in california wage hour laws and class actionsdevelopments in california wage & hour laws and...

Developments in California Wage & Hour Laws and Class Actions

Brought to you by Winston & Strawn’s Labor & Employment Practice Group

© 2010 Winston & Strawn LLP

Today’s PresentersToday s Presenters

Amanda SommerfeldLabor & Employment

Los Angeles

Maria RodriguezLabor & Employment

Los Angelesg

[email protected]

g

[email protected]

2© 2010 Winston & Strawn LLP

RoadmapRoadmap

California wage and hour primer, focusing on key California wage and hour primer, focusing on key differences between California and federal law

Current law and pending cases that will shape p g pCalifornia wage and hour landscape

Practical approaches to ensure compliancepp p


CA Wage and Hour: State of AffairsCA Wage and Hour: State of Affairs

100+ wage and hour class actions filed each month 100+ wage and hour class actions filed each month

Companies hit multiple times

Increase in compliance has not resulted in decrease Increase in compliance has not resulted in decrease of claims

Targets – companies with lots of California Targets companies with lots of California employees or potential misclassification of high wage employees


CA and Federal: Key Differences and Additional Issues in CA

Daily Overtime

Meal and rest periods

Exemptions

E i b Expense reimbursements Mileage Uniform

Piece‐rate or load rate

Non‐productive work time

Recordkeeping Recordkeeping


Key Issues in CA Law (cont’d)Key Issues in CA Law (cont d)

Wage statementsg

Pay checks

Final pay

Vacation pay No “use it or lose it”

Fl t ti k k Fluctuating work week Not allowed

Reporting time payp g p y

Split shift pay

Wage orders – industry‐specific items


Other Class Action Claims that Make Up the Basis of Wage and Hour Class Actions

Failure to recalculate bonus pay to determine true Failure to recalculate bonus pay to determine true hourly rates and true‐up overtime

Tip‐pooling p p g

Off‐the‐clock

Donning and doffing Donning and doffing

Labor code penalties

Unfair business practices – 4‐year statute of Unfair business practices 4 year statute of limitations


Overtime; Calculating and Paying Overtime 1.5 X hours over 8 a day X hourly rate 1.5 X hours over 8 a day X hourly rate

2 X hours over 12 a day X hourly rate

Calculation of hourly rate Calculation of hourly rate If employer makes additional weekly, monthly, quarterly payments such as bonuses, recalculation of hourly rate and true‐up of overtime required

Cannot determine hourly rate by dividing weekly amount paid by hours worked – must divide by 40paid by hours worked must divide by 40

No fluctuating work week


Meal PeriodsMeal Periods

Employers required to “provide”meal period for all p y q p pemployees who work more than 5 hours

Must pay one hour of additional pay as “premium” to employees who are not “provided” a meal periodare not provided a meal period

Must be 30 min., duty free, before the employee has worked more than 5 hours in the shift

Brinker still pending but fully briefed Brinker – still pending, but fully briefed “Provide” versus “ensure”

Target Issues “Auto deducts” for meal periods Poor records of when meal periods are taken History of never paying a single meal break premium


y p y g g p

Meal Periods (cont’d)Meal Periods (cont d)

Second meal period required if shift is over 10 hours Second meal period required if shift is over 10 hours

First meal periods can be waived by voluntary consent, but only for a maximum 6‐hour shift , y

If first meal period provided, second meal period can be waived

On‐duty meal period agreements rarely enforceable

Employer responsibility to recordp y p y


Rest PeriodsRest Periods

10 minutes for every 4‐hour period, “or fraction 10 minutes for every 4 hour period, or fraction thereof”

On the clock

Not required to record rest periods taken

“Provide” seems to be sufficient Provide seems to be sufficient

1 hour premium if not provided


Exemption MisclassificationExemption Misclassification

Executive exemption Executive exemption Weekly analysis of whether the manager manages > 50 percent

of the timeArenas v El Torito restaurant manager class not certified Arenas v. El Torito – restaurant manager class not certified –individualized inquiry; but compare with Jaimez v. Daiohs(exemption case certified)

Administrative exemption Matters of significance = affecting corporate policy – high

standardstandard Testing discretion and independent judgment Liberty Mutual – the production dichotomy issue

ll i b lf i


Pellegrino v. Robert Half – account executives not exempt

Exemption Misclassification (cont’d)Exemption Misclassification (cont d)

Outside sales persons Outside sales persons Really outside more than 50 percent of the time?

How is that being monitored/audited?

What kind of notice do sales managers have that sales people are not outside?


