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Court Finds that Restaurant Complied with California Law by Requiring Employees Purchasing Discounted Meals to Eat their Meals on Premises

In California, generally an employer may not employ a non-exempt employee for a work period of more than five hours per day without providing the employee with a meal period that may be taken off the premises. Yet, in the restaurant industry employers often provide employees free or discounted meals to be eaten on the premises. Such perks are provided for countless reasons, including to allow employees to enjoy the dishes being offered to customers, to build morale and productivity, and to discourage theft.

In Rodriguez v. Taco Bell Corp., the United States Court of Appeals for the Ninth Circuit considered whether a restaurant violated California law by requiring employees purchasing meals from the restaurant at a discount to eat their meals on the premises.

In Rodriguez, a restaurant employee filed a class action lawsuit against Taco Bell claiming she was entitled to be paid a premium rate for the time she spent on the employer’s premises eating the discounted meal during her meal breaks. She argued that because the employer required the discounted meal to be eaten in the restaurant, that the employee was under sufficient employer control to render the time compensable.

At the time, the restaurant offered thirty-minute meal breaks that were fully compliant with California requirements, but with an offer that employees could purchase a meal from the restaurant at a discount. The catch? Employees were not required to purchase the discounted meal, but if they chose to they could only get the discount if they ate the meal in the restaurant. The policy was intended to prevent theft.

The court, applying the meal period standard set out by the California Supreme Court in Brinker Restaurant Corp. v. Superior Court, reasoned there was no violation of California law because the employer relieved employees of all duties during meal breaks and exercised no control over their activities. Employees were free to use the thirty minutes as they wanted, and the employer did not interfere with the employees’ use of the break time. Employees were not required to purchase any restaurant products.

The court in Rodriguez distinguished cases where employers exercised control over employees even though they were not performing work by, for example, requiring employees travel to work on employer provided transportation. Where employees were compelled to participate, compensation was required. On the other hand, where employers offered a benefit or service that employees could choose, compensation was not required. The court further distinguished cases where employers exercised control over employees during their breaks by, for example, subjecting them to “on-call” restrictions. In such cases employees were subject to performing duties for their employer during breaks and thus entitled to compensation for such time.

The court also rejected an additional claim by plaintiff that the discounted value of the meal should be added to her regular rate of pay for overtime purposes. Since the court held plaintiff was not entitled to be paid for her time eating the discounted meals, it likewise held she was not entitled to overtime pay for it either.

Background on Meal Periods

In general, non-exempt employees who work more than five hours in a day are entitled to an unpaid meal period of not less than 30 minutes. The meal period must begin no later than the fifth hour of work. Yet, if the total work period per day of the employee is no more than six hours, the meal period may be waived by mutual consent of both the employer and employee.

A second meal period of not less than 30 minutes is required if non-exempt employees work more than ten hours in a day. The meal period must begin no later than the end of the tenth hour of work. If the total hours worked is no more than 12 hours, the second meal period may be waived by mutual consent of the employer and employee only if the first meal period was not waived.

Wage Order 5, which governs meal periods, rest periods and overtime in the restaurant industry, requires employees be relieved of “all duty” during the meal period. The failure to provide a required meal period can be a costly mistake for employers. Employees are entitled to premium wages of one additional hour of pay at the employee’s regular rate of pay for each workday that the meal period is not provided.

Prior to the decision in Brinker, there was uncertainty over what it meant for an employer to provide a meal period. Brinker clarified that an employer is obligated to relieve the employee of all duty for the designated period. Although employers are not required to police employees to ensure no work is performed, employers must relinquish control over employee’s activities, must permit them a reasonable opportunity to take an uninterrupted 30-minute break, and must not impede or discourage them from doing so. In discussing the history of meal periods, the Brinker Court agreed with the Division of Labor Standards Enforcement’s historic interpretation of the wage order that generally employees must be free to leave the premises during their meal period.

Takeaways for Businesses

Rodriguez sanctions a common practice in the restaurant and food service industries to offer employees free or discounted meals eaten on the premises. It remains true that employees not falling within this exception must be permitted to leave the work place for a proper off-duty meal period. The key will be, as it was in Rodriguez, that the employee voluntarily chooses to purchase a discounted meal and the employer does not interfere with the employee’s activities while on break.

This case is a good reminder for businesses to ensure their meal period policy is up to date and that managers are adequately trained to ensure compliance. Care should be taken so that employees are not discouraged from taking their uninterrupted, duty-free meal periods.

Megan Shaked

Megan Stevens Shaked is an Associate in the San Francisco office of Conn Maciel Carey LLP.

Ms. Shaked represents employers on a wide range of employment matters, including claims of discrimination and harassment, wrongful termination, wage and hour violations and whistle blowing. She also conducts workplace harassment prevention training and counsels employers on personnel matters such as the development of employee handbooks, hiring and termination decisions, and wage and hour compliance.

Ms. Shaked represents clients in inspections, investigations and enforcement actions involving Cal/OSHA. She also represents clients against claims brought by patrons alleging lack of accessibility under Title III of the ADA and the California Unruh and Disabled Persons Acts.

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