02.17.2011
Court Of Appeal Doubles Potential Exposure For Meal And Rest Period Claims

Labor Code section 226.7 states that if an employer fails to "provide" an employee a meal period or a rest period in accordance with an applicable Industrial Welfare Commission wage order, "the employer shall pay the employee 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."

In our experience, many if not most judges and most attorneys have understood Labor Code section 226.7 to mean the employer could be liable for one such penalty per workday regardless of how many rest periods or meal periods the employer failed to "provide" to an employee during a single workday, and, before today, there was no reported California decision to the contrary.

Today, in United Parcel Service, Inc. v. Superior Court, the Court of Appeal held Labor Code section 226.7 "permits up to two premium payments per work day." In other words, the court held Labor Code section 226.7 authorizes the recovery of up to two additional hours of compensation per workday per non-exempt employee where the employer is found to have failed to "provide" in a workday both  one or more meal periods and one or more rest periods. The court held Labor Code section 226.7 is reasonably susceptible to two contrary interpretations and therefore relied greatly on legislative history to reach its conclusion that up to two section 226.7 penalties can be recovered per workday per employee. The court states as follows:"[w]e conclude, based upon the wording of section 226.7, subdivision (b), the legislative and administrative history of the statute and IWC wage orders, the public policy behind the statue and wage orders, and also the principle that we are to construe section 226.7 broadly in favor of protecting employees, that the employees in this case may recover up to two additional hours of pay on single work day for meal period and rest period violations — one for failure to provide a meal period and another for failure to provide a rest period."

Today's decision also potentially opens the door to various derivative claims that might be based on an alleged failure to pay to an employee two Labor Code section 226.7 penalties when the employer fails to provide both one or more meal periods and one or more rest periods in a workday. For example, if an employer fails to pay two such penalties when they are required, that could open the door to claims the employer failed to provide fully complaint wage statements as required by Labor Code section 226 by failing to accurately state all wages earned during a pay period by failing to reflect all required 226.7 payments during a pay period and could open the door to claims the employer is liable for Labor Code section 203 "waiting time" penalties because the employer ailed to pay to employees who quit or who are terminated all wages due and owing, which would include any required Labor Code section 226.7 penalties, which the California Supreme Court holds are wages. 

Today's decision further underscores the need for employers to have in place compliant meal period and rest period policies and practices.

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