Labor & Employment Law Daily Taco Bell’s policy that employee discounted meals be eaten on-site, without pay, didn’t violate California meal break law
Friday, July 20, 2018

Taco Bell’s policy that employee discounted meals be eaten on-site, without pay, didn’t violate California meal break law

By Marjorie Johnson, J.D.

In a putative class action against Taco Bell concerning employee meal breaks, the Ninth Circuit found that the fast-food chain’s policy of requiring employees to stay on the premises to eat discounted meals did not violate the California Labor Code since they were relieved of all duties during their meal break, were free to use the 30 minutes in any way they wished, and were only subject to the stay-on-the-premises restriction if they voluntarily chose to purchase a meal at a discount. Affirming dismissal of the plaintiff’s claims on summary judgment, the appeals court also rejected the plaintiff’s assertion that the value of the discounted meals must be added to the regular rate of pay for overtime purposes (Rodriguez v. Taco Bell Corp., July 18, 2018, Schroeder, M.).

Discounted meals. Throughout the employee’s employment, Taco Bell offered 30-minute meal breaks that were fully compliant with California’s requirements. As a special benefit, employees were also allowed to buy one meal per shift at a deep discount, provided that they ate the meal in the restaurant. Taco Bell required that discounted meals be eaten on the premises to prevent theft by ensuring that employees did not bring the discounted food to friends and family. The purchase of the discounted meals was on a voluntary basis and there was no requirement that employees ever purchase Taco Bell products. However, the policy was apparently popular, and the employee bought a discounted meal almost every shift.

District court finds no wage violation. The employee’s putative class action asserted that in requiring that discounted meals be eaten on the premises, Taco Bell violated California law by failing to provide uninterrupted, duty-free meal periods and/or rest periods, or premium wages in lieu thereof. The district court granted summary judgment for Taco Bell on these claims, emphasizing that employees were free to use the meal break time as they wished and were only required to remain on the premises if they voluntarily chose to purchase a discounted meal.

Applicable law. The applicable California regulation governing meal periods, rest breaks, and overtime pay in the restaurant industry (Wage Order 5) required that employees be relieved of “all duty” during the meal period. The remedy for failing to provide a meal or rest break required by statute or regulation was “premium wages,” or one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal or rest or recovery period was not provided. The California Supreme Court has held that employers fulfill their obligation to provide meal periods to their employees when they relieve their “employees of all duty, relinquish control over their activities and permit them a reasonable opportunity to take an uninterrupted 30-minute break, and do not impede or discourage them from doing so.”

Meal plan was voluntary. Here, the employee did not dispute that the condition of consumption-on-premises was to prevent theft, but contended that employees were nevertheless under employer control during the meal period, and thus “on duty” for purposes of California Wage Order 5. The Ninth Circuit disagreed, however, since the undisputed evidence showed that Taco Bell did not require or otherwise pressure employees to purchase a discounted meal and relieved anyone who did of all duty. They were free to leave the premises or spend their break time in any way that they chose that did not interfere with Taco Bell conducting its business.

Indeed, employees were free to purchase meals at full price and eat them wherever they wished. Moreover, there was no evidence showing that Taco Bell required or pressured the employee to conduct work activities while on premises during the meal period. In fact, Taco Bell’s policy appeared to prohibit this, as employees were required to take rest breaks and meal periods away from “the food production” and “cash register” area.

Not compelled to stay. The appeals court also rejected the employee’s reliance on a California Supreme Court case that involved employees who were required to travel to work on employer-provided buses. Their time was held to be compensable since they were under the employer’s control even if they weren’t required to work, since the employer’s work rules “prohibited employees from using their own transportation to get to and from the fields.” However, the state high court limited its holding to policies that compelled employee participation.

This case was also distinguishable from those involving employees who were “on call” during their break time and required to be readily available to perform their duties on behalf of the employer. The Taco Bell employees were free to use their break time in any way they wished.

Value of meals. The Ninth Circuit also rejected the employee’s assertion that the value of the discounted meals be added to the regular rate of pay for overtime purposes. At the outset, it appeared that this regular rate claim was derivative of her challenge to Taco Bell’s discounted meal policy, since the overtime she sought was predicated on counting the time spent eating meals as on-duty time. Accordingly, because she was not entitled to be paid for her time eating the meals, she was not entitled to overtime pay for it.

But even assuming that her claim referred to overtime hours worked apart from meal breaks, and that the value of the meal could be considered part of her compensation, her claim still failed since she was unable to establish the applicable value. The additional compensation she would receive from Taco Bell would be the reasonable cost of the meal to Taco Bell. However, she relied only upon the dollar amount of the discount from the retail price, but failed to produce any evidence showing the “reasonable cost” or “fair value” to Taco Bell of furnishing the discounted meal.

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