BILL ANALYSIS Ó
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Date of Hearing: April 20, 2016
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Roger Hernández, Chair
AB 1948
(Wagner) - As Amended March 28, 2016
SUBJECT: Compensation: meal and rest or recovery periods
SUMMARY: Makes changes to provisions of existing law providing
a statutory remedy for an employer's failure to provide a meal
or rest or recovery period as required under existing law.
Specifically, this bill:
1)Provides that the requirement to pay an additional hour or pay
for each day that a meal or rest or recovery period is not
provided shall be the entire "penalty amount" awarded to the
employee, as specified.
2)Provides that payment of the additional hour of pay shall be
considered a "penalty" for all purposes, including, but not
limited to, the statute of limitations on an action.
EXISTING LAW:
1)Prohibits an employer from requiring an employee to work
during a meal or rest or recovery period mandated pursuant to
existing law.
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2)Provides that if an employer fails to provide an employee a
meal or rest or recovery period in accordance with existing
law, 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 or recovery period is not
provided.
FISCAL EFFECT: Unknown
COMMENTS: This bill addresses issues related to a specified
statutory remedy for an employer's failure to provide a meal or
rest or recovery period as required by existing law. Although
the current remedy applies to the failure to provide a meal or
rest or recovery period, the provisions related to meal periods
have garnered most of the attention in recent years and, for
several years, garnered much proposed regulatory and legislative
action.
Brief Background on Meal Periods
California law currently regulates meal periods of employees via
statute and regulation. The Industrial Welfare Commission (IWC)
is the state agency generally empowered to formulate regulations
(known as Wage Orders) governing employment.
The meal period provisions of the IWC's Wage Orders have
remained largely unchanged since 1947. Under those provisions,
non-exempt employees are entitled to 30-minute unpaid meal
periods depending on the number of hours worked. In 1999, the
Legislature enacted Labor Code Section 512 to codify the
language regarding meal periods that had previously been
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contained in most of the IWC wage orders<1>.
Labor Code Section 512 provides in relevant part as follows:
"(a) 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, except that if the
total work period per
day of the employee is no more than six hours, the meal
period may be
waived by mutual consent of both the employer and employee.
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, except that if the total hours worked is
no more than 12
hours, the second meal period may be waived by mutual
consent of the
employer and the employee only if the first meal period was
not waived.
(b) Notwithstanding subdivision (a), the Industrial Welfare
Commission
may adopt a working condition order permitting a meal
period to commence
after six hour of work if the commission determines that
the order is
consistent with the health and welfare of the affected
employees."
In 2000, the IWC conducted a legislatively mandated review of
the remedy available to employees against an employer that
---------------------------
<1> Labor Code Section 512 was enacted by Assembly Bill 60,
Chapter # 134, Statutes of 1999, the "Eight-Hour-Day Restoration
and Workplace Flexibility Act of 1999."
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failed to provide a meal or rest period mandated by applicable
law. At the time, the only remedy available to an employee was
to obtain an injunction against the employer ordering the
employer to provide the meal and rest periods. In an effort to
provide employers with an incentive to comply with the meal and
rest period provisions, the IWC adopted a proposal which
required employers to pay employees one hour's pay for each day
on which an employee did not receive a meal or rest period.
In 2000, the Legislature adopted Labor Code Section 226.7
codifying the new remedy:
"(a) No employer shall require any 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.<2>"
The 2004 Proposed DLSE Regulation
On December 10, 2004, the Division of Labor Standards
Enforcement (DLSE) of the Department of Industrial Relations
(DIR) submitted a proposed emergency regulation to the Office of
Administrative Law (OAL) regarding the provision of meal and
---------------------------
<2> Section 226.7 was subsequently amended to apply to "recovery
periods," as will be discussed below further.
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rest periods in the workplace. As a proposed emergency
regulation, there was a five (5) calendar day public comment
period, which ended on December 15, 2004. OAL had until
December 20, 2004 to act on the proposed regulation.
On December 20, 2004, DLSE withdrew the proposed emergency
regulation and resubmitted a revised proposed regulation under
the regular rulemaking process on January 4, 2005.
DLSE proposed to adopt section 13700, Meal and Rest Periods, in
Title 8 of the California Code of Regulations. According to
DLSE's notice of proposed rulemaking:
"DLSE proposes to adopt section 13700 to clarify that the
one hour of
pay an employer must pay an employee for each workday in
which a
meal or rest period is not provided in accordance with the
applicable
Industrial Welfare Commission Order is considered a penalty
as well
as to clarify the time parameters and criteria under which
meal periods
can be provided to employees."
