Calculating the correct overtime pay rate in California has long been a complicated process.  The basic overtime rate is defined as one and a half times an employee’s “regular rate” of pay.  This purportedly “regular” figure may change from pay period to pay period when an employee earns shift differentials, different hourly rates for different jobs, or lump sum bonuses.  Such was the case in Alvarado v. Dart Container Corporation of California.

In Alvarado, the California Supreme Court considered the correct method of calculating overtime when an employee is paid a flat sum bonus.  The parties offered competing calculations to the Court.  The employer’s method spread the per-hour value of the bonus across all hours worked in a given pay period—including overtime hours.  The employee argued that the bonus should only be spread across the non-overtime hours worked.  In choosing between the two approaches, the Court emphasized California’s pro-employee policies:  “[W]e are obligated to prefer an interpretation that discourages employers from imposing overtime work and that favors the protection of the employee’s interests.”  The Court found that plaintiff’s version was “marginally more favorable to employees.”  Unfortunately, this doesn’t tell the whole story.  The opinion apparently requires employers to calculate the regular rate based on the “relevant pay period.”  This is inconsistent with established California and Federal principles that require regular rate calculations be performed on a weekly basis.  A “friend of the court,” or Amicus brief, was filed in this case on this very issue, and we are hopeful that the Court will issue an amended opinion, or other clarification.worker marking paper next to calculator

In the meantime, let’s look at an example. Suppose an employee works 90 hours in a two-week pay period (including ten hours of overtime), and the employee receives $15 per hour and a $100 bonus.  The value of the bonus must be calculated by dividing the $100 by the 80 non-overtime hours worked, which comes out to $1.25 per hour.  This would then be added to the employee’s straight time rate for an effective regular rate of $16.25 per hour.  Of course, the next step is to multiply the regular rate by 1.5 to obtain the basic overtime rate, and then multiply the number of overtime hours worked by the overtime rate.

The fun didn’t end there.  The Court drew a distinction between flat sum bonuses, like the one at issue in Alvarado, and bonuses that increase in rough proportion to the hours worked—such as piecework or commission bonuses.  In these cases, the Court stated “the payment of the bonus itself constitutes base compensation, including base compensation for overtime work, in which case one might be able to argue that only the overtime premium need be added.”  In other words, different bonuses require different overtime calculations.  Adding insult to injury, the Court proclaimed this interpretation is to be applied retroactively.

The big takeaway here is that employers must take a closer look at their bonus plans and overtime calculations to ensure compliance with the new standard.  Isn’t math fun?

Thorough investigations can protect employers from claims that their decisions were discriminatory, retaliatory, or in bad faith. Conversely, a defective investigation can increase an employers’ exposure to those same claims. Consider, for example, Viana v. FedEx Corporate Services, an unpublished Ninth Circuit opinion issued on March 22, 2018. The appellate panel in that case overturned summary judgment for the employer because (among other things) there were issues regarding the adequacy of the investigation. The court noted, for example, that there was evidence that the supervisor conducting the investigation referred to the plaintiff using derogatory and sexist terms and failed to get the plaintiff’s side of the story before deciding to terminate.

To help ensure that your investigation strengthens your ability to support whatever decision you ultimately make, follow these ground rules:

  1. Pick a qualified investigator — You want someone who’s far enough from the situation to be impartial and who has experience investigating these types of issues. It also needs to be someone who understands how to question witnesses. (Now the cynics out there may be thinking that I’m just saying that so people hire us to do their investigations. To that I respond: 1)  If people follow these steps, there will be less harassment litigation, and therefore less work for me and my ilk; and 2) It’s not as if the goal of this blog is to repel clients.)
  2. Follow your company policies — The policies are there for a reason. Use them. Any irregularities allow plaintiffs and their attorneys to raise doubts as to whether this was a good faith investigation or a cover-up.
  3. Keep things moving — Get to witnesses while their memories are fresh. Delays make it too easy for a plaintiff to argue that discovering the truth wasn’t a priority for the employer.
  4. Document every step — The most critical documentation will be written statements from key witnesses. Documentation minimizes the opportunity people have to change their stories. And save every scrap of documentation.  If you dispose of anything expect to be questioned about what you were trying to hide.
  5. Evaluate the evidence objectively — The person complaining doesn’t have to prove his or her case beyond a reasonable doubt. Even if it’s the proverbial “he said/she said,” you need to decide who is more credible.
  6. Take appropriate remedial action — If you conclude there was wrongdoing, take actions reasonably calculated to prevent it from recurring.
  7. Keep the complaining party informed — Let them know the status of the investigation, the conclusions, and the steps being taken. Then when it’s all over, follow up with the complaining party periodically to make sure that there have been no further issues.
  8. Don’t add a retaliation claim to your problems — Do nothing to the complaining party that could be viewed as punitive. This includes transfers, reductions in hours, or anything else that penalizes or isolates them.

