In August 2024, the California Supreme Court decided Stone v. Alameda Health System, which clarified that the meal and rest break requirements of the California Labor Code at sections 226.7 and 512 and other Labor Code provisions do not apply to public employers. The Court also held that the California Private Attorneys General Act (PAGA) penalty provisions do not apply to public employers. The decision also clarified that the definition of “municipal corporation” is broad for the purpose of determining what types of public entities are exempt from certain wage payment laws under section 220(b) of the California Labor Code.
Background of the Case
In Stone, employees of Alameda Health System (AHS) field a lawsuit on behalf of themselves and others alleging that AHS: (1) failed to provide off-duty meal periods, (2) failed to provide off-duty rest periods, (3) failed to keep accurate payroll records, (4) failed to provide accurate itemized wage statements, (5) failed to pay wages, (6) failed to pay wages timely, and (7) owed civil penalties under PAGA. AHS argued that, as a public entity, it was exempt from these provisions of the Labor Code. The trial court initially sided with AHS, ruling that public agencies were not subject to wage and hour claims under the Labor Code unless the statute expressly stated it applied to them. However, the Court of Appeal overturned this decision, allowing many employees’ claims to proceed.
Public Agency Obligations under the California Labor Code
The California Supreme Court reversed the appellate decision, holding that meal and rest period laws under Labor Code sections 226.7 and 512 do not apply to public employers because the Labor Code provisions do not expressly state they do. The Court noted that if the legislature intended for these meal and rest break laws to apply to government employers, it would have expressly stated so in the statute, as it has for other provisions that apply to public agencies.
The Court also held that public employers are not subject to PAGA civil penalties. Under PAGA (Labor Code § 2698, et seq.), a single “aggrieved” employee can initiate an action for themselves and other similarly situated employees for civil penalties for an employer’s labor code violations. Such actions may lead to significant monetary verdicts for employees—in addition to the back pay or other remedies available under different sections of the Labor Code. The Court also reasoned that the civil penalties under PAGA were analogous to punitive damages, which cannot be imposed on public entities under existing California law.
Finally, the Court examined Labor Code Section 220(b), which exempts public agencies from many Labor Code Provisions, and clarified that the term “municipal corporation” in Section 220(b) should be read broadly and encompass all public employers.
Aligning with New Standards
The Stone decision represents a clear victory for public employers, offering greater protection from alleged meal and rest break violations, wage payment violations, and PAGA penalties. This decision reaffirms that Labor Code provisions do not apply to public agencies unless the provisions expressly state so. Additionally, public agencies will not be subject to liability for civil penalties associated with PAGA cases.
This decision also underscores the importance of carefully evaluating whether a California wage and hour law applies to a public employer. Some do and some do not. Moreover, public employers should remain vigilant for legislative enactments that expressly state that labor code provisions apply to public employers. For example, recent legislation requires public employers to offer meal and rest breaks to employees who provide or support direct patient care in a general acute care hospital, clinic, or public hospital setting. The Stone case did not address this new legislation.
Impact on the Public Sector Beyond California
Although this ruling applies specifically to California public employers, the principles established in this decision have the potential to influence decisions in other states. Other states with similar wage and hour laws may look to this case when determining how to apply their state’s wage and hour laws to public entities.
For public employers nationwide, this decision serves as a reminder to continually monitor legal developments in their jurisdictions and seek clarification on their obligations under their state’s laws. Further, policymakers must evaluate whether to negotiate changes to their collective bargaining agreements to ensure they align with their state’s wage and hour laws.
Conclusion
The Stone v. Alameda ruling marks a significant moment for public employers in California, providing clear guidance on applying specific California wage and hour laws. By affirming that public entities are not bound by the meal and rest break requirements at California Labor Code 226.7 and 512 and PAGA penalties, the Court has alleviated the burden of costly litigation for public agencies across California. However, it is crucial for public agencies to remain vigilant and prepared for potential legislative shifts that may impact their wage and hour obligations under their respective state laws.
Lisa S. Charbonneau is a Partner at Liebert Cassidy Whitmore, specializing in labor and employment law for public agencies. With a robust background in leading negotiations and litigations for a variety of public sector clients, her practice spans labor relations, collective bargaining, FLSA, wage and hour compliance, and conducting comprehensive workplace investigations. She can be reached at lcharbonneau@lcwlegal.com.
Julia Franco is an associate at Liebert Cassidy Whitmore.