The proposed meal period regulation contained three distinct
provisions:
Obligation to "Provide" Meal Periods
The first provision of the regulation attempted to define when
an employer has met the statutory requirement of "providing" a
meal period. Under the proposed regulation, an employer would
have been deemed to have provided a meal period if the employer:
(1) makes the meal period available and affords the employee an
opportunity to take it; (2) posts the applicable IWC wage order;
and (3) maintains accurate time records.
The first provision also provided that "as a further precaution"
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an employer may inform an employee in writing of the
circumstances under which he or she is entitled to a meal period
and the employee acknowledges in writing that he or she
understands those rights.
Time Parameters in Which Meal Periods Must Be Provided
The second provision of the proposed regulation related to the
time parameters in which meal periods must be provided. Labor
Code Section 512 and the IWC wage orders specify that employers
cannot allow employees to work more than five hours without
taking a 30-minute meal period.
The proposed regulation provided that a meal period may begin
before the end of the sixth hour of the work period.
Furthermore, an employee may request and commence their meal
period after the end of the sixth hour of work, so long as they
were provided the opportunity to take a meal period before the
end of the sixth hour of work.
The proposed regulation contained four examples to illustrate
this provision.
Additional Hour of Pay Under Labor Code Section 226.7
The final provision of the proposed regulation provided that any
amount paid or owed by an employer under Labor Code Section
226.7 is a "penalty" and not a "wage."
Final Outcome of the 2004 Proposed Regulations
After questions emerged about the legal authority of DLSE to
promulgate the proposed regulation, this committee conducted an
oversight hearing on the subject on January 26, 2005.
Subsequently, the Legislature passed ACR 43 (J. Horton) which,
among other things, made a legislative declaration that the DLSE
did not have the authority to promulgate the proposed regulation
concerning meal and rest periods, and that the proposal was
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inconsistent with existing law.
On January 13, 2006, DLSE announced that it would not file the
proposed regulation with the OAL by the applicable deadline.
The Obligation to "Provide" Meal Periods and the Brinker
Decision
As discussed above, Labor Code Section 512 provides that "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."
For many years, there was much dispute over the precise meaning
of this term. Representatives of workers and organized labor
generally argued that the use of the term "provide" means that
an employer must actually provide the meal period and ensure
that employees are able to actually take it. On the other hand,
the business community generally argued such an interpretation
is unreasonable and too restrictive and that therefore the term
"provide" means simply that an employer must make the meal
period available to the employee (but not necessarily ensure
that the employee does in fact take the meal period).
The appellate courts grappled with the decision in recent years,
culminating with the California Supreme Court's decision in
Brinker Restaurant Corporation v. Superior Court, 53 Cal. 4th
1004 (2012). In a unanimous opinion authored by Associate
Justice Kathryn M. Werdegar, the court explained that neither
state statutes nor the IWC Wage Orders compel an employer to
ensure employees cease all work during meal periods. Instead,
under state law an employer must provide its employees an
uninterrupted 30-minute duty-free period during which the
employee is at liberty to come and go as he or she pleases:
"To summarize: An employer's duty with respect to meal
breaks?is an obligation to provide a meal period to its
employees. The employer satisfies this obligation if it
relieves its employees of all duty, relinquishes control over
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their activities and permits them a reasonable opportunity to
take an uninterrupted 30-minute break, and does not impede or
discourage them from doing so. What will suffice may vary from
industry to industry, and we cannot in the context of this
class certification proceeding delineate the full range of
approaches that in each instance might be sufficient to
satisfy the law.
On the other hand, the 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 work by a relieved
employee during a meal break does not thereby place the
employer in violation of its obligations and create liability
for premium pay under?"
The Murphy v. Kenneth Cole Decision
One of the more controversial points of contention over
California's meal period law has involved whether the remedy
provided in Labor Code Section 226.7 constituted a "penalty" or
"wages."
Following the enactment of Labor Code Section 226.7, employers
defending class action lawsuits for such compensation generally
raised this issue in two contexts, arguing that such payments
constitute "penalties." First, they argued that, as penalties,
employees had no private right of action to recover such
compensation. Second, employers argued that as "penalties," the
payments under Labor Code Section 226.7(b) were limited by the
one-year statute of limitations set forth in Code of Civil
Procedure Section 340(a) rather than the longer statute of
limitations provided for wage claims under the Labor Code.
As discussed above, the proposed 2004 DLSE regulation attempted
to specify that such amounts paid or owed by employers were
"penalties" and not "wages."
However, in 2007, the California Supreme Court resolved the
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issue when it held that the "additional hour of pay" due to an
employee is a wage, not a penalty. Murphy v. Kenneth Cole
Productions, Inc., (2007) 40 Cal. 4th 1094. Specifically, the
Court stated:
"We hold that section 226.7's plain language, the
administrative and legislative history, and the
compensatory purpose of the remedy compel the conclusion
that the 'additional hour of pay' is a premium wage, not a
penalty."
