Wage Law

California's Domestic Worker Bill of Rights Becomes Permanent

Existing law, the Domestic Worker Bill of Rights (Labor Code section 1451-1453), regulates the hours of work of domestic work employees who are personal attendants and provides an overtime compensation rate for those employees. The Domestic Worker Bill of Rights defines terms for its purposes and requires the Governor to convene a committee to study and report to the Governor on the effects of its provisions on personal attendants and their employers.

Pursuant to Labor Code section 1453, the Domestic Worker Bill of Rights would be repealed as of January 1, 2017. SB 1015 deletes that repeal date. By extending the effect of the Domestic Worker Bill of Rights, the violation of which is a misdemeanor, this bill would expand the definition of a crime, which would impose a state-mandated local program. Here is the full text of the heart of the Domestic Worker Bill of Rights, Labor Code section 1451:

1451.  As used in this part, the following definitions apply:
   (a) (1) "Domestic work" means services related to the care of persons in private households or maintenance of private households or their premises. Domestic work occupations include childcare
providers, caregivers of people with disabilities, sick, convalescing, or elderly persons, house cleaners, housekeepers, maids, and other household occupations.
   (2) "Domestic work" does not include care of persons in facilities providing board or lodging in addition to medical, nursing, convalescent, aged, or child care, including, but not limited to,
residential care facilities for the elderly.
   (b) (1) "Domestic work employee" means an individual who performs domestic work and includes live-in domestic work employees and personal attendants.
   (2) "Domestic work employee" does not include any of the
following:
   (A) Any person who performs services through the In-Home Supportive Services program under Article 7 (commencing with Section 12300) of Chapter 3 of Part 3 of Division 9 of, or Sections 14132.95, 14132.952, and 14132.956 of, the Welfare and Institutions Code.
   (B) Any person who is the parent, grandparent, spouse, sibling, child, or legally adopted child of the domestic work employer.
   (C) Any person under 18 years of age who is employed as a babysitter for a minor child of the domestic work employer in the employer's home.
   (D) Any person employed as a casual babysitter for a minor child
in the domestic employer's home. A casual babysitter is a person whose employment is irregular or intermittent and is not performed by an individual whose vocation is babysitting. If a person who
performs babysitting services on an irregular and intermittent basis does a significant amount of work other than supervising, feeding, and dressing a child, this exemption shall not apply and the person
shall be considered a domestic work employee. A person who is a casual babysitter who is over 18 years of age retains the right to payment of minimum wage for all hours worked, pursuant to Wage Order
No. 15-2001 of the Industrial Welfare Commission.
   (E) Any person employed by a licensed health facility, as defined in Section 1250 of the Health and Safety Code.
   (F) Any person who is employed pursuant to a voucher issued through a regional center or who is employed by, or contracts with, an organization vendored or contracted through a regional center or the State Department of Developmental Services pursuant to the Lanterman Developmental Disabilities Services Act (Division 4.5 (commencing with Section 4500) of the Welfare and Institutions Code) or the California Early Intervention Services Act (Title 14 (commencing with Section 95000) of the Government Code) to provide services and support for persons with developmental disabilities, as defined in Section 4512 of the Welfare and Institutions Code, when any funding for those services is provided through the State Department of Developmental Services.
   (G) Any person who provides child care and who, pursuant to subdivision (d) or (f) of Section 1596.792 of the Health and Safety Code, is exempt from the licensing requirements of Chapters 3.4 (commencing with Section 1596.70), 3.5 (commencing with Section 1596.90), and 3.6 (commencing with Section 1597.30) of Division 2 of the Health and Safety Code, if the parent or guardian of the child to whom child care is provided receives child care and development services pursuant to any program authorized under the Child Care and Development Services Act (Chapter 2 (commencing with Section 8200) of Part 6 of Division 1 of Title 1 of the Education Code) or the California Work Opportunity and Responsibility to Kids Act (Chapter 2 (commencing with Section 11200) of Part 3 of Division 9 of the Welfare and Institutions Code).
   (c) (1) "Domestic work employer" means a person, including corporate officers or executives, who directly or indirectly, or through an agent or any other person, including through the services of a third-party employer, temporary service, or staffing agency or similar entity, employs or exercises control over the wages, hours, or working conditions of a domestic work employee.
   (2) "Domestic work employer" does not include any of the following:
   (A) Any person or entity that employs or exercises control over the wages, hours, or working conditions of an individual who performs domestic work services through the In-Home Supportive Services program under Article 7 (commencing with Section 12300) of Chapter 3 of Part 3 of Division 9 of, or Sections 14132.95, 14132.952, and 14132.956 of, the Welfare and Institutions Code or who is eligible for that program.
   (B) An employment agency that complies with Section 1812.5095 of the Civil Code and that operates solely to procure, offer, refer, provide, or attempt to provide work to domestic workers if the relationship between the employment agency and the domestic workers for whom the agency procures, offers, refers, provides, or attempts to provide domestic work is characterized by all of the factors listed in subdivision (b) of Section 1812.5095 of the Civil Code and Section 687.2 of the Unemployment Insurance Code.
   (C) A licensed health facility, as defined in Section 1250 of the
Health and Safety Code.
   (d) "Personal attendant" means any person employed by a private householder or by any third-party employer recognized in the health care industry to work in a private household, to supervise, feed, or dress a child, or a person who by reason of advanced age, physical disability, or mental deficiency needs supervision. The status of personal attendant shall apply when no significant amount of work other than the foregoing is required. For purposes of this subdivision, "no significant amount of work" means work other than the foregoing did not exceed 20 percent of the total weekly hours worked.

