Wage and Hour

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Do you remember all of the hoopla back in 2016 when the Department of Labor published new overtime rules, and then at the last minute, after everyone did audits (and many reclassified), the rule was halted?  We wrote about it here.

Now the Department of Labor has proposed a new set of rules, setting the minimum salary threshold for white-collar exemptions at $35,308 (up from $23,660).  The new rules do not include many of the more controversial elements, including automatic increases, regional salary levels, or changes to the duties tests.  Here is a helpful alert that summarizes the new rules.

Despite what will like be a lot of press, these federal changes won’t have any effect on employers in California employers who already need to pay twice the state’s minimum wage to satisfy the requirements for exempt status.  With a minimum wage of $12 an hour (for employer’s with 26 or more employees), that is $49,920 in 2019.  And that amount goes up as the minimum wage increases a dollar a year until it hits $15 for all employers in January 1, 2023; at that time the minimum salary level for exempt status in California will be $62,400.

Even though many cities have their own minimum wages, it is still the state’s minimum wage that triggers the minimum salary threshold.

The highly compensated exemption threshold also went up from $100,000 to $147,414, but that doesn’t apply in California either.

Bottomline, since California’s minimum wage is already so much higher than the federal minimum wage, these proposed DOL changes won’t impact the golden state.

The Federal Motor Carrier Safety Administration (FMCSA) recently announced that it was exercising its authority under federal law to rule that California’s meal and rest break laws are preempted and cannot be enforced against interstate motor carriers. The FMCSA’s ruling was in response to a petition filed by the American Trucking Associations (ATA) and the Specialized Carriers and Rigging Association (SC&RA).  A big win for the trucking industry, this decision helps define regulatory standards for interstate carriers.

California state laws require employers to provide breaks for their employees for meals and rest. Employees working more than five hours in a day are entitled to receive a 30 minute meal break and, if work extends beyond 10 hours a day, they must receive an additional 30 minute break. Further, every four hours the employee must receive a 15 minute break. For years, interstate motor carriers have argued that these laws, as well as other similar state laws, should not be enforced against them because they are governed by separate hours of service regulations set by the FMCSA.

The ATA and SC&RA first fought the state laws in court, arguing that the provisions of the FAAAA, 49 USC 14501(c), which generally preempts state laws that regulate the routes, prices and services of motor carriers. These cases failed in the Ninth Circuit. See, e.g., Dilts v. Penske Logistics, LLC. The carriers advanced their arguments to Congress, supporting a bill that would have expressly confirmed that California’s laws are preempted. This bill passed in the House but failed in the Senate. Finally, the ATA and SC&RA petitioned FMCSA to use its authority under 49 U.S.C. 31141 to find that the state laws are preempted because they (1) have no safety benefit; (2) are incompatible with federal regulations; or (3) would cause an unreasonable burden on interstate commerce.

On December 21, 2018, the FMCSA announced that it would grant the petition and find the meal and rest break laws preempted. The agency concluded that the laws met all three criteria— they had no safety benefit, were incompatible with federal regulations and caused an unreasonable burden on interstate commerce. The FMCSA’s action was a big win for the ATA and SC&RA, who, in addition to filing the petition that led to the agency’s action, also lobbied extensively for it to be granted. With California’s meal and rest break laws preempted, carriers now have one standard to comply with: federal hours of service. Additionally, carriers are freed from the extensive damages they have faced in cases such as Dilts, in which class action plaintiff attorneys have collected for alleged violation of the now-preempted labor laws.

Unsurprisingly, not everyone is happy with the FMCSA’s decision. The Teamsters Union has already filed suit to block its implementation, arguing that the agency’s findings are arbitrary and not supported by facts. The Teamsters specifically characterized FMCSA’s finding that California’s laws have no safety benefit as “ludicrous.” Notably, the union’s suit is filed in the same court—the Ninth Circuit—that previously ruled in Dilts that federal law did not preempt the state laws. However, that decision was on a blank slate, while the new ruling by the FMCSA must be upheld unless deemed entirely unreasonable.

If they can keep it, the FMCSA’s decision is undoubtedly a win for carriers and another recognition that transportation is a national industry that should not be subject to a patchwork of inconsistent state laws and regulations.

What is considered “work time” that requires pay?  Well, that definition keeps on getting broader for California employers.

