Employment Law Commentary, December 2004

End-of-Year Odds and Ends: Meal and Rest Period Regulations, Case Law Developments, Federal Statutory Developments, New OFCCP Policies and Procedures, and Significant N.L.R.B. Decisions

During the past year, there have been many significant developments in the area of employment law. As 2004 draws to a close, we thought that it would be appropriate to dedicate this edition of the Employment Law Commentary to providing a summary of some of these compelling changes which might not warrant an issue all their own. Many of the decisions and advancements that are discussed in this Commentary represent considerable departures from previously held precedent, thus playing a central role in shaping, and to some extent redirecting, the future of employment law.

California DLSE Withdraws Proposed Emergency Regulations Clarifying Meal and Rest Period Rules Under Labor Code Section 512 and Resubmits Proposal Under Regular Administrative Rulemaking Process

On December 10, 2004, the California Division of Labor Standards Enforcement ("DLSE") of the Department of Industrial Relations submitted proposed emergency regulations to the Office of Administrative Law ("OAL") that would give more flexibility in scheduling meal periods and would clarify the nature of the penalties imposed for meal and rest period violations.

The DLSE withdrew the proposed emergency regulations and resubmitted the proposal for consideration under the regular rulemaking process on December 20, 2004, the deadline by which the OAL was required to review the proposed emergency regulations, as required by the Administrative Procedure Act ("APA").

Labor Code Section 512(a)

Under Labor Code Section 512(a), "[a]n employer may not employ an employee for a period of more than five hours per day without providing the employee with a meal period of not less than 30 minutes." Under a limited exception, if the employee's total work period is not more than six hours, the meal period may be waived by the mutual consent of the employer and the employee.

The penalties for failure to comply with 512 can be severe. Under Labor Code Section 553, any person who violates 512 is also guilty of a misdemeanor. In addition, an employer that fails to provide an employee with a meal period as required must pay the employee an amount equal to "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." Cal. Lab. Code 226.7(b).

DLSE Proposed "Emergency" Meal and Rest Period Regulations

Some of the more significant consequences of the proposed regulations include the following:

Section 226.7(b) Imposes Penalty

Under the proposed emergency regulations, the one-hour payment provision described in Labor Code Section 226.7(b) would be treated by the DLSE as a penalty rather than as wages. If treated as a penalty, the amount would be subject to a one-year statute of limitations and would not be subject to tax withholdings. If treated as wages, the position that the DLSE has previously embraced, a three or four-year statute of limitations would apply, and plaintiffs could also recover attorneys' fees and costs under 218.5 and 218.6.

"Provide" Means "Afford" Rather than "Take"

The proposed regulations clarify that employers will meet their statutory requirement under 512 of the Labor Code to "provide" meal periods as long as they (1) make the meal periods available to the employees and afford the employees the opportunity to take them, (2) post the applicable order of the Industrial Welfare Commission ("IWC"), and (3) maintain accurate time records for covered employees, as required by the IWC's wage order. As an added precaution, employers can further establish that they have "provided" their employees with the required meal period if they (1) inform employees of the circumstances under which the employee is entitled to a meal period, and (2) obtain written acknowledgements that the employees understand these rights. Consequently, employers that "provide" meal periods to their employees will not be penalized if their employees elect not to take their meal periods.

Meal Periods Can Begin After the Fifth Hour

Under the proposed regulations, employers would no longer need to require employees to take their meal periods before the sixth hour of work. As long as employers provide the employees with a meal period prior to the sixth hour of work, the employers will not be prohibited from permitting employees to begin their meal periods after the start of the sixth hour. Employers should be aware that under the proposed regulations, a second meal period must be provided if the work period commencing after the end of the initial meal period exceeds five hours.

The Significance of the Decision in Westside Concrete Company, Inc. v. Dept. of Industrial Relations

In October of this year, the Court of Appeal for the Second Appellate District held in Westside Concrete Company, Inc. v. Dept. of Industrial Relations 1 that the lower court erred in sustaining the DLSE's demurrers to Westside's initial complaint with respect to the claim that DLSE opinion letters interpreting an IWC wage order governing meal breaks constituted unlawful rulemaking in violation of the Administrative Procedure Act (APA). The Westside Concrete court noted that the record supported plaintiff Westside's contention that the broad language of the DLSE's letters suggested that the agency's "interpretations" stated new policy that was intended to apply statewide. The court found that the record contained sufficient evidence such that Westside should have been afforded the opportunity to show that the letters were more than "mere summaries of [the DLSE's] prior decisions or restatements of its prior positions in specific cases," and that therefore, the letters violated the procedural requirements for rulemaking that are outlined in the APA. 2

In response to this opinion, Gregory Rupp, the Acting Deputy Chief of the DLSE, issued a memorandum on December 20, 2004, that indicates that the DLSE intends to replace the specific opinion letters at issue in the Westside Concrete case with the formal rulemaking process outlined in the APA. This action, Rupp states, is necessary because the opinion letters have general industry-wide application. Rupp has directed that the opinion letters be removed from all enforcement manuals and from the DLSE website.

Effect of Withdrawal from Emergency Review and Resubmission Under Rulemaking Process

Pursuant to the requirements of the APA for formal rulemaking, the DLSE has issued a notice of proposed rulemaking. This notice informs interested parties about the details of the notice and comment period that will precede the DLSE's determination of whether or not the proposed regulations should be adopted. Three hearings for public comment are scheduled to be held in February of 2005. In addition, interested parties may submit written comments until the written comment period closes at 5:00 p.m. on February 14, 2005.

CASE LAW DEVELOPMENTS

EEOC Approves Law Firm's Mandatory Arbitration Plan

In a settlement agreement entered into by the Equal Employment Opportunity Commission ("EEOC") and the California law firm of Luce, Forward, Hamilton & Scripps ("Luce Forward"), the EEOC approved, with some minor revisions, Luce Forward's mandatory arbitration agreement. The settlement agreement marks a departure from the EEOC's previously held position opposing the use of mandatory arbitration plans to resolve employment disputes.

The settlement agreement followed the Ninth Circuit's decision in EEOC v. Luce, Forward, Hamilton & Scripps. 3 In EEOC v. Luce, Forward, the Ninth Circuit overruled prior precedent in holding that Luce Forward was not precluded by Title VII of the Civil Rights Act either from requiring applicants to agree to arbitrate Title VII claims or from enforcing existing mandatory arbitration agreements. Although the EEOC has not expressly revoked its 1997 policy statement that articulates its opposition to the use of mandatory arbitration agreements to resolve employment disputes, the Luce Forward settlement agreement indicates that the EEOC may be more willing to approve an employer's mandatory arbitration plan than it has been in the past.

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