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California employers may have bitten off more than they can chew in their efforts to curb the growing number of lunch-break lawsuits with multimillion-dollar wage claims. But if they succeed in squelching the workers’ claims, the payoff will be sweet. California is one of the only states in the nation that fines employers for violation of meal-break rules. The law entitles employees who work more than five hours without a meal break to sue for one hour of pay for each missed meal going back as much as three years. That 3-year-old law has made California a battleground for suits seeking back wages by hourly employees who say they have been denied meals and rest breaks. Although there is no reliable tally, Sacramento attorney Mark Spring speculated that there might be as many as 100 back- pay suits in the state seeking lost meal compensation. “This is the fastest growing area of labor law,” Spring said. His defense firm, Carlton, DiSante & Freudenberger, has doubled in size, from 20 to 40 lawyers since 2000, “largely on the back of these lawsuits,” he said. “It is a huge problem for employers in a variety of industries because the law appears to be so rigid,” said Judith Droz Keyes, an employment law expert in Morrison & Foerster’s San Francisco office. She singled out the retail, restaurant and trucking industries as the front line in the fight. Plaintiff attorney Jessica Grant of the Furth Law Firm in San Francisco scoffed at the numbers. “There are 10 class actions, at most, in the state and less than five have been certified as classes,” she said. Grant should know. She currently represents plaintiffs in the biggest single case in the nation. Her class action accuses Wal-Mart Stores Inc. of denying as many as 204,000 current and former California employees of pay for missed lunch and rest breaks. The case has a June trial date in Oakland. Savaglio v. Wal-Mart Stores, No. 83587, (Alameda Co., Calif., Super. Ct.). Most states follow federal law, which does not require meal or rest breaks, no matter how long the shift, although most employers provide some sort of meal break. Suits for denial of breaks have been brought in other states, usually as breach-of-contract claims. Grant filed such a suit in Massachusetts, also against Wal-Mart, representing 50,000 workers, Polion v. Wal-Mart Stores, No. 01-03645 (Middlesex Co., Mass. Super Ct.). She said the California fines have been in place for years without much problem. It wasn’t until the Wal-Mart case that defense lawyers “went into a tizzy,” she said. Spring said, “If [Wal-Mart] loses or there is a big public settlement, it could very well generate more lawsuits.” “These types of allegations are counter to everything the company stands for,” said Christi Davis Gallagher, a Wal-Mart spokeswoman. “We take these allegations very seriously. Wal-Mart’s policy is to pay associates for every minute they work.” Now the public spotlight on the Wal-Mart litigation and employer complaints has drawn the attention of politicians. The pro-business administration of Gov. Arnold Schwarzenegger attempted to soften the law through emergency regulation just days before Christmas. That left the public just five days to comment. The California Division of Labor Standards Enforcement said the one-hour pay requirement would be treated as a penalty, rather than wages. As a penalty, and not a wage, the rule cuts the statute of limitations from three years to one, and the money would not be subject to withholding taxes. “If the time is cut by two-thirds, it would shave millions of dollars from employers’ existing claims,” Spring said. He pointed to the potential savings for a company like Cheesecake Factory Inc., which pledged to defend itself against two rest-break suits but also set aside $4.5 million in a legal reserve to cover potential liability. The proposed regulations would also allow an employer to say a meal period was provided if they simply inform employees of the right to a break and the worker acknowledges it in writing. But the attempt at hasty changes brought protest from unions, and regulators backed off, but not completely. The changes now head for a six-month review period and public hearings this week. “At a time the state’s unprepared for terrorism they declare an emergency against lunch breaks,” said Art Pulaski, secretary-treasurer of the California Labor Federation. “It’s absurd.” Even if the state adopts the regulations, Grant predicted an almost certain legal challenge to the legitimacy of the new rules. Pamela A. MacLean is a reporter with The National Law Journal, a Recorder affiliate based in New York City.

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