  • Can you let individuals “volunteer” and provide comps/trade for their time?  No.
  • Can you let non-exempt employees check emails at night or on weekends and assume that the time is so small it is not compensable?  No.
  • Can you require a non-exempt employee to wait around at home and check in throughout the day to determine when/if needed at work (i.e. be engaged to wait)?  No.

And now per a new California Supreme Court case (Ward v. Tilly’s), can a California employer require an employee to call-in two hours before a shift, yet only pay that employee if actually required to come into work?  Also, no.

If you are a California based retailer, spa, salon, or restaurant that relies on an on-call system to adjust your California workforce based on last minute fluctuating operational needs, then think again.  Based on this ruling, your on-call policy is likely creating unnecessary risk.

The Court found that an on-call employee really isn’t free from work if required to call-in and then report in as needed.  In fact, such a call-in responsibility really requires that employee to keep the day free.  The employee can’t make plans, go to the beach or a movie, commit to another job, or secure child care.  And in the opinion of the Court, that isn’t particularly fair.

So what can you do if you are a California business that relies on an on-call workforce?

  • You can still have on-call employees, you just can’t discipline them for not calling or not showing up when needed (not very helpful, I know); or
  • You can still have on-call employees, but make the call-in time more than 2 hours before the shift (but note, with predictive scheduling laws in some cities, and more pending in the state legislature, how much on-call time is okay is still an open question); or
  • Ask for volunteers for any last minute extra shifts; or
  • Keep a list of employees who want extra shifts, and notify them when you need people last minute; or
  • Post open shifts and invite employees to sign up for them (and you can even put limits on taking extra shifts if it triggers overtime); or
  • Have employees show up, and if you don’t need them, send them home after 2-4 hours (but beware of strict reporting time pay requirements).

Was this case over-reaching by California courts?  According to the dissenting judge, this was an issue for the legislature, not the courts.  Maybe the legislature will take this issue up, or impose even more restrictions for on-call shifts with more predictive scheduling laws.  In the meantime, the lesson:  If you schedule on-call (especially in retail in California), beware.

Anyone who pays attention can tell you that California employment law changes constantly. So we’re continually updating Doing Business in California: A Guide for Employers. This 15-page guide provides clear summaries of California’s unique requirements for employers. You can download a PDF of the Guide here. If you subscribe to that whole “ounce of prevention” theory, this is a great way to see if your company is complying with California’s overly complicated employment law requirements. On the other hand, if you’re more of the “ignorance is bliss” type, well, good luck in court.

Special thanks to Nancy Yaffe, Tyreen Torner, Sahara Pynes, and Cristina Armstrong for their work on earlier versions of this guide.

California employers know to expect that the law sometimes takes some crazy turns. But the changes to the rules for healthcare worker meal waivers have been particularly insane. Try to keep up.

  1. In 2000, the legislature enacted AB 60, which included provisions saying that if you worked more than 12 hours, you could not waive a second meal period. The law also gave the Industrial Welfare Commission authority to issue regulations.
  2. The IWC issued amended Wage Orders that same year. Wage Orders 4 (Professional, Technical, Clerical, Mechanical & Similar Occupations) and 5 (Public Housekeeping Industry – which includes hospitals) specifically allow healthcare employees working 12–15 hours to waive a second meal period.
  3. A group of plaintiffs sued their employer arguing that the IWC exceeded its authority and that the Wage Orders were illegal to the extent that they allowed waiver of the second meal period. The case was Jazmina Gerard v. Orange Coast Memorial Medical Center. In that case, the trial judge granted summary judgment for the employer, the employees appealed, and the appellate court reversed. So as of February 2015, employers who had followed the Wage Orders were suddenly subject to class-wide liability going back at least three years.
  4. In October 2015, the state legislature enacted a statute specifically permitting healthcare workers working over 12 hours to waive the second meal period. Still, the litigation continued because it raised questions about how to interpret the law before that enactment.
  5. In March 2017, after being told by the California Supreme Court to take another look, the appellate court reversed itself. It recognized that it was mistaken on the timing and concluded that the IWC acted appropriately.
  6. The California Supreme Court agreed to hear the case. In a decision issued earlier this week, the California Supreme Court agreed that the IWC acted within its rights in issuing the Wage Orders. So we’re back where we started. Healthcare employees working 12-15 hours are allowed (and have been allowed since 2000) to waive a second meal period.

