Kevin SullivanA little more than two years ago, we wrote about how a California Court of Appeal’s decision exposed health care employers to litigation if they relied upon IWC Wage Order 5 for meal period waivers. That decision was Gerard v. Orange Coast Memorial Medical Center (“Gerard I”), where the Court of Appeal concluded that IWC Wage Order 5 was partially invalid to the extent it authorized second meal period waivers on shifts over 12 hours. Much has happened since then.

After Gerard I was published, the Legislature moved quickly to enact SB 327, which amended Labor Code section 516 to state in pertinent part that “the health care employee meal period waiver provisions in Section 11(D) of [IWC] Wage Orders 4 and 5 were valid and enforceable on and after October 1, 2000, and continue to be valid and enforceable. This subdivision is declarative of, and clarifies, existing law.” In enacting SB 327, the Legislature specifically noted “the uncertainty caused by a recent appellate court decision” – Gerard I – and that “without immediate clarification, hospitals will alter scheduling practices.”

After SB 327 was enacted, the California Supreme Court directed the Court of Appeal to vacate its decision in Gerard I and to reconsider the case in light of SB 327. The Court of Appeal has now done so. On March 1, 2017, in an unpublished opinion, the Court of Appeal in Gerard II held that SB 327 is effective retroactively. As a result, the second meal period waivers that the plaintiffs had signed were valid and enforceable. Consequently, the Gerard II Court affirmed the trial court’s order granting summary judgment, denying class certification, and striking class allegations.

The Gerard II decision is a welcome development for California health care employers who have relied upon IWC Wage Order 5 for second meal period waivers, reinforcing the use of such waivers for employees who work more than 12 hours in a shift.

On November 30, 2016, the California Court of Appeal issued its opinion in Driscoll v. Granite Rock Company. The opinion provides guidance to California employers who enter into on-duty meal period agreements with their employees.

In Driscoll, the trial court had certified a class of approximately 200 concrete-mixer drivers who alleged they were not provided off-duty meal periods pursuant to California law. Those claims proceeded to a bench trial and the trial court found in favor of the employer. The employees then appealed.

The Court of Appeal upheld the employer’s on-duty meal period agreements, noting that the employer’s “policies regarding meal periods [we]re particularly appropriate in the context of the ready mix concrete industry.” The Court of Appeal cited the 2012 decision in Brinker, where the California Supreme Court held that “[w]hat [off-duty meal practices that] 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.” Relying on Brinker, the Driscoll Court concluded that “the issue of different industry practices is a factual determination. Here, while on the job, mixer drivers manage a rolling drum of freshly batched concrete at any given time throughout their work day. When a driver is able to take a duty-free lunch period is dependent on the state of the concrete in his or her truck, and the nature of the construction job to which the driver is attending.”

The Court of Appeal also rejected the employees’ arguments that the employer required employees to enter into on-duty meal period agreements. The trial court had “found that when a concrete-mixer driver requested to have an off-duty meal period, Graniterock granted that request, and relinquished all control of the employee for the 30-minute off-duty period.” The Court of Appeal concluded that doing so satisfied the Brinker standard.

The Driscoll decision is a welcome one for employers – especially those facing class actions – that use on-duty meal period agreements as it reaffirms their validity.

PostThe Third Circuit Court of Appeals recently joined the chorus of Circuits adopting the pro-employer “predominant benefit test” when weighing the compensability of meal periods under the Fair Labor Standards Act (“FLSA”).  As a result, the Ninth Circuit is the lone Circuit to apply a different standard, opting to follow the U.S. Department of Labor regulations providing that an “employee must be completely relieved from duty” in order for a meal period to be deemed bona fide and thus not compensable.

In Babcock v. Butler County, a putative class action lawsuit, employees at the Butler County prison alleged that their employer required them to abide by certain restrictions beneficial to the employer during their one-hour meal periods, and that they were not paid for 15 minutes of the one-hour break, in violation of the FLSA. The issue before the Third Circuit was whether the 15 minutes was compensable under the FLSA.  The Third Circuit covers the States of Delaware, New Jersey and Pennsylvania.

While there is no provision of the FLSA that directly addresses the issue, the regulations provide that bona fide meal periods are not work time, and that employees “must be completely relieved from duty for the purposes of eating regular meals … [and that an] employee is not relieved if he is required to perform any duties, whether active or inactive, while eating.”  The courts, however, have generally avoided a literal reading of the regulations. Indeed, despite the “completely relieved from duty” language followed by the Ninth Circuit, the other Circuits, now including the Third, have taken the position that a meal period is compensable if an employee is performing activities predominantly for the benefit of the employer. This approach is derived from Supreme Court precedent from 1944 holding that “[w]hether time is spent predominantly for the employer’s benefit or for the employee’s is a question dependent upon all the circumstances of the case.” (Emphasis added.). As a result, the “predominant benefit test” is necessarily a fact-intensive inquiry.

