In a recent case, the United States Court of Appeals, Ninth Circuit, provided a helpful interpretation of California’s meal break requirements, siding with an employer that a voluntary, discounted meal program did not violate California’s meal break requirement.
In Rodriguez v. Taco Bell Corp. (2018 DJDAR 6993, July 18, 2018), the Ninth Circuit considered an appeal from a trial court’s decision granting summary judgment in favor of employer Taco Bell. Ms. Rodriguez had worked in a restaurant as a cook at Taco Bell for approximately seven years. Ms. Rodriguez had received an acknowledged Taco Bell’s meal break policy upon her hiring. The meal break policy generally conformed to the Brinker requirements, although it contained a variation allowing employees to voluntarily purchase a discounted meal during their meal break. If they did purchase the discounted meal, then they were required to eat the meal in the Taco Bell restaurant. Taco Bell justified the requirement that the voluntary meal be eaten on site, because it prevented theft – specifically an employee using their discount to benefit nonemployees or family members which might have occurred if they were allowed to purchase the food at a discount and leave the facility.
Ms. Rodriguez challenged this voluntary meal policy arguing that the requirement that she eat the meal on site violated California law relative to meal break periods and required the payment for her time spent eating, as well as a meal break premium. More specifically, Ms. Rodriguez argued that Taco Bell retained control over her due to the requirement that she eat the discounted meal on site such that the time should be counted as work time, not valid break time. In contrast, Taco Bell argued that the policy was valid and met the Brinker requirements, because the discounted meal policy was voluntary, the employees performed no work while they were eating and were not required to perform work, and the employees could choose not to purchase the discounted meal and could leave the premises for their break.
California’s Labor Code requires that nonexempt employees receive compliant meal breaks or they must be paid for all time worked and be paid an additional, one hour meal premium for each day in which they do not receive compliant meal breaks. (Labor Code §§ 226.7, 512 ) The applicable regulation governing the restaurant industry (Wage Order 5) requires that the employee be relieved of “all duties” during the meal break. (Cal. Code Reg, tit. 8, §11050(11)(A).) The California Supreme Court in the Brinker case had further clarified this requirement, explaining that the employer had to “relinquish control over their activities,” permit the employees to take an uninterrupted break, and not encourage or impede them from taking a compliant break. (Brinker Restaurant Group v. Superior Court (2012) 53 Cal.4th 1004)
Applying these requirements to the Taco Bell policy, the Ninth Circuit concluded that Taco Bell’s voluntary, discounted meal policy did not violate these meal break requirements. There was no evidence produced by plaintiff showing the program was not wholly voluntary. Nor did Plaintiff produce any evidence showing that the employer encouraged participation in the program or otherwise impeded compliant meal breaks. Moreover, Defendant produced evidence showing that employees were free to purchase meals at full price, and then leave with the meals or eat them wherever they wanted. In ruling in favor of the employer, the Ninth Circuit distinguished the Taco Bell situation from other circumstances in which employers compelled or coerced employees to spend their meal breaks on premise, and thereby did not relinquish control over the employees for their full meal break.
The Ninth Circuit also rejected another, derivative claim of Ms. Rodriguez. Her counsel argued that the value of the discount on the meal that Taco Bell provided had to be included in the calculation of the employee’s overtime rate, and, thus, Taco Bell had underpaid overtime and also provided inaccurate wage statements. The Court again rejected this claim, but only on a procedural basis. The Court noted that the overtime claim was premised upon the claim that there was a meal break violation, which the Court found not to exist.
However, the Court’s analysis may highlight a ground for future liability that employers providing meals should avoid. California law requires that the overtime pay be based upon the “regular rate of pay”, which includes any discretionary bonuses and other forms of compensation that the employee receives. The court acknowledged that federal law requires the “regular rate” to be calculated on the basis of all compensation received by the employee and that California followed federal law in this regard. (29 C.F.R. §778.116; Prachasaisoradej v. Ralph’s Grocery (2007) 42 Cal. 217.) The Court acknowledged that the discounted value of the meal provided might fall within the definition of additional compensation paid to the employee. As such, it needed to be incorporated into the “regular rate of pay” calculation for purposes of overtime calculation. The Court rejected Ms. Rodriguez’s claim, but only finding that she failed to offer any evidence concerning the reasonable cost or fair value of the meals, which would be the proper measure for any claim of increased compensation.
In conclusion, the Ninth Circuit Rodriguez holding is a win for employers that provide voluntary meal programs for employees. Such programs are lawful and do not result in a meal break violation, absent some showing that the meal program is not voluntary or that employees are encouraged or coerced into participating in the program and staying on site during a meal break, or that some other interference exists. However, the Rodriguez holding also highlights a potential source of liability for employers offering discounted meals to employees, or other forms of indirect compensation. Such benefits must be carefully analyzed to determine whether the value of the indirect compensation must be included in the calculation of the “regular rate of pay” as it is used to calculate overtime and to assure wage statements are accurate.
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