Throughout this process, healthcare workers and their employers both wanted the same thing. Neither benefited from a rule that said that, after working over 12 hours, you couldn’t go home until you took an unpaid, 30-minute meal break. It didn’t need to be this complicated.

Tyreen Torner has again updated this Chart Summarizing CA State and Local Paid Sick Leave Rules. It summarizes the Paid Sick Leave laws for California, San Francisco, Los Angeles, San Diego, Oakland, Berkeley, Santa Monica, and Emeryville.

Regular readers of this blog may be asking: “Wait. Didn’t she just do an update in June?” Yes, she did! But there have been changes since then in the rules for Santa Monica, San Francisco, and pesky little Emeryville. Keeping this chart current requires constant vigilance, but Tyreen is up to the task.

It’s been nearly six months since the California Supreme Court announced that employers and government agencies were using the wrong test to determine who’s an independent contractor. In Dynamex Operations West, Inc. v. Superior Court, the court declared that employers must meet the three-prong ABC test to overcome the presumption of employment status. But Dynamex left a number of questions unanswered. A decision filed this week,  Garcia v. Border Transportation Group, LLC, takes a tentative initial step to address those open questions.

There, the trial court granted summary judgment for the employer on the basis that Garcia was an independent contractor. Some of those claims (but not all) were based on the IWC Wage Orders, which guarantee employees a minimum wage, maximum hours, overtime compensation, meal and rest breaks, and more. The employee appealed and, while the appeal was pending, the CA Supreme Court issued its opinion in Dynamex.

Since the employer could not show that the plaintiff had an independently established business (part C of the ABC test), the court of appeal reversed the summary judgment on the claims based on the Wage Orders. These included claims for unpaid wages, minimum wage violations, failure to provide meal and rest periods, failure to furnish itemized wage statements, and a claim that the foregoing constituted unfair competition.

The court upheld summary judgment on claims for wrongful termination, waiting time penalties, and an unfair competition claim based on those violations. The court reasoned that, while Dynamex applied to claims based on the Wage Orders, the test for the remaining claims still involved the extent of control the employer exercised over the worker.

In a footnote, the court also questioned whether the Dynamex decision applies retroactively. The parties had not raised the issue and the court therefore said it would not address it. But in declining to address it, the court noted: (1) the general rule that judicial decisions have retroactive effect; (2) that there could be exceptions where the parties reasonably relied on the previously existing law; (3) that the Dynamex court declined a request to apply its ruling only prospectively; and (4) that Dynamex came as no greater surprise than a number of decisions that routinely apply retroactively. That’s quite a bit for an issue the court said it would not address.

While this decision doesn’t hold out much hope for Dynamex not applying retroactively, it at least says that it may be an open question. The greater value for employers comes in the decision’s reinforcement that (at least in this appellate court on this day), Dynamex is limited to claims under the Wage Orders. As to when we’ll have greater clarity on those issues, that remains to be seen.

In July, the California Supreme Court announced that various provisions of the Labor Code and the IWC Wage Orders did not incorporate the de minimis doctrine. According to that doctrine, some alleged wrongs are so trivial or hard to measure that courts will disregard them. The de minimis doctrine applies to the federal Fair Labor Standards Act, so under that law, employers can disregard small amounts of time (a few minutes) in calculating what employees are owed. The California Supreme Court announced, however, that that was not the case under corresponding state laws.

On August 29, 2018, the court slightly modified its earlier opinion, stating that:

“The opinion herein is modified as follows: The final paragraph of the opinion … is modified to read: We hold that the relevant California statutes and wage order have not incorporated the de minimis doctrine found in the FLSA. We further conclude that although California has a de minimis rule that is a background principle of state law, the rule is not applicable to the regularly reoccurring activities that are principally at issue here. The relevant statutes and wage order do not allow employers to require employees to routinely work for minutes off the clock without compensation. We leave open whether there are wage claims involving employee activities that are so irregular or brief in duration that employers may not be reasonably required to compensate employees for the time spent on them. The petition for rehearing is denied.” (emphasis added)

The reference to “reoccurring activities” and employees “routinely” working for minutes off the clock indicates that the court is addressing situations where employees are required to perform some off-the-clock work on a repeated or regular basis, such as closing shop or shutting down systems. So a different rule may apply to activities that are more irregular or isolated. In fact, the court said as much in its earlier version of the opinion by noting that there may be employee activities “where compensable time is so minute or irregular that it is unreasonable to expect the time to be recorded.” The more recent modification simply clarifies that that is still the case. 

