Calculating Overtime in California - Bonuses

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.

How to File a Report of a Labor Law Violation in California

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.

Overtime for Missed Lunches

Q:  If an employer doesn't let the employee take her lunch, doesn't it owe her overtime for that missed lunch break?

A:  California's overtime and meal period laws imposed entirely separate obligations to the employer. A missed meal period does not necessarily mean the employer owes overtime. There are times when that is the case, however. For example, if the employer had the employee clock out for the meal period, but the employer was required to work during the meal period, and also worked 8 hours on the clock that day. In that example, the employee's meal period should count as hours worked, and since the additional time makes the employee's workday exceed 8 hour, and the additional time should be paid at one and a half times the employee's regular rate of pay.

Independent of the overtime issue, however, an employer who causes an employee to miss a required meal period will owe the employee an extra hour of pay at the employee's regular rate, pursuant to Labor Code § 226.7.

Under Labor Code § 512, the employer may not employ an employee for a work period of more than five hours per day without providing the employee with a meal period of not less than thirty minutes, except that if the total work period per day of the employee is no more than six hours, the meal period may be waived by mutual consent of both the employer and employee.

A second meal period of not less than thirty minutes is required if an employee works more than ten hours per day, except that if the total hours worked is no more than 12 hours, the second meal period may be waived by mutual consent of the employer and employee only if the first meal period was not waived.

If the employer requires the employee to remain on premises during the meal period, it must be a paid meal period, whether or not the employee is relieved of all duties during the meal period. Bono Enterprises, In. v. Bradshaw (1995) 32 Cal.App.4th 968.

No, Samy, the Tips Belong to the Servers

Have you seen the epic meltdown on Chef Gordon Ramsey's show "Kitchen Nightmares" feating Amy's Baking Company? This is quite possibly the greatest public relations failure by a small business that I've ever witnessed. As a wage and hour lawyer, however, I was particularly amazed by the scene where owner Samy Bouzaglo greedily pockets his waitress's tip. Keeping employee tips is a violation of wage and hour law. It doesn't matter than you pay them $8 an hour. Amy's Baking Company was foolish enough to do it with the cameras rolling.

"A tip is the sole property of the tipped employee regardless of whether the employer takes atip credit. The FLSA prohibits any arrangement between the employer and the tipped employee whereby anypart of the tip received becomesthe property of the employer. For example, even where a tipped employeereceives at least $7.25 per hour in wages directly from the employer, the employee may not be required to turnover his or her tips to the employer."

U.S. Department of Labor Wage and Hour Division (Revised March 2011) Fact Sheet #15: Tipped Employees U nder the Fair Labor Standards Act (FLSA)

California law also provides that tips belong to the employees who earned them.Labor Code § 351.

Unfortunately, Samy and Amy Bouzaglo of Amy's Baking Company operate in Scottsdale, Arizona. So we can't represent their employees. That bums us out a bit. We'd even do it pro bono.

To watch the owner steal his workers' tips, just watch here. At 6:12, a customer leaves a $10 tip and Samy pockets it unapologetically and then brags about being a gangster.


He may not just be popping off about the gangster stuff, either. Amy Bouzaglo, fka Amanda Patricia Bossingham, has a felony record.


Yes, You Get Paid For Both Hours When Daylight Saving Time Ends

The FLSA and the California Labor Code require that non-exempt employees must be paid for all hours actually worked. Therefore, an employee who works the 2 o'clock hour on Daylight Saving Time, and then again works the 2 o'clock hour on Standard Time has worked two hours and is entitled to payment for both. See, e.g., DOL Advisement on Daylight Savings [sic] Time.

To our surprise, there are some employers who believe that someone who worked from 10:00 p.m. on Saturday to 6:00 a.m. on Sunday is entitled to be paid for no more than 8 hours. Such an employee actually worked nine hours and is entitled to 8 hours of regular pay and 1 hour of overtime.

"They'll make it up in March when they get paid 8 hours of pay for 7 hours of work" is not a defense.

He Did WHAT With The Settlement Money?

We were shocked by this story about Sandeep Baweja, an Irvine attorney who admits he stole most of the money from a $3.55 million wage and hour class action settlement in a case against ZipRealty. Lubocki, et al. v. ZipRealty, Inc., Case No. CV 07 2959 SJO (JCX) (C.D. Cal.)

