The problem. It helps to recall that the Fair Labor Standards Act (FLSA) was enacted in the 1930′s, when the work force consisted of men (as in, “males”) going to heavy, dirty factories, doing heavy, dirty labor, punching out at the end of the day, and going home to simple-but-delicious dinners cooked by their loving wives, and surrounded by their obedient children.

As a result, the FLSA still works pretty well in what manufacturing we have left in this country but less so in the Buck Rogers world of the salaried non-exempt employee, who is equally likely to be female and who may place more value on a flexible schedule and be more inclined to “work straight through” so she can leave early and get little Addison and Liam picked up before the day care center closes. Not to mention that we now have these devices called “cell phones” and “home computers,” which greatly heighten the risk that some “off-clock work” will be performed on any given day. And not to mention that the supervisors of these employees are FLSA-exempt and can work whenever they feel like it with no problem . . . which makes them more inclined to think nothing of their direct reports’ doing likewise. Not so!

My own opinion is that salaried, non-exempt employees should be able to make their own schedules and be flexible if the job allows it. But nobody consulted me when they enacted the FLSA. (I’m sure they wanted to, but my parents were only preschoolers at the time and hadn’t met yet.) So, according to the “Stone Age” law, employers are faced with two unattractive alternatives: (1) keep employees happy by letting them do their thing as long as the work gets done, but risk liability for off-clock work; or (2) obey the law by requiring employees to stick to their required shifts and take all required breaks on schedule, no ifs, ands, or buts, which will make the employees very unhappy, not to mention insulted because they identify with the Buck Rogers world.

What do you do if your employee continues to disobey your instructions to avoid off-clock work?

Do treat it as a disciplinary issue. First, make sure your expectations have been clearly communicated and that you are not “winking” at off-clock work. Realize that most employees want to do a good job and please their bosses, so make sure you aren’t giving off vibes that make your employees think off-clock work is expected, no matter what you may say.

If you have not communicated your expectations clearly before, do so now. If you used to “suffer” off-clock work and have decided to turn over a new leaf, make sure your employees know that the rules have changed and that you sincerely mean it. Once you are comfortable that they know (and believe) the expectations, start with an oral counseling the first time you catch them working off the clock. If it happens again, up it to a written warning. Continue with the progressive steps, and if you have to eventually terminate, then terminate. Even if you don’t win your unemployment case, that’s not the end of the world. Much better to lose the unemployment “battle,” but prevent or win a collective or class action “war” under the FLSA or state wage-hour law.

Reminder: You should not dock an employee’s pay when the employee worked without authorization. This would be a clear violation of California law.

Bonus word of caution: In case the preceding post has not made this clear, “salaried” does not equal “exempt.”  We have to constantly remind clients that having someone as salaried, does not mean they do not have to be paid overtime. The employee still has to meet the requirements for being an exempt person or you have to pay the overtime.

As we previously posted on this blog, a new California law was passed in October requiring California employers, effective January 1, 2012, to provide new hires with a written notice containing certain wage and other information.  The new law is codified as Labor Code section 2810.5 and requires employers to provide newly hired non-exempt employees with the following categories of information (in one self-contained writing):

1. The rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission or otherwise, including any rates for overtime;

2. Allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances;

3. The regular payday designated by the employer;

4. The name of the employer, including any “doing business as” names used by the employer;

5. The physical address of the employer’s main office or principal place of business, and a mailing address, if different;

6. The telephone number of the employer;

7. The name, address, and telephone number of the employer’s workers’ compensation insurance carrier; and

8. Any other information the Labor Commissioner deems material and necessary.

Employers are required to begin providing the foregoing information to non-exempt new hires effective January 1.  If there are changes to any of the information provided, written notice of the change must be provided to employees within 7 calendar days.  The information must be provided in the language normally used by the employer to communicate employment-related information.  The new law exempts from the notice requirement State workers and most unionized employees covered by the terms of a collective bargaining agreement, as well as employees who are exempt from overtime.