Our recommendations for employers remain the same:

  1. Do everything possible to ensure that employees don’t clock out until they’ve completed all work-related tasks. This includes security checks, closing shop, and exiting the work premises.
  2. If you use fixed time clocks, locate them as close as practicable to the exits. Or better yet, look at more advanced systems that employees can operate remotely, The court specifically referred to “advances in technology … shaping our understanding of what fractions of time can be reliably measured.”
  3. Ensure that whatever policy you use to round off workers’ time entries is facially neutral (i.e., you’re just as likely to round up as to round down).
  4. Require non-exempt employees to report any time they work after hours. Seemingly trivial tasks like checking e-mail or an online schedule could be compensable.
  5. Train managers on how and when to communicate with non-exempt staff after hours.
  6. If employees do after-hours work without authorization, discipline them, but pay for the time.

Is this modification good news for employers? No. But it may be slightly less awful than it was before.

I was in court last week for a status conference in a wage-and-hour class action, and was talking to my opposing counsel, an active litigator in this arena.  I asked him if the new California Supreme Court case rejecting the de minimis standard was going to be big business for him.

His candid response surprised me, so I thought I’d share it.  He opined that it really isn’t hard to prevent class action lawsuits in California and the de minimis argument really isn’t necessary.  All an employer has to do is:

  • Pay per actual time punches; don’t round at all.
  • Require a 45 minute or one hour meal break; don’t bother with 30 minutes.
  • Provide meal breaks at the 4th hour (always way before the end of the 5th hour worked).
  • Have a fully compliant rest break policy and a strict policy against working off the clock.

To his list I would add:

  • Don’t schedule 6-hour shifts with a 6-hour or less meal wavier; schedule 5 hour shifts or just schedule the meal break.
  • Don’t rely on-duty meal waivers.
  • Update your handbooks every year, it really is cost effective in the long run.
  • Train your managers not to mess things up (even inadvertently), and keep records of that training.

He said that an employer who consistently does all of these things makes taking a class action case very un-interesting for plaintiff’s attorneys like him.

58097900 – class action, 3d rendering, rough street sign collection

Easy enough, right?  Well, it sounds a little bit expensive to me, and it also might create some employee relations issues.  But then again, it might  be worth a try….

Thermometer and pills on paper marked with Sick Leave labelAs employers know all too well, it is no small task keeping up with California’s State and Local Sick Leave laws. Just as frustrating are California’s many paystub requirements under Labor Code section 226. One paystub requirement that often gets forgotten is the need to include employees’ accrued sick time on paystubs.

Inclusion of sick time on paystubs is not governed by Labor Code section 226.  Instead, it is Labor Code section 246(i) which requires employers to list an employee’s accrued sick time on their wage statements or in a separate writing.  Luckily for employers, violations of this particular subdivision also do not trigger Labor Code section 226’s dreaded penalties.

The enforcement of the provisions from the Healthy Workplaces, Healthy Families Act of 2014 is governed by Labor Code section 248.5.  Section 248.5 makes clear that there is no private right of action to enforce the Act’s provisions.  Only the Labor Commissioner or Attorney General may bring a civil action against the employer for alleged violations.  Further, the section explicitly makes clear that “any person or entity enforcing this article on behalf of the public as provided for under applicable state law shall, upon prevailing, be entitled only to equitable, injunctive, or restitutionary relief, and reasonable attorney’s fees and costs.”  (Labor Code section 248.5(e))  Thus, individual employees cannot collect penalties for themselves, or for others pursuant to a dreaded PAGA claim.

Since employees cannot sue to collect individual penalties and cannot sue to collect PAGA penalties, is there any risk to employers who do not include accrued sick time on paystubs?  The answer is yes.  Even though an individual cannot seek penalties, the California Labor Commissioner can take action to recover penalties in the amount of $50 for “each employee or person whose rights under this article were violated for each day or portion thereof that the violation occurred” with a cap of $4,000.  Further, a claim for injunctive action still allows for recovery of reasonable attorney’s fees and costs.

Businessman handing over paycheck at desk in officeSo California employers, check those paystubs.  In addition to ensuring that they include all of the information required under Labor Code 226, add accrued sick time to the list of necessary information provided to your California employees.