Wage and Hour Update for California Employers

Marie Burke Kenny, Partner

Procopio’s Annual Labor and Employment Seminar

11.17.14

HR Professionals Traumatized By Rise In California Wage Claims!

Mutant Wage and Hour Laws Kill California Jobs!

The Shocking Truth About California Wage and

Hour Law !

Trends In California Wage And Hour Claims

• Types of claims • Court developments • Legislation developments

Overview • Individual

– Single Plaintiff – Multiple Plaintiff

• Class Action • Reimbursement of Expenses • Hours Worked

– Off the clock work • Exemption Issues

– Partial day vacation deductions – Inside sales exemption

• Meal period issues • Arbitration Agreements

Reimbursement of Business Expenses • California Labor Code §2802

– Employer must indemnify employees for expenses or losses necessarily incurred in direct consequence of performance of duties

– Knew or should have known of the expense and failed to reimburse • Types of expenses

– Mileage – Cell Phone – Tools or equipment – Uniforms

• Preventing liability – Monitor – Document – Audit

Reimbursement of Cell Phone Expenses • Cochran v. Schwan’s Home Service, Inc., 228 Cal. App. 4th 1137

(2014). • 1,500 Class Members • Employees with unlimited minutes/data cell phone plans • No additional expense for work-related calls • Employer must reimburse a “reasonable percentage” of employees’

cell phone bills – even in the absence of any actual expense

Employee Constructively Discharged By Failure To Reimburse Expenses • Vasquez v. Franklin Management Real Estate Fund, Inc., 222 Cal. App. 4th

819 (2013) • Maintenance technician paid $10 per hour • Required to drive his own vehicle for work - at least 30 miles per day • Court -> “Employer passed on a portion of its normal operating expenses to a

low waged worker” • Constructive discharge

– Employer “either intentionally created or knowingly permitted working conditions that were so intolerable or aggravated at the time of the employee’s resignation that a reasonable employer would realize that a reasonable person in the employee’s position would be compelled to resign.”

• Unique facts

Hours Worked • Jong v. Kaiser Found. Health Plan, Inc., 226 Cal. App. 4th 391 (2014)

– Employer not liable for “off the clock” work by an employee performed without the employer’s actual or constructive knowledge.

• Written policy requiring all employees to be “clocked in” when performing any work

• Signed acknowledgment that “off the clock work” was prohibited • Written policy requiring overtime approval • Not a single request for overtime denied

– Employee alleged inability to get work done within allotted time – Court -> reasonable for employer to rely on the times reported by the

employees

Overtime Issues: Dueling Perceptions

• Management – Employees take advantage

and “milk” overtime – Employees wait by the clock

before clocking out to get extra overtime

– Only weak or new employees are working overtime

– Occasional overtime is necessary, but there is simply too much overtime being worked

• Employees – There are not enough regular

work hours in the day to get the job done

– Sometimes I don’t know until the very end of my shift, that I need to work overtime

– If I work overtime on the clock, I will be disciplined or fired

– Only “favorite” employees can work overtime

– I work hard and I just get criticized for excess overtime. I can’t “win.”

Overtime Issues: Reframed • Frame the issue differently:

– What is the primary goal of the Company? • Were the hours worked important or necessary to achieve that goal?

– Customer service or regulatory audit or other key project? • Does the overtime signify a different problem?

– Hiring need or performance management issue – Compliance with wage and hour laws is paramount!

• If the employee worked the hours, pay the employee. • Discipline employees who engage in proven overtime abuse.

– Foster an environment where accurate reporting is encouraged and expected

• “Nobody works for free!”

California Overtime Exemptions • Salary basis test

– Typically 2 x minimum wage • Not sales

• Duties test – P.E.A.S.

• Professional – Licensed – Learned – Artistic

• Executive • Administrative • Sales

Jeopardizing Exempt Status – Vacation Pay • Rhea v. General Atomics, 227 Cal. App. 4th 1560 (2014). • Class action alleged that requiring exempt employees to use accrued paid

time off (PTO) to cover partial day absences from work jeopardized their exempt status.

• Employer policy - PTO could be used for any reason and employees were required to use PTO for partial day absences of any length of time. – Exception: Employees who worked more than 40 hours in a week were

not required to use PTO to cover full or partial day absences. • Plaintiff alleged policy violated the salary basis test under California law by

requiring exempt employees to use vacation for partial day absences. • Court disagreed.

Inside Sales Exemption • Employer is in the professional, technical or mercantile industry

(Wage Orders 4 and 7) • More than ½ of the compensation is in the form of commissions • Employee’s earnings exceed 1½ times the minimum wage

– How is this measured? • Peabody v. Time Warner Cable, Inc., 59 Cal. 4th 662 (2014). • Employee must receive in each pay check at least 1.5 times the minimum

wage for the hours worked during the applicable workweeks covered by that paycheck.

• An employer may not attribute commission wages paid in one pay period to other pay periods in order to satisfy the compensation requirement.

• Reminder: Commission agreements must be in writing since 1/1/13.

California Meal Period Requirements

• Employers are not required to “police” employees during meal periods to ensure no work is performed.

• Employers must relieve their employees of all duty, relinquish control over their activities, and permit them a reasonable opportunity to take an uninterrupted 30-minute meal break.

• Employers must not impede or discourage employees from taking meal periods.

NO AUTO-DEDUCTIONS FOR MEAL PERIODS!

Post-Brinker Decision • Faulkinbury v. Boyd & Associates, Inc., 216 Cal.App. 220, 224 (2013) • Employer must have a meal period policy in place, or that can form a

basis for a class action claim against employer • Policy must be legally compliant

– 1st Meal period: 30 minute uninterrupted period commencing before the end of the 5th hour of work

– 2d Meal period: 30 minute uninterrupted period commencing before the end of the 10th hour of work

– On-duty meal period agreements, if unlawful, could form basis for class action claim

Post Brinker considerations • Late meal periods • Short meal periods • Meal period waivers

– 1st meal period – 2nd meal period – On Duty

• Monitor • Document

– Meal Period Reporting Form

• Discipline • Pay and record as

paid on paycheck

Preventing Wage and Hour Claims • Stay apprised of wage and hour developments. • Review and update policies to comply with wage and hour law. • Ensure all compensation arrangements are in writing (wage theft prevention

act notice, offer letter, commission agreement, incentive compensation plan).

• Train managers and supervisors on wage and hour issues. • Consider red-flagging late, short or missed meal periods and using a meal

period reporting system for payments. • Educate employees regarding expense reimbursement. • Cultivate environment of wage and hour compliance. • Investigate complaints regarding wages. • Monitor and audit - periodically check time records, wage statements etc • Secure release agreements upon termination.* • Use mandatory arbitration agreements.*

Class Action Waiver in Employment Arbitration Agreements

• Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 327 (2014). • Can an employer require employees to waive the right to participate in a

class or representative action? • Iskanian now makes it clear that class action waivers are enforceable under

California law. • Purported waivers of a representative action under the Private Attorneys’

General Act are unenforceable. • NOTE: For an arbitration agreement to be valid and enforceable, the

employer also must give the employee some “consideration” in exchange for the employee’s agreement to waive access to the courts.

• New hires • Existing employees

That’s All Folks!