Changes Made to Exemptions for Elementary and Secondary School Teachers in California

School teachers often work long hour, and are generally exemption from overtime pay under California law. However, public school teachers often enjoy high salaries and outstanding benefits. The same is not always true, however, for private school teachers. California law currently allows private school teachers to make as little as $800 per week (double the minimum wage) and still be required to work longer hours of unpaid overtime.

AB 2230 would suspend that earnings standard until July 1, 2017. On and after that date, the bill would prescribe a revised earnings standard for exemption from the overtime provisions described above that would require the employee to earn no less than the lowest salary offered by any school district or the equivalent of no less than 70% of the lowest schedule salary offered by the school district or county in which the private elementary or secondary institution is located, as specified.

Here's the full text of AB 2230:

The people of the State of California do enact as follows:

SECTION 1.

 Section 515.8 of the Labor Code is amended to read:

515.8.

 (a) Section 510 does not apply to an individual employed as a teacher at a private elementary or secondary academic institution in which pupils are enrolled in kindergarten or any of grades 1 to 12, inclusive.

(b) For purposes of this section, “employed as a teacher” means that the employee meets all of the following requirements:

(1) The employee is primarily engaged in the duty of imparting knowledge to pupils by teaching, instructing, or lecturing.

(2) The employee customarily and regularly exercises discretion and independent judgment in performing the duties of a teacher.

(3) On and after July 1, 2017, the employee earns the greater of the following:

(A) No less than 100 percent of the lowest salary offered by any school district to a person who is in a position that requires the person to have a valid California teaching credential and is not employed in that position pursuant to an emergency permit, intern permit, or waiver.

(B) The equivalent of no less than 70 percent of the lowest schedule salary offered by the school district or county in which the private elementary or secondary academic institution is located to a person who is in a position that requires the person to have a valid California teaching credential and is not employed in that position pursuant to an emergency permit, intern permit, or waiver.

(4) The employee has attained at least one of the following levels of professional advancement:

(A) A baccalaureate or higher degree from an accredited institution of higher education.

(B) Current compliance with the requirements established by the California Commission on Teacher Credentialing, or the equivalent certification authority in another state, for obtaining a preliminary or alternative teaching credential.

(c) This section does not apply to any tutor, teaching assistant, instructional aide, student teacher, day care provider, vocational instructor, or other similar employee.

(d) The exemption established in subdivision (a) is in addition to, and does not limit or supersede, any exemption from overtime established by a Wage Order of the Industrial Welfare Commission for persons employed in a professional capacity, and does not affect any exemption from overtime established by that commission pursuant to subdivision (a) of Section 515 for persons employed in an executive or administrative capacity.

California Farm Workers to Get Daily Overtime

AB 1066, a bill authored Assemblymember Lorena Gonzalez (D-San Diego), to provide daily overtime to California agricultural workers, has been signed into law by Governor Brown.

Existing law sets wage, hour, meal break requirements, and other working conditions for employees and requires an employer to pay overtime wages as specified to an employee who works in excess of a workday or workweek, as defined, and imposes criminal penalties for the violation of these requirements. Existing law has exempted agricultural employees from these requirements.

AB 1066, the Phase-In Overtime for Agricultural Workers Act of 2016, removes this exemption for agricultural employees regarding hours, meal breaks, and other working conditions, and creates a schedule phases in overtime requirements for agricultural workers over the course of 4 years (from 2019 to 2022). Beginning January 1, 2022, the bill will require any work performed by a person, employed in an agricultural occupation, in excess of 12 hours in one day to be compensated at the rate of no less than twice the employee’s regular rate of pay. The bill would provide employers who employ 25 or fewer employees an additional 3 years to comply with the phasing in of these overtime requirements. The bill also authorizes the Governor to delay the implementation of these overtime pay provisions if the Governor also suspends the implementation of a scheduled state minimum wage increase. The bill would require the Department of Industrial Relations to update a specified wage order for consistency with these provisions, as specified.

Here is the full text of the new law:

The people of the State of California do enact as follows:

SECTION 1.

 Section 554 of the Labor Code is amended to read:

554.

 (a) Sections 551 and 552 do not apply to cases of emergency or to work performed in the protection of life or property from loss or destruction, or to any common carrier engaged in or connected with the movement of trains. Nothing in this chapter shall be construed to prevent an accumulation of days of rest when the nature of the employment reasonably requires that the employee work seven or more consecutive days, if in each calendar month the employee receives days of rest equivalent to one day’s rest in seven. The requirement respecting the equivalent of one day’s rest in seven shall apply, notwithstanding the other provisions of this chapter relating to collective bargaining agreements, where the employer and a labor organization representing employees of the employer have entered into a valid collective bargaining agreement respecting the hours of work of the employees, unless the agreement expressly provides otherwise.

(b) In addition to the exceptions specified in subdivision (a), the Chief of the Division of Labor Standards Enforcement may, when in his or her judgment hardship will result, exempt any employer or employees from the provisions of Sections 551 and 552.

SEC. 2.

 Chapter 6 (commencing with Section 857) is added to Part 2 of Division 2 of the Labor Code, to read:

CHAPTER  6. Agriculture

857.

 This chapter shall be known and may be cited as the Phase-In Overtime for Agricultural Workers Act of 2016.

858.

 The Legislature finds and declares all of the following:

(a) Agricultural employees engage in back-breaking work every day.

(b) Few occupations in today’s America are as physically demanding and exhausting as agricultural work.

(c) In 1938, the United States Congress enacted the federal Fair Labor Standards Act of 1938 (29 U.S.C. Sec. 201 et seq.), which excluded agricultural workers from wage protections and overtime compensation requirements.