As resumes and accomplishments go, Irvine attorney Sandeep Baweja was a superstar. Then, in the span of a few months this year, he threw it all away. In an unfolding case that has stunned colleagues, Baweja, 38, has admitted to burning through almost all of a $2.7-million settlement that was supposed to be shared by about 1,000 plaintiffs he represented in a class-action labor lawsuit. In legal filings, Baweja cites his inexperience as a stock market investor and this year's market freefall for the massive losses — money he had no right to transfer without court approval, according to legal documents.

We'd never met or heard of him, but apparently "superstar" Baweja is a ten year lawyer, active in politics and civic matters. And apparently, ZipRealty and/or the claims administrator Garden City Group released all of the settlement money to Baweja, who then spent several months playing the stock market with the money. Unfortunately for Baweja and his clients, mid-2008 was a bad time to be playing the stock market. He blew all but $54,846.90 of the settlement money.

Baweja and his co-counsel have taken down most of their website about the ZipRealty case, and replaced it with an update informing class members that Baweja is withdrawing due to a conflict of interest.

On December 24, 2008, Mr. Baweja filed a Motion to Withdraw as counsel in Lubocki v. Zip Realty, Inc. Case No. CV 07-2959-SJO (JCx). Mr. Baweja is asking to be removed as class counsel due to a conflict of interest. All class members should expect to receive a letter explaining the basis of the conflict of interest, with a copy of the Motion to Withdraw. The hearing on the Motion to Withdraw is currently set for January 26, 2009.

That motion will be granted. He also sent an email to class members that same day, confessing what he had done with their money. For a cached version of the site, check here. For a copy of the class notice, check out this blog post. There is no evidence that Ernest J. Franceschi or any of the other lawyers involved in the case played any role in the disappearance of the money.

What's next? A new class action to represent the class members in the pursuit of their class settlement money. Disciplinary proceedings are also a certainty. Playing with and losing your clients' money is about as serious a violation as a lawyer can commit. As one lawyer asked about the case and the rule Baweja violated put it this way: "That's Ethics 101." Actually, that's one you learn in kindergarten. Don't take what doesn't belong to you. Don't borrow without permission. You don't have to be a lawyer to know that.

On a side note, as further evidence that ratings are worthless, here's a link to his Avvo rating. "No ratings yet. ... We have not found any instances of professional misconduct for this lawyer." Perhaps when the angry clients and newspaper readers find out about Avvo, that will change. Baweja does have a wikipedia page now, though. Baweja was also the treasurer in Irvine for the Yes on Measure R and Yes on Measure S campaign committees. You can't help but wonder how clean those campaign accounts were kept.

California Law on Vacation Pay

We often get questions about wages due for vacation time. In general, California law does not require employers to provide vacation pay to their employees. However, if an employer has a vacation policy, whether written or oral, accrued vacation benefits are considered earned wages, and they are earned by the employee on a pro rata basis for each day of work.

Vacation is a form of deferred compensation, and it vests as it is earned. Employers can defer the accrual of vacation benefits (i.e., saying that you begin to accrue 1.2 vacation days per month once you've been employed for six months), but cannot declare that vacation pay is earned in lump sums (i.e., you get no vacation for six months, but at the beginning of your seventh month, you get one week of vacation, and then begin to accrue further vacation benefits).

Vacation pay that has been earned cannot be forfeited. Thus, a use-it-or-lose-it vacation policy is unenforceable. See Suastez v. Plastic Dress Up (1982) 31 Cal.3d 774. However, reasonable caps upon further accrual of vacation benefits are lawful. Boothby v. Atlas Mechanical (1992) 6 Cal.App.4th 1595. Therefore, an employer cannot, for example, tell you that your 12 days of accrued vacation must be used by December 31, or your "bank" of vacation time will be reduced to 7 days on January 1. On the other hand, an employer can enforce a rule that says an employee who has 15 days of unused vacation time cannot continue to accrue more time until he or she uses some of those 15 days.

When one's employment ends, all earned but unused and unpaid vacation benefits must be paid immediately. Labor Code §§ 201, 202, 227.3.