Brief Background on Rest Periods
An employer's obligation to provide rest periods is contained in
the IWC Wage Orders, which generally provide as follows:
"(A) Every employer shall authorize and permit all employees
to take rest periods, which insofar as practicable shall be in
the middle of each work period. The authorized rest period
time shall be based on the total hours worked daily at the
rate of ten (10) minutes net rest time per four (4) hours or
major fraction thereof.
However, a rest period need not be authorized for employees
whose total daily work time is less than three and one-half
(31/2) hours. Authorized rest period time shall be counted as
hours worked for which there shall be no deduction from wages.
(B) If an employer fails to provide an employee a rest period
in accordance with the applicable provisions of this order,
the employer shall pay the employee one (1) hour of pay at the
employee's regular rate of compensation for each work day that
the rest period is not provided."
Therefore, an employer must "authorize and permit" an employee
to take rest periods (unlike the meal period language which
requires an employer to "provide" meal periods). In addition,
rest periods (unlike meal periods) are treated as hours worked,
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meaning an employee is paid for such time.
Brief Background on "Recovery Periods"
A "recovery period" is defined by the Labor Code as a cooldown
period afforded an employee to prevent heat illness.
In addition to meal and rest periods, the Heat Illness
Prevention regulations established by the Occupational Safety
and Health Standards Board have an additional requirement
regarding a "recovery" period applicable to all outdoor places
of employment. Since August 2005, employers in the State of
California have been required by regulation to protect outdoor
employees from the hazard of heat illness. This regulation was
promulgated in response to unusually hot summer temperatures
over a wide area of the state which led to a greatly elevated
number of cases of serious heat illness in the workplace,
including a number of deaths. This regulation, codified at Title
8 CCR §3395, came about first by adoption of an emergency
temporary standard and was followed by adoption of a permanent
standard in 2006. Under these regulations, employees are
allowed and encouraged to take a cool-down rest in the shade for
a period of no less than five minutes at a time when they feel
the need to do so to protect themselves from overheating.
SB 435 (Padilla) of 2013 amended Labor Code section 226.7 to
also include "recovery periods." Specifically, SB 435 provided
that, in addition to meal and rest periods, an employer shall
not require any employee to work during any "recovery period"
mandated by any applicable statute, regulation, standard or
order of the Occupational Safety and Health Standards Board
(Standards Board) or the Division of Occupational Safety and
Health (DOSH).
SB 435 also amended Section 226.7 to provide that the existing
provision of law that requires an employer to pay an employee
one additional hour of pay at the employee's regular rate of
compensation for each work day that a meal or rest period is not
provided also applies to work days that a "recovery period" is
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not provided.
Changes Proposed by This Bill
This bill proposes to make two changes to the provisions of
existing law providing a statutory remedy for an employer's
failure to provide a meal or rest or recovery period as required
under existing law.
First, this bill provides that the requirement to pay an
additional hour or pay for each day that a meal or rest or
recovery period is not provided shall be the entire "penalty
amount" awarded to the employee, as specified. The bill goes on
to state that is an employee recovers the additional hour of pay
under Section 226.7, no civil or criminal penalty shall be
imposed under the following, based on the same missed meal or
rest period:
Labor Code Section 203 - establishes "waiting time"
penalties where an employer willfully fails to pay any
wages of any employee who is discharged or who quits.
Labor Code Section 225 - provides that the unlawful
receipt or withholding of wages or the secret payment of
wages below a designated wage scale is a misdemeanor.
Labor Code 226 - failure to provide an accurate
itemized wage statement.
Labor Code Section 558 - establishes civil penalties
for any employer or other person acting on behalf of an
employer who violates, or causes to be violated, specified
provisions of existing law.
Labor Code Section 2699 - establishes civil penalties
and the right of recovery for aggrieved employees, also
known as the Labor Code Private Attorneys General Act
(PAGA) of 2004.
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Business and Professions Code Section 17200 - among
other things, establishes civil penalties and other
remedies for "unfair competition."
As discussed below, the author and sponsor argue that violations
of wage and hour laws often give rise to "stacking" claims for
other violations, which this bill is designed to prevent.
Second, this bill provides that payment of the additional hour
of pay shall be considered a "penalty" for all purposes,
including, but not limited to, the statute of limitations on an
action. This provision would effectively overturn the
California Supreme Court decision in Murphy v. Kenneth Cole,
discussed above, thereby making the one year statute of
limitations applicable to the additional hour of pay under
Section 226.7 (as opposed to three years).
