Global Compliance Desk – United States

United States: Auto Deduction of Meal Breaks and its Implications on Employers

According to the Fair Labor Standards Act (FLSA) §785.18, when employers provide employees rest breaks that last 20 minutes or less, federal law requires these breaks be paid. Additionally, that time must be used in the total number of hours worked during a workweek to determine if the employee worked overtime.

The FLSA does not have any specific provisions for providing meal breaks to employees. However, giving unpaid meal breaks of 30 minutes or more is a common practice among employers in the US. Auto deduction of meal breaks is a commonly accepted practice wherein by automatically deducting time for breaks from the employee time sheet, the employee doesn’t have to remember to clock in and out and managers don’t have to adjust times nor deal with inaccurate timekeeping.

There are various court rulings and precedents that indicate that auto-deduction does not violate any FLSA policy, but if employers are not careful, these practices might breach essential FLSA principles. In recent times numerous businesses have adopted “auto-deduct” break policies wherein, the employee meal break shall be automatically deducted for a set duration of time each day or shift. The main advantage of an automatic deduction for meal periods is that employees do not have to remember to clock in and out when they take their meal periods. This also helps in workplaces where employees might take meal periods at differing times, including having staggered lunch schedules during the day.

Further according to § 785.19 of the FLSA, if the employer provides the employee with a bonafide meal break then the break has to be at least 30 minutes long. If an employee is required to perform any duties during their meal break, the break must be compensated as work time.  Employees can voluntarily work through their meal breaks, but if the employer knows or has reason to believe the employee is working, this time is generally compensable. 

Various states have enacted regulations on providing meal breaks to employees. 21 states in the United States including California, New York, Washington & Puerto Rico require a minimum period of meal break to be provided to the employees during a work day. 

In California for example, an employer may not require an employee to work for more than 5 hours per day without providing the employee with a meal period of not less than 30 minutes. If any employer fails to provide their employees with meal breaks, then the employee will be entitled to receive premium pay of 1 extra hour at their regular hourly rate for each workday. 

In the case of Wilson v. TE Connectivity Networks, Inc., the plaintiff alleged that due to work pressure, their meal breaks were either interrupted or entirely missed, and these breaks were automatically deducted from the employee’s total working hours. As a consequence, TE Connectivity Networks and Tyco Electronics were ordered to pay $4.96 million to 1,300 non-exempt employees in California for half-hour meal periods that were automatically deducted from their working hours.

Kindly refer to our blog on the California meal break requirement and the subsequent Supreme Court ruling in this regard.

Employers must comply with both federal and state laws, adhering to the one that provides greater protection to employees.

Additionally, the FLSA requires employers to accurately record the working hours of their employees. When work-related activities interfere with meal breaks and the records fail to appropriately modify the associated working hours, the employee’s time is not accurately recorded. This results in an employee working more than their weekly hours (i.e. 40 hours) and the employee is entitled to overtime compensation. 

For example, employees working in health care or other customer service-related positions may not be able to predict exactly when a particular task will end so that they can commence their meal period. As a result, employees may be required to work through the meal period or take an abbreviated meal period that is not at least 30 minutes. This can lead to underpayment of overtime.

In recent years, numerous legal actions have sought to recover unpaid overtime seeking claims for unpaid meal periods, where commonly employers have failed to fully release employees from their duties. The majority of courts in the United States acknowledge that auto-deductions for meal periods are not inherently illegal as such deductions serve as a means for employers to demonstrate compliance with legal requirements. Nevertheless, the implementation of auto-deduction systems has been the subject of considerable class-action litigation over the years, posing potential risks for employers.

Recently in the case of Quickley v. University of Maryland Medical System Corporation, the Hospital (employer)  implemented an auto-deduction policy that automatically deducted 30 minutes from employees’ daily time records for scheduled meal breaks without allowing employees to adjust their time records. 

Employees utilized a Time-keeping system, swiping ID badges at the start and end of work but not for meal breaks. Employees were not expected to include the unused meal break time in the adjustment sheet, and they were unaware of any other method for recording or reporting the time worked during meal breaks. The employees sued and alleged that there was no way, either on the Time-keeping system or otherwise, to adjust the time if they worked during a meal break.  The Time-keeping system provided opt-out buttons for other missed periods but lacked a similar feature for missed meal breaks. 

The District Court of Maryland denied the employer’s motion to dismiss, allowing the lawsuit to proceed based on the absence of a clear mechanism for adjusting time-related to meal breaks.

The Court has further outlined specific guidelines delineating the obligations of employers concerning transparent policies around auto deduction of meal breaks: 

• • Automatic deductions are permissible only when the employer precisely records the actual hours worked, encompassing any tasks carried out during the lunch break. The onus is on the employer to guarantee that employees receive their complete meal break, without engaging in any work, whether active or inactive, during that period.
  • If the employer’s automatic deduction policy necessitates employees to self-report time spent working during meal breaks, the policy must be communicated to the employees. Additionally, the employer must actively strive to facilitate opportunities for employees to report their work time accurately.

In another ongoing case – JULIE A. SU, Acting Secretary of Labor, United States Department of Labor vs. NEXT STEP HEALTHCARE LLC d/b/a and others, the U.S. The Department of Labor filed a complaint against Next Step Healthcare (Defendant) and its affiliates, alleging deliberate underpayment and inaccurate employment records. The defendant had the practice of auto deduction of 30-minute meal breaks from employees’ total daily working hours. However, employees often worked during these designated meal breaks, violating the FLSA. Employees’ accurate working hours were not recorded properly resulting in each employee exceeding 40 hours of work per week and consequently incurring overtime.

FLSA Violations: The complaint outlines how the Defendants breached the FLSA by automatically subtracting 30 minutes from the total working time for every 6-hour shift recorded in the Defendants’ time clock system. Simultaneously, they failed to ensure that employees, who frequently worked through their 30-minute breaks, received proper compensation. Moreover, the Defendants also neglected to maintain sufficient and accurate records as per law.

In response to these allegations, the State has requested a jury trial. The case proceeding is currently ongoing, however, the verdict of this case may lead to a significant impact on labor practices around auto deduction of meal breaks.

Conclusion – The policies and practices around auto deduction of breaks are gaining huge momentum as they pose a potential risk of unpaid overtime arising out of insufficient meal breaks. 

In the meantime, as a best practice, employers who automatically deduct meal breaks from their employees’ daily time sheets must also put in place a procedure and policy that explains the timekeeping system and its requirements that employees must follow when taking meal periods and breaks. Also, any applicable regulations related to the specific State where the employee is working (including the time during the shift when the breaks and meal period must be taken), and a very clear mechanism to allow employees to report any missed meal periods or breaks wherein employees can override the auto-deduction if they do indeed work during a meal break.