By John R. Giovannone and Aaron Lubeley

“Let me get this straight. To the delight of our workers, we’ve been providing free meals. But now someone is claiming that I owe unpaid overtime to account for the value of the free meals? Really??” 

We have been hearing this kind of exasperated response from clients with more frequency, as many employers have made the business choice to provide their employees with lunch at no cost. Many of these same employers are being accused of underpaying overtime by failing to incorporate the value of free food in calculating the regular, overtime, and double-time rates of pay. Talk about a funny way to give thanks!

Companies provide free food to employees for many legitimate business reasons: to help limit lunch breaks to 30 minutes, to encourage employees stay close to the job site during lunch breaks in case of emergencies, to avoid food waste and related disposal costs in industries where more food is prepared than the customers will consume (i.e., menu options), and to build workforce camaraderie by encouraging employees to take their lunch breaks together. This just a small sampling of reasons an employer might decide to feed its workforce. And not all free food needs to be considered in the computation of overtime.  But sometimes companies enact such free lunch policies without due consideration of the rules and possible legal ramifications.

As the plaintiffs’ bar clearly understands, California defines wages as “all amounts for labor performed by employees.” California overtime and double time are computed based on an employee’s regular rate of pay, which includes cash and other types of remuneration. Labor Code §§ 200, 510.

Increasingly, employers are seeing complaints that argue, essentially, if an employee earns $9 an hour and gets a free turkey sandwich for lunch, the sandwich is part of the “amounts for labor performed.” Therefore, plaintiffs argue, the value of the food should be factored into the employee’s regular rate, so that the corresponding rate of payment for any overtime worked should be increased by the per-hour value of a couple slices of turkey and bread! For example, if the value of the sandwich is $4.00, and is provided five days a week, the employee is getting an extra $20 per week in “other remuneration” that, plaintiffs argue, would make the regular rate for overtime computation not just $9/hour, but something more (depending on the number of hours worked in the week).

Unfortunately, this is no Thanksgiving prank. Free food regular rate miscalculation cases have actually been around in California since the Seventies (e.g., Marshall v. Valhalla Inn, 9th Cir. 1979: “The regular remuneration … consisted of the wages … plus the value of the meal provided … . The amount of such payments must therefore be included in determining the overtime rate.”). But this “gotcha” category of lawsuits, which defy common sense, have recently come into vogue. Worse still, theoretically similar claim types have evolved in response to similar food-related company policies.

Some lawsuits, for example, attack the practice of giving employees a discount on cafeteria food, claiming that the value of the discount should be included in calculating overtime rates (“If you charge me $1 for a $4 sandwich, that’s $3 more to my regular rate computation.”).

Other lawsuits claim that employers miscalculate overtime when they incorporate the employer’s cost of the food provided into the overtime calculation rather than incorporating the fair market value of the food provided to the employee into the overtime calculation.

These lawsuits actually work against the interests of employees, as they inspire an unsurprising employer response: cancellation of free and discounted meal policies. Are there effective alternatives to the drastic cancel-the-policy solution to this problem? Yes, but only careful consideration of each employer’s relevant facts and circumstances, coupled with careful drafting of free-lunch policies and procedures, will avoid liability for miscalculating overtime and double time rates:
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By Colleen M. Regan

Over the past decade, plaintiffs have filed hundreds of class actions alleging that California employers have failed to “provide” meal breaks.  The California Supreme court finally handed down some rules in 2012, in Brinker Restaurant Corp. v. Superior Court, 53 Cal. 4th 1004: 

  • An employer may not employ a person for more than 5 hours in a day without providing a meal break of at least 30 minutes, or more than 10 hours without providing a second 30 minute meal break. 
  • An employer must relieve the employee of all duty for a required meal break, but the employer need not ensure that the employee does no work:  “The employer satisfies this obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30–minute break, and does not impede or discourage them from doing so.”  Brinker, 53 Cal. 4th at 1040. 
  • Absent a waiver by the employee, a first meal break must begin no later than the start of an employee’s sixth hour of work.
  • Absent a waiver by the employee, a second meal break must begin no later than the start of the 11th hour of work, but the second meal break may begin later than 5 hours after the end of the first meal period.

But, you may ask, does the government mandate over employee eating schedules know no bounds?  Are there no exceptions?
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By John R. Giovannone and Brandon R. McKelvey

When the California Supreme Court issued its landmark decision in Brinker last year, employers were excited about the apparent legal clarity it offered in the area of meal and rest breaks.  We finally had our explanation of what an employer must do to “authorize and permit” meal and rest breaks, as Brinker succinctly declared:  “an employer is obligated only to ‘make available’ meal [and rest] break periods, with no responsibility for whether they are [actually] taken. [But] the employer is not obligated to police meal [and rest] breaks and ensure no work thereafter is performed.” 

In Brinker’s immediate wake, employers could feel confident in their meal and rest break rule compliance, so long as they (a) relieved employees of all duty, relinquished control and permitted them a reasonable opportunity to take breaks and (b) did not impede or discourage employees from taking breaks. 

But now, the breadth of Brinker’s clarity is under attack.  In this blog series, The Battle After Brinker, we will explore the current controversy over Brinker and what it means.  Since Brinker was decided, the battleground has shifted from the text of the Wage Order to the text of Brinker’s explanation.  While we now know that the employer’s duty is not to police breaks so as to ensure that they are actually taken, disputes can still arise over the meaning of an employer’s duty to make breaks available and the ramifications of that duty on the employer’s break policies and on the viability of meal and rest period class actions
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