The WARN Act and the Faltering Business Exception

The federal Worker Adjustment and Retraining Notification Act ("WARN" Act) 29 USCA § 2101 et seq., requires certain employers to provide 60 days' advance notice of a "plant closing" or a "mass layoff" to affected employees and state and local government officials. 29 USCA § 2102(a); Hollowell v. Orleans Regional Hosp. LLC (5th Cir. 2000) 217 F.3d 379. An employer who conducts a closing or layoff without giving the required advance notice is liable for up to 60 days' pay and benefits to affected employees. Allen v. Sybase, Inc. (10th Cir. 2006) 468 F.3d 642.

The federal WARN Act has an exception called the "Faltering Company" exception. A faltering company "may order the shutdown of a single site of employment before the conclusion of the 60-day period if as of the time that notice would have been required: the employer was actively seeking capital or business which, if obtained, would have enabled the employer to avoid or postpone the shutdown; and the employer reasonably and in good faith believed that giving the required notice would have precluded ... obtaining the needed capital or business." 29 USCA § 2102(b)(1).

The DOL regulations provide that the employer must have been seeking financing or refinancing or additional business through a commercially reasonably method. 20 CFR § 639.9(a)(1). To prove the defense, the company must identify specific actions taken at that time to obtain financing or new business. Local 397, Int'l Union of Electronic, Elec., Salaried, Mach. & Furniture Workers, AFL-CIO v. Midwest Fasteners, Inc. (D.NJ 1990) 763 F.Supp. 78. There must have been a realistic opportunity to obtain the financing or business sought. 20 CFR § 639.9(a)(2). The financing or business sought would have been sufficient to enable the employer to avoid or postpone the shutdown and to keep the facility open for a reasonable period of time. 20 CFR § 639.9(a)(3). And the employer must be able to demonstrate objectively that it could have kept the facility open for a reasonable period of time with the amount of financing or new business sought. 20 CFR § 639.9(a)(2). The employer must have objectively and subjectively believed that a potential customer or source of financing would have been unwilling to provide the new business or capital if notice were given. 20 CFR § 639.9(a)(4); Childress v. Darby Lumber, Inc. (9th Cir. 2004) 357 F.3d 1000. The employer must show that, upon learning that the workplace would be closed, it promptly notified the employees and explained why it had not given earlier notice. Local 397, Int'l Union of Electronic, Elec., Salaried, Mach. & Furniture Workers, AFL-CIO v. Midwest Fasteners, Inc. (D. NJ 1990) 763 F.Supp. 78.

There is also an "Unforeseen Business Circumstances" exception, whereby an employer need not give the full 60 day notice if the closing was caused by a business circumstance that was not reasonably foreseeable as of the time notice would have been required. 29 USCA § 2102(b)(2)(A). However, where an unforeseen business circumstance prevents an employer from timely giving notice, the employer must give "as much notice as is practicable and at that time shall give a brief statement of the basis for reducing the notification period." 29 USCA § 2102(b)(3); Allen v. Sybase, Inc. (10th Cir. 2006) 468 F.3d 642. However, in one recent case, layoffs could be attributed to unforeseen business circumstances where the employer's lender bank gives numerous warnings that employer was at risk of losing credit, the market price of its product was depressed, and its operations had been losing money over a significant period of time. Childress v. Darby Lumber, Inc. (9th Cir. 2004) 357 F.3d 1000.

California law has a similar requirement, with similar defenses. Under Labor Code § 1400, most of the federal WARN Act requirements are also mandated under state law. Notice of a relocation or termination, but not a mass layoff, is excused where the employer furnishes records and affidavits and the Employment Development Department determines that (i) at the time notice was required, the employer was actively seeking capital or business that would have enabled it to avoid or postpone the relocation or termination; and (ii) the employer reasonably and in good faith believed that giving the 60 days' notice would preclude it from obtaining the needed capital or business. Labor Code § 1402.5.

Where To File Your Wage Claim With The Labor Commissioner

We get a lot of emails from people wondering where they can go to file their wage claims with the Labor Commissioner. Here, per the DLSE website, is a list of locations and contact numbers. The numbers listed in red below are lines that contain general information on wage and hour issues. If the information you need is not provided in the general information, or if you have a question regarding a claim already filed, please call the general office number listed below in black.