Although the Third Circuit decision in Babcock was split, on appeal the parties and the justices agreed that applying the “predominant benefit test” was appropriate.  In support of the argument that the meal period was spent predominantly for the benefit of the employer, the employees specifically claimed that, during the one-hour meal period, they were subject to the following restrictions: they were not permitted to leave the prison building (unless granted permission by the warden); they were required to remain in uniform; they were required to remain in close proximity to emergency response equipment; and they were required to respond to any emergencies.

While there were restrictions that clearly benefitted the employer, the District Court found, and the Third Circuit agreed, that the restrictions did not predominantly benefit the employer. Rather, under the totality of the circumstances, the employees enjoyed the predominant benefit of their uninterrupted hour-long meal period. Simply put, outside of the restrictions described above, the employees were free to comfortably and adequately spend their meal period how they wished, including eating away from their desks or seeking approval to leave the premises, without their time or attention devoted primarily to official responsibilities.  Although deemed a relevant, but not dispositive, factor, the Third Circuit noted that the parties’ collective bargaining agreement set forth the terms of the one-hour meal period, including that the fifteen minutes would be unpaid.

Until the Supreme Court weighs in on the split between the Circuits, employers located in those states covered by the Ninth Circuit – Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington – will need to ensure that employees are provided a “completely relieved from duty” meal period, or risk being in violation of the FLSA.  Employers located in any of the other states stand to benefit from the pro-employer “predominant benefit test,” which as evidenced by the decision in Babcock, permits employers to place some restrictions on employee meal periods, so long as the employees remain free to comfortably and adequately spend their meal period without primarily engaged in their official responsibilities.  Note, the First Circuit, covering the States of Maine, Massachusetts, New Hampshire and Rhode Island, has not had an opportunity to establish a test to determine whether a meal period is compensable under the FLSA.  However, the District Court in Massachusetts has had three opportunities, and adopted the “predominant benefits test.”

In Naylor v. Securiguard, Inc., the Fifth Circuit Court of Appeals held that an employer may be required to compensate employees for meal breaks if the employees are required to spend a significant portion of that period traveling to a required break area.

Facts Black white striped sentry box

Securiguard employees guarded several gates to a Naval air station.  During their shifts, the guards received two scheduled thirty-minute meal breaks.  The guards expressed a desire to eat at their posts, but Securiguard prohibited them from doing so (out of concern that the customer would think they were shirking their security duties).

Accordingly, the guards were required to travel to designated break areas on the base.  Some traveled only a few yards, while others had twelve-minute roundtrip drives to the nearest meal area.

The District Court for the Southern District of Mississippi granted Securiguard’s motion for summary judgment. It held that the FLSA requires compensation for a meal break only when an employer imposes “substantial duties or restrictions” during the designated time, and found Securiguard’s restrictions too insubstantial to make the breaks compensable.

Rest periods, meal periods & on-call time

On appeal, the Fifth Circuit cited to 29 C.F.R. § 785.19 for the proposition that bona fide meal periods “are not worktime,” and noted the regulations state: “Ordinarily 30 minutes or more is long enough for a bona fide meal period. A shorter period may be long enough under special conditions.”

Conversely, under 29 C.F.R. § 785.18,  rest periods are “of short duration, running from 5 minutes to about 20 minutes, … promote the efficiency of the employee and … must be counted as hours worked.”

The Fifth Circuit noted that the District Court and the parties compared the restrictions imposed on Securiguard meal breaks to on-call time, in which “the critical question is whether the meal period is used predominantly or primarily for the benefit of the employer or for the benefit of the employee.”

Sufficient time “to use the break for their own purposes”

The Fifth Circuit affirmed summary judgment for Securiguard as to the gates where break areas were “a few yards away,” less than a minute’s drive or “across the street.”

As to the remaining gates, the Fifth Circuit reversed summary judgment for Securiguard and remanded the case because it concluded a jury could decide that, in some cases, the travel time was “a meaningful limitation on the employee’s freedom” during the meal period, and was imposed for benefit of the employer – rendering that time compensable.

The Court also stated that a jury could further conclude that the remaining time was not long enough for employees to qualify as a noncompensable meal period under FLSA.

Accordingly, employers (particularly those in the Fifth Circuit) should evaluate any restrictions imposed on employee meal-periods in light of the ruling in Naylor v. Securiguard, Inc.

