03.16.2015
California Court of Appeal Invalidates Provision of IWC Wage Order Conflicting with Labor Code

On February 10, 2015, the California Court of Appeal held that Industrial Welfare Commission (“IWC”) Wage Order 5 conflicts with California Labor Code section 512(a), and that the IWC exceeded its authority by creating an additional exception for second meal period waivers for health care workers.  (Gerard v. Orange Coast Memorial Medical Center, 2015 WL 535730 (2015)).

Background

Plaintiff Jazmina Gerard (“Gerard”) and two other employees worked for defendant Orange Coast Memorial Medical Center (“Orange Coast”).  Gerard usually worked a 12-hour shift, but from time-to-time worked in excess of 12 hours.  Orange Coast permitted its employees who worked shifts in excess of 10 hours to voluntarily waive one of their meal periods, even if their shifts lasted more than 12 hours.

Gerard alleged she signed second meal period waivers and occasionally worked shifts in excess of 12 hours without being provided a second meal period.  Gerard brought suit against Orange Coast, alleging Orange Coast’s second meal period waiver policy violated the California Labor Code.  Gerard sought statutory penalties, unpaid wages, and injunctive relief, on behalf of herself and all other similarly situated employees.

Orange Coast contended its meal break policy was consistent with IWC Wage Order 5 and moved for summary judgment on Gerard’s claims and denial of class certification.  The trial court found Orange Coast provided Gerard meal periods as required by law, granted summary judgment for Orange Coast, and denied class certification.  Gerard appealed.

Conflict between Wage Order 5 and the Labor Code

The Court of Appeal addressed the apparent conflict between Wage Order 5 and Labor Code section 512(a).  Wage Order 5 permits health care employees to waive their second meal period, even when they work in excess of 12 hours in a shift: “[E]mployees in the health care industry who work shifts in excess of eight (8) total hours in a workday may voluntarily waive their right to one of their two meal periods.”

Labor Code section 512(a), by contrast, allows waiver of the second meal period only when the employee works less than 12 hours in a shift:

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.

Labor Code section 516 authorizes the IWC to adopt or amend working condition orders with respect to meal periods, “[e]xcept as provided in [Labor Code] Section 512.”

Gerard contended that Wage Order 5 is partially invalid because it conflicts with Labor Code section 512(a) and creates an additional exception for health care workers beyond what is authorized by the Labor Code.  Gerard contended the IWC exceeded its authority by creating the additional exception.

Orange Coast, by contrast, contended that:

  • The legislative history of Labor Code sections 512(a) and 516 supports the IWC’s creation of the additional meal period exception for health care workers;
  • Wage Order 5 was issued before Labor Code section 516 was enacted, and therefore controls the determination of the legality of the additional exception;
  • Wage Order 5 is “final and conclusive for all purposes” and forecloses judicial consideration of whether the IWC acted within the scope of its authority by promulgating Wage Order 5; and
  • The waiver of the second meal period was valid under the California Supreme Court’s landmark decision in Brinker v. Superior Court.

The Court’s Analysis

The court rejected each of Orange Coast’s contentions.  The court stated that there is a conflict between the plain language of Wage Order 5 and Labor Code section 512(a).  Although the IWC was empowered to adopt requirements beyond those codified in statute, Labor Code section 516 was intended to limit that power with respect to the meal period requirements set forth in Labor Code section 512(a).  The California Legislature, the court reasoned, amended Labor Code section 516 with the intent to prohibit the IWC from amending its wage orders in ways that conflict with the meal period requirements set forth in Labor Code section 512(a).

The court then rejected Orange Coast’s contention that Wage Order 5, rather than Labor Code section 516, controls the determination of the legality of the additional meal period exception.  The court reasoned that even though Wage Order 5 was promulgated prior to the date on which Labor Code section 516 was amended, Wage Order 5 did not become effective until after Labor Code section 516 became effective.  Thus, the court reasoned, Wage Order 5 is subject to the amended version of Labor Code section 516.  Further, although IWC Wage Orders are to be accorded “extraordinary deference,” nothing within the text of the Labor Code suggests the Legislature intended to foreclose judicial consideration of whether the IWC acted within the scope of its authority in promulgating the Wage Orders.

The court then rejected Orange Coast’s contention that the Brinker decision confirmed the validity of second meal period waivers on shifts longer than 12 hours, pointing out that Brinker did not discuss the issue.

Retroactivity of the Court’s Decision

The court also addressed whether its decision invalidating section 11(D) of Wage Order 5 should be given retroactive effect.  The court cited the general rule that judicial decisions are given retroactive effect, but also expressed reluctance to punish Orange Coast for conduct apparently excepted from penalties under Wage Order 5.  Regardless, the court held that because the hour of additional pay under Labor Code section 226.7 constitutes a wage and not a penalty, the court’s decision had to be given retroactive effect with respect to Orange Coast’s liability (if any) for such damages.  With respect to other potential liability, such as penalties under California’s Private Attorneys General Act, the court remanded to the trial court for additional consideration.

Effect on Employers

Employers should review their policies and practices in light of this decision, which invalidates second meal period waivers for shifts of more than 12 hours in the health care industry.

It is worth noting that the five-member IWC, appointed by the Governor, was de-funded effective July 1, 2004 and is no longer in operation. In the IWC’s absence, the Wage Orders are being administered and enforced by the Division of Labor Standards Enforcement.

The IWC promulgated the Wage Orders for specific industries through a public drafting and hearing process. Without funding, the IWC processes for issuing revised or new Wage Orders are not available as they have been in the past. This is one reason the focus has shifted to the courts to challenge the existing Wage Orders.

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