5555 California Avenue, Suite 200
Bakersfield, CA 93309
(661) 395-2710
(661) 859-2462

2115 Civic Center Drive, Room 17
Redding, CA 96001
(530) 225-2655
(530) 229-0565

San Jose
100 Paseo de San Antonio, Room 120
San Jose, CA 95113
(408) 277-1266
(408) 277-3711

El Centro
1550 W. Main St.
El Centro, CA 92243
(760) 353-0607
(760) 353-2544

2031 Howe Avenue, Suite 100
Sacramento, CA 95825
(916) 263-1811
(916) 263-5378

Santa Ana
28 Civic Center Plaza, Room 625
Santa Ana, CA 92701
(714) 558-4910
(714) 558-4574

619 Second Street, Room 109
Eureka, CA 95501
(707) 445-6613
(707) 441-4604

1870 N. Main St., Suite 150
Salinas, CA 93906
(831) 443-3041
(831) 443-3029

Santa Barbara
411 E. Canon Perdido, Room 3
Santa Barbara, CA 93101
(805) 568-1222
(805) 965-7214

770 E. Shaw Avenue, Room 315
Fresno, CA 93710
(559) 244-5340
(559) 248-8398

San Bernardino
464 W. Fourth Street, Room 348
San Bernardino, CA 92401
(909) 383-4334
(909) 889-8120

Santa Rosa
50 "D" Street, Suite 360
Santa Rosa, CA 95404
(707) 576-2362
(707) 576-2459

Long Beach
300 Oceangate, Suite 302
Long Beach, CA 90802
(562) 590-5048
(562) 491-0160

San Diego
7575 Metropolitan Dr., Rm. 210
San Diego, CA 92108
(619) 220-5451
(619) 682-7221

31 E. Channel Street, Room 317
Stockton, CA 95202
(209) 948-7771
(209) 941-1906

Los Angeles
320 W. Fourth Street, Suite 450
Los Angeles, CA 90013
(213) 620-6330
(213) 576-6227

San Francisco
455 Golden Gate Ave., 10th Floor
San Francisco, CA 94102
(415) 703-5300
(415) 703-5444

Van Nuys
6150 Van Nuys Blvd., Room 206
Van Nuys, CA 91401
(818) 901-5315
(818) 908-4556

1515 Clay Street, Suite 801
Oakland, CA 94612
(510) 622-3273
(510) 622-2660

San Francisco--Headquarters
455 Golden Gate Avenue, 9th Floor
San Francisco, CA 94102
(415) 703-4810

Most Unpaid Internships Are Unlawful

As intern came to us recently and asked if her internship, which was unpaid, complied with the wage and hour laws. It did not; she had a handsome claim for unpaid wages. Interns who do "volunteer work" or other unpaid training programs are entitled to be paid minimum wage, overtime, if applicable, and they are entitled to meal periods and rest periods, just like any other employee. When must an employer pay for the intern's work?

The answer isn't always always, but it comes close. The U.S. Department of Labor (DOL) has set a standard under the Fair Labor Standards Act (FLSA). As part of that standard, the DOL has developed six criteria for determining whether a novice worker is a paid performer or a lawfully unpaid learner or trainee:

  1. The training, even though it includes actual operations of the facilities of the employers, is similar to that which would be given in a vocational school.
  2. The training is for the benefit of the student.
  3. The student does not displace a regular employee, but works under the close observation of a regular employee or supervisor.
  4. The employer provides the training and derives no immediate advantage from the activities of the student; and on occasion, the operations may actually be impeded by the training.
  5. The student is not necessarily entitled to a job at the conclusion of the training period.
  6. The employer and the student understand that the student is not entitled to wages for the time spent training.

Not all six factors have to be present in order for the individual to be considered a trainee. The experience, however, should look more like a training/learning experience than a job. We find that the third and fourth factors are often lacking.

If you do work, other than pure practice, or work on dummy files, you are probably entited to get paid, and your claim can go back four years. We certainly hope you weren't an unpaid worker for four years.

It is unclear whether the 4th prong in this analysis renders traditional college internships unlawful. They are usually part of the curriculum, but participants tend to do actual work, to get a feel for the business world. Several DOL rulings, while not directly addressing the criterion, suggest that as long as the internship is a prescribed part of the curriculum, is part of the school's educational process, and is predominately for the benefit of the student, the fact that the employer receives some benefit for the student's services does not make the student an employee for purposes of wage and hour law.

