On December 22, 2005, a jury in California (Alameda County Superior Court)
awarded $172 million ($57 million in general damages and $115 million in
punitive damages) to approximately 115,000 individuals who worked for Wal-Mart
in California between 2001 and 2005. The class action lawsuit alleged that
Wal-Mart violated California Labor Code §512, which generally requires
employers to provide a thirty-minute unpaid lunch break to employees who work
more than five hours per day.
The sheer size of this award—and the media attention it has generated—will
undoubtedly result in copycat lawsuits as well as class action lawsuits
alleging violations of still other state or federal employment laws including
the most arcane and technical provisions of such laws.
The Law of Lunch in California
In order to understand the Wal-Mart case, some background information on the
law of lunch in California is necessary. California Labor Code §512 provides:
- Employers must provide an unpaid lunch break of at least
thirty minutes to employees who work more than five hours per day.
- If the total work period of the employee is no more than
six hours, the employee and employer may waive the lunch break by mutual consent.
- If the total work period of an employee is more than ten
hours, a second unpaid meal break of at least thirty minutes must be provided.
- If an employee works no more than twelve hours, the employee
and employer can mutually waive the second meal break if the first
meal break was not waived.
There are certain exceptions and differences that apply to employees working
under a collective bargaining agreement and to employees working in certain
There are also very limited circumstances in which an employee can take an
on-duty lunch break (generally, the work must preclude an employee from
taking an off-duty break and the on-duty break must be paid for and agreed
to in writing). If an employee must eat on premises, a suitable place for
a meal break must be provided (IWC Wage Order 11), and Cal/OSHA contains some
limitations on where employees can eat or where food and drink can be stored.
If an employee is required to remain on premises, the lunch break must also
The California labor commissioner has taken the position that an employer
has an affirmative obligation to ensure that employees are actually relieved
of all duty for unpaid lunch breaks. This can be a very difficult obligation
to meet because some employees will simply not self-monitor and/or prefer
not to take a break either because they are involved in a particular
activity and/or they want to finish a required shift and go home early.
If an employer fails to provide a legally required meal or rest break, the
employer must pay the employee an additional hour of pay (at regular rates)
for each day the meal or rest period was not provided. A
failure to provide a legally required meal or rest period (or failure to
meet a number of other wage and hour obligations) can also be punishable as
Next Steps in the Wal-Mart Case
It seems likely that an appeal will be filed in the Wal-Mart case (or the
award will be reduced and/or the case settled for a substantially smaller
amount) because the verdict appears suspect for several reasons.
First, the labor commissioner has issued a precedent decision declaring that
the extra hour of pay provided by Labor Code §226.7 is a penalty, not
a wage, which
means that the statute of limitations is just one year. This precedent decision
is entitled to substantial deference from the courts.
Second, there is a significant question whether punitive damages can be awarded
at all based on assessment of a penalty. Such an award would in essence
result in a double penalty—and one that is often far in excess of the penalty
specifically established by the legislature.
Third, even if punitive damages could be assessed, consideration must be given
to whether the award was excessive. As an example, in this case Wal-Mart
apparently acknowledged that when the law was amended effective 2001, the
company had some difficulty with compliance issues (as did many other employers,
often for the reasons noted above), but that the company instituted new policies
to ensure that employees received meal periods. This even included installing
new technology that alerts cashiers when it is time for a lunch break and automatically
shuts down the register if the cashier does not respond (undoubtedly pleasing
customers standing in line!).
What Should Employers Do Now?
Despite the apparent flaws in the Wal-Mart verdict, prudent employers should
now conduct thorough reviews of their employment law compliance practices.
Given the potentially huge liability involved and the substantial cost of
defending even nonmeritorious class actions, these reviews should be done in
conjunction with counsel utilizing attorney-client privilege and the attorney
work product doctrine as appropriate. A review of all employment law compliance
issues is advisable, but particular attention should now be paid to the following:
- lunch break and rest period policies, practices, and enforcement
- overtime policies and practices
- appropriate determination of independent contractor versus
- proper employee classification as exempt or nonexempt
- time clock, time cards, and payroll practices
- Bono v. Bradshaw (1995) 32 Cal. App. 4th 968.
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- Cal. Labor Code §226.7.
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- Ca. Labor Code § 553 and 1199 et seq.
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- Hartwig v. Orchid Commercial, Inc., Case No. 12-56901RB.
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