2005-11

Labor Commissioner Issues Important Revisions to Meal Breaks and Vacation Rules.

Meal Breaks

On July 7, 2005, the Labor Commissioner issued additional changes to the proposed meal break regulations that have been under review since January. The comment period on the latest revisions closes July 25.

Like the prior versions of the proposed regulations, these revisions state that an employer is in compliance with the meal break requirements if it informs employees orally or in writing about their right to take a meal break, allows the employees to take the meal break, and keeps accurate time records of when the breaks were taken. Even if one of these requirements cannot be established, an employer may still be in compliance if it can prove by other evidence that the employee was allowed to take a meal break.

The latest revisions also make it clear that employers must provide the meal break before the end of the 6th hour of work. The prior versions of the regulations were ambiguous as to when the meal break must start.

One important change in the revised regulations is a new provision which expressly states that an employee may initiate a request to either skip or take a short meal break, even if the work shift exceeds 6 hours. The language suggests employees cannot make a blanket request, but must request to be excused from a break or take a short break, each work day. The request must also be initiated by the employee. Still, this is a significant improvement for employers from earlier versions of the regulations and the prior enforcement position, and provides much needed flexibility to the meal break rules.

Most of the other provisions from the prior drafts of the regulations are not materially different. The revised regulations continue to state that the one hour of pay for meal and rest break violations is a penalty and not a wage. This is significant because the statute of limitations for penalties is one year instead of the longer 4-year statute that can apply to wage claims. In addition, by treating the one hour of pay as a penalty, employees cannot recover attorney?s fees or waiting time penalties for alleged meal or rest break violations.

There is still an open question as to whether the regulations will apply retroactively or only to future claims once the regulations become final. The initial explanation offered by the Labor Commissioner with the original proposed regulations supports retroactive application, since it states the regulations are necessary to clarify existing law. Whether the regulations apply retroactively or only prospectively will likely be the subject of future litigation. We also anticipate that the regulations themselves will be challenged in court by employees or labor groups.

The revised regulations come on the heels of a Precedent Decision issued by the Labor Commissioner last month. Like the proposed regulations, the Precedent Decision makes it clear that the one hour of pay for rest and meal break violations is a penalty and not a wage. The Precedent Decision will be binding in other cases brought before the Labor Commissioner.

Vacation

The Labor Commissioner also recently issued an internal memorandum to all of its field offices which dramatically changes the government?s enforcement position on vacation banks for exempt employees. Based on an earlier opinion letter issued by the Labor Commissioner?s legal staff, the prior enforcement position prohibited employers from making deductions from vacation or personal time off (PTO) leave banks for partial day absences for exempt employees. Violation of this rule could make the employee non-exempt and, therefore, eligible for overtime pay. This interpretation was contrary to the interpretation of the U.S. Department of Labor. The DOL has long taken the position that deductions from vacation or PTO banks for partial day absences for exempt employees are permissible under federal law so long as the employee still receives his full salary for the day. Only deductions from salary for partial day absences would jeopardize the employee?s exempt status.

In the memorandum issued last month, the Labor Commissioner has reversed its prior enforcement position to bring California in line with the federal regulations. Now the Labor Commissioner will permit employers to make partial day deductions from vacation and PTO banks for exempt employees without affecting their exempt status. Like the federal rules, California still does not permit deductions from an exempt employee?s salary for partial day absences. As such, if the employee has no vacation or PTO on the books, they must still receive their full salary for partial work days.

The Labor Commissioner?s new interpretation is binding in all cases filed with the government. There are no reported court cases that have decided this issue. While the Labor Commissioner?s interpretation should be given a lot of weight by a judge, it is not binding in cases filed in court, and employers are still potentially at risk for partial day deductions from vacation or PTO banks.

The rules regarding meal breaks, overtime exemptions, and vacation pay are very complicated. Please call your Firm contact to discuss how these rules apply to your company.

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