A list of questions collected by R.K. Kaplan, Legal Counsel, National Association of Colleges and Employers, has been prepared to try to distinguish between a proper internship and an underpaid/unpaid trainee. A legitimate internship program should be able to answer "yes" to at least half the following questions if an unpaid internship is being contemplated:

  1. Is the work that you are offering an integral part of the student's course of study?
  2. Will the student receive credit for the work or is the internship required for graduation?
  3. Does the student have to prepare a report of his/her experience and submit it to a faculty supervisor?
  4. Have you received a letter or some other form of written documentation from the school stating that the internship is approved/sponsored by the school as educationally relevant?
  5. Will the student perform work that other employees also perform, with the student doing the work for the purpose of learning and not necessarily performing a task for the employer?
  6. Is the student working and providing benefit to you less than 50 percent of the time and/or is the student in a shadowing/learning mode?
  7. Will you provide an opportunity for the individual to learn a skill, process, or other business function, or operate equipment?
  8. Is there educational value to the work performed, that is, is it related to the courses the person is taking in school?
  9. Is the individual supervised by one of your staff members?
  10. Is it clear that a job is not guaranteed upon completion of the training or completion of the person's schooling?

The dollar amounts can be bigger than you think. If an employee works just four weeks as an unpaid intern, the minimum wage due would be $1,080. The aggreived intern would also be entitled to $1,620 in waiting time penalties. The intern is also entitled to recover interest and attorney's fees. If the internship lasted more than 8 hours of work per day, overtime pay was due, and interns are entitled to the same paid rest periods and unpaid meal periods as other employees. Often, the claims of a few or all of the affected employees can be brought in a single case.

If you have worked an unpaid internship in the last four years and have questions about your rights, feel free to call us at (714) 544-6609.

But What If The Boss Fires Me When I Ask For Overtime

From an email we received recently:

Q: I know my employer is required to pay overtime when we work over eight hours per day, but they don't, and I am afraid I will lose my job if I speak out. Can they fire me for complaining about the overtime pay?

A: No. Demanding wages and reporting violations of wage and hour laws is protected conduct, favored by a fundamental public policy of the State of California. Retaliation or termination of an employee for demanding full payment of wages is a violation of public policy and supports a cause of action for wrongful termination. Gould v. Maryland Sound Industries, Inc. (1995) 31 Cal. App. 4th 1137, 1150; Phillips v. Gemini Moving Specialists (1998) 63 Cal. App. 4th 563.

We had a case a few years ago that would not have been worth taking but for the fact that the employee was fired for demanding about $1,500 in overtime pay. The case settled for many times what the employer owed in back pay.

The Five Most Common Wage Mistakes Made by Employers

From what we've observed within the last five years:

  • Not Paying an Employee's Final Wages on Time.
  • In most cases, an employer must pay all of the wages earned, at the time of terminating an employee, or on aq resigning employee's last day. This time can be extended to 72 hours after resignation if an employee quits without notice. An employer who fails to do so may be required to pay penalty wages of up to 30 days pay (note: this included full pay on Saturday and Sunday, even if the employee doesn't normally work on those days). The final pay due at the end of employment includes vacation pay, which is frequently paid late. Often, these violations are systematic and can lead to costly liabilities to an entire class of workers.

  • Misclassifying Exempt Employees.
  • In our experience, most salaried employees who are classified as "managers" are improperly classified as exempt. To be properly classified as an exempt employee, a manager must be paid a salary of no less than twice the minimum wage; and must supervise (which generally must include the power to hire and fire) two or more employees; and must customarily exercise independent discretion; and must spend more than 50% of the time performing those managerial tasks, rather than the same sort of work as their hourly underlings. Often, employers will simply add a small amount of managerial authority to a crew member, call that crew member the manager, and put them on a salary. While there is nothing wrong with do that, it does not excuse the employer from paying overtime if that salaried worker then works more than 8 hours per day or 40 hours per week. If those improperly classified employees work long hours, they may be entitled to overtime pay reaching back four years. If the hours are long enough, the liability can easily exceed a year's worth of ordinary salary. Since the Sav-On case last year, these misclassification cases have well suited for wage and hour class action lawsuits for which liability can be in the tens of millions of dollars companywide.