While the foregoing seems fairly straightforward to apply, some confusion has arisen over the eighth category of prescribed information listed—“any other information the Labor Commissioner deems material and necessary.”  The Labor Commissioner waited until late December to post anything substantive about this new law and has since revised its position at least once regarding the scope of the new law, leaving employers with less than clear guidance over compliance.  Under the new law, the Labor Commissioner is charged with creating a template that employers may (but are not required to) use to comply with the new notice requirement.  The Labor Commissioner waited until almost the end of December to publish their template. Interestingly, the Labor Commissioner’s template includes several additional categories of information (beyond those enumerated in the actual statute):

1. The employee’s hire date and position;

2. The business form of the employer (e.g. corporation, partnership, LLC, etc.);

3. Specified information about other businesses or entities the employer uses to hire employees or to administer wages or benefits;

4. Whether the employee’s employment agreement is written or oral; and

5. The employer’s workers’ compensation policy number.

Adding more to the confusion, the Labor Commissioner also posted (at the eleventh hour) some “Frequently Asked Questions” about the new law, including guidance stating that the notice needed to be provided to all current employees, not just to new hires as indicated in the statute.  It appears that the Labor Commissioner’s office then realized it had overstepped its authority in exceeding the scope of the statute by extending its coverage to current employees, so the Labor Commissioner (without explanation) revised the FAQ to delete this reference. 

Although employers are not required to use the Labor Commissioner template as a form notice, they are advised to make sure that any written notice they create includes all categories of information indicated on the Labor Commissioner template.  To be clear, it appears that the Labor Commissioner does have the authority (prescribed by the express language of the statute) to broaden the categories of information that must be provided in writing to new hires.  At this time, the notice must only be provided to new hires and not to current employees.  However, changes to any of the information provided in the new hire notice will need to be provided to current employees within 7 calendar days of the change.

Employers should note that although the new law does not provide for any specific penalties for non-compliance, it appears that the law can be enforced through California’s “catch-all” penalty provision, known as the Private Attorneys’ General Act (PAGA).  PAGA allows for recovery of substantial penalties for non-compliance with provisions of the Labor Code.  Employers should review the Labor Commissioner template and guidance and ensure that they have a compliant notice in place, if they have not already done so.  Employers are advised to include language in their notice to make clear, as applicable, that the employment relationship is at will and that nothing in the notice should be construed as creating a contract of employment or for the promise of any particular term or condition of employment, and that the employer has the right to change the terms and conditions of employment at any time with both employer and employee having the right to terminate the employment relationship with or without cause or advance notice.  Employers should also monitor the Labor Commissioner website from time to time in the event there are changes to the content of the notice requirement that may be prescribed by the Labor Commissioner.

Hope this helps.

Plaintiff Moreno is a former employee of Sonic-Calabasas. As a condition of employment, Moreno signed an agreement requiring him to arbitrate any and all disputes arising out of the employment relationship. The agreement exempted administrative proceedings before the EEOC/DFEH, but was silent as to administrative claims for unpaid wages. After Moreno’s employment ended, he filed a claim for alleged unpaid vacation wages with California’s Department of Labor Standards Enforcement (“DLSE”). Sonic-Calabasas filed a motion to compel arbitration, arguing that the arbitration agreement Moreno had signed required arbitration of the dispute.

The California Supreme Court has ruled that an arbitration agreement, even if otherwise enforceable, cannot be used to prevent an employee from pursuing administrative relief for unpaid wages through the DLSE. Thus, employees are entitled to an administrative hearing through the DLSE to resolve claims for unpaid wages. However, the Court held that in the event of an appeal of the DLSE’s decision (following the administrative hearing), that appeal can be compelled to arbitration pursuant to a valid and enforceable arbitration agreement.

The Supreme Court also addressed and rejected the employer’s argument that the FAA preempts California law and requires enforcement of the arbitration agreement in this context. In a lengthy discussion, the Court reasoned that its holding simply promoted “delaying” arbitration pending exhaustion of administrative remedies; it did not disfavor arbitration entirely.

Quite frankly, you would rather have an employee go to the Labor Board as opposed to Arbitration. Arbitration fees and representation costs are very expensive whereas with the Labor Board the process is faster and the Labor Commissioners do not charge a fee to decide the case. For those of you that are Potts & Associates clients our monthly retainer includes assistance with Labor Board matters so there are no additional charges.

As a final note, have your arbitration agreements reviewed to ensure they are up to date.

In addition, on the form under “Wage Information” there is one line that reads “Employment Agreement” and give you the option of checking off either “Oral” or “Written.” I am not comfortable with anything that is acknowledging that there is an “employment agreement” in place. I can see plaintiff attorney’s jumping on the fact there was an “employment agreement” between the former employee (their new client) and the employer.  The template is a suggested version of what you can use. The specific requirements of the new bill,

“Requires an employer to provide each employee, at the time of hire with a notice that specifies the rate and the basis, whether hourly, salary, commission, or otherwise, of the employee’s wages and to notify each employee in writing of any changes to the information set forth in the notice within 7 calendar days of the changes unless such changes are reflected on a timely wage statement or another writing, as specified.”