ARGUMENTS IN SUPPORT
Supporters of this bill, including the Civil Justice Association
of California (CJAC), argue that often a claim for a meal or
rest period violation will be "stacked" with other claims. For
example, an employee alleging a shortened or missed meal period
may also claim failure to pay overtime for the shift containing
that meal break, as well as an incorrect wage statement for the
pay period containing that meal break.
Supporters contend that this bill would provide that the penalty
established in current law-one additional hour of pay-is the
total penalty for meal and rest period violations and, if an
employee recovers that extra hour of pay, the employer will not
face additional penalties or litigation.
Supporters state that lawsuits against employers have increased
dramatically in recent years, causing employers to face costly
and protracted litigation, often over marginal claims. This
bill would allow employees to recover the penalty provided in
current law for meal and rest period violations and guard
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against abusive lawsuits.
ARGUMENTS IN OPPOSITION
Opponents argue that this bill runs directly contrary to the
legislative intent and public policy underpinning of Section
226.7 and is a direct assault on the clear and unequivocal
determination by the California Supreme Court in Murphy v.
Kenneth Cole, that the additional hour of pay for failure to
provide a meal or rest or recovery break is a "wage" and not a
"penalty." They contend that this bill will have a tremendous
cost to workers seeking to recover for meal and rest or recover
period claims because the re-characterization of the premium
wage as a "penalty" would shorten the statute of limitations for
meal and rest or recovery period claims to just one year. Not
only would that limit recovery, but it also means that many
workers would never get their day in court because by the time
they realize their rights have been violated and file a claim,
the statute would have run.
In addition, opponents argue that this bill would also impede
the purpose of the remedial provision by prohibiting the
imposition of any additional penalties under Sections 203, 225,
226, 558, or 2699 of the Labor Code. They contend that these
penalties serve the purpose of deterring flagrant violations.
The "cap" on penalties proposed by this bill is unwarranted and
inappropriate. Failing to provide meal, rest and recovery
periods can have serious health and safety consequences for
workers and can even threaten public safety should a fatigued
worker be driving a bus or operating heavy machinery. These are
serious violations and the penalty structure should serve as a
deterrent. Opponents argue that, given the limited resources of
the Labor Agency and the slim chance that an employer cheating
workers out of breaks will ever get caught an arbitrary cap on
penalties only undermines the goals of the existing enforcement
structure.
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Similarly, the Consumer Attorneys of California states:
"In reality, if an employer violates two or more laws, there
are different elements that must be proven for each cause of
action alleged and if the aggrieved employee proves that each
violation occurred, they may be entitled to different
remedies, depending on their claims. An analogy to the
criminal law arena may be helpful: Assuming there is a
criminal action filed against a defendant for financial fraud,
that defendant may simultaneously face a criminal action for
embezzlement. The two may stem from the same crime, but are
separate causes of action with different elements and
penalties."
REGISTERED SUPPORT / OPPOSITION:
Support
Acclamation Insurance Management Services
Allied Managed Care
Brea Chamber of Commerce
California Building Industry Association
California Business Properties Association
California Chamber of Commerce
California Chapter American Fence Association
California Construction & Industrial Materials Association
California Delivery Association
California Farm Bureau Federation
California Fence Contractors Association
California Grocers Association
California Hotel and Lodging Association
California League of Food Processors
California Manufacturers and Technology Association
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California Trucking Association
Camarillo Chamber of Commerce
Carlsbad Chamber of Commerce
Civil Justice Association of California
Coalition of Small and Disabled Veteran Businesses
Desert Hot Springs Chamber of Commerce
El Centro Chamber of Commerce
Flasher Barricade Association
Gilroy Chamber of Commerce
Greater Bakersfield Chamber of Commerce
Greater Riverside Chambers of Commerce
Lake Tahoe South Shore Chamber of Commerce
Montclair Chamber of Commerce
National Federation of Independent Business
North Orange County Chamber
Oxnard Chamber of Commerce
Redondo Beach Chamber of Commerce
Ripon Chamber of Commerce
Santa Ana Chamber of Commerce
Santa Maria Valley Chamber of Commerce Visitor & Convention
Bureau
South Bay Association of Chambers of Commerce
Southwest California Legislative Council
Torrance Area Chamber of Commerce
Valley Industry and Commerce Association
Opposition
American Federation of State, County and Municipal Employees
California Employment Lawyers Association
California Labor Federation, AFL-CIO
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California Rural Legal Assistance Foundation
Consumer Attorneys of California
Los Angeles County Professional Peace Officers Association
Organization of SMUD Employees
San Diego County Court Employees Association
San Luis Obispo County Employees Association
Analysis Prepared by:Ben Ebbink / L. & E. / (916) 319-2091