(d) It is the intent of the Legislature to enact the Phase-In Overtime for Agricultural Workers Act of 2016 to provide any person employed in an agricultural occupation in California, as defined in Order No. 14-2001 of the Industrial Welfare Commission (revised 07-2014) with an opportunity to earn overtime compensation under the same standards as millions of other Californians.

859.

 For purposes of this chapter, “employed in an agricultural occupation” has the same meaning as in Order No.14-2001 of the Industrial Welfare Commission (revised 07-2014).

860.

 Notwithstanding any other provision of law, including Chapter 1 (commencing with Section 500):

(a) (1) Commencing January 1, 2019, except as provided in paragraph (2), any person employed in an agricultural occupation shall not be employed more than nine and one-half hours in any one workday or work in excess of 55 hours in any one workweek, unless the employee receives one and one-half times that employee’s regular rate of pay for all hours worked over nine and one-half hours in any workday or over 55 hours in any workweek.

(2) This subdivision shall apply to an employer who employs 25 or fewer employees commencing January 1, 2022.

(b) (1) Commencing January 1, 2020, except as provided in paragraph (2), any person employed in an agricultural occupation shall not be employed more than nine hours in any one workday or work in excess of 50 hours in any one workweek, unless the employee receives one and one-half times that employee’s regular rate of pay for all hours worked over nine hours in any workday or over 50 hours in any workweek.

(2) This subdivision shall apply to an employer who employs 25 or fewer employees commencing January 1, 2023.

(c) (1) Commencing January 1, 2021, except as provided in paragraph (2), any person employed in an agricultural occupation shall not be employed more than eight and one-half hours in any one workday or work in excess of 45 hours in any one workweek, unless the employee receives one and one-half times that employee’s regular rate of pay for all hours worked over eight and one-half hours in any workday or over 45 hours in any workweek.

(2) This subdivision shall apply to an employer who employs 25 or fewer employees commencing January 1, 2024.

(d) (1) Commencing January 1, 2022, except as provided in paragraph (2), any person employed in an agricultural occupation shall not be employed more than eight hours in any one workday or work in excess of 40 hours in any one workweek, unless the employee receives one and one-half times that employee’s regular rate of pay for all hours worked over eight hours in any workday or over 40 hours in any workweek.

(2) This subdivision shall apply to an employer who employs 25 or fewer employees commencing January 1, 2025.

861.

 Except as set forth in Section 860 and subdivision (a) of Section 862, all other provisions of Chapter 1 (commencing with Section 500) regarding compensation for overtime work shall apply to workers in an agricultural occupation commencing January 1, 2017.

862.

 (a) Beginning January 1, 2022, except as provided in subdivision (c), and consistent with Section 510, any work performed by a person, employed in an agricultural occupation, in excess of 12 hours in one day shall be compensated at the rate of no less than twice the employee’s regular rate of pay.

(b) Consistent with Section 861, notwithstanding subdivision (a) or Section 863, the other provisions of Section 510 shall be applicable to workers in an agricultural occupation commencing January 1, 2019.

(c) Subdivision (a) shall apply to an employer who employs 25 or fewer employees commencing January 1, 2025.

863.

 (a) Notwithstanding Section 860 or 862, the Governor may temporarily suspend scheduled phase in of the overtime requirements set forth in Section 860, or subdivision (a) of Section 862 only if the Governor suspends scheduled minimum wage increases pursuant to clause (i) of subparagraph (A) of, and subparagraph (B) of, paragraph (3) of subdivision (d) of Section 1182.12.

(b) If the Governor makes a final determination to temporarily suspend scheduled phase in of the overtime requirements set forth in Section 860 or subdivision (a) of Section 862 for the following year, all implementation dates applicable to Section 860 and subdivision (a) of Section 862 that are suspended subsequent to the September 1 final determination date, consistent with clause (i) of subparagraph (A) of, and subparagraph (B) of, paragraph (3) of subdivision (d) of Section 1182.12, shall be postponed by an additional year, but the full implementation of the overtime requirements set forth in Section 860 or subdivision (a) of Section 862 shall in no event be later than January 1, 2022. The Governor’s temporary suspension under this section shall be by proclamation.

(c) The Governor’s authority to suspend the scheduled overtime requirements under this section shall end upon the phase in of the overtime requirements contained in subdivision (d) of Section 860, the phase in of the overtime requirements contained in subdivision (c) of Section 862, or January 1, 2025, whichever occurs first.

864.

 The Department of Industrial Relations shall update Wage Order No. 14-2001 to be consistent with this chapter, except that any existing provision in Wage Order 14-2001 providing greater protections or benefits to agricultural employees shall continue in full force and effect, notwithstanding any provision of this chapter.

SEC. 3.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

California Supreme Court Grants Review of Alvarado v. Dart Container Corp

The Supreme Court has agreed to review the Court of Appeal's decision in Alvarado v. Dart Container Corp. of California (2016) 243 Cal.App.4th 1200 (SC S232607/E061645, review granted, 5/11/16), concerning overtime calculations and the "regular rate of pay" for employees paid flat sum bonuses.

In Alvarado, the employer calculated overtime as follows:

1. Multiply the number of overtime hours worked in a pay period by the straight hourly rate (straight hourly pay for overtime hours).
2. Add the total amount owed in a pay period for (a) regular non-overtime work, (b) for extra pay such as attendance bonuses, and (c) overtime due from the first step. That total amount is divided by the total hours worked during the pay period. This amount is the employee’s “regular rate.”
3. Multiply the number of overtime hours worked in a pay period by the employee’s regular rate, which is determined in step 2. This amount is then divided in half to obtain the “overtime premium” amount, which is multiplied by the total number of overtime hours worked in the pay period (overtime premium pay).
4. Add the amount from step 1 to the amount in step 3 (total overtime pay). This overtime pay is added to the employee’s regular hourly pay and the attendance bonus.