  • Failing to Permit Meal/Rest Periods.
  • Employees working more than 5 hours per day must be provided 30-minute meal periods unless they work shifts of six hours or less and agree to waive the break for that day. If the shift lasts ten hours or more, a second meal period is required.  The employees must be relieved of all job duties and may not have their breaks interrupted with work. In addition, employers are required to permit and authorize employees to take ten minute breaks, with pay, for every four hours of work "or major fraction thereof." That means that the second break obligation applies if a shift exceeds six hours, and a third applies if the shift exceeds ten hours. Employers who do not provide the breaks required under California law must pay the affected employee an extra hour of pay at the employee's regular rate of pay for that day. Our firm has certified several class actions involving meal period and rest period violations. At an hour of pay per employee per day, the liability can be substantial.

  • Taking or Receiving Tips.
  • Although tip pooling among non-management employees is permitted, no employer or supervisor may collect, take or receive tips left for by patrons for its employees. We most often see this in restaurants, salons and, surprisingly, car washes.

  • Failing to Provide Itemized Wage Statements.
  • Employers must provide an itemized wage statement showing: the employer's name and address, the employee's name and social security number, the payperiod dates, gross/net wages, deductions, total hours worked, applicable hourly rates and hours worked at each rate. Many employers who misclassify employees get into added trouble by not documenting and reporting the actual hours worked on each paystub, resulting in additional penalties due.

    Are You Really in Outside Sales?

    Outside salespeople in California are like the last of the bareback riders when it comes to legal protections from hard employment practices. The outside salesperson has almost no protection under any California Industrial Welfare Commission wage order. Outside salespersons are entitled to virtually no wage protections. They need not be guaranteed overtime pay, breaks, or minimum wage. You can almost literally work an outside salesperson to death and guarantee them nothing more than taste of his or her own productivity.

    Who is an outside salesperson? Each wage order (8 Cal. Code Reg. §§ 10110 et seq.) defines an outside salesperson with the same language:

    "any person, 18 years of age or over, who customarily and regularly works more than half the working time away from the employer’s place of business selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities."


    Many employers routinely misclassify their employees as outside sales staff. Common examples include commissioned employees who spend time delivering product, even if on a regular "sales route." For example, in Ramirez v. Yosemite Water Co., Inc. (1999) 20 Cal.4th 785, 796, the court found it to be a factual question whether "route sales representatives" for a bottled water company spent more than half of their time in sales as opposed to delivery activities. The actual activities here control. The employer's job description was not controlling. The important analysis is that of "the realistic requirements of the job." In other words, "how the employee actually spends his or her time" and "whether the employee's practice diverges from the employer's realistic expectations."

    If you spend more of your time performing customer service, delivering product, making repairs and other activities that are not part of the sales and marketing of the goods or services sold by the employer, you probably are not an outside sales representative, no matter what your business card calls you.

    Likewise, if you spend a significant amount of time at your employer's place of business, you are not in "outside" sales. For example, if you spend 75% of your time engaged in sales activity, and 25% of your time doing customer service, you are primarily engaged in sales activities. But if half of that sales activity is performed in your office at the company, you spend only 37.5% of your time in "outside sales." That makes you an inside saleperson, and, with the exception of mercantile, professional, technical, clerical, mechanical and similar industries, you are non-exempt from almost all wage order protections.

    But, if you are under 18, it doesn't matter what you do. You are not an outside salesperson. You are entitled to overtime, when applicable. You must make at least minimum wage. And you are entitled to breaks and other protections provided by the wage order applicable to your industry.

    These cases often qualify for class action status. We have represented employees misclassified as outside sales in the automotive industry, water and other delivery businesses, the paint and auto body industry and the construction industry. If you would like to have your situation reviewed to see if you have a claim, drop us an email and we would be happy to give you an evaluation.

    Training Time Pay

    Though employers do not like to pay for training time, it is usually compensable.

    For an employer to avoid paying for training time, four general criteria must be met: (i) the training attendance must be before or after regular working hours; (ii) the employee must not be performing work during the training; (iii) attendance must be voluntary; and (iv) the training duties must not be directly related to the employee's job.

    Frequently, however, employees are ordered to attend training -- retail sales employers are notorious for this violation -- but are told to attend the training on their own time. If the training is mandatory, the employee must be paid. If the employee is subject to the employer's control during the training, the employee must be paid. If the employee is trained during regular work hours, the training is on the clock.

