This post was written by Michael Gallion and David Van Pelt and originally posted on Kelley Drye’s Labor Days Blog.

In a noteworthy decision last week, the Ninth Circuit ruled that fast food workers in California can voluntarily bargain away some of their meal period rights in exchange for discounted meals. The unanswered questions are how much employees can trade away, and in exchange for what.

The case (Rodriguez v. Taco Bell) challenged Taco Bell’s policy of offering discounted food to employees to be eaten during their meal breaks, as long as the employees agreed to remain in the store. Taco Bell’s reason for adopting the policy was apparently to prevent employees from leaving the premises and giving the food to friends or family. California law requires that during employees’ required meal breaks, employees must be relieved of all duty and be free to leave the premises.

The Court rejected the employee’s argument that by being required to remain in the store, the employee was “under the control” of Taco Bell and the meal period was invalid. The Court noted that purchasing the discounted food was “entirely voluntary,” and Taco Bell did not interfere in how the employee spent the meal break.

The obvious question is how far the reasoning in this case can be extended. The California Supreme Court held years ago that an employer is not liable if employees voluntarily choose not to take their meal break. Does this mean that employees can trade away their right to take meal periods or rest breaks in exchange for a company gift card, for example? What about a monthly bonus? Employees in California can waive their meal periods under certain circumstances. Can they also trade them away, and be required to work an eight-hour shift with no meal period, in exchange for a benefit?

In our view, a significant expansion of this case is unlikely. California courts are simply too protective of employee rights (or perhaps paternalistic, depending on your viewpoint) to permit employees themselves to trade away significant rights. The Court in this case suggested that if the employee had been “under the control” of Taco Bell during the meal period, even voluntarily as part of receiving discounted meals, the practice would have been struck down. Indeed, California law provides that even if an employee prefers to work (and be paid) during his/her meal period, an employer can only do so if the nature of the job makes it necessary.

Still, this case does provide an opportunity that California employers may use to their advantage. Companies might consider ways to lessen the inconvenience that comes with certain legally-protected employee rights (such as the right to leave the premises during a meal period) in exchange for a benefit. Employers should just be aware that any limitation on employee rights will be viewed with suspicion by California courts.

This post was written by  Michael D. Yim and originally posted on Kelley Drye’s Labor Days Blog.

Employers, even with the most robust and well-intentioned human resources departments, can still face the dreaded misclassification lawsuit for their salaried employers. In many cases, exempt employees are properly classified as executive or administrative employees. A misclassification lawsuit, however, is difficult to dismiss early because plaintiffs are afforded great latitude in crafting factual disputes that can only be resolved at trial. On top of that, plaintiffs generally bring such claims as class or collective actions – making litigation costly as well. Further compounding the problem, settlement of wage and hour misclassification cases is the preferred mode of resolution – but only after a range of damages can be made with some degree of certainty.

What if I told you that if you included one simple sentence in your employment contracts, handbooks and policies for salaried employees, it would likely reduce your exposure by approximately two-thirds in FLSA cases? For starters, it would make it easier to settle at the right amount by avoiding unnecessarily inflated ceiling for damage calculations by plaintiffs. So what are the “magic words” in this simple sentence?

For exempt employees, your salary is intended to pay for all hours worked during each pay period, regardless of your scheduled or tracked hours.

An employer’s first response is: well, isn’t that assumed for salaried employees since common sense dictates that a salaried employee means that an employee is not paid on a time basis and would be paid for all hours worked? No. This isn’t the case as more courts have presumed that, absent an express understanding, an employee’s salary only applies to the first 40 hours of a workweek as a default. This is because U.S. Department of Labor regulations are vague on how to calculate damages for misclassification cases, and courts have growingly interpreted guidance on what is called the Fluctuating Workweek (“FWW”) method of calculation for non-exempt employees – that is, counting a weekly salary to count as pay for all hours worked at a regular rate, even “overtime.”

Wait, what? In short, many courts would treat any overtime hours as unpaid as a default for calculations. Damages, therefore, would be 1.5 times the regular rate based on 40 hours (salary divided by 40 hours) for the overtime hours. See Ramos v. Telgian Corp., 176 F. Supp. 3d 181, 193, 2016 U.S. Dist. LEXIS 44321 (E.D.N.Y. 2016) (explaining that “[i]n the case of salaried, rather than hourly, employees, … the FLSA … ‘presum[es] that [] a weekly salary covers only the first forty hours, unless the parties intend and understand the weekly salary to include overtime hours at the premium rate’”).

Continue Reading Add One Line in Your Employment Contracts and Policies to Reduce Exposure to Misclassification Liability