Plaintiff contends that this method fails to pay proper overtime in violation of Labor Code sections 510 and 1194 by not including shift differential premiums and bonuses in calculating overtime rates.

Defendant prevailed on a motion for summary judgment. The court found that there was no legal basis for plaintiff’s proposed formula because federal law did not conflict with the employer's method and there was no California law providing a formula for calculating overtime on bonuses, and plaintiff’s proposed formula was based solely on California public policy and void regulations from the Division of Labor Standards Enforcement (DLSE) Manual which have no force or effect.

Plaintiff contended that Marin v. Costco Wholesale Corp. (2008) 169 Cal.App.4th 804 applies and under that holding, the defendant’s formula dilutes and reduces the regular rate of pay by including overtime hours when calculating the regular rate of pay used to compute overtime on plaintiff’s flat sum bonuses.

The question presented on review is:

What is the proper method for calculating the rate of overtime pay when an employee receives both an hourly wage and a flat sum bonus?

You can follow the progress in Alvarado here.

California's Salaried Exempt Minimum Increases to $41,600

Now that the California minimum wage has increased to $10 per hour as of January 1, 2016, California employers must also pay more to keep exempt workers exempt. In addition to the Duties Test, California employers who classify workers as salaried exempt must meet the Salary Test. Among other things, this means that the salary must be no less than double the minimum wage for full time work.

A full-time minimum wage earner now makes $20,800 per year. Thus, a salaried exempt worker must be paid at least $41,600 annually to meet the California standards ($10 per hour x 40 hours per week x 52 weeks per year, doubled).

Failure to meet this standard can prove costly, even if an employee only works an extra 30 to 60 minutes per day. A worker who is misclassified as exempt who works an extra 45 minutes a day, at $40,000 a year, would accrue an overtime liability of $5,625 per year. Employees can reach back four years under California's statute of limitations, so that could grow to $22,500 over four years, for just one worker. Make the same mistake with a staff of 45 employees and you're looking at a seven figure liability.

Heyen v Safeway - A Primary Purpose Test for Overtime Exemption

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.

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.

Wage Cheats in Chinatown

We love Chinatown, but it is teeming with employers who oppress their laborers and refuse to pay minimum wage and overtime, or violate other labor laws such as those requiring meal and rest breaks. The latest violator is Dick Lee Pastry, a poorly reviewed restaurant in San Franscisco's Chinatown. Dick Lee Pastry was recently ordered to pay back wages and penalties after forcing employees to work up to 80 hours per week for under $4 per hour. According to the San Francisco Chronicle, Dick Lee Pastry paid $525,000 to settle the wage theft claims. But it wasn't the first, and it won't be the last.

Places with large concentrations of immigrant workers are notorious violators of California wage and hour laws. Sadly, this is even true when the employers are also immigrants, even of the same ethnicity. The more vulnerable the worker, the higher the probability that they are going to be exploited.

Governor Brown Signs AB 2103

AB 2103 has been signed into law, boosting California overtime laws that were weakened by the Court of Appeal in Arechiga v. Dolores Press, Inc. (2011) 192 Cal.App.4th 567. Arechiga disregarded the language of Labor Code § 515(d) to validate private agreements for a fixed salary, including regular and overtime pay, for non-exempt employees. AB 2103 clarifies that "payment of a fixed salary to a nonexempt employee shall be deemed to provide compensation only for the employee's regular, nonovertime hours, notwithstanding any private agreement to the contrary."

You can read the full text of the bill here in PDF.

You can read the Arechiga v. Dolores Press, Inc. opinion here.

UPS Supply Chain Solutions to Pay $12.8 Million

Another misclassified independent contractor overtime case has settled for millions. UPS Supply Chain Solutions has agreed to pay $12.8 million to settle an overtime class action. U.S. District Judge Phyllis Hamilton has given preliminary approval to the deal, involving approximately 660 workers in the two subclasses - one national, the other limited to California workers only. The case was mediated by retired Alameda County Superior Court judge Ronald Sabraw. The final fairness hearing will take place on March 15, 2010.

Supreme Court Extends Time to Decide Whether to Review Brewer

The Supreme Court has extended its time to grant or deny a petition for review that was filed in January in Brewer v. Premier Golf Properties (2008) 168 Cal.App.4th 1243. We discussed the opinion in a post that can be found at this link. The case was notable both for declaring punitive damages unavailable in claims made for Labor Code wage-and-hour violations, and for upholding the trial court's award for meal period and rest period violations. The time for granting or denying review in the above-entitled matter is now extended to and including April 8, 2009, or the date upon which review is either granted or denied.

Modification Upon Rehearing in Marin v. Costco

The Second District Court of Appeal has modified its opinion and denied rehearing in Marin v. Costco Wholesale Corp. (2008) 169 Cal.App.4th 804. The modification does not change the judgment. The modification is as follows:

It is ordered that the opinion filed herein on December 23 2008, be modified as follows:

1. On page 13, the second full paragraph is modified to read: In sum, no California court decision, statute, or regulation governs bonus overtime, the DLSE Manual sections on the subject do not have the force of law, and the DLSE advice letters on the subject are not on point. Thus, there is no controlling California authority apart from the directive that overtime hours be compensated at a rate of no less than one and one-half times the regular rate of pay. (Lab. Code, § 510, subd. (a).) In deciding whether defendant’s bonus plan fulfills that directive, we are persuaded that the DLSE Manual provisions for overtime on production bonuses set forth a valid formula. (See Gattuso v. Harte-Hanks Shoppers, Inc. (2007) 42 Cal.4th 554, 563 [court may adopt a DLSE statutory interpretation embodied in a void regulation if it independently determines that the interpretation is correct].) We conclude that defendant’s plan is consistent with that formula, and thus that the plan does not violate California law. 
2. On page 14, the third sentence in the first full paragraph is modified to read as follows (the citation following the sentence is unchanged): Therefore, as one commentator has observed, overtime on a bonus based on hours worked should be calculated in the same manner as overtime on a bonus based on production, under the formula set forth in section 49.2.4 of the Manual.

