly pay period, acknowledging that “[b]y submitting this timesheet, I am certifying that I have reviewed the time entries I made and confirm they are true and accurate. I am also confirming that… I was provided the opportunity to take all meal breaks to which I was entitled, or, if not, I have reported on this timesheet that I was not provided the opportunity to take all such meal breaks…”
In April 2014 plaintiff filed a class action lawsuit against AMN alleging various wage and hour claims, including meal period violations. Based in part on the certification submitted by employees at the end of each bi-weekly pay period, AMN successfully obtained a trial court order ruling that it had satisfied its obligation to provide employees with legally compliant meal periods. AMN also secured a ruling that its policy of relying on rounded time punches in the context of meal periods was permissible under California law.
A Court of Appeal affirmed the trial court’s judgment in AMN’s favor. In doing so, the Court of Appeal rejected plaintiff’s argument that time records showing missing, short, or delayed meal periods gave rise to a rebuttable presumption of meal period violations. The Court of Appeal also agreed with the trial court that it was permissible for AMN to use rounded time punches in the context of meal periods. Plaintiff appealed.
In reversing the Court of Appeal’s decision with respect to AMN’s policy of rounding, the California Supreme Court undertook a methodical review of the relevant sections of the Labor Code, IWC Wage Order as well as the corresponding legislative history to determine that rounding policies could not be validly applied within the context of meal periods. In short, the Supreme Court noted that the Labor Code and IWC wage order set forth “precise time requirements for meal periods.” The Supreme Court observed that the precision of these time requirements was at odds with the imprecise calculations that rounding necessarily involved, reasoning “[a] premium pay scheme that discourages employers from infringing on meal periods by even a few minutes cannot be reconciled with a policy that counts those minutes as negligible rounding errors.”
The Supreme Court also disagreed with the Court of Appeal concerning the effect of time records showing noncompliant meal periods, holding that such records raised a rebuttable presumption of meal period violations at summary judgment. The Supreme Court anchored its analysis in an employer’s already-existing obligation to maintain accurate time records.
In reaching this conclusion, the Supreme Court also rejected AMN’s argument that applying this presumption at the summary judgment stage would result in “automatic liability,” explaining that employers could still rebut the presumption by presenting evidence that employees were compensated for noncompliant meal periods or that they had in fact been provided compliant meal periods during which the employees chose to work. The employers’ evidence could be in the form of employees’ testimony and/or employee surveys.
Taken together, the twin holdings of the Supreme Court’s Donohue decision reinforce the importance of maintaining accurate time records. California employers must ensure that employees are provided a mechanism for accurately recording the beginning and end of their meal periods and, ideally, an opportunity to indicate whether they were provided a compliant meal period. Such information is absolutely critical to any employer hoping to overcome the analytical framework established by the court’s decision.
Ideally, employers should use an electronic timekeeping system that automatically identifies non-compliant meal periods based on time records and asks each employee to review their time records and certify whether they were (1) provided an opportunity to take a 30-minute meal break before the end of their 5th hour of work but chose not to, or (2) provided an opportunity to take a 30-minute meal period before the end of the 5th hour of work but chose to take a shorter or later break, or (3) not provided an opportunity to take a 30 minutes break before the end of the 5th hour of work. If an employee were to check no. 3, he or she should be paid a one-hour premium penalty. However, if an employee were to check nos. 1 or 2, the Supreme Court’s holding provides an affirmative defense even where time records were to show a missed or late meal break on time records. The technology is available today to permit this type of certification of time records prior to each pay period. Ironically, AMN’s certification would have been approved by the Supreme Court except for the rounding of time punches to the nearest 10 minutes, up and down, which did not accurately reflect late or short meal periods.
Questions
If you have any questions regarding this Legal Alert, please contact the following attorneys from our office or the attorney with whom you typically consult.
Bruce Scheidt
bscheidt@kmtg.com | 916.321.4502
Ian Sangster
isangster@kmtg.com | 916.321.4348