As you can see, there is nothing that requires you to have that line. You have two choices. Either eliminate it or simply do not check off either box.

The template provided by the DLSE is also available in other languages including Spanish. Remember to make the above change. In the event you do not speak or read Spanish, get someone on your staff to assist you if you intend to eliminate the line.

As for the reporting time pay claim, the facts were undisputed that on certain occasions the employees were required to attend scheduled meetings that were less than two hours in length, and that was their entire “work” for the day.  The plaintiffs claimed that California’s wage orders required AirTouch to pay them for a minimum of two hours as reporting time pay.  The court disagreed, holding that reporting time pay is only required where an employee is furnished with less than half the scheduled day’s work.  Because the employees’ scheduled day was two hours or less, as long as the employees were furnished and paid for at least half of that time, no additional reporting time pay was owed.

As for the split shift claim, the facts were similarly undisputed that the employees on occasion worked a split shift.  However, the parties disputed whether a split shift premium was owed in the circumstances.  California’s wage orders state as follows:  “When an employee works a split shift, one hour’s pay at the minimum wage shall be paid in addition to the minimum wage for that workday…”  AirTouch’s position was that because the employees’ regular wages were well over the minimum wage, they were paid more than the minimum wage for all hours worked plus one additional hour and, as a result, there was no requirement to pay an additional split shift premium.  The court agreed, endorsing the following example: 

“As an example, on November 26, 2005, Krofta worked a total of eight hours.  Because he was making $10.58 per hour at the time, he was paid a total of $84.64 (8 x $10.58).  The minimum wage at the time was $6.75, so a minimum wage worker would be paid wages of $54 (8 x $6.75) plus, pursuant to subdivision 4(C), one additional ―hour‘s pay at the minimum wage, for a total of $60.75 ($54 + $6.75).  AirTouch contended that since subdivision 4(C) by itself required no greater payment for the workday than $60.75, the pay for an employee who earned more than that amount (like Krofta) would not be affected.”

The following reminders are for laws that will be effective January 1, 2012, and only apply to California employers! These are only a recap. You can go into the archives and get more information if you need or go directly to the law as indicated next to the particular category.

Pregnancy Disability Leave (AB 299)

Employers are now prohibited from refusing to maintain and pay for group health insurance coverage for the duration of pregnancy disability leave, for up to four months in a twelve month period.

Organ and Bone Marrow Donor Leave (SB 272)

Employers must grant a leave of absence of up to thirty days in a twelve month period to an employee who is an organ donor program and up to five days in a twelve month period to an employee who is a bone marrow donor. The days for the leave are business days not to include weekends. Employers can condition the leave upon the employee’s use of any paid days off that they may have on the books.

Credit Reports (AB 22)

This particular law significantly restricts an employer’s ability to obtain credit reports for employment purposes. It generally permits employers that are seeking to fill only specific, identified exempt positions to obtain and use credit reports to screen applicants or current employees.

Credit reports also may be obtained for employees of financial institutions subject to Sections 6801-6809 of the U.S. Code.

Willful Misclassification of Independent Contractors (AB 459)

Although this is a California law please be reminded that the Feds are also cracking down in this area. This particular law now imposes a civil penalty of between $5,000 and $15,000 for EACH violation on a person or employer that willfully misclassifies an individual as an independent contractor. The penalty increases to between $10,000 and $25,000 for each violation if the person or employer has engaged in a pattern or practice of willful misclassification.

Wage Payment Detail (AB 469)

This change requires employers to provide nonexempt employees, at the time of hire, a written notice of eight different points of notification to the new hire (such as rate of pay, whether hourly, shift, day, week, piece commission, regular pay day etc.). Please go back to my archives for the exact requirements.

Use of E-Verify System (AB 1236)

This provision states that state agencies, cities and counties, cannot require private employers to use the Federal E-Verify System to confirm the legal immigrant status of workers they hire, except when required by Federal law or as a condition of receiving Federal funds.

Genetic Information (AB 559)

This new law amends the California Fair Employment & Housing Act (FEHA) to prohibit discrimination on the basis of genetic information.

Gender Expression (AB 887)

This law is also an amendment to FEHA to clarify that prohibited discrimination in employment and housing on the basis of sex or gender includes discrimination on the basis of a person’s gender identity and gender expression (includes a person’s gender-related appearance).

