Developments in California Wage & Hour Laws and Class Actions
Brought to you by Winston & Strawn’s Labor & Employment Practice Group
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Today’s PresentersToday s Presenters
Amanda SommerfeldLabor & Employment
Los Angeles
Maria RodriguezLabor & Employment
Los Angelesg
g
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RoadmapRoadmap
California wage and hour primer, focusing on key California wage and hour primer, focusing on key differences between California and federal law
Current law and pending cases that will shape p g pCalifornia wage and hour landscape
Practical approaches to ensure compliancepp p
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CA Wage and Hour: State of AffairsCA Wage and Hour: State of Affairs
100+ wage and hour class actions filed each month 100+ wage and hour class actions filed each month
Companies hit multiple times
Increase in compliance has not resulted in decrease Increase in compliance has not resulted in decrease of claims
Targets – companies with lots of California Targets companies with lots of California employees or potential misclassification of high wage employees
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CA and Federal: Key Differences and Additional Issues in CA
Daily Overtime
Meal and rest periods
Exemptions
E i b Expense reimbursements Mileage Uniform
Piece‐rate or load rate
Non‐productive work time
Recordkeeping Recordkeeping
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Key Issues in CA Law (cont’d)Key Issues in CA Law (cont d)
Wage statementsg
Pay checks
Final pay
Vacation pay No “use it or lose it”
Fl t ti k k Fluctuating work week Not allowed
Reporting time payp g p y
Split shift pay
Wage orders – industry‐specific items
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Other Class Action Claims that Make Up the Basis of Wage and Hour Class Actions
Failure to recalculate bonus pay to determine true Failure to recalculate bonus pay to determine true hourly rates and true‐up overtime
Tip‐pooling p p g
Off‐the‐clock
Donning and doffing Donning and doffing
Labor code penalties
Unfair business practices – 4‐year statute of Unfair business practices 4 year statute of limitations
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Overtime; Calculating and Paying Overtime 1.5 X hours over 8 a day X hourly rate 1.5 X hours over 8 a day X hourly rate
2 X hours over 12 a day X hourly rate
Calculation of hourly rate Calculation of hourly rate If employer makes additional weekly, monthly, quarterly payments such as bonuses, recalculation of hourly rate and true‐up of overtime required
Cannot determine hourly rate by dividing weekly amount paid by hours worked – must divide by 40paid by hours worked must divide by 40
No fluctuating work week
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Meal PeriodsMeal Periods
Employers required to “provide”meal period for all p y q p pemployees who work more than 5 hours
Must pay one hour of additional pay as “premium” to employees who are not “provided” a meal periodare not provided a meal period
Must be 30 min., duty free, before the employee has worked more than 5 hours in the shift
Brinker still pending but fully briefed Brinker – still pending, but fully briefed “Provide” versus “ensure”
Target Issues “Auto deducts” for meal periods Poor records of when meal periods are taken History of never paying a single meal break premium
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y p y g g p
Meal Periods (cont’d)Meal Periods (cont d)
Second meal period required if shift is over 10 hours Second meal period required if shift is over 10 hours
First meal periods can be waived by voluntary consent, but only for a maximum 6‐hour shift , y
If first meal period provided, second meal period can be waived
On‐duty meal period agreements rarely enforceable
Employer responsibility to recordp y p y
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Rest PeriodsRest Periods
10 minutes for every 4‐hour period, “or fraction 10 minutes for every 4 hour period, or fraction thereof”
On the clock
Not required to record rest periods taken
“Provide” seems to be sufficient Provide seems to be sufficient
1 hour premium if not provided
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Exemption MisclassificationExemption Misclassification
Executive exemption Executive exemption Weekly analysis of whether the manager manages > 50 percent
of the timeArenas v El Torito restaurant manager class not certified Arenas v. El Torito – restaurant manager class not certified –individualized inquiry; but compare with Jaimez v. Daiohs(exemption case certified)
Administrative exemption Matters of significance = affecting corporate policy – high
standardstandard Testing discretion and independent judgment Liberty Mutual – the production dichotomy issue
ll i b lf i
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Pellegrino v. Robert Half – account executives not exempt
Exemption Misclassification (cont’d)Exemption Misclassification (cont d)
Outside sales persons Outside sales persons Really outside more than 50 percent of the time?
How is that being monitored/audited?
What kind of notice do sales managers have that sales people are not outside?
