On December 10, 2018, the California Supreme Court handed down its unanimous decision in Gerard, et al. v. Orange Coast Memorial Medical Center, affirming the Court of Appeal ruling that voluntary meal period waivers are permissible for healthcare employees who work long shifts, even if they work more than 12 hours. By allowing healthcare employees to waive one of their two meal periods, the Gerard decision preserves a choice for employees who work 12-hour shifts. They continue to have the flexibility to work shifts that span 12 ½ hours with one 30-minute meal period or shifts that span 13 hours and include two 30-minute meal periods.
Sheppard Mullin argued this case before the California Supreme Court and has represented Orange Coast Memorial Medical Center in the case since 2008.
Not only was this case hard fought throughout California courts for 10 years, but it also involved novel legislative action. Notably, it was the only wage-hour victory for an employer before the California Supreme Court in 2018.
Background on the Case and Relevant Laws
The lawsuit was filed in August of 2008 and initially alleged a variety of wage-hour claims, including meal period, rest period, regular pay, final pay, wage statement (pay stub), expense reimbursement, and unfair business practice claims. A claim under the Private Attorneys General Act (“PAGA”) was also asserted. Sheppard Mullin successfully defended the lawsuit in the trial court by moving to deny class certification and obtaining summary judgment in favor of Orange Coast on all of the claims, including the PAGA claim.
The plaintiffs challenged the trial court’s rulings, but directed the focus of their appeal on the meal period regulations contained in section 11 of Wage Order 5, a regulation issued by the California Industrial Welfare Commission (“IWC”). They argued that the meal period waiver regulation for healthcare employees differed in some respects from the Labor Code and was therefore invalid. It followed, they argued, that Orange Coast and any hospital that relied on the IWC’s regulation faced liability for allowing employees to waive one their two meal periods on long shifts, even though they acted entirely in good faith and the voluntary waivers were revocable by employees at any time.
California’s meal period rules for healthcare employees are the product of several overlapping legal schemes – the California Labor Code and the IWC Wage Orders. First, California Labor Code section 512 generally provides that employees who work over 10 hours are entitled to two 30-minute meal periods. However, employees can waive their second meal period if they work no more than 12 hours. Separately, Labor Code section 516 (which was added by AB 60 in 1999) permits the IWC to adopt or amend working condition orders with respect to meal periods, among other things.
Second, IWC Wage Order 5, section 11(D), permits healthcare employees to waive one of the two meal periods on long shifts, even if they work more than 12 hours. Wage Order 5 was adopted by the IWC on June 30, 2000, and became effective October 1, 2000.
After section 11(D) was adopted, but before it became effective, the Legislature enacted SB 88, which amended Labor Code section 516 to limit the scope of the IWC’s authority after SB 88 took effect. It modified section 516 to state: “Except as provided in Section 512, the [IWC] may adopt or amend working condition orders with respect to break periods [and] meal periods.” Before the SB 88 amendment, section 516 stated: “Notwithstanding any other provision of law, the [IWC] may adopt or amend working condition orders with respect to break periods, meal periods, and days of rest . . . .” It was therefore clear that SB 88 changed the law, including the IWC’s authority.
The Plaintiffs’ Challenge to the Wage Order
Plaintiffs claimed that, as a result of SB 88, section 11(D) of Wage Order was invalid because it created a form of “additional exception” to the meal period waiver standard that was not in Labor Code section 512. The trial court rejected this theory and each of the plaintiffs’ claims. It granted Orange Coast’s motion for summary judgment and its motion to deny class certification. The trial court found, among other things, that the plaintiffs were provided meal periods as required by California law.
Gerard I & II
After the trial court ruled in Orange Coast’s favor, the plaintiffs appealed. In Gerard I, the Court of Appeal sided with plaintiffs and found that section 11(D) was invalid based on SB 88 and the new language of section 516 that was enacted on September 19, 2000. The court found that the IWC exceeded its authority by enacting section 11(D) because it allowed meal period waivers for healthcare employees who worked more than 12 hours, whereas Labor Code section 512 did not. Shortly after Gerard I was decided in February 2015, the California Supreme Court granted Orange Coast’s petition that it review the case.
In a novel approach, an additional avenue was pursued to address the serious industry-wide concerns that arose from the Court of Appeal’s incorrect conclusions in Gerard I. After Gerard I was decided in February of 2015, with the backing of the California Hospital Association and the healthcare industry, a legislative solution to the problems caused by the decision was explored. The Legislature responded by unanimously passing SB 327 as an urgency measure that was signed by Governor Brown in October of 2015 to amend section 516. A new subdivision (b) was added, stating: “Notwithstanding subdivision (a), or any other law, including Section 512, the healthcare employee meal period waiver provisions in Section 11(D)…were valid and enforceable on and after October 1, 2000, and continue to be valid and enforceable.”
After SB 327 was enacted, the Supreme Court transferred the Gerard case back to the Court of Appeal in 2016. This time, in Gerard II – the Court of Appeal acknowledged in a March 2017 opinion that it had erred both in its analysis and conclusion by focusing on the date section 11(D) took effect (October 1, 2000, i.e., after SB 88 was enacted) rather than the date it was “adopted” (June 30, 2000, i.e., before SB 88 was enacted). On reevaluation, the Court of Appeal accepted arguments that Sheppard Mullin had made throughout the case and concluded that the IWC’s action in adopting Wage Order 5 when it did on June 30, 2000 was valid. The Court of Appeal thus affirmed the trial court’s judgment granting the hospital’s motion for summary judgment and subsequent motion to deny class certification.
The Supreme Court Decision
After the plaintiffs appealed Gerard II, the Supreme Court heard oral arguments on October 2, 2018. The Supreme Court reviewed the history of the case and the evolution of the meal period rules in California. It traced the rules from 1993 (when the healthcare industry petitioned the IWC to allow 12-hour shifts with meal period waivers) through 1999 (when the Legislature enacted AB 60 to create the first statutory meal period requirements). As AB 60 authorized, the IWC adopted section 11(D) to allow employees working long shifts to voluntarily waive one of their two meal periods, even if they exceed 12 hours.
The Supreme Court agreed with the Court of Appeal in Gerard II and found that the timing of the IWC’s adoption of Wage Order 5 on June 30, 2000, before SB 88 took effect, warranted the conclusion that the Wage Order was valid. Significantly, the Court also explained that this decision would have been the same whether or not SB 327 had been enacted. Thus, even though SB 327 supported the same conclusion, the validity of Wage Order 5 was determined based on the IWC’s authority on the date it was adopted.
What the Decision Means for California Healthcare Employees and Employers
The Gerard decision will have a lasting impact on healthcare employers and employees throughout California. Healthcare employers can now be confident they can continue to use voluntary meal period waivers for healthcare employees, even when they work over 12 hours. This decision also means that healthcare employees can continue to benefit from flexibility with their shifts; shifts can be scheduled for 12 ½ hours with one 30-minute meal period, rather than 13 hours with two 30-minute meal periods, without violating California law. Collective bargaining agreements that incorporate these rules can also be used. In sum, the Gerard decision allows healthcare employees and employers to preserve the flexibility they fought to achieve 25 years ago.