May 28, 2010

Hon. Bob Dutton

Senator, 31st District
Room 5094, State Capitol
Sacramento, California 95814

Dear Senator Dutton:

Your staff asked us to compare California and Oregon’s meal and rest break laws,
their penalty structures, and the ease of filing and certifying meal and rest break class
actions lawsuits in their respective state courts. Our review finds that California and
Oregon have similar approaches to meal and rest break policy. However, there are sig-
nificant differences in the two states’ penalty structures for rest breaks. Below, we pro-
vide background on this issue and explain our findings concerning the requirements in
the two states.

California’s Meal and Rest Regulations and Statutes

The Labor Code and the Industrial Welfare Commission Wage Orders. In California,
the Labor Code provides the underlying statutory authority for meal and rest break
regulations. Using this authority, the Industrial Welfare Commission (IWC) has estab-
lished 17 wage orders to regulate the wages, hours, and working conditions in specific
industries, such as manufacturing, transportation, and agriculture. The Department of
Industrial Relations’ Division of Labor Standards Enforcement (DLSE) implements La-
bor Code statutes and IWC wage orders and interprets them to clarify their intent.
Meal and Rest Break Regulations Enacted in Law. Prior to 1999, the IWC issued
meal and rest break regulations for 17 industries under the general authority it has in
statute. Although employers were required to comply with these regulations, there
were no specific statutes regarding meal and rest breaks. Under these regulations, for
example, an employee who was denied meal and rest breaks could file a claim with the
DLSE, potentially resulting in fines on the employer if DLSE concurred with the em-
ployee’s complaint. Theoretically, employees also had the private right of legal action to
sue in court for such a violation. However, we are not aware of court cases involving
employers who had failed to provide meal and rest breaks under the regulations. In
1999, the Legislature effectively converted the IWC meal and rest break regulations into
statute with generally similar language by enacting Chapter 134, Statutes of 1999
(AB 60, Knox). It enacted Labor Code Section 512, which is now cited as the legal basis
for employees to file lawsuits against employers who fail to provide meal and rest
Preprinted logo will go here
Hon. Bob Dutton 2 May 28, 2010

breaks. The Labor Code does allow for a waiver of the meal period requirements by
mutual agreement of the employer and employee for shifts that are six hours or less. In
addition, collective bargaining agreements can supersede state requirements, provided
that agreement provisions provide equal to or greater benefits to workers.
Monetary Payment for Labor Code Section 512 Violations. Subsequently, the Legis-
lature enacted Chapter 876, Statutes of 2000 (AB 2509, Steinberg), which requires em-
ployers to pay an employee an additional hour of wages for each day that the worker
misses a meal or rest break. The requirement for this monetary payment was codified in
Labor Code Section 226.7.
Requirements That Employers “Provide and Ensure” Meal and Rest Breaks. In 2002,
the DLSE issued its Enforcement Policies and Interpretations Manual, which included
provisions relating to the newly codified meal and rest break laws. Among other issues,
DLSE interpreted the law to mean that an employer must provide and ensure that an
employee takes a meal and rest break. In other words, the DLSE required employers to
not only make meal and rest breaks available for employees, but also to make sure em-
ployees take them even if it is their personal preference not to do so.
A number of employers subsequently urged the administration to change DLSE’s
decision, voicing concern that the provide-and-ensure obligation would be difficult for
them to enforce. In 2008, the DLSE updated the Enforcement Policies and Interpreta-
tions Manual to indicate that employers are required to provide, but need not ensure,
that their employees take meal and rest breaks. (The department issued this rule after
taking into consideration the Brinker court case, which we will discuss later in this
analysis.)

Litigation and Controversy Ongoing Over California’s Meal and Rest Rules
Increased Litigation Activity Over Meal and Rest Violations. Since the changes dis-
cussed above in state laws and regulations, several class action lawsuits have been pur-
sued in California’s courts against companies that allegedly failed to provide and en-
sure meal and rest breaks. Most notably, in 2005, a California jury ordered Wal-Mart to
pay $172 million in damages for failing to provide and ensure meal breaks for its work-
ers. This case is known as Savaglio, et al. v. Wal-Mart Stores, Inc.
In 2007, the California Supreme Court ruled in Murphy v. Kenneth Cole Productions,
Inc. that Labor Code Section 226.7 required that any amounts paid as a result of meal or
rest rule violations constitute compensation to an employee for wages, rather than a
penalty imposed by the state. One important consequence of this decision is that an
employee may obtain compensation from an employer for violations that go back as far
as three years. This ruling had the general effect of exposing employers to greater po-
Hon. Bob Dutton 3 May 28, 2010

