Wage Law

In another 5-4 decision, the Supreme Court has again declared its passion the Federal Arbitration Act, and specifically for 9 USC § 2 - Validity, irrevocability, and enforcement of agreements to arbitrate. Section 2 provides:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

In American Express Co. v. Italian Colors Restaurant (2013) __ U.S. __ [No. 12-133) the Supreme Court extended its recent trend of rejecting challenges to the FAA, and arbitration agreements containing class action waivers, holding that a contractual waiver of class arbitration is enforceable under the FAA even where the cost of pursuing individual arbitration claims exceeds the amount in controversy. Although this is not an employment case and the plaintiff was a business entity and not an individual, the holding in American Express Co. v. Italian Colors Restaurant will likely have a substantial impact on employment class action litigation.

Barring a change in the FAA or a change in the majority bloc of justices on the Supreme Court, there may be only three ways left to avoid class action waivers in employee/employer arbitration agreements: disproving the existence of the agreement; invalidating the agreement under state unconscionability law or some other state law that is generally applicable to all contracts, and not just arbitration agreements; or suing under a federal statute that guarantees the plaintiff's right to bring a class action.

You can read the entire opinion in American Express Co. v. Italian Colors Restaurant here in PDF.

Gordon Ramsey's Fat Cow restaurant has been hit with a wage and hour class action in California alleging failure to provide meal breaks, rest breaks, failure to pay minimum wage and proper overtime pay. It also seeks waiting time penalties for former employees who were not paid all wages due upon termination. Ramsey's PR firm released a statement explaining that the claims involve former workers, that the restaurant's "previous management" is at fault, and the practices have been corrected.

If you get a judgment against a contractor in California and the contractor doesn't pay, you can have its contractor's license suspended. Just send a copy of the judgment or an abstract to the Contractors State License Board and the license will be suspended within 90 days.

The Court of Appeal has applied a primary purpose test to the case of a store manager classified as exempt by her employer, and found that the employee was misclassfied. In Heyen v. Safeway (2013) ___ Cal.App.4th ___, the court was called upon to decide how to characterize time spent on nonexempt tasks when the manager is also simultaneously responsible for management and supervision.

Plaintiff/respondent Linda Heyen is a former assistant manager for defendant/appellant Safeway Inc. (Safeway).  After Safeway terminated her employment, Heyen brought this action to recover unpaid overtime pay, contending Safeway should have classified her as a “nonexempt” employee because she regularly spent more than 50 percent of her work hours doing “nonexempt” tasks such as bagging groceries and stocking shelves.  An advisory jury and the trial court agreed with Heyen and awarded her overtime pay of $26,184.60, plus interest. 

Safeway appeals, contending that the trial court failed to properly account for hours Heyen spent simultaneously performing exempt and nonexempt tasks—i.e., “actively . . . manag[ing] the store while also concurrently performing some checking and bagging of customer grocery purchases.”  Safeway urges that, consistent with federal law, the trial court should have classified as “exempt” all hours during which Heyen simultaneously performed exempt and nonexempt tasks.  Because the court failed to do so, Safeway claims it prejudicially erred, requiring a reversal of the judgment.  

We disagree with Safeway’s analysis as inconsistent with California law.  Hence, we affirm the judgment for Heyen.

Essentially, the argument presented by employers in this sort of situation is to claim that while a manager might be bagging groceries, or sweeping floors or ringing up sales, they also are observing their subordinates, overseeing the general operations of the store and other tasks that fall upon exempt managers, therefore, the time spent sweeping floors should count as time spent on exempt tasks for the purpose of meeting the 50% time test required to prove that the manager is "primarily engaged in duties which meet the test of the exemption" from overtime pay.

In this case, the trial court instructed the jury as follows:

“If a party claims that an employee is engaged in concurrent performance of  an exempt and non-exempt work, you must consider that time to be either an exempt or a non-exempt activity depending on the primary purpose for which the employee undertook the activity at that time.  The nature of the activity can change from time to time.”

So time spent for each task, or each period of multitasking, had to be evaluated either as primarily exempt work, or primarily nonexempt work. If it was primarily nonexempt work, it was nonexempt work even if the manager was simultaneously making sure that nothing was happening that needed a manager's intervention at the time. Applying that standard, the managers were found to be nonexempt.

The opinion contains a very good discussion of the federal regulations on this subject, as well as a discussion of the employer's "reasonable expectations" defense that was found lacking in this particular case. You can download the entire opinion in Heyen v. Safeway here in PDF or Word.

Q: If I make $30 an hour, plus a bonus of 20% of my annual income ($12,480) if I hit my performance goals, what should I be paid when I work overtime? The company is paying $45 an hour as my overtime rate.

A. If  you are an hourly employee who is paid non-discretionary bonus that is tied to performance, the value of that bonus has to be including in the computations of your "regular rate of pay" for overtime purposes. The wage orders provide that the overtime rate must be "one and one-half (1 1/2) times such employee’s regular rate of pay". Your "regular rate" is the compensation you normally earn for the work you perform. The regular rate of pay includes a number of different kinds of remuneration, such as hourly earnings, salary, piecework earnings, and commissions.

Your bonus is included in the regular rate of pay for purposes of calculating overtime if it is a nondiscretionary bonus. A nondiscretionary bonus is included in determining the regular rate of pay for computing overtime when it is based upon hours worked, production or proficiency. Discretionary bonuses or sums paid as gifts at a holiday or other special occasions, such as a reward for good service, which are not measured by or dependent upon hours worked, production or efficiency, are not included for purposes of determining the regular rate of pay.

In your case, the bonus is a nondiscretionary bonus measured by or dependent upon hours worked, production or efficiency. Therefore, if you hit those goals, that bonus must be included in your regular rate of pay. Adding that bonus to your base hourly rate, you have a regular rate of pay that comes to $36 per hour. Your overtime rate should be $54 per hour.

This very useful page on the DIR's website explains how an employee or former employee can report a labor law violation with the Division of Labor Standards Enforcement's (DLSE) Bureau of Field Enforcement (BOFE) about a variety of wage and hour violations, including violations concerning minimum wage, overtime, failure to give meal and/or rest periods, reimbursement for uniforms, payroll record keeping, cash shortages, child labor laws, failure to carry workers' compensation insurance, wage statement violations, failure to provide break time or locations to express milk and several others.

The list is also a handy short list of issues wage and hour lawyers like us us might use to explore client's options during an intial client interview.