Doing Business in California after Brinker

Dear Friends, Colleagues, and Clients,

If you own a business in California and pay employees, you should be aware of the Brinker case. What is the employer’s obligation with respect to employee meal and rest periods? Must an employer force its employees to take these breaks, or is it enough to make them available for employees who are interested in taking them? An incorrect answer can be expensive. California courts have seen a marked increase in employee class actions alleging meal and rest period violations. Employees seek an extra hour of pay for each day that they miss a meal period or a rest break, along with miscellaneous penalties, attorney fees, and interest, going back three to four years.

Recent oral arguments before the California Supreme Court raise the question, is it the employer’s duty to “provide” or “ensure” a meal break. The decision if mandated retroactively rather than prospectively could expose California employers to a new onslaught of lawsuits on this issue as well as potentially huge liability. Whatever the outcome, the Brinker case will be one of the most important wage and hour cases in California’s history.

By way of background, in the San Diego case of Brinker v. Superior Court (Hornbaum), the plaintiffs have argued that an employer must affirmatively ensure that their employees take the required meal periods, while defendants claim that the employer’s duty is only to provide the employee the opportunity to take the meal period free of any control by the employer. After much legal wrangling, most of the case rests on the Court’s interpretation of the Labor Code, which indicates that the employer is to “provide” a meal period.

During oral arguments, the plaintiff argued that under the “ensure” standard, employers would be justified in disciplining or even firing employees who did not follow instructions on taking their meal breaks. The Court seemed hesitant to adopt a standard that could lead to this outcome and appeared to favor a standard that provided flexibility, leaving the choice up to the employee as to whether or when they would take their meal break. The most insightful comment from the bench on this issue pointed out that, if the hallmark of a meal period is the employer suspending control over the employee, then the employee should be able to choose for themself whether to take the meal period at the designated time. Overall, the tenor of the questions suggested that the Court is in favor of a standard that leaves the employee some flexibility in deciding whether to take their meal breaks.

In a relatively rare circumstance, the California Supreme Court accepted a post-argument brief concerning the “rolling 5” issue – whether meal periods must be provided for every 5 consecutive hours of work, e.g., in an 8-hour shift, if an employee takes a meal period after 3 hours, then works a further 5 hours after the meal period, must a second meal period be provided. Also, the brief addresses whether the Court’s decision will apply prospectively or retroactively. If applied retroactively, the statute of limitations for meal period violations is 3 years, but challenges could also be filed under California’s unfair competition law, which has a 4-year statute of limitations.

The California Supreme Court is required by court rule to issue decisions 90 days after they are submitted. The Court previously submitted the Brinker case for decision after the November 8 oral argument, which is why most expected the final ruling by early February 2012. On December 14, the California Supreme Court vacated the November 8 submission of the matter based on its earlier decision to allow further briefing on the issue of whether the eventual decision will operate prospectively or retroactively. The Court has now ruled that additional briefing will be completed by January 13, 2012, and the matter submitted at that time. As a result, the Court should issue its decision by April 12, assuming no additional delays.

Recognizing the potential for significant liability exposure at the employer level, check with your insurance broker to determine if you have coverage. And, by all means, institute a rationale and effective asset protection structure at the company level in case a catastrophic lawsuit besets your company.

Wishing all of you a very healthy, happy and prosperous New Year.

Jeffrey M. Verdon Law Group, LLC

Posted in Client Alert.