Supreme Court Hands Down Ruling in California Overtime Lawsuit

Los Angeles, CAThe Los Angeles Times (April 17, 2007) reports that the California Supreme Court handed down a ruling that triples the amount of back pay that employees can seek if they were forced to work through their breaks. The decision affects many people who are considered managers or assistant managers but generally spend less than half their time at work doing managerial tasks.

Hundreds of thousands of workers could be affected by the Supreme Court ruling, which will likely lead to more lawsuits being filed against employers.

The decision effectively allows employees to recover unpaid wages for as far back as three years. Employers had hoped that the courts would only allow employees to recover wages from one year. In handing down the ruling, the Supreme Court said that a missed lunch break "constitutes a wage or premium pay and is governed by a three-year statute of limitations."

The Supreme Court made its ruling while considering the case of John Paul Murphy, who worked for Kenneth Cole Productions at one of the company's retail stores from June 2000 until July 19, 2002. According to court documents, Murphy worked between nine and ten hours a day and was considered a manager. "He rarely, if ever, had the opportunity to take a rest period and, on occasion, was unable to go to the restroom." Murphy's shifts were often spent making sales, receiving merchandise, processing markdowns, and cleaning.

After he left his job, Murphy filed a claim with the Labor Commissioner, who found that Murphy was not an exempt employee and should have received pay for the overtime he worked. Kenneth Cole Productions filed an appeal, where the trial court awarded Murphy unpaid overtime, payments for missed breaks, and prejudgment interest. That court awarded the payments based on a three-year statue of limitations. Kenneth Cole Productions appealed again and this time the Court of Appeal found that break violations were subject only to a one-year statute of limitations. The Supreme Court then agreed to hear Murphy's appeal.

The major question was of whether payment for missed breaks constitutes a wage for the worker or a penalty against the employer. If it is a wage for the worker, then the three-year statue of limitations applies. If it is a penalty against the employer, the one-year statute applies. The California Supreme Court found that payment for missed breaks is a premium wage and not a penalty, meaning that employees can seek reimbursement based on a three-year statute of limitations.

In the past, large companies such as IBM Corp., Allstate, and Bank of America have been hit with similar lawsuits. These companies often settle rather than facing a long trial. Late last year, IBM reached a settlement with 32,000 computer technicians who claimed that the company failed to pay them overtime. IBM agreed to pay $65 million to settle the lawsuit.

In California, employees must get a 30-minute unpaid meal break for every five hours that they work. Additionally, they are entitled to a 10-minute, paid rest break per four hours worked. People who are classified as managers but spend the majority of the time performing non-managerial tasks often find themselves working without a break because they are considered managers and therefore not entitled to breaks. However, in order to be an "exempt" managerial worker, more than half of a person's time must be spent on supervisory duties. In many cases, people are classified as management but actually spend the majority of their shifts out on the sales floor, marking-down merchandise, cleaning the store, and taking out garbage.

If you have been classified as a manager and therefore are considered exempt from break laws, but spend less than half your on-the-job time in supervisory duties, contact a lawyer to discuss your options.