A prompt, thorough investigation can go a long way towards protecting an employer from litigation. A shoddy investigation can have the opposite effect.

Every year I look forward to attending and presenting at the Cornell HR in Hospitality Conference.  It is a great time to connect with clients, contacts, and to learn from the best and brightest in the hospitality industry.

Group of people discussing human resources around a tableThe three big themes this year seemed to be:  (1) #metoo and the many repercussions thereof; (2) the struggle to get the best talent in an era of low unemployment; and (3) the uncertainty of immigration laws and how to best protect valued employees and still comply with the changing legal landscape.

On the issue of #metoo (an issue we have blogged about many times over), my takeaways were:

  • Implement a “safe word” for colleagues to use with each other if someone is making them uncomfortable for any reason, without having to go to HR; I note my millennial niece often simply announces “uncomfortable.”
  • It is important for leaders (especially male leaders) to really listen to women and how these issues have impacted them, and not simply “mansplain” (and if you don’t know what that means you are likely doing it).

On the issue of recruiting the best talent, there was lots of talk about how to define the company culture in a way that attracts desired recruits.  One panel discussed performance assessments and how they are too long and complicated, and often do not mirror the company’s cultural values.  Some ideas there were:

  • Simplify and shorten
  • Provide reviews quarterly instead of annually
  • Ask fun questions:  What is your superpower and why?
  • Make them forward looking
  • Embrace anonymous 360 reviews, up and down the scale, so candid feedback can be provided

And finally, on the issue of immigration, on the one hand there is compassion for employees.  One panelist told a story about an employee who needed time off because her mother was deported and at 20 years old (and a citizen), she was suddenly responsible for the care of her 6 year old sister.

On the other hand, employers also have to deal with AB 450 (the California Immigration Worker Protection Act), which prohibits CA employers from granting access to immigration officials at a place of labor without a judicial warrant.  As of last week, this law is being challenged under federal law.  In addition, there is increased Federal I9 enforcement, so employers with concerns in that area should be proactive in reviewing those I9s.  Bottomline, it is time to have immigration counsel on speed dial, or subscribe to our firm’s blog on that subject.

All in all, a great conference.  Hope to see you there next year (March 25-27, 2019 at the Cosmopolitan in Las Vegas)!

 

It’s been five months since the #MeToo movement burst onto the scene. Since then, the headlines have been dominated with accusations of grossly inappropriate behavior by prominent politicians, entertainers, business people, and others. So it’s somewhat surprising that, according to acting EEOC Commissioner Victoria Lipnic (as reported in Law360 (subscription required)), the number of sexual harassment claims being filed with her agency hasn’t changed. Why is that?

One reason may be that employers are being more proactive. Those of us who do harassment prevention training are certainly doing more of it than in prior years. So perhaps (he said, trying to sound optimistic) employers are putting more emphasis on preventing harassment and those efforts are paying off.

Another explanation may be that employers are settling pre-litigation to avoid the devastating publicity that can accompany these claims, particularly with higher-profile defendants.

Also, many of the accusations that figure so prominently in the media involve conduct that occurred many years ago. Employees generally have no more than a year to bring these claims. So conduct occurring before then, no matter how offensive, will not be legally actionable.

Finally, it may be that the claims are working their way through the system. Before filing a lawsuit or a charge with a government agency, plaintiffs’ lawyers may be interviewing witnesses and lining up support for their clients’ claims. That process takes time.

Whatever the reason, employers shouldn’t let their guards down. They should continue to ensure that their harassment policies are legally compliant, that they appropriately investigate complaints of bad behavior, and that their managers are trained about their obligations in providing a harassment-free workplace. While there has not been a big upsurge in harassment claims yet, it only takes one to devastate your company.

 A disabled employee asks her employer for an accommodation. After engaging in the interactive process, it becomes clear that the accommodation requested is going to be challenging. At what point can the employer say “no” to an accommodation request because it creates an undue hardship?

If the accommodation is cost prohibitive, that can be enough to show undue hardship. But the question of undue hardship is not limited to financial burden. In other words, just because a company can monetarily afford to provide the accommodation requested, it is not necessarily required to do so.