Employers in California – and healthcare employers in particular – have been besieged by wage-hour class actions for more than a decade. They have been sued repeatedly on claims that they have not complied with the terms of Industrial Welfare Commission (“IWC”) Wage Orders. Now, as a result of a new decision from the California Court of Appeal, they may face lawsuits based not on a failure to comply with the language of a Wage Order, but because they in fact relied upon language in a Wage Order. It is a development that may lead many employers to throw up their hands and quote the old adage, “Damned if you do, damned if you don’t.”

The IWC issues industry-specific Wage Orders with which employers are expected to comply. The failure to comply may lead not only to agency investigations, but to class action lawsuits seeking damages, a variety of penalties, interest, and attorney’s fees.

On February 10, 2015, in Gerard v. Orange Coast Memorial Medical Center, the California Court of Appeal held that it was improper for an employer to rely upon the language of the governing Wage Order. The employer had relied upon a provision of Wage Order 5 that expressly authorized healthcare workers to waive one of their two required meal periods on shifts longer than 12 hours. The Court of Appeal concluded that the provision was contrary to the California Labor Code and partially invalidated it.

Blindfolded businessmanIn reaching this conclusion, the Court of Appeal determined that the IWC had no authority to adopt a regulation that conflicts with the express language of California Labor Code section 512(a), which provides as follows: “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.” (Italics added.) For this reason, the Court partially invalidated Wage Order 5 to the extent it authorized second meal break waivers on shifts longer than 12 hours.

With one exception, the Court determined that the hospital and employees must now litigate whether or not the Court’s decision should apply retroactively. That one exception, however, is significant as the Court ruled that “there is no compelling reason of fairness or public policy that warrants an exception to the general rule of retroactivity for our decision partially invalidating [Wage Order 5]. Plaintiffs are entitled to seek premium pay . . . for any failure by [Orange Coast] hospital to provide mandatory second meal periods before [February 10, 2015] that falls within the governing three-year limitations period.” That premium pay which the Court determined the Gerard plaintiffs are entitled to seek consists of one hour of pay at an employee’s regular rate of compensation for each employee who worked more than 12 hours and did not get a second meal period – and for each instance there was no second meal period.

The decision is a troubling development for California healthcare employers who have relied upon the regulation – and that may now face class action lawsuits precisely because they did so. Healthcare employers that have relied on Wage Order 5’s express language permitting employees to waive their second meal periods when working more than 12 hours in a shift should reevaluate their practices with counsel promptly to determine how to address such practices prospectively. And, unfortunately, they may now also face lawsuits based upon their past reliance on the Wage Order.

In Ruffin v. MotorCity Casino, the Sixth Circuit Court of Appeals considered whether casino security guards were entitled to be paid for meal periods during which they were required to remain on casino property, monitor two-way radios and respond to emergencies if called to do so.

The District Court for the Eastern District of Michigan had granted summary judgment to the employer based on the conclusion that no reasonable jury could have found the meal periods to be compensable work time.

In affirming the ruling of the District Court, the Sixth Circuit relied on its earlier decision in Hill v. United States, which in turn relied on 29 CFR §785.19.  That regulation provides that bona fide meal periods are not work time.  To qualify as bona fide meal period, an “employee must be completely relieved from duty for the purposes of eating regular meals.”

However, the Sixth Circuit further noted that so long as (i) the employee can “pursue his or her mealtime adequately and comfortably,” (ii) the employee does not perform any substantial duties during the period, and (iii) the mealtime is not predominantly for the employer’s benefit, the employee is “relieved of duty” and is not entitled to compensation under the FLSA.

The plaintiffs in Ruffin contended that monitoring their two-way radios, which exposed them to a steady stream of work-related radio chatter during meal periods, was a substantial job duty.

The Sixth Circuit disagreed and cited to caselaw holding that monitoring a radio and being available to respond if called, generally was a de minimis activity rather than a substantial job duty.

Furthermore, the plaintiffs in Ruffin spent their meal periods eating, reading, socializing and conducting personal business on their phones.   Their mealtimes were not interrupted with such regularity that they were spending the time primarily for the employer’s benefit.

While the plaintiffs were required to remain on the premises, the evidence showed that this restriction was not an indirect way of extracting unpaid work from the employee.  Rather, the plaintiffs “spent their meal periods doing exactly what one might expect an off-duty employee to be doing on a meal break.”

Based on the totality of the circumstances, the Sixth Circuit affirmed the District Court’s summary judgment in favor of the employer.

Therefore, in deciding whether or not to compensate employees for their meal breaks, employers should be mindful of Ruffin, 29 CFR §785.19 and the related caselaw.  Under those circumstances, employers should consider whether (i) the employees are performing any substantial duties during the meal period; (ii) the employees are regularly interrupted during the meal periods to perform work for the employer; and (iii) the employees are unable to leave the employer’s property or spend the meal periods predominantly for their own benefit.