There is no change in the judgment. The petition for rehearing is denied.

We discussed the original opinion in a recent post found at this link.

Bonus Calculations and Regular Rates of Pay

Where a bonus payment is considered a part of the regular rate at which an employee is employed, it must be included in computing his regular hourly rate of pay and overtime compensation. No difficulty arises in computing overtime compensation if the bonus covers only one weekly pay period. The amount of the bonus is merely added to the other earnings of the employee (except statutory exclusions) and the total divided by total hours worked. Under many bonus plans, however, calculations of the bonus may necessarily be deferred over a period of time longer than a workweek. In such a case the employer may disregard the bonus in computing the regular hourly rate until such time as the amount of the bonus can be ascertained. Until that is done he may pay compensation for overtime at one and one-half times the hourly rate paid to the employee, exclusive of the bonus. When the amount of the bonus can be ascertained, it must be apportioned back over the workweeks of the period during which it may be said to have been earned. The employee must then receive an additional amount of compensation for each workweek that he worked overtime during the period equal to one-half of the hourly rate of pay allocable to the bonus for that week multiplied by the number of statutory overtime hours worked during the week. 29 C.F.R. § 778.209(a).

Applying that standard, the Court of Appeal in Marin v. Costco Wholesale Corp. (2008) 169 Cal.App.4th 804 reviewed the bonus/overtime payment plan of Costco, and reversed a $5.3 million class action judgment.

This case concerns the lawfulness of defendant Costco Wholesale Corporation’s formula for computing overtime compensation on semi-annual bonuses paid to hourly employees. The trial court determined that defendant’s bonus overtime formula for the class of employees who qualify for the maximum base bonus (plaintiffs) violates California law, and ordered use of a different formula.  We conclude that defendant’s formula violates neither California nor federal law, and reverse the judgment with directions to enter judgment for defendant.

The description of the bonus and overtime payment plan goes on for several pages. If you have a bonus/overtime case that could be affected by the holding in Marin v. Costco, you can download the full text of the opinion here in PDF or Word format. A petition for rehearing is pending. A petition for review would appear likely.

Supreme Court Denies Publication in Martinez v. Wild Oats Markets

This morning, the California Supreme Court denied a petition to publish the opinion in Martinez v. WIld Oats Markets, Inc., which upheld a trial verdict finding that store manager was misclassified as exempt, under the executive exemption, when she worked more than 50% of her time on nonexempt tasks. The employer claimed that this did not comport with their "realistic expectations" of her job duties, and that her work on the nonexempt tasks came after "concrete expressions of displeasure" by her superiors.

While the primary issue in this case was whether Wild Oats had properly classified Martinez as exempt, by closing arguments the defense had conceded that Martinez did not spend the majority of her time on managerial or executive duties. However, Wild Oats argued it did not intend Martinez to spend her time on nonexempt activities, and that she did illustrated her incompetence and poor job performance. The parties therefore agreed that Ramirez was on point. Ramirez analyzed the outside sales exemption to overtime requirements, and addressed whether a court should determine the applicability of the exemption based on how the employee should be spending his or her working hours, or on what the employee actually does on a daily basis. The court noted that if trial courts were to rely solely on the employer's job description, “the employer could make an employee exempt from overtime laws solely by fashioning an idealized job description that had little basis in reality.” [citing Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785].

The primary focus of the opinion centered around whether the judgment was supported by sufficent evidence. The Court of Appeal concluded that it was. The trial judge was Los Angeles County Superior Court Judge Ronald Sohegian. The appellate court's link to the opinion (http://www.courtinfo.ca.gov/opinions/nonpub/B195749.DOC) no longer works.

MARTINEZ v. WILD OATS MARKETS, INC. Case: S168412, Supreme Court of California: 2009-01-14 Event Description: Publication request denied (case closed) Notes: George, C.J., was absent and did not participate. Not Reported in Cal.Rptr.3d, 2008 WL 4572161, Nonpublished/Noncitable (Cal. Rules of Court, Rules 8.1105 and 8.1110, 8.1115), Cal.App. 2 Dist., October 15, 2008 (NO. B195749)

Another Minimum Rate Change for Computer Software Professionals

In 2007, the minimum hourly rate for exempt computer software professionals in California was $49.77 per hour. This hourly rate was reduced to $36.00 per hour in 2008. Until 2008, the exemption applied only to hourly workers. In September 2008, AB 10 amended California Labor Code § 515.5 to apply the overtime exemption to qualifying computer programmers, analysts and engineers who are paid a monthly salary of $6,250 or more each month ($75,000 annually, excluding bonuses). Alternatively, employers can also keep such employees on an hourly basis and enjoy the exemption if the employees are paid at least $36 per hour for all hours worked. The bill was passed as urgency legislation and is already in effect.

The Division of Labor Statistics and Research adjusts the rate annually for inflation in accordance with Labor Code § 515.5(a)(4). Pursuant to that provision, effective January 1, 2009, the rate will increase from $36.00 to $37.94; the minimum monthly salary exemption from $6,250.00 to $6,587.50; and the minimum annual salary exemption from $75,000 to $79,050.

