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(December
2004)
Major Changes in Meal / Rest Break Regulations
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All
Non-Government Employers
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If
approved, they are slated to become effective on December 20,
2004. Afterward, new, final regulations on the issue will be
promulgated.
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On
December 10, 2004, the California Division of Labor Standards
Enforcement (“DLSE”), filed emergency regulations
that will provide workers more flexibility in taking meal and
rest periods and clarify penalty assessments paid to workers
by noncompliant employers. The Office of Administrative Law
has ten days in which to review the filed regulations.
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Finding
of Emergency: Wages or Penalty?
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Until now,
the DLSE had enforced a staff opinion letter that deemed the “one-hour of pay” (required as an award
to the employee for the employer's failure to abide by the law)
to be “wages,” rather than a “penalty.” However,
in its “Finding of Emergency” filed in support of
the emergency regulations, the DLSE stated that the history of
Labor Code section 226.7 clearly indicates that the payment was
meant to be a penalty. As a penalty, the payment is subject to
a one-year statute of limitations. This means that employees
can only go back one year for unpaid missed-break penalties,
rather than three years for “unpaid wages.” The DLSE
is expected to look at whether this new interpretation will apply
to claims that are currently pending at the DLSE. Since the only
basis for previously declaring the payment to be wages was a
staff opinion letter, and the Finding of Emergency is relying
on a several-year-old statute, the “penalty” interpretation
seems to be declaratory of existing law and should apply to currently
pending cases
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Income
Tax Withholding Issues
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One
wrinkle to the “penalty” issue, however, is
that, as a “penalty,” such payments are not subject
to income tax withholding as they would be if they were deemed
to be wages. This will create some new complexities in processing
payroll where an employee has any missed breaks. Waag and Co.
spoke with the DLSE’s regulatory office in San Francisco
regarding this difficulty and they note that this is an issue
that they will need to work out with the IRS. Accordingly, it
is not yet clear how the tax-withholding issue will be resolved.
Employers should contact their tax advisors for further guidance
until and unless the DLSE is able to provide better information.
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The
second area of law clarified by the emergency regulations relates
to the time parameters in which meal periods can be taken.
In prior opinion letters, DLSE staff interpreted the Labor
Code and the Wage Orders to require an employer to start the
employee 30-minute meal period before the end of the fifth
hour after the start of the workday. This interpretation has
resulted in the imposition of penalties on employers even in
cases where the employee's meal period was scheduled to begin,
for example, five minutes after the fifth hour of the workday.
As a result, employers often force employees to take meal periods
within those constraints, even when the employee has no desire
to stop work in order to eat or rest at such specific times.
This was due to the DLSE’s literal application of the language
contained in the Wage Orders, without reference to the statutory
intent. The Finding of Emergency notes that Labor Code sections
512(a) and (b) gave the Agency the specific authority to address
meal periods that begin after the sixth hour, but not for meal
periods occurring prior to the sixth hour. Therefore, common
sense dictates that the DLSE has the authority to interpret the
provisions dealing with meal periods that occur between the beginning
and the sixth hour of the workday.
So, under
the emergency regulations, an employee who wants to take a
meal period still should start it by the end of the fifth
hour worked; however, there would now be a “grace period” of
a one-hour window for the employee to clock out for lunch. Employers
need to understand that this is only a “grace period” relating
to the five-hour mark; in other words, if somebody wants their
meal break but cannot get off-duty until six hours and
one minute into their shift, that employee has missed their break and must
be paid a penalty.
The emergency
regulations also state that an employer will be deemed to have
provided a meal period to an employee in accordance
with the Labor Code Section 512 if the employer does the following:
Makes the meal period available to the employee and affords the
employee the opportunity to take it; posts the applicable Wage
Order; and maintains accurate time records for covered employees,
as required by the posted Wage Order. The result of this is that
if an employer makes timely meal periods available, but the employee
simply does not want to stop for lunch (and this must be solely
the employee’s choice with no pressure by the employer),
then the employer would not be liable for the missed-break penalty
when that employee decides not to take a timely meal break.
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Meal
Period Recommendations
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Waag and Co. recommends that, once the new rules go into effect,
employers inform employees in writing of the circumstances under
which they are entitled to a meal period and have them acknowledge
in writing that they understand those rights. |
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If approved, these regulations would go into effect on December
20, 2004. Waag and Co. will continue to monitor this situation
as it develops and provide information as it becomes available. |
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This
material is a general overview of the subject matter, and
is not meant to provide professional opinions regarding any
specific case, matter, or set of facts, or to substitute
for the professional advice of Waag and Co. Instead, please
contact Susan S. Waag, Esq. for additional information. Use
of this information is allowed, provided that credit is given
to: Susan S. Waag, attorney; Waag and Co.; September 2001
Employer Bulletin; INFO@WaagandCo.com;
(805) 783-2300
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