Under California law, an employer who fails to provide meal or rest breaks for applicable non-exempt employees must pay the employee one extra hour for each day the breaks were not provided. A recent decision of the California Labor Commissioner, Hartwig v. Orchard Commercial, Inc., Case No. 12-56901RB, sheds light on Labor Code section 226.7 for missed meal and rest periods. The Hartwig decision declares that the extra-hour of pay for each workday that a meal or rest period is not provided to the employee is a "penalty," rather than a "wage" owed to the employee. The good news for employers: the "penalty" designation does away with additional waiting time penalties for employers who failed to pay terminated employees the extra-hour penalty, and reduces the time limit for an employee to file a claim alleging non-payment of the penalty from three years to only one year.
More importantly, the Labor Commissioner designated the Hartwig decision as a "Precedent Decision," meaning it supplies the rule of law in all future Labor Commission proceedings regarding the extra-hour "penalty."
What should an employer do in light of Hartwig?
Employers should ensure that their employee policy regarding meal or rest periods is consistent with Labor Code section 226.7 and applicable Orders of the Industrial Welfare Commission. The policies should be communicated to all supervisors and managers, in addition to all employees, and should be absolutely enforced. Additionally, employers must regularly review employee time sheets to confirm that beginning and ending times, and appropriate meal breaks, appear on the time sheets.
Hartwig is also a reminder to employers that Labor Code section 203, which awards waiting time penalties to an employee whose final wages are not paid immediately upon termination, is alive and well. Upon termination, an employer must pay the terminated employee all wages earned and owed in order to avoid substantial waiting time penalties.
Facts of Hartwig v. Orchard Commercial, Inc.
Orchard employed Roi A. Hartwig from January 7, 2002 until his termination on February 4, 2004. Hartwig filed a claim with the Labor Commissioner's office for 104 meal period violations between January 2002 and December 2003. Hartwig's supervisor was aware that Hartwig was working long days and unable to take meal periods. Orchard's employee handbook, which Hartwig acknowledged receiving, contained a policy for meal or rest periods and indicated that employees could not waive the meal or rest periods. However, Hartwig's time sheets did not reflect that meal periods were taken and did not indicate the beginning and ending times of each workday.
Hartwig argued that the one hour additional pay for missed meal or rest periods, as provided in Labor Code section 226.7, was a wage and therefore his claims were subject to a three year statute of limitations and waiting time penalties. Orchard countered that the one hour additional pay was a penalty, subject to the one year statute of limitation and not subject to waiting time penalties.
The Hartwig Decision
The Labor Commissioner determined that Orchard failed to pay Hartwig for meal and rest periods he was entitled to – primarily because Orchard's time records didn't have sufficient information regarding start and stop times and whether meal periods were taken. Having concluded that Orchard violated Labor Code section 226.7, the hearing officer then analyzed whether the additional one hour of pay designated in section 226.7 was a wage or a penalty. Distinguishing the definition of "wages" in Labor Code §200, the Precedent Decision declared the additional one hour of pay a penalty. This decision clarified prior decisions of the Labor Commissioner and the courts, which had gone both ways on the issue.
By designating the one hour pay as a penalty, Hartwig's claims were subject to a one year statute of limitations, rather than a longer three-year period applicable to non-payment of "wages." Plaintiff was awarded $870 for 29 meal or rest period violations. Defendant did not pay Plaintiff's final wages upon termination, but instead waited five days. Plaintiff received $1,272 in waiting time penalties pursuant to Labor Code section 203.
As a designated Precedent Decision, the Hartwig rule will apply in future administrative cases before the Commissioner regarding this issue. In addition, while courts are not bound by the Labor Commissioner's decisions, most judges defer to the Commissioner's interpretations of the Labor Code provisions and regulations – so Hartwig will likely apply in future court cases as well.
If you need additional information or assistance in reviewing your policies to ensure compliance with Hartwig and other applicable California Labor Code provisions and regulations, please contact the authors or any Bullivant attorney.