A full rate history of the wages required under Labor Code § 515.5 can be downloaded here in PDF.

New Minimum Pay Levels for Exempt Medical Professionals

The licensed physicians and surgeons employee's minimum hourly rate of pay exemption will increase from $65.59 to $69.13 on January 1, 2009.

Legislature in Special Session

The California legislature has convened a special session to consider some of the proposals governor Arnold Schwarzenegger made in November. A copy of the governor's proclamation regarding the special session can be seen at this link.

Among the proposals on the table:

Broaden Overtime Exemptions:

Exempt employees in executive, sales, administrative, and professional jobs who earn more than $100,000 annually from overtime pay.

Eliminate Eight Hour Work Days:

Allow employees to work flexible hours in excess of 8 per day, i.e., 10/40 work weeks without overtime.

Weaken Meal And Rest Period Laws:

Relax existing law regarding meal and rest periods to provide employers and employees with a clear understanding of meal breaks and offering flexibility to both businesses and workers.

We haven't been able to find yet exactly what meal and rest period proposals are on the table, but we have a list of meal and rest period bills that were vetoed or stalled in 2008:

AB 124 - Price - Meal and rest periods (Vetoed)

This bill would have extended protections afforded to employees covered by an order of the Industrial Welfare Commission to pool lifeguards and stage assistants who employed in the public sector. The bill specified that pool lifeguards and stage assistants employed by a city, county, or special district, shall not be required to work during any meal and rest period required for non-exempt employees under existing law.   The bill specified that if the public sector employer failed to provide a meal or rest period, the employer shall pay the employee one additional hour of pay at the employee’s regular rate of compensation.  In addition, the bill specified that should these requirements be in conflict with the provisions of a memorandum of understanding (MOU) reached between an employer and a recognized employee organization, the provisions of the MOU shall control.

AB 628 – Price - Meal and rest periods: pool lifeguards (Vetoed)

This bill would have extended protections afforded to employees covered by an order of the Industrial Welfare Commission to pool lifeguards who are employed in the public sector. The bill specified that pool lifeguards employed by a city, county, or special district shall not be required to work during any meal and rest period required for non-exempt employees under existing law.   The bill specified that if the employer failed to provide a meal or rest period, the employer would have to pay the employee one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal or rest period was not provided.  In addition, the bill specified that if these requirements were in conflict with the provisions of a memorandum of understanding (MOU) reached between an employer and a recognized employee organization, the provisions of the MOU shall control. This bill was very similar to AB 124 (Price) from the previous year which addressed meal and rest period requirements for both pool lifeguards and stage assistants, however, this bill targets only pool lifeguards.

AB 1666 – Price - Meal and rest periods: stage assistants (Vetoed)

This bill would have extended protections afforded to employees covered by an order of the Industrial Welfare Commission to stage assistants who are employed in the public sector. The bill specified that stage assistants employed by a city, county, or special district shall not be required to work during any meal and rest period required for non-exempt employees under existing law.   The bill specified that if the employer failed to provide a meal or rest period, the employer would have to pay the employee one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal or rest period was not provided.  In addition, the bill specified that if these requirements were in conflict with the provisions of a memorandum of understanding (MOU) reached between an employer and a recognized employee organization, the provisions of the MOU shall control. This bill was very similar to AB 124 (Price) from the previous year which addressed meal and rest period requirements for both pool lifeguards and stage assistants; however, this bill targets only stage assistants.

SB 342 – Torlakson - Employment: rest and meal periods. (Without further action)

This bill would have declared the intent of the legislature to clarify the law regarding on-duty meal periods for employees who work in the armored car industry. 

SB 1192 – Margett - Employment: meal and rest periods. (Without further action)

This bill would have allowed employees to take their first meal period before the conclusion of the 6th hour of work, decreased the statute of limitations on penalties for failing to provide a meal period, and defined the employer’s responsibility to provide a meal period as making a meal period available without interference.

SB 1539 – Calderon - Meal periods. (Without further action)
            
This bill would have required an employer to provide meal periods to employees covered by Industrial Welfare Commission Wage Orders before the conclusion of the sixth hour of work; defined an employer responsibility to provide a meal period as giving the employee an opportunity to take a meal period; would have exempted all employees covered by collective bargaining agreements from meal period requirements if the collective bargaining agreement covers meal periods, and would have codified and expanded on-duty meal period requirements.

AB 1034 – Keene - Employment: meal periods. (Without further action)

This was originally introduced as a bill related to water; later it was re-referred to this committee ( L. & I.R.) pursuant to Senate Rule 29.10.  Bill was held in committee pursuant to Senate Rule 29.10. This bill would have stipulated that meal periods must begin no later than the conclusion of an employee’s 6th hour of work, exempted employees covered by a collective bargaining agreement that dealt with meal periods, codified on-duty meal period regulations, and permitted the Department of Industrial Relations (DIR) to adopt regulations specifying the circumstances preventing employees from being relieved of all duty during a meal period.

The sessions, so far, have been unproductive.

Kreutzer: Misclassified Non-Exempt Public Worker Gets No Civil Service Protections

A government employee hired into a position expressly classified as exempt from civil service is not entitled to the protections of the civil service system upon the employee’s release from the position, even if a court finds that, based on the duties of the position, it should not have been classified as exempt. Kreutzer v. City and County of San Francisco (2008) 166 Cal.App.4th 306.

