Proposed Changes
As we previously informed you, on January 14, 2005, the Division of Labor Standards Enforcement (DLSE) issued a proposed meal and rest period regulation. The intent behind the proposed regulation was to provide clarity and flexibility with regard to the meal and rest period requirements. The proposed regulation addressed the timing of meal periods, the requirements for “providing” a meal period, and the classification of any money paid for failure to provide a meal period.

However, the DLSE failed to complete the rulemaking process and promulgate a final rule by the January 14, 2006 deadline. On that date, the proposed regulation lapsed, leaving employers with the law as it existed prior to the proposed regulation. Therefore, employers must be aware of and properly follow the applicable law in place before the proposed DLSE regulation.

Meal Period Requirements In Effect Prior To The DLSE’s Proposed Regulation And Still In Effect Today
Because the DLSE’s proposed regulation failed to take effect, employers are left to deal with the less-than-clear law in place prior to the proposed DLSE regulation. As always, diligence on the part of employers in following the law will help prevent lawsuits by employees and protect the interests of employers.

Currently, an employee who works at least five hours a day must receive an unpaid meal period of at least 30 minutes. However, if the total work period is less than six hours, the meal period can be waived with the mutual consent of the employer and employee. Additionally, a second meal period is required if the employee works more than 10 hours. Again, however, this meal period can be waived with the mutual consent of the employer and employee if the total work period is less than 12 hours and the first meal period was not waived.

Prior to the DLSE’s proposed regulation, the DLSE took the position that meal periods had to start before the end of the fifth hour for the first meal period and before the end of the tenth hour for the second meal period. Thus, employers should continue to follow this mandate in an effort to ensure that meal periods are timely taken. As for “providing” the meal period required by the law, the onus is on the employer to make sure that employees take their required meal periods at the required times. If the employer fails to provide a required meal period, the employer must pay one additional hour of pay at the employee’s regular rate of pay for each workday that the meal period is not provided in addition to paying for the time that the employee worked during the period. The failure to provide meal periods can be very costly. In a recent class-action suit, a jury returned a $172 million verdict against Wal-Mart for denying employees their legally required meal and rest periods. The potential for large verdicts and costly court battles necessitates diligence in ensuring that employees are taking their required meal periods.

If Meal Periods Are Missed And The Employer Must Pay, Is The Payment A Penalty Or Wages?
When employers pay for meal periods missed by employees, the payment can arguably represent either wages to the employee or a penalty against the employer. If the payment is characterized as a penalty, the employee must file a claim within one year, whereas a claim for wages must be filed within three (sometimes four) years. Additionally, a penalty, unlike wages, is not subject to income tax withholding. Finally, if the payment is characterized as a penalty, the employee cannot seek attorneys’ fees under the wage recovery statutes.

The lapse of the proposed DLSE regulation that would have clarified this area of law left employers without a definite answer to this issue. Further, no clear answer has been provided by the courts. In May of 2005, the Labor Commissioner issued an opinion that such payments were penalties. Additionally, two California appellate courts that have addressed the issue agree with the Labor Commissioner that such payments are penalties. However, another California appellate court has ruled that such payments represent wages to the employee. Because of this split of authority and the importance of the issue, the California Supreme Court has granted review of one of the cases to provide a definitive answer.

Conclusion
While employers may have heard or read about proposed changes to the meal period requirements, the proposed regulation that would have made such changes lapsed on January 14, 2006. Thus, any proposed changes regarding meal periods did not take effect and the law existing prior to the proposed regulation is still in force. In order to avoid liability for missed meal periods, employers must be proactive in making sure that employees take their meal periods at the appropriate times. Otherwise, employers may face costly lawsuits by employees.