California Labor Code Section 515(d) states that for the purposes of computing the overtime rate due to a nonexempt full-time salaried employee, the regularly hourly rate is generally 1/40^th of the employee’s weekly salary. If the contracted hours are fewer than the legal maximum of 40 regular hours in one work -week, the contracted hours are used as the denominator.  All hours over the legal maximum regular hours in any one workweek or workday must be compensated at the resulting overtime rate.

Similarly, when earnings are determined on a piece work, commission, or some other non-hourly basis, the overtime pay due must be computed based on the average hourly rate. This is calculated by dividing the total pay for employment (except for certain exclusions) in any workweek by the total number of hours actually worked.

A group rate for piece workers is another acceptable method for calculating the regular rate of pay. Under this method, the total number of pieces produced by the group is divided by the number of people in the group; each worker is paid accordingly. The regular rate for each worker is determined by dividing the pay received by the number of hours worked. Keep in mind, the regular rate cannot be less than minimum wage.

Computing Overtime on a Bonus

Although discretionary bonuses are excludable when you compute the regular rate of pay, nondiscretionary bonuses are included.

For bonuses based on a percentage of production or some other formula, the overtime premium is half or all (for double-time hours) of the regular bonus rate. The regular bonus rate is calculated by dividing the bonus by the total hours worked (including overtime hours) during the period for which the bonus applies.

For example, if an employee receives a $200 bonus for a workweek in which he worked 50 hours, the regular bonus rate is $4.00 ($200 divided by 50). The employee would be entitled to an additional half of  the regular bonus rate ($2.00) for each time –and-one-half overtime hour worked and the full bonus rate ($4.00) for each double time hour, if any.

If the bonus is a flat sum (for example, $500.00 for continuing to the end of the season), the regular bonus rate is determined by dividing the bonus by the maximum legal regular hours worked during the period covered by the bonus. So, if an employee received $500.00 and worked 500 regular hours, the bonus regular rate is $1.00. She would be entitled to $1.50 overtime on the bonus for each time-and-one-half overtime worked and $2.00 overtime on the bonus for each double-time hour, if any.

California’s Department of Industrial Relations has announced that the minimum pay required for computer professionals to qualify for overtime exemption in California is increasing effective January 1, 2012.  The increase is 2.5% higher than the current minimum pay rate and requires that these employees be paid at least $38.89 per hour, which translates to a monthly salary of $6,752.19 and an annual salary of $81,026.25.  Employers should note that these minimum pay thresholds are applicable to only to California computer professionals.  The minimum rate of pay under federal law is different (the hourly rate being $27.63 per hour).  Employers with exempt computer professionals in California should review their pay practices to ensure compliance with the increased pay requirements. 

California employers are cautioned that not all employees who work in the computer field qualify for overtime exemption, regardless of how much they are paid.  In order to qualify, these employees (in addition to being paid at least the minimum pay detailed above) must meet very specific duties tests, generally involving programming, software development, as opposed to installation, maintenance, repair, and the like. A description of these duties can be found on the California Department of Labor Standards Enforcement website.  The duties tests under California law are, again, somewhat different than those applied under the federal computer professional exemption.  As such, employers with California computer professionals who are or will be classified as exempt, should carefully review the duties and pay to be sure exempt classification is proper.   

San Francisco’s minimum wage, which currently is $9.92 per hour, is increasing to $10.24 per hour effective January 1, 2012.  This makes San Francisco the first city in the country with a minimum wage in excess of $10 per hour.  The minimum wage increase is tied to a new law passed by San Francisco voters in 2004 which automatically increases the city’s minimum wage in accordance with inflation.  Employers with employees who work more than two hours in a workweek inside San Francisco city limits should ensure their payroll practices are updated to reflect the new minimum wage.

On appeal, the California appellate court reversed, holding that Section 394 only allows for liability against an employer, not against individual supervisors.  The court reasoned that although Section 394 prohibits discrimination by any “person,” that does not necessarily mean that liability may be imposed against any “person.”  The court explained that California’s primary law prohibiting employment discrimination, FEHA, similarly prohibits discrimination by any person, yet it is well-established that only employers (not individual supervisors) may be held liable for discrimination under FEHA.  The court held that there was no reason to treat employment discrimination under Section 394 any differently.

To be clear, the court in no way addressed the propriety of the employee’s claims against the employer, much less held that the employer acted properly in terminating the employment relationship.  The court simply held that the employee would have to pursue his claims only against the employer and not against his individual supervisors. Whew, at last, this is some relief for supervisors but remember, this is only one aspect of not being held personally liable. Don’t get crazy on me!