Accommodations that are “unduly extensive, substantial, or disruptive” can create an undue hardship regardless of monetary cost. See US E.E.O.C. v. Placer ARC, 114 F. Supp. 3d 1048, 1058 (E.D. Cal. 2015). Maybe a requested accommodation would not financially break the company, but it would affect essential operational flexibility. That can be enough to show undue hardship. See Barth v. Gelb, 2 F.3d 1180 (D.C. Cir. 1993).

Of course, the law expects employers to accept certain costs, inefficiencies, and burdens to keep disabled employees working. Whether hardship is undue will depend on the employer’s size and resources.

Finally, remember that if no reasonable accommodation exists, and/or if the accommodation creates an undue hardship, the employer should consider reassigning the disabled employee to another vacant position. But that’s a blog post for another day.

When an employer gets sued for sexual harassment, the focus is not on what the alleged harasser did. It’s on what the employer did to provide its employees a harassment-free work environment. This includes both steps taken before anyone complains and steps taken in response to the complaint. So if your goal is to prevent your company getting sued for harassment, there are 12 steps you can (and should) take now. In fact, California law requires these things be present in all harassment policies.

  1. List all the categories currently protected under the Fair Employment and Housing Act, i.e., race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, sexual orientation, and military or veteran status.
  2. State that the policy prohibits harassment by co-workers, supervisors, managers, and third parties with whom the employee comes into contact. (That’s basically everyone, isn’t it?)
  3. Provide confidentiality, to the extent possible, for complaints.
  4. Promise timeliness. This is a point of emphasis. The regulations require “a timely response,” “timely investigations,” and “timely closures.”
  5. State that investigations will be impartial and conducted by qualified personnel.
  6. State that investigations will be documented and tracked for reasonable progress.
  7. Provide “appropriate options for remedial actions and resolutions.”
  8. Designate personnel to receive complaints, while stating that employees are not required to complain to their immediate supervisors.
  9. Instruct supervisors whom to direct complaints to. Don’t let them investigate on their own, unless they’re trained to do so.
  10. Indicate that the employer will conduct a fair, timely (there’s that word again!), and thorough investigation that provides all parties with appropriate due process and reaches a reasonable conclusion based on the evidence.
  11. Indicate that, if misconduct is found, the employer will take appropriate remedial measures.
  12. Prohibit retaliation.

Perhaps you’ve noticed that harassment claims have been in the news a lot lately. The first line of defense is having a compliant policy in place. Not allowing your employees to ever interact with customers, supervisors, vendors, or each other may also be effective, but that doesn’t seem to work for many businesses.

 

The #MeToo movement has understandably made employers more concerned about sexual relations between coworkers. An office romance may seem consensual, but is it really? This is especially problematic when there’s a power differential – such as a supervisor-subordinate relationship.

So what can employers do to prevent coworker relations that they fear may end in a sexual harassment claim? Certainly, employers can establish rules and internal policies discouraging coworker relations. But, as recently affirmed by the Ninth Circuit in Perez v. City of Roseville, there are constitutional limits on what public employers, like State and municipal governments, can do if they discover a consensual office romance.

Coworkers sitting across from each other with heart, symbolizing office romanceIn Perez, the City of Roseville, California investigated police officers Janelle Perez and Shad Begley after Begley’s wife reported that Begley and Perez engaged in sexual conduct while on duty. The investigation revealed that the officers were involved in an extramarital affair, but the City could not prove that they engaged in sexual conduct while on duty. Begley and Perez were written up for violating department policies. A short time later, Perez was fired, purportedly for performance reasons unrelated to the affair. Perez sued, alleging that “her termination violated her constitutional right to privacy and intimate association because it was impermissibly based in part on disapproval of her private, off-duty sexual conduct.” The lower court granted summary judgment for the defendants and Perez appealed.

The Ninth Circuit reversed in part, finding triable issues of fact as to whether Perez was fired for engaging in constitutionally-protected private sexual conduct. The court said: “[T]he constitutional guarantees of privacy and free association prohibit the State from taking adverse employment action on the basis of private sexual conduct unless it demonstrates that such conduct negatively affects on-the-job performance or violates a constitutionally permissible, narrowly tailored regulation.”

In a nutshell, Perez establishes that, at least within the Ninth Circuit (including California), a public employer cannot take adverse action on the basis of an employee’s private, off-duty sexual activity, unless the employer demonstrates that the conduct caused the employee’s job performance to suffer. This holding arguably extends to employees in the private sector too, who are subject to the same constitutional right to privacy and intimate association.

