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Implications of Murphy v. Kenneth Cole for California Employee Rest and Meal Breaks

Under California law (regulations issued by the California Industrial Welfare Commission called “wage orders,” and California Labor Code, Section 226.7), employees must be given the opportunity to take a 10-minute paid rest break for every 4 hours worked, and they must take an uninterrupted 30-minute unpaidmeal break for every 5 hours worked.

There are 2 exceptions: (1) employees who work fewer than 6 hours who voluntarily waive their meal period, and (2) employees who work in positions where they cannot be relieved of duty and who voluntarily execute written meal period waivers. If employees are not given an opportunity to take their rest breaks, and if they do not take their mandatory meal breaks, they are entitled to receive 1 hour of pay, at their regular rate of compensation, for every day on which they miss their rest and meal breaks.

The recent California Supreme Court decision of Murphy v Kenneth Cole (April 16th 2007) has dramatically changed the legal landscape, and handed plaintiff lawyers a big bone:

The Murphy court held that the “1 hour of pay” arising from “meal and restbreak” violations constitute “wages;” this means there is a 3-year statute of limitations for these types of claims. They are not a “penalty,” which would have carried only a 1-year statute of limitations (i.e. the time in which such a claim must be filed with a court.

This case highlights why employers must comply with California wage and hour requirements (California wage and hour law is different from federal law; simply complying with the FLSA is not enough to protect employers) – the financial ramifications for non-compliance can be costly to the bottom line:

The effect of Murphy is to triple the time period for an employee or ex-employeeto file a claim to recover such “wages,” based on an employer’s alleged failure to grant meal and rest breaks. And it triggers potential liability for “waiting time” penalties as to employees terminated during the prior 3 years, plus additional related penalties and attorneys’ fees.

Further, meal and rest violation claims usually include an allegation of unfair competition under California Business & Professions Code, Section 17200, which carries a 4-year statute of limitations.

Although not discussed in Murphy, claimants may try to take advantage of the 4-year statute of limitations under B&P Code, §17200 by arguing that, unlike penalties, recovery of unpaid wages under Labor Code, §226.7 is a permissible form of restitution under Section 17200. This issue is sure to be litigated, and it will be interesting to see how the courts deal with this issue.

Since cases alleging meal and rest period violations are often brought as class actions, Murphy will expand the size of potential classes to include workers employed up to 4 years prior to the date the action is or was filed! Clearly, this is a new day for class action lawsuits that will likely be on the increase.

What to do?

This California Supreme Court decision means each employer mustensure that itsmeal and rest break policies and procedures are in compliance with California law. In other words, employers (via their HR department or person in charge of HR) should take practical steps to make sure employees are taking their meal and rest breaks. For example, employers must:

  • Ensure they have written meal and rest period policies e.g. in their employee handbook
  • Implement (if not already in place) an electronic or paper time card for eachemployee, to be completed each day on the job, noting meal and rest periods
  • Make sure that any electronic time card or computer software program does not simply “default” to a one hour meal period and 10 minute rest periods
  • Discipline employees who do not comply with the time card requirement, including up to termination
  • Conduct an internal audit; and if this results in a finding of non-compliance, consider paying an extra hour of pay to those employees who were denied ameal break or opportunity to take a rest break

If you have any questions, you should consult with your employment and labor lawyers, or feel free to contact us.

Labor Code Section 203 imposes “waiting time” penalties of 1 day’s pay (up to 30 days) for every day that an employer willfully fails to pay a discharged employeeall wages due. Because the Supreme Court has now classified meal and rest period payments as “wages,” claimants could argue they are entitled to waiting time penalties if they missed even one meal or rest period and their employer failed to make the additional one-hour wage payment at termination.

Because Labor Code Section 226.7 provides compensation, not penalties, claimants may also argue they are now entitled to penalties on top of the additional wage payment, under a catch-all penalty applicable to “all provisions of [the Labor Code] except those for which a civil penalty is specifically provided.” This is generally US$100 for an initial violation and US$200 for each subsequent violation for each aggrieved employee per pay period.