United States: Big Win For The Healthcare Industry On Meal Break Waivers As The California Supreme Court Resolves An Apparent Conflict In The Labor Code And IWC Wage Order

On December 10, the California Supreme Court issued an impactful decision for the healthcare industry. In Gerard v. Orange Coast Memorial Medical Center, the unanimous Court endorsed the Hospitals' meal break policy, over which the parties had battled for more than a decade.

The policy permitted employees who worked shifts longer than 10 hours to voluntarily waive one of their two meal breaks, even if their shifts lasted more than 12 hours. The Plaintiffs alleged the meal period waivers they signed were illegal because under the California Labor Code, waivers were not permissible for shifts greater than 12 hours.

The parties' arguments centered on an apparent conflict in the Labor Code and IWC Wage Orders on second meal period waivers for healthcare professionals:

  • Section 512(a) of the Labor Code requires a second 30-minute meal period for a work period of more than 10 hours. However, if the total hours worked in a day is less than 12, the second meal period can be waived by mutual consent if the first meal period was not waived.
  • On October 1, 2000, the IWC adopted the current version of Wage Order No. 5, which contains Section 11(D) that provides that in the health care industry, employees who work in excess of 8 hours in a day may waive one of their two meal periods. There is no 12-hour cap on waivers for second meal periods. This is particularly important to Gerard's allegations, since hospital staff typically worked shifts greater than 12 hours and the hospital permitted waivers under those circumstances.

California courts typically seek to harmonize the Labor Code and Wage Orders where they overlap. Where there is a conflict, the Labor Code prevails.  Plaintiffs in Gerard argued Section 512 and 11(D) were in conflict and thus Section 512 should prevail. The trial court granted the Hospitals' motion for summary judgment, but the Court of Appeal reversed in Gerard I, agreeing with Plaintiffs.

In response to Gerard I, the legislature enacted SB 327, an amendment to Section 516 providing that Wage Order 5 was valid and enforceable. The amendment provided that "notwithstanding . . . any other law, including Section 512, the health care employee meal period waiver provisions in Section 11(D) of IWC Wage Orders 4 and 5 were valid and enforceable on and after October 1, 2000 and continue to be valid and enforceable."

The legislative findings directly addressed the second meal period waiver for healthcare workers and observed that hospitals had relied on the Wage Order's allowance for a waiver for all shifts greater than 8 hours, and that even health care professional unions supported the allowance because it permitted flexibility and better patient care. At the same time the legislature acted, the California Supreme Court granted the Hospital's petition to review Gerard I and transferred the case to the Court of Appeal with directions to reconsider. In Gerard II, the Court of Appeal reversed itself, agreeing this time with the Hospitals, and the California Supreme Court again granted the petition for review.

In Gerard II, Plaintiffs argued the IWC lacked authority to adopt Section 11(D), focusing in part on Section 516's mandate that IWC regulations be "consistent with this chapter." The California Supreme Court disagreed, reading Section 516 of the Labor Code to give broad powers to the IWC. The primary purpose of the Eight Hour Day Restoration Workplace Flexibility Act was to restore overtime for employees, and the "consistent with this chapter" language meant IWC orders going forward could not ignore daily overtime. Section 11(D) was thus not beyond the IWC's authority.

The Gerard decision is a clear win for the healthcare industry and may even indicate the California Supreme Court's willingness to interpret the Labor Code in a way to permit Wage Orders room to regulate specific industries.

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