Takeaway: The #MeToo movement has led many employers to believe that all office romances are off-limits and constitute a fireable offense. Not so. At least within the Ninth Circuit, public employers cannot fire employees for private, off-duty sexual conduct that does not adversely impact job performance. Of course, employers can and must address non-consensual conduct and conduct that creates a sexually hostile work environment. But that does not give employers the right to intrude into relationships outside of work that do not directly impact the workplace.

If you have a questions about sexual harassment, office romance, or employee privacy rights, our employment attorneys are here to help.

Plaintiffs’ attorneys in California love making claims based on technical violations related to paystubs.  An employee will go see a lawyer complaining about wrongful termination or harassment or discrimination and the lawyer will say, “Let me see your paystub.”  Labor Code Section 226 lists at least 9 items that an employer must include on employees’ paystubs.  Even omitting one item (e.g., pay period dates on a “final” paycheck) can expose employers to extensive liability depending on the nature of the oversight, the number of affected employees, and how often the improper paystubs were issued.  Under the Private Attorneys General Act (“PAGA”) a single employee can bring a lawsuit on behalf of all affected employees, also known as “aggrieved employees,” regardless of whether those employees want to be included, and without having to go through the rigorous requirements of class certification.  [We told you about this in a 2009 California employment law newsletter,]

Up close of wage statementEmployees (or rather, the class action attorneys that bring these cases) do not have to prove that anybody was injured by the omission on the paystub because the code section provides an automatic penalty per paycheck in place of requiring employees to prove actual damages (which are typically non-existent).  Because employers have virtually no defense to these paystub cases, they are generally referred to as “gotcha” claims.

Recently a California Court of Appeal handed PAGA attorneys a “gotcha” of their own.  In Khan v. Dunn-Edwards Corporation, the appellate court upheld summary judgment dismissing Plaintiff Khan’s PAGA claims because he failed to comply with required administrative procedures.  Though Plaintiff’s regular paychecks appeared to be in order, his final paycheck failed to list the start date of the pay period.  On the basis of that single oversight on a single check, Khan and his attorneys filed their lawsuit seeking to recover penalties on behalf of a group of employees who may have received a similar final paycheck.  Khan’s notice and exhaustion letter to California’s Labor and Workforce Development Agency, however, was peppered with references to violations of his rights, and nowhere referenced any other employee other than himself.  The Court was not impressed.  It held that Khan’s use of the word “my” instead of “we,” or any other language indicating that he was seeking to claim penalties on behalf of anyone but himself, constituted a failure to give proper notice to the individuals involved, and a failure to comply with administrative requirements.  Thus, the Court upheld summary judgment in favor of the employer, and dismissed Khan’s PAGA claim.

If you are in the unfortunate position of having to defend yourself (or a client) against a PAGA action, make sure you take a very close look at the employee’s letter to the Labor Workforce and Development Agency to make sure the employee has followed every technical requirement of the law in giving notice to the employer and the Agency.  You might find a technical shortcoming in the letter on which to defend your client.  Or better yet, make sure that your employees’ paystubs contain the required information in advance.

Employees generally love Alternative Workweek Schedules. They prefer, for example, working four 10-hour days to working five eight-hour days. They work the same number of hours but they get an additional day off and less time commuting. The advantage to employers is that they can give employees the schedule they prefer without incurring additional overtime liability. But before California employers can implement an Alternative Workweek Schedule (or AWS), they need to jump through all sorts of hoops, including having secret ballot elections where two thirds of the affected employees approve the arrangement. All this is spelled out in Section 3 of the Wage Orders. Get it wrong and you risk employees coming back down the road and asking for years’ worth of unpaid overtime.

Once an employer in California adopts an AWS, different rules apply to (for example) sending employees home early, transferring them to different work units and locations, and changing their schedules. The following Q&A addresses many of these issues.

1.   What happens if an employee scheduled to work 12 hours as part of an AWS is asked to work a 12-hours shift on a different day?

Because they are not subject to an AWS that covers that day, all hours they work on that day would be considered overtime. The employee would get 1.5 times his regular rate of pay for the first 8 hours and double his regular rate of pay for the last 4 hours.

2.   What happens if an employee scheduled to work 10 hours as part of an AWS is sent home after 9 hours?

If you require the employee to work fewer hours in a day than they’re normally scheduled to work, you lose the advantage of the AWS. So in this case, you pay overtime (time and a half) after 8 hours on that day.