Exemption Misclassification (cont’d)Exemption Misclassification (cont d)

Inside salespersons Inside salespersons Provided for in CA Wage Orders 4 and 7 (which specify what employees, units of employees, or companies are eligible for i id l ti )inside salesperson exemption)

More than 50 percent of their compensation must be from commissions and they must be selling

Runs afoul of FLSA FLSA only provides a commissioned salesperson exemption for retail establishments – this limitation does not exist in CA law

If the company is an on‐line retail establishment and is relying on FLSA‐commissioned sales, it may not qualify under FLSA

Investor’s Business Daily – recent CA case


Investor s Business Daily recent CA case

Expense ReimbursementsExpense Reimbursements

Mileageg Must reimburse for actual expense to the employee

If company is not reimbursing at the IRS rate, have this reviewed

U if Uniforms General rule has been that if the item does not have company

branding or logo and can be used in another job in the industry (e.g., )plain khaki pants), the employer is not required to reimburse

In some cases, CA courts certifying classes on this issue

Practical point: keep track of what the company is and is not reimbursing for, and review for compliance (these claims and penalties add up)


Expense Reimbursements (cont’d)Expense Reimbursements (cont d)

Reasonable business expenses must be reimbursedp What does this mean? What about blackberries, mobile phone

service charges, etc.?

What kind of company policies are appropriate on this subject? What kind of company policies are appropriate on this subject?

How do we measure whether it is reasonable?

Is damage to an employee’s car, who drives for work, a reasonable business expense?business expense?

Employer can require pre‐approval, but if an employee incurs the reasonable expense without pre‐approval, it must be reimbursed

The allowable consequence is a write‐up


Piece Rate or Incentive‐based Compensation We could spend an entire day talking about this subjectp y g j

All minutes worked must be paid at the appropriate rate Must be able to show that the plan was designed in advance to cover

all minutes workedall minutes worked

Cannot try to show after the fact that the total compensation covers the hours worked (this is called “averaging” under CA piece‐rate law and is not allowed)and is not allowed)

Non‐productive work rates are allowed as part of the compensation plan

Use counsel on this one!


More CA DifferencesMore CA Differences

Recordkeeping p g Employer’s responsibilities

Penalties

Payroll documents must be kept in CA (what about on line records?) Payroll documents must be kept in CA (what about on‐line records?)

Wage statements CA labor code specifically requires all information the employee

would need to verify their pay is correct (e.g., total pay, deductions, different pay rates, straight and overtime hours worked, piece‐rate pay and pieces completed)

Penalties are proscribed by statute (up to $4,000 per year, per employee)


More CA Differences (cont’d)More CA Differences (cont d)

Pay checks Pay checks Must include the address of California bank upon which the check can be drawn without a fee

Pay cards No fees may apply to employees

Communicate the details of the policy and how the pay cards work very clearly

Practical tip: check company contract with payroll bankp p y p y



Reporting time pay Reporting time pay If an employee reports to work and there is no work for him/her, employer must pay half of employee’s scheduled hift ( i i f 2 h i f 4)shift (minimum of 2 hours, maximum of 4)

Split shifts If an employee is required to split a shift by more than one If an employee is required to split a shift by more than one hour, employer owes 1 hour of pay

Final pay Due immediately upon termination and within 72 hours of resignation

No deductions for employee loans


No deductions for employee loans


Vacation pay – no “use it or lose it” policies allowed Vacation pay no use it or lose it policies allowed

Wage orders – industry‐specific items


CA’s Private Attorney General ActCA s Private Attorney General Act

Private Attorney General Act (PAGA) enacted in 2004 to offer financial incentives to individuals to enforce state employment laws

Any “aggrieved employee” may recover civil penalties against an y gg p y y p gemployer on behalf of other current and former employees

75 percent to CA Labor & Workforce Development Agency; 25 percent to the employees

Penalties recoverable: those provided in the underlying Labor Code, or, if no penalty listed:

$100 per person, per pay period – 1st violation$200 per person per pay period each subsequent violation $200 per person, per pay period – each subsequent violation

Administrative prerequisites must be exhausted Until recently, unclear if class action standard applied


Practical Approaches to Measure and Maintain Compliance and Avoid Class Actions

Top things to considerp g Audit

Develop process to review meal periods and ensure they are taken; consider a policy to deal with missed meal periodsconsider a policy to deal with missed meal periods

Have pay stubs and live payroll checks reviewed for compliance regularly

Review time keeping systems to make sure every minute worked is Review time‐keeping systems to make sure every minute worked is captured accurately

If you don’t reimburse at the IRS rate, discuss with counsel to ensure compliance with CA lawcompliance with CA law

Review all recordkeeping related to time‐keeping and payroll Operationally, review incentives and business model to detect incentives that

cause cheating


cause cheating

Practical Approaches to Measure and Maintain

Top things to consider (cont’d)

Compliance and Avoid Class Actions

Top things to consider (cont d) Review job descriptions for every entry‐level exempt position and standards to ensure classification is really met

M i Managing Independent discretion and judgment Outside sales IT “professionals”

Review procedures and policies for the various topics discussed todaydiscussed today

Determine what managers and employees are actually doing (reviewing written policies and procedures is not enough –

d t k h t i ll h i )


need to know what is really happening)

Questions?


Thank You.


Contact InformationContact Information

Amanda SommerfeldLos Angeles

Maria RodriguezLos Angelesg

(213) [email protected]

g(213) [email protected]


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