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No Free Lunch: Jury Awards $172 Million for Alleged Denial of Lunch BreaksA recent multimillion dollar jury award in California provides a stark reminder for employers of the need to review compliance with the numerous requirements of wage and hour law. 12/29/2005 Open PDF: No Free Lunch: Jury Awards $172 Million for Alleged Denial of Lunch Breaks On December 22, 2005, a jury in California (Alameda County Superior Court) awarded $172 million ($57 million in general damages and $115 million in punitive damages) to approximately 115,000 individuals who worked for Wal-Mart in California between 2001 and 2005. The class action lawsuit alleged that Wal-Mart violated California Labor Code §512, which generally requires employers to provide a thirty-minute unpaid lunch break to employees who work more than five hours per day. The sheer size of this award—and the media attention it has generated—will undoubtedly result in copycat lawsuits as well as class action lawsuits alleging violations of still other state or federal employment laws including the most arcane and technical provisions of such laws. The Law of Lunch in CaliforniaIn order to understand the Wal-Mart case, some background information on the law of lunch in California is necessary. California Labor Code §512 provides:
There are certain exceptions and differences that apply to employees working under a collective bargaining agreement and to employees working in certain industries. There are also very limited circumstances in which an employee can take an on-duty lunch break (generally, the work must preclude an employee from taking an off-duty break and the on-duty break must be paid for and agreed to in writing). If an employee must eat on premises, a suitable place for a meal break must be provided (IWC Wage Order 11), and Cal/OSHA contains some limitations on where employees can eat or where food and drink can be stored. If an employee is required to remain on premises, the lunch break must also be paid.[1] The California labor commissioner has taken the position that an employer has an affirmative obligation to ensure that employees are actually relieved of all duty for unpaid lunch breaks. This can be a very difficult obligation to meet because some employees will simply not self-monitor and/or prefer not to take a break either because they are involved in a particular activity and/or they want to finish a required shift and go home early. If an employer fails to provide a legally required meal or rest break, the employer must pay the employee an additional hour of pay (at regular rates) for each day the meal or rest period was not provided.[2] A failure to provide a legally required meal or rest period (or failure to meet a number of other wage and hour obligations) can also be punishable as a misdemeanor.[3] Next Steps in the Wal-Mart CaseIt seems likely that an appeal will be filed in the Wal-Mart case (or the award will be reduced and/or the case settled for a substantially smaller amount) because the verdict appears suspect for several reasons. First, the labor commissioner has issued a precedent decision declaring that the extra hour of pay provided by Labor Code §226.7 is a penalty, not a wage,[4] which means that the statute of limitations is just one year. This precedent decision is entitled to substantial deference from the courts. Second, there is a significant question whether punitive damages can be awarded at all based on assessment of a penalty. Such an award would in essence result in a double penalty—and one that is often far in excess of the penalty specifically established by the legislature. Third, even if punitive damages could be assessed, consideration must be given to whether the award was excessive. As an example, in this case Wal-Mart apparently acknowledged that when the law was amended effective 2001, the company had some difficulty with compliance issues (as did many other employers, often for the reasons noted above), but that the company instituted new policies to ensure that employees received meal periods. This even included installing new technology that alerts cashiers when it is time for a lunch break and automatically shuts down the register if the cashier does not respond (undoubtedly pleasing customers standing in line!). What Should Employers Do Now?Despite the apparent flaws in the Wal-Mart verdict, prudent employers should now conduct thorough reviews of their employment law compliance practices. Given the potentially huge liability involved and the substantial cost of defending even nonmeritorious class actions, these reviews should be done in conjunction with counsel utilizing attorney-client privilege and the attorney work product doctrine as appropriate. A review of all employment law compliance issues is advisable, but particular attention should now be paid to the following:
The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct. The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct. |
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