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Exemption Misclassification (cont’d)Exemption Misclassification (cont d)
Inside salespersons Inside salespersons Provided for in CA Wage Orders 4 and 7 (which specify what employees, units of employees, or companies are eligible for i id l ti )inside salesperson exemption)
More than 50 percent of their compensation must be from commissions and they must be selling
Runs afoul of FLSA FLSA only provides a commissioned salesperson exemption for retail establishments – this limitation does not exist in CA law
If the company is an on‐line retail establishment and is relying on FLSA‐commissioned sales, it may not qualify under FLSA
Investor’s Business Daily – recent CA case
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Investor s Business Daily recent CA case
Expense ReimbursementsExpense Reimbursements
Mileageg Must reimburse for actual expense to the employee
If company is not reimbursing at the IRS rate, have this reviewed
U if Uniforms General rule has been that if the item does not have company
branding or logo and can be used in another job in the industry (e.g., )plain khaki pants), the employer is not required to reimburse
In some cases, CA courts certifying classes on this issue
Practical point: keep track of what the company is and is not reimbursing for, and review for compliance (these claims and penalties add up)
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Expense Reimbursements (cont’d)Expense Reimbursements (cont d)
Reasonable business expenses must be reimbursedp What does this mean? What about blackberries, mobile phone
service charges, etc.?
What kind of company policies are appropriate on this subject? What kind of company policies are appropriate on this subject?
How do we measure whether it is reasonable?
Is damage to an employee’s car, who drives for work, a reasonable business expense?business expense?
Employer can require pre‐approval, but if an employee incurs the reasonable expense without pre‐approval, it must be reimbursed
The allowable consequence is a write‐up
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Piece Rate or Incentive‐based Compensation We could spend an entire day talking about this subjectp y g j
All minutes worked must be paid at the appropriate rate Must be able to show that the plan was designed in advance to cover
all minutes workedall minutes worked
Cannot try to show after the fact that the total compensation covers the hours worked (this is called “averaging” under CA piece‐rate law and is not allowed)and is not allowed)
Non‐productive work rates are allowed as part of the compensation plan
Use counsel on this one!
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More CA DifferencesMore CA Differences
Recordkeeping p g Employer’s responsibilities
Penalties
Payroll documents must be kept in CA (what about on line records?) Payroll documents must be kept in CA (what about on‐line records?)
Wage statements CA labor code specifically requires all information the employee
would need to verify their pay is correct (e.g., total pay, deductions, different pay rates, straight and overtime hours worked, piece‐rate pay and pieces completed)
Penalties are proscribed by statute (up to $4,000 per year, per employee)
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More CA Differences (cont’d)More CA Differences (cont d)
Pay checks Pay checks Must include the address of California bank upon which the check can be drawn without a fee
Pay cards No fees may apply to employees
Communicate the details of the policy and how the pay cards work very clearly
Practical tip: check company contract with payroll bankp p y p y
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More CA Differences (cont’d)More CA Differences (cont d)
Reporting time pay Reporting time pay If an employee reports to work and there is no work for him/her, employer must pay half of employee’s scheduled hift ( i i f 2 h i f 4)shift (minimum of 2 hours, maximum of 4)
Split shifts If an employee is required to split a shift by more than one If an employee is required to split a shift by more than one hour, employer owes 1 hour of pay
Final pay Due immediately upon termination and within 72 hours of resignation
No deductions for employee loans
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No deductions for employee loans
More CA Differences (cont’d)More CA Differences (cont d)
Vacation pay – no “use it or lose it” policies allowed Vacation pay no use it or lose it policies allowed
Wage orders – industry‐specific items
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CA’s Private Attorney General ActCA s Private Attorney General Act
Private Attorney General Act (PAGA) enacted in 2004 to offer financial incentives to individuals to enforce state employment laws
Any “aggrieved employee” may recover civil penalties against an y gg p y y p gemployer on behalf of other current and former employees
75 percent to CA Labor & Workforce Development Agency; 25 percent to the employees
Penalties recoverable: those provided in the underlying Labor Code, or, if no penalty listed:
$100 per person, per pay period – 1st violation$200 per person per pay period each subsequent violation $200 per person, per pay period – each subsequent violation
Administrative prerequisites must be exhausted Until recently, unclear if class action standard applied
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Practical Approaches to Measure and Maintain Compliance and Avoid Class Actions
Top things to considerp g Audit
Develop process to review meal periods and ensure they are taken; consider a policy to deal with missed meal periodsconsider a policy to deal with missed meal periods
Have pay stubs and live payroll checks reviewed for compliance regularly
Review time keeping systems to make sure every minute worked is Review time‐keeping systems to make sure every minute worked is captured accurately
If you don’t reimburse at the IRS rate, discuss with counsel to ensure compliance with CA lawcompliance with CA law
Review all recordkeeping related to time‐keeping and payroll Operationally, review incentives and business model to detect incentives that
cause cheating
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cause cheating
Practical Approaches to Measure and Maintain
Top things to consider (cont’d)
Compliance and Avoid Class Actions
Top things to consider (cont d) Review job descriptions for every entry‐level exempt position and standards to ensure classification is really met
M i Managing Independent discretion and judgment Outside sales IT “professionals”
Review procedures and policies for the various topics discussed todaydiscussed today
Determine what managers and employees are actually doing (reviewing written policies and procedures is not enough –
d t k h t i ll h i )
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need to know what is really happening)
Questions?
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Thank You.
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Contact InformationContact Information
Amanda SommerfeldLos Angeles
Maria RodriguezLos Angelesg
(213) [email protected]
g(213) [email protected]
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