In this opinion, we conclude that a government employee hired into a position expressly classified as exempt from civil service is not entitled to the protections of the civil service system upon the employee’s release from the position, even if a court finds that, based on the duties of the position, it should not have been classified as exempt. We also hold that where a government employee is released from employment for reasons characterized only as non-disciplinary, and not otherwise publicly disclosed, the employee’s liberty interest in reputation has not been infringed, and the employee is entitled to no relief. Accordingly, we reverse the trial court’s judgment in this case, which ordered a government employer to reinstate a former exempt employee into a non-exempt position.

A petition for review was filed, and yesterday, the Supreme Court denied review. You can download a complete copy of the Kreutzer opinion from the court's website in PDF or MS Word format. 

Brewer v. Premier Golf - No Punitives for Labor Code Violations

We offer a hearty welcome to those of you who found this blog after attending Bridgeport's seminar on Wage & Hour litigation at UCLA on Tuesday and Wednesday. Every time I present something on recent developments in wage and hour law, I recite the mantra that this is one of the most busily changing areas of practice, and that rarely does a week go by without some significant development in the law coming from the courts, the legislatures, the DLSE or the DOL. Usually, something interesting pops up in the first few days after the seminar, and this was no exception.

Yesterday, the 4th District Court of Appeal ruled that punitive damages are generally unavailable as part of a claim for meal break, rest break or overtime claims based upon Labor Code violations, but attorney's fees are recoverable under  Labor Code § 218.5 "because it is now settled that compensation for missed meal and rest breaks are wages" [citing Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094]. Brewer v. Premier Golf Properties (2008) __ Cal.App.4th __.

The question of whether an aggrieved employee is entitled to punitive damages in an overtime case had never been squarely addressed in a published holding in a California case. The closest thing we had to a ruling on that issue was a bit of dictum in Gentry v. Superior Court (2007) 42 Cal.4th 443, that began with "Although exemplary damages are not available in overtime suits (see section 1194.2...)"

Employers seeking to avoid punitive damage claims would cite Gentry, and would argue something along these lines: Where a right is created by statute and the statute does not expressly permit punitive damages, punitive damages under California Civil Code section 3294 are not available. Turnbull & Turnbull v. ARA Transp., Inc. (1990) 219 Cal. App.3d 811, 826-27, 268 Cal. Rptr. 856 ("when a new right . . . is created by statute and a statutory remedy for the infringement thereof is provided, such remedy is exclusive of all others") (citing Orloff v. L.A. Turf Club (1947) 30 Cal.2d 110, 112-13, 180 P.2d 321); Czechowski v. Tandy Corp. (N.D. Cal 1990) 731 F.Supp. 406, 410 (penalty provision provided by Labor Code precludes award of punitive damages). Furthermore, claims under section 17200 of the Business and Professions Code will not support an award of punitive damages. Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal. 4th 1134, 1148.

The employees would argue Greenberg v. Western Turf Ass'n (1903) 140 Cal.357, 73 P. 1050, in which the California Supreme Court upheld the imposition of punitive damages where a statutory penalty had already been awarded, because it determined that the civil penalty was not meant to punish. Labor Code penalties, similarly, are not meant to punish, therefore, punitive damages are permitted for certain types of Labor Code violations where the defendant is guilty of blatant violations of law. See Bender v. Darden Restaurants, Inc. (2002) 26 Fed.Appx. 726 (compensatory damages in the sum of $9,860 and punitive damages in the sum of $943,000 for one plaintiff, and compensatory damages in the sum of $5,970 and punitive damages in the sum of $890,000 for the other plaintiff, all based upon denied meal and rest periods.)

Now, the analysis is much clearer:

"[P]unitive damages are not recoverable when liability is premised solely on the employer's violation of the Labor Code statutes that regulate meal and rest breaks, pay stubs, and minimum wage laws."  Brewer v. Premier Golf Properties (2008) __ Cal.App.4th __. "Labor Code statutes regulating meal and rest breaks, pay stubs, and minimum wages provide express statutory remedies, including penalties for violation of those statutes that are punitive in nature, that are available when an employer has violated those provisions, and are exclusive remedy available for such statutory violations absent evidence that statutory remedy is inadequate."

It is left to our imagination what kind of evidentiary showing would be necessary to establish that the statutory remedy under the Labor Code would be inadequate. We suspect that this holding would not have compelled a different result under so-called "slavery" cases, such as Bureerong v. Uvawas (1996) 922 F.Supp. 1450, where the District Court permitted punitive damages to be asserted in a wage claim brought by garment workers who were denied minimum wage and overtime.

Elsewhere in the Brewer opinion, the court upheld the trial court's award of $6,000 for unpaid meal and rest break wages (Labor Code § 226.7), $4,000 in pay stub penalties (Labor Code § 226), and $15,300 for "minimum wage" penalties (Labor Code § 1197.1). The court rejected the employer's statute of limitations defense on the penalties, rejected the employee's appeal of an order denying a JNOV based upon a claim for waiting time penalties, and held that the plaintiff had no obligation to exhaust any administrative remedies as a condition to the recovery of any penalties. The last point was founded upon the holding in Mokler v. County of Orange (2007) 157 Cal.App.4th 121, 133-136 that a party's failure to exhaust administrative remedies may not be raised for the first time in the appeal from the allegedly void judgment.

The published part of the opinion also addressed various FEHA issues, which is off topic for us, and we will leave that for others to discuss. For a the next few weeks, you will be able to download the full text of the opinion in Brewer here in PDF or MS Word format.

Terminator Proposes Wage & Hour Law Changes to Reduce Terminations

In a press conference today, Governor Schwarzenegger called for a temporary 1½ cent statewide sales tax increase, along with new taxes on liquor and oil as part of a plan to increase revenues $4.4 billion to make up part of an $11 billion budget deficit. At the same time, Schwarzenegger proposed $4.5 billion in spending cuts.