    One employer we recently sued had a policy of requiring its employees to attend a sales course, which cost the employees $500 each. The course explained, among other things, how to document and solicit sales of that particular employer's products, and the cost of "tuition" was paid over five pay periods via $100 payroll deductions. The employer was quick to settle once it hired legal counsel.

    If you are a non-exempt employee, and your employer requires you to attend training related to your work, you are entitled to be paid wages for the time spent in mandatory training sessions, and if there is any expense incurred, including mileage and parking, you are entitled to reimbursement for those expenses. If you have any questions, feel free to drop us an email.

    The Commissioned Sales Exemption

    A client came to us recently to inquire about the lawfulness of his employer's progressive discipline policy. He wasn't actually seeking our services for a wage and hour issue, but we nonetheless asked him what kind of hours he kept, and whether he ever received overtime pay.

    "Yeah, I've heard about some of those overtime lawsuits," he said, "but I don't have one. You see, I'm on a straight commission."

    Five minutes later, we had concluded that his employer's progressive discipline policy was quite lawful, but its overtime policy violated California wage and hour law. Yes, it is common knowledge among salespeople that overtime pay is not due to a commissioned salesperson. Common knowledge, however, is not always correct.

    Under California law, the "commissioned sales exemption" does not apply unless (i) the employee is an "outside" salesperson, who spends more than half of their time engaging in sales activities outside the employer's place of business; or (ii) the salesperson makes more than 1 ½ times the minimum wage, and more than half of that employee’s compensation represents commissions.

    More importantly, the "commissioned inside sales exemption" only applies to workers who are employed in the mercantile industry (covered by Wage Order 7) or in professional, technical, clerical, mechanical and similar occupations (covered by Wage Order 4). Who are those?

    The "Mercantile Industry" means any industry, business, or establishment operated for the purpose of purchasing, selling, or distributing goods or commodities at wholesale or retail; or for the purpose of renting goods or commodities. Obvious examples include retail stores, leasing companies and automobile dealerships.

    The "Professional, Technical, Clerical, Mechanical, and Similar Occupations" include professional, managerial, supervisorial, laboratory, research, technical, clerical, office work, and mechanical occupations, such as accountants; agents; appraisers; artists; attendants; audio-visual technicians; bookkeepers; bundlers; billposters; canvassers; carriers; cashiers; checkers; clerks; collectors; communications and sound technicians; compilers; copy holders; copy readers; copy writers; computer programmers and operators; demonstrators and display representatives; dispatchers; distributors; door-keepers; drafters; elevator operators; estimators; editors; graphic arts technicians; guards; guides; hosts; inspectors; installers; instructors; interviewers; investigators; librarians; laboratory workers; machine operators; mechanics; mailers; messengers; medical and dental technicians and technologists; models; nurses; packagers; photographers; porters and cleaners; process servers; printers; proof readers; salespersons and sales agents; secretaries; sign erectors; sign painters; social workers; solicitors; statisticians; stenographers; teachers; telephone, radio-telephone, telegraph and call-out operators; tellers; ticket agents; tracers; typists; vehicle operators; x-ray technicians; their assistants and other related occupations listed as professional, semiprofessional, technical, clerical, mechanical, and kindred occupations.

    Do those descriptions cover your employer's place of business? It is important to note that what matters is not what an employee's job may be. What matters is the primary purpose of the business for which the employee works.

    For example, a person who sells parts for a Ford dealership would likely be governed by the mercantile industry's commissioned salesperson exemption under Wage Order 7. A person who does precisely the same work for an automotive repair shop would not. Auto repair shops are governed by Wage Order 9, pertaining to working conditions in the transportation industry. That wage order contains no commissioned salesperson exemption.

    Likewise, someone paid a commission to drum up business for a print shop would be exempt under Wage Order 4. Someone who does the same for a restaurant's banquet hall (covered by Wage Order 5 -- hospitality industry), or a health club (Wage Order 2 - personal service industry), would be entitled to overtime pay.

    If you are working long hours on a straight commission (or a "draw against commission") basis, you might have a significant amount of back pay due to you. If you are in the restaurant, auto repair, manufacturing, farming, filmmaking or construction industries -- in other words, unless Wage Orders 4 or Wage Order 7 apply to your employer -- you are entitled to overtime pay if you work overtime hours, in spite of what your manager may be telling you.

