Legally Speaking: Are Meal Periods Creating Overtime Liability?
Providing hourly employees with unpaid meal breaks may seem like a straightforward thing to do, and it is done in thousands of workplaces on a daily basis. However, while the federal government doesn’t require employers to offer meal breaks, the logistics of taking workers off the clock for their meal periods can lead to litigation and government investigations if not done with considerable care.
SSM Health Care is one company that learned that lesson the hard way. In 2009, the medical corporation had to pay more than $1.7 million in back wages when the U.S. Department of Labor ruled that the company did not properly compensate more than 4,000 nurses who worked during at least part of their unpaid meal breaks.
The company had relied on an automatic timekeeping system to deduct meal periods for the nurses, regardless of the actual length of the lunch break. According to the Wage and Hour Division of the DOL, when the nurses had to work during some of their meal breaks, SSM failed to pay them overtime, which violated the Fair Labor Standards Act.
“The welfare of our workforce depends on ensuring that workers receive all the wages they have earned, and the Labor Department is committed to that end,” Secretary of Labor Hilda L. Solis said in a press release at the time.
Along with regulatory action, employers risk lawsuits when employees who are non-exempt under FLSA are not properly compensated for time they work during their unpaid meal breaks. According to the American Bar Association, FLSA lawsuits in federal district courts continue to rise and are a significant portion of pending court actions.
Employers need to understand the risks involved when employees clock out for unpaid meal breaks to stay in compliance with the law and stay out of trouble.
The Bona Fide Meal Break
When it comes to non-exempt employees, federal law doesn’t require that employers give their workers either rest or meal breaks. Of course, most employers understand that it’s extremely difficult for employees to be productive or content when they work long hours without any breaks. And, because many states have strict requirements for meal and break periods, most employers quite reasonably offer breaks when employees work a certain number of consecutive hours.
When talking about breaks, there is a difference between meal breaks and rest breaks. Under federal law, employees must be compensated for short breaks, which are typically more than five minutes but less than 20. Anything longer than 20 minutes may be considered a meal break. Meal breaks that are 30 minutes or more are almost always considered true, or “bona fide,” meal breaks. And the DOL takes these bona fide meal breaks seriously.
According to the DOL, “Bona fide meal periods (typically lasting at least 30 minutes), serve a different purpose than coffee or snack breaks and, thus, are not work time and are not compensable.” During a bona fide meal break, companies do not have to pay their employees who are non-exempt under the FLSA. But, companies cannot expect employees to do any kind of work once they are off the clock for their lunch period. For example, according to the DOL, companies can’t expect factory workers to eat at their workstations during their unpaid meal breaks.
The courts have applied only limited exceptions. For example, in Roy v. County of Lexington, the U.S. Court of Appeals for the Fourth Circuit ruled that emergency medical service paramedics and technicians were not entitled to compensation for meal periods, even though they had to respond to emergency calls during that time. However, because such exceptions are limited, employers should consult with legal counsel, who can advise on the employer’s specific situation and relevant state laws and court rulings regarding possible exceptions.
The Problems with the Clock
Problems arise when employees go off the clock but still work for at least part of the time that they are not getting paid. Employers also risk overtime violations if employees who work more than 40 hours a week are not properly compensated when they work during unpaid breaks.
Employers often deal with the issue of lunch breaks by having employees clock in and out for each break. Unfortunately, employees may forget to punch in and out, or may find ways to manipulate the timekeeping system. That has led some employers to consider payroll systems that automatically deduct time off for meals. Several years ago, the FLSA considered the issue of allowing for automatic payroll deductions rather than punching in and out. In that situation, an employer asked the DOL if it was acceptable to automatically deduct 30 minutes for a lunch period from the total daily time the employees worked, unless the employee notified the employer that he or she didn’t take the 30-minute lunch period.
In its opinion letter, the DOL said the automatic payroll method was acceptable, “so long as the employer accurately records actual hours worked, including any work performed during the lunch period.”
While the DOL’s letter seems obvious enough, automatic payroll systems can be particularly tricky to override. If an employee fills in at the front desk during a lunch break, either the employee or his or her manager has to remember to go into the payroll system to reflect the time the employee had to work.
As noted above, for many companies, federal laws are only part of the challenge. Twenty states have laws on the books regarding meal breaks for those in the private sector. And lawsuits at the state level can take a heavy toll on employers.
Several years ago, a California jury awarded more than $172 million to current and former Wal-Mart employees who claimed they were denied lunch breaks. Wal-Mart was ordered to pay more than $57 million in general damages and $115 in punitive damages for violating California state law.
In another California case, Ann Taylor Retail Inc. settled claims that it misclassified store managers and senior assistant and assistant store managers as exempt from California overtime wage and hour laws, depriving them of overtime and adequate meal breaks.
What Employers Need to Do
With all the areas of risk involved with a meal break, employers may be tempted to just tell non-exempt workers they can’t have unpaid meal breaks. However, that approach will undoubtedly cause significant dissatisfaction among employees and could result in other negative outcomes. Instead, companies should ensure that their policies regarding meal breaks are as thorough as possible and minimize the chances that employees aren’t docked for meal periods when they are actually working.
• Develop a policy and communicate it. If your company doesn’t have a clear-cut policy regarding meal breaks, you need to create one as soon as possible. Consult with HR as well as in-house and outside counsel to make sure the policy complies with all federal and state laws. Check with industry peers to see what they are doing.
Once you have a policy in place, let all of your non-exempt employees know what their obligations are when they take their lunch break. Remind employees every chance you get. Employees should hear about it during their orientation and it should be published in the company handbook. If you have employees clock in and out for meal breaks, post the policy next to the clock.
For companies that already have sophisticated payroll systems, automatically factoring meal breaks into employee compensation may seem like an easy way to deal with the issue. But this approach can quickly become problematic if employees are asked to work during their meal breaks. In this instance, you should install an extremely easy and effective way for employees to update their timecards in a timely manner.
• Encourage a change of scenery. When employees have to remain at their desks or workstations for meals, employers will have a much more difficult time regulating whether those employees are working or not. If the phone rings or an urgent e-mail comes in, an employee may be tempted to respond. But by working during their lunch break, you risk that employees will violate the bona fide meal period rules.
If it’s feasible, encourage employees to eat lunch away from their workstations. You do not have to let them leave the premises. But providing a break room may be a minimal expense compared to potential regulatory problems or lawsuits.
• Make it a priority. Tracking lunch breaks may seem like a burden, but it is important that managers and supervisors regularly check in with employees to make sure they understand the rules and procedures. Companies should perform routine audits to identify potential issues and deal with them as soon as possible.
You also need to carefully consider your company culture. You can’t have one policy on the books and then subtly encourage employees to disregard it. Non-exempt employees should never be rewarded or encouraged to work through their meals, and managers should not expect them to.
Unfortunately, employers who do the right thing and offer unpaid meal breaks to their non-exempt employees may end up running afoul of state and federal regulations or getting sued by employees even while trying to do the right thing. Employers need to be proactive about their meal break policies and regularly monitor employees to be sure they are not working when they are not being paid.