To save money on wages to state workers, the governor proposes to require them to take a one-day unpaid furlough each month. Columbus Day and Lincoln's Birthday would no longer be paid state holidays, and premium pay for working a holiday would be dropped. State agencies would be given the option of establishing 10-hour, four-day work weeks, and employees would no longer be allowed to count leave time as hours worked while computing overtime pay.

Oddly enough, part of this plan requires "[k]eeping high paying jobs in California by providing overtime exemptions and allowing more flexible work schedules to increase productivity; and " [c]larifying meal and rest periods to save businesses hundreds of millions of dollars in litigation costs and create less confusion from meal break violations which will mean fewer terminations."

The governor proposes to:

Provide Overtime Exemptions: Exempt employees in executive, sales, administrative, and professional jobs who earn more than $100,000 annually from overtime pay.
· Keep high-paying jobs from leaving the state. (For every 10,000 jobs paying more than $100,000 placed out of state, California’s economy misses out on $1 billion in employee spending.)
· Save approximately $90 million per year in employee classification costs.

Allow More Flexible Work Schedules: Allow employees to work more flexible hours upon request, such as 10 hour work days for a 40 hour work without being paid overtime.
· Reduce absenteeism and boost productivity, which save employers real dollars.
· Raise employee retention rates, which will reduce claims on the Unemployment Insurance trust fund.

Clarify Meal And Rest Period Laws: Clarify existing law regarding meal and rest periods to provide employers and employees with a clear understanding of meal breaks and offering flexibility to both businesses and workers.
· Will save businesses hundreds of millions of dollars in litigation costs.
· Less confusion means fewer terminations over meal break violations and a more welcoming work environment.

Full details of the governor's plan have not been released.

Computer Professional Exemption Expands to Include Salaried Workers

Governor Schwarzenegger has signed a bill to significantly revise the way certain computer software professionals can be paid. An odd quirk in California's overtime laws allowed employers to avoid paying overtime to certain computer programmers, analysts and engineers, but only if they were hourly employees, and were paid for all of their hours of work. Employers wanted to be able to put such employees on salaries without losing the exemption. Assembly Bill 10 accomplishes that goal. It amends California Labor Code § 515.5 to apply the overtime exemption to qualifying computer programmers, analysts and engineers who are paid a monthly salary of $6,250 or more each month ($75,000 annually, excluding bonuses). Alternatively, employers can keep the employees on an hourly basis and enjoy the exemption if the employees are paid at least $36 per hour for all hours worked. The bill was passed as urgency legislation* and is already in effect.

The compensation test will be given annual CPI adjustments, but can always be legislated back down, as happened last year when the hourly rate was suddenly reduced to $36. Section 515.5's compensation requirements started at $41 per hour in 2000; annual CPI increases brought the rate to $49.77 by 2007. The reduction to $36 per hour became effective January 1, 2008.

The Animation Guild Blog has a roll call listing every aye and nay vote.

Section 515.5 now reads:

(a) Except as provided in subdivision (b), an employee in the computer software field shall be exempt from the requirement that an overtime rate of compensation be paid pursuant to Section 510 if all of the following apply:

   (1) The employee is primarily engaged in work that is intellectual or creative and that requires the exercise of discretion and independent judgment.

   (2) The employee is primarily engaged in duties that consist of one or more of the following:

   (A) The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications.
   (B) The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications.
   (C) The documentation, testing, creation, or modification of computer programs related to the design of software or hardware for computer operating systems.

   (3) The employee is highly skilled and is proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, or software engineering. A job title shall not be determinative of the applicability of this exemption.

   (4) The employee's hourly rate of pay is not less than thirty-six dollars ($36.00) or, if the employee is paid on a salaried basis, the employee earns an annual salary of not less than seventy-five thousand dollars ($75,000) for full-time employment, which is paid at least once a month and in a monthly amount of not less than six thousand two hundred fifty dollars ($6,250). The Division of Labor Statistics and Research shall adjust both the hourly pay rate and the salary level described in this paragraph on October 1 of each year to be effective on January 1 of the following year by an amount equal to the percentage increase in the California Consumer Price Index for Urban Wage Earners and Clerical Workers.

(b) The exemption provided in subdivision (a) does not apply to an employee if any of the following apply:

   (1) The employee is a trainee or employee in an entry-level position who is learning to become proficient in the theoretical and practical application of highly specialized information to computer
systems analysis, programming, and software engineering.

   (2) The employee is in a computer-related occupation but has not attained the level of skill and expertise necessary to work independently and without close supervision.

   (3) The employee is engaged in the operation of computers or in the manufacture, repair, or maintenance of computer hardware and related equipment.

   (4) The employee is an engineer, drafter, machinist, or other professional whose work is highly dependent upon or facilitated by the use of computers and computer software programs and who is skilled in computer-aided design software, including CAD/CAM, but who is not engaged in computer systems analysis, programming, or any other similarly skilled computer-related occupation.

   (5) The employee is a writer engaged in writing material, including box labels, product descriptions, documentation, promotional material, setup and installation instructions, and other similar written information, either for print or for onscreen media or who writes or provides content material intended to be read by customers, subscribers, or visitors to computer-related media such as the World Wide Web or CD-ROMs.

   (6) The employee is engaged in any of the activities set forth in subdivision (a) for the purpose of creating imagery for effects used in the motion picture, television, or theatrical industry.

*This "urgency" legislation was introduced in December 2006, amended seven times over the next 19 months, and passed in September 2008 as part of the budget compromise.