    If you aren't sure whether the commissioned sales exemption applies to you, and you would like to know, send us an email, or contact our firm. Perhaps we can help you.

    Tip-Pooling: Not Always Legal; Not Always Illegal

    The little known law found at California Labor Code § 351 was enacted to protect all tipped employees from the over-reaching employers. It prohibits employers from maintaining any tip-pooling policy which requires employees to distribute or share any part of their tips with any owner, manager or supervisor of the business. Thus, any system under which any person with supervisory capacity over the tipped employees can collect or receive any portion of any tips paid, given to or left for another employee is illegal.

    Moreoever, the law prohibits employers from accounting for such tips "on the back end" by decreasing or deducting from the wages of an employee who receives gratuities. A tip left by a customer is the "sole property of the employee or employees to whom it was paid, given or left for," regarding of the type of business or the rules imposed by the employer.

    This does not mean that all tip-pooling policies are unlawful. A tip-pooling policy that requires employees to share tips with other non-supervisory employees may be perfectly lawful. Typical pooling programs that comply with the law include restaurant policies requiring food servers to share tips with bussers or bartenders, or casino tip pools shared by every card dealer working a particular shift. However, if tips are pooled in any way that allows the fingers of a supervisor, owner or manager into the tip jar, the tipped employees may have a valuable claim for wages, interest and penalties under the Labor Code.

    Exempt Employee Holiday Pay

    Holiday pay for exempt, salaried, employees can be confusing to both employee and employer. The general rule, however, is simply. If a salaried exempt employee is ready, willing and able to work, the employer may not deduct from his or her salary if the business is closed for less than a full workweek. Thus, for example, when a business closes on the Friday after Thanksgiving or any other Thursday holiday, or the Monday before a Tuesday holiday, or any other one-day closure, the hourly employees need not be paid, but the salaried employees are credited with, and paid for, a full workweek. The same rule applies for deductions taken in the form of compelled use of vacation time or "paid time off." Exempt employees may be denied pay if the business closes for an entire workweek, as long as the employee performs no work during that week, and as long as the deduction from payroll does not reduce that employee's monthly compensation to an amount below the required minimum for his or her exemption.

    The Computer Professional Exemption

    The exemption pay rate for computer professionals in California is going up this weekend.

    Many computer professionals believe that they are exempt from overtime pay just because they are on a salary. That belief is usually misguided. Programmers are rarely [correctly] classified as exempt professionals or administrators, because few computer programmers meet the definitions of the wage order exemptions. There are three commonly applied exemptions for salaried workers:

    (i) The administrative exemption: this applies to employees who perform work "directly related to management policies or general business operations of the employer." Even if you meet this description, you are no exempt if you are a "production employee" -- one whose primary duty is producing the goods or services that the business exists to produce.

    (ii) The executive or "managerial" exemption: this applies to employees "whose duties and responsibilities involve the management of the enterprise." There are a number of tests, all of which must be met, for an employee to qualify for this exemption, e.g., the employee must have the power to hire and fire (or have significant input into hiring and firing) and must supervise two or more subordinates.

    (iii) The professional exemption:  this generally applies to licensed professions, such as lawyers, accountants, doctors and similar occupations.

    Very, very few computer workers fall into any of these three exemptions. Thus, if you are a software engineer who spends a majority of time doing software-related work, such as writing code, debugging and similar tasks, if you work long hours for a fixed salary, your employer might owe you a significant amount of back overtime.

    The same is not necessarily true of employees in the computer software field who are paid by the hour. Software professionals can be exempt from overtime pay if they are paid by the hour, and they earn more than $44.63 per hour. This rate increases to $45.84 per hour on January 1, 2005. The software professional exemption is different from most of the other exemptions, because it requires that the employee receive pay for every hour -- overtime or otherwise -- that the employee works. The exemption merely excuses the employer from paying the overtime premium rate of time-and-a-half.

    Do you have a case? If you work in California and spend most of your time programming software, and you do not get paid for more than 40 hours per week, or 8 hours per day, you probably have a case. If you would like to have your situation reviewed to see if you have a claim, drop us an email and we would be happy to give you a free evaluation.