3.   What happens if an employee scheduled to work 10 hours as part of an AWS is sent home 10 or fewer minutes before their shift ends?

Pay them according to the AWS, but don’t make a habit of this.

4.   What happens if an employee scheduled to work 10 hours as part of an AWS is sent home between 10 and 30 minutes early?

Don’t do that. Keep them around until the shift ends. It’s cheaper to pay them to do nothing than to unnecessarily incur an hour and a half or more of overtime.

5.   What happens if an employee scheduled to work 10 hours asks to leave after 9 hours?

If the employee volunteers to work fewer hours than they’re scheduled as part of an AWS, there is no overtime liability. But have the employee put their request to leave early in writing (even e-mail) to avoid disputes later as to whether it was voluntary.

6.   What happens if an employee scheduled to work 10 hours as part of an AWS is required to work 12 hours on that day?

The additional 2 hours would be paid at time and a half. Any hours beyond 12 would be at double their normal hourly rate.

7.   What happens if an employee who is subject to an AWS is asked to work his normal shift, but at a different location that does not have an AWS?

This work would not be subject to the AWS and would be subject to normal overtime rules.

8.   What happens if an employee who is subject to an AWS volunteers to work his normal shift, but at a different location that does not have an AWS?

Same as paragraph 7.

9.   What happens if an employee who is not subject to an AWS is asked to work on a day she is normally scheduled, but at a different location that has an AWS?

This work would not be subject to the AWS and would be subject to normal overtime rules, unless (1) the employee is told that the different location has an AWS; and (2) the employee works at the different location for one or more full workweeks (as defined under the AWS). If both conditions are met, the employee’s overtime can be calculated the same as other employees who are subject to the AWS for each full workweek the employee works at that location. To avoid disputes later on, have the employee document that she was informed of the AWS.

For example, assume that (1) an employee is assigned from Monday, January 1st through Thursday, January 18th to a location with an AWS; (2) the employee is told in advance about the AWS; and (3) the location’s workweek under the AWS begins Monday at 12:01 a.m. The employee would be paid according to the AWS from Monday, January 1st through Sunday, January 14th and paid normal overtime (e.g. time and a half for 8-12 hours) for time worked between January 15th and 18th (since that is not a full workweek).

As another example, if the situation was the same as in the last paragraph, except the employee learned on January 2nd that the new location had an AWS, the employee would be paid according to the AWS from Monday, January 8th through Sunday, January 14th and paid normal overtime the rest of the time.

10. What happens if an employee who is not subject to an AWS volunteers to work on a day she is normally scheduled, but at a different location that has an AWS?

Same as paragraph 9.

11. What happens if an employee who is subject to an AWS works only at a location that is subject to a different AWS?

The employee would be treated the same as in paragraph 9. In other words, the employee would be paid according to the AWS at the location he was assigned to for each full workweek he worked there, as long as he knew about that AWS in advance.

12. What happens if an employee who is subject to an AWS works in the same workweek at his normal location and at a location that is also subject to an AWS?

The time the employee works at his normally assigned location would be paid according to the AWS at that location. The time he works at the second location would be treated as overtime (time and a half for the first eight hours in a workday, as long as the employee hasn’t yet exceeded 40 hours for the workweek and double time after eight hour in a workday or for all hours beyond 40 in a workweek). If the two locations have different workweeks, use the workweek at the location to which the employee is normally assigned.

13. If an employee is repeatedly asked to deviate from the approved AWS, can the employer lose the benefits of the AWS?

Yes, if the deviations are more than “occasional.”  As a general rule, an alternative workweek must be “regularly scheduled.”

Takeaway: How typical of California law! Employers offering a schedule that employees prefer have to negotiate a maze of complex requirements and face serious exposure for even an accidental misstep. California employers wishing to implement an Alternative Workweek Schedule should get guidance from qualified counsel in doing so. Those with one in place should ensure that their managers understand the consequences of deviating.

Illustration of a fox with sunglassesWe often blog about how different California employment laws are when compared to the rest of the US.  Whether it is the minimum wage, mandatory harassment prevention training requirements, or that funky law called PAGA, find out how to comply with laws in what we fondly refer to as the United Republic of California with this handy guide to Doing Business in California.

Many thanks to Sahara Pynes for her assistance in updating this informative guide.  Check it out on the Fox Rothschild website.

The California state flag