tential total costs for violations than had the court ruled differently, because penalties
imposed by the state are subject to a one-year statute of limitations.
Controversy Over Requirements Persists Between Employers and Labor. Employers
and their organizations continue to raise issues concerning the state meal and rest re-
quirements, arguing that business costs have increased significantly because of meal
and rest liabilities, court settlements, and attorney fees. Notwithstanding DLSE’s inter-
pretation of the provide-and-ensure provision, employees are continuing to successfully
pursue litigation on these grounds. Employers also contend that the law is inflexible be-
cause the full responsibility falls on the employer, rather than the employee, to ensure
that meal and rest breaks are taken. These groups have urged that state law be changed
to specify that employers should be required to provide, but need not ensure, that their
employees take meal and rest breaks. According to business associations, removing the
requirement to “ensure” would probably reduce lawsuits over meal and rest break ob-
ligations.
On the other hand, labor representatives assert that meal and rest laws exist to en-
force critical workplace protections and provide the path to effective enforcement.
Moreover, they argue that the law is, in fact, flexible because, as noted above, the meal
break can be waived by mutual agreement if an employee works for no more than six
hours.
Court Case Could Clarify Employer Responsibilities. Currently, the California Su-
preme Court is contemplating the key issue discussed above of what employers are ob-
ligated to do in regard to the meal and rest breaks taken by their employees. In the case
of Brinker Restaurant Corporation, et al. v. Superior Court of San Diego (Hohnbaum, et al.),
the court is considering an appeal of a 2008 Fourth District Court of Appeal decision
that held that “meal periods need only be made available, not ensured” by employers.
The legal ramifications of the case are significant. For example, under the appellate
court ruling, employers are not liable for employees who choose to miss their meal
breaks, as long as they can prove that they have established break policies, communi-
cated them to employees, and kept records of employees’ work time and break time. In
addition, under the court ruling, only employers who “impede, discourage, or dis-
suade” employees from taking their breaks are required to pay an hour’s worth of wage
for each missed break.

How California and Oregon Provisions Compare

There are approximately 22 states that have meal break laws and about eight states
that have rest break laws. As you requested, in this analysis we specifically compared
California’s meal and rest break laws with Oregon’s laws. Figure 1 shows a comparison
of the two states’ meal break laws and their penalty structures, and Figure 2 provides
the same information regarding the rest break laws.
Hon. Bob Dutton 4 May 28, 2010
Hon. Bob Dutton 5 May 28, 2010

Key Differences Between the Two States

Meal Break Laws. Our review indicates that California and Oregon have very simi-
lar meal break laws. In both states, if employers do not provide payment for a missed
meal break, employees are entitled to file a wage claim with the labor department or
sue an employer in court. The two states differ in that, in California, employers must
pay an hour’s worth of wages for each missed meal break, while Oregon employers
must pay for 30 minutes’ worth of wages. Another difference is that, while employees
can claim up to three years of unpaid wages for violations of California’s meal break
laws, Oregon employees can claim up to six years’ worth of unpaid wages for missed
meal breaks.
Hon. Bob Dutton 6 May 28, 2010

Rest Break Laws. As shown in Figure 2, California and Oregon have similar rest
break laws. However, the penalty structures in the two states differ significantly. In
California, employers must pay a full hour’s worth of wages for each missed rest break
and employees may seek redress through the courts if employers fail to provide pay-
ment. In Oregon, employers are not required to pay an additional wage for a missed
rest break and employees may not seek redress through the courts.

Class Action Lawsuits

Class Action Certification. Your office also asked us to assess the relative ease of fil-
ing and certifying meal and rest break class actions lawsuits in state court. Generally,
obtaining certification of class action lawsuits is complex and challenging. The plaintiffs
must prove that the violation involves a large group of people who are “similarly situ-
ated.” If a class action lawsuit is certified in state court, all the members of the class that
are similarly situated are “opted in” unless they volunteer to opt out. In contrast, mem-
bers of a certified federal class action need to volunteer to opt in.
Report Confirms Increased Number of Meal and Rest Class Action Filings. A
March 2009 study by the California’s Administrative Office of the Courts (AOC) found
that, between 2000 and 2005, there was a steady increase in the number of class action
lawsuit filings concerning Labor Code Section 512. Out of the approximately 1,500 class
action cases of various types that were filed, employment cases grew from 29 cases in
2000 to 120 cases in 2005. About a third of the employment cases referred to Labor Code
Section 512 as the underlying statute that was the basis of the litigation. Most of the
meal and rest class action filings involved large firms and largely resulted in settlements
or dismissals. Finally, with respect to Oregon’s class action filing trends, we have not
found an equivalent research study. (Information on the content of the settlements is
typically not publicly available.)
No Conclusive Data on the Ease of Certification for Meal and Rest Class Actions.
While the number of class action cases based on meal and rest period-related claims has
increased, that does not necessarily mean that the number of these types of cases that
are actually being certified as class actions has also grown. The AOC study mentioned
that about 75 percent of class action filings were not certified, and the rate of class certi-
fication actually decreased by more than 50 percent between 2000 and 2005. The avail-
able data, unfortunately, does not indicate how many meal and rest cases are being cer-
tified as class actions. The Brown v. Federal Express, Brinker v. Superior Court, and White v.
Starbucks cases are examples in which state courts have denied certification to meal and
rest class actions. As noted above, with respect to Oregon’s class action certification
trends, we have not found an equivalent research study. Nevertheless, in Oregon, we
have found cases where courts have denied certification to class action lawsuits relating
Hon. Bob Dutton 7 May 28, 2010

to meals and rest laws (Rogers v. RGIS, LLP and Gafur v. Legacy Good Samaritan Hospital
and Medical Center).
If you have any questions about this letter, please contact Todd Bland of my staff at
(916) 319-8353.

Sincerely,

Mac Taylor
Legislative Analyst