Meal Breaks: Courts Cannot Agree!

August 19, 2019

The issue regarding California meal breaks continues to create nightmares for employers and the Courts themselves cannot agree on this issue. Unfortunately, employers are paying dearly.

As you may or may not know, suing California employers in class action and representative PAGA lawsuits for alleged non-compliance with California meal break laws is big business in the state for plaintiffs’ attorneys.  Several years ago, the biggest issue that was litigated was whether employers had to “ensure” that employees took at least a 30-minute meal break or whether they simply had to provide employees the “opportunity” to do so.  Employers across the state were sued for not “ensuring” that such breaks were taken (based, for example, on timesheets showing a meal break was taken late in the day or was less than 30 minutes in length).  In 2012, the California Supreme Court provided some clarity in Brinker v Superior Court, holding that employers need only provide employees a reasonable opportunity to take a 30-minute meal break before the end of the fifth hour of work (yet some plaintiff attorneys have argued before the beginning of the 5th hour). That did not stop the lawsuits, however.  Plaintiffs’ attorneys just began manufacturing new theories for meal break violations.

One such theory is that if employee timesheets show late, short, or missed meal breaks, that automatically creates a rebuttable presumption against the employer that a compliant meal break was not provided (leaving it to the employer to have to “prove” that a meal break opportunity was, in fact, provided on any given day).This of course turns the traditional burden of proof in a lawsuit on its head, by effectively requiring the employer to prove it did not commit a violation, rather than requiring the plaintiff to prove that the employer did commit a violation.

Another theory is that an employer’s lack of a formal meal break policy automatically means that the employer did not authorize and permit compliant meal breaks (regardless of whether employees, in fact, took such breaks on a day to day basis).  Yet another emerging theory is that employers violate meal break laws by paying missed meal break premiums at the employee’s normal hourly rate of compensation as opposed to the employee’s “regular rate” for overtime purposes (which may be higher than the base hourly rate).  The state’s Division of Labor Standards Enforcement provides no guidance for employers on whether these theories are correct or not, leaving it to the courts to weigh in on in expensive litigation.  As is commonly the case, the courts disagree on the answers, leaving employers with unclear rules and exposure to costly litigation as well as potential liability.

It appears that at least some additional clarity is on the horizon.  The Ninth Circuit recently certified two questions of meal break law to the California Supreme Court in Cole v CRST Van Expedited, Inc. (1) Does the absence of a formal policy regarding meal (and rest) breaks violate California law? and (2) Does an employer’s failure to keep records regarding meal (and rest) breaks taken by its employees create a rebuttable presumption that such breaks were not provided?  The California Supreme Court is expected to accept the certification request and provide answers to these questions.  Until that happens, the answer will depend on the venue.

On the issue of the proper rate of pay for meal and rest break premiums (the one hour of pay an employer is supposed to pay if an employee is denied a meal or rest break), there is a split of authority among federal district courts in California, with most ruling that the correct rate is the employee’s normal base hourly rate, but with at least one district court ruling differently and holding that the one hour of premium pay must be paid at the employee’s regular rate for overtime purposes (which is higher than the employee’s base hourly rate if the employee receives other forms of compensation such as shift differentials).  The first published state court decision is expected on this issue in the next month in Ferra v. Loews Hollywood Hotel, which was argued last month in Los Angeles.  Hopefully employers will get some clarification on this issue.

It would, of course, be nice if the California Legislature would enact legislation providing clarity for California employers and preventing situations where employers can be held liable retroactively based on brand new interpretations of law.  Don’t hold your breath for that to happen though.  Employers, in the meantime, should do their best to have compliant, written meal and rest break policies and practices in place and to train managers and employees accordingly.

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How the “MeToo Movement” has Impacted Males Training Females!

August 12, 2019

The, “MeToo Movement,” so to speak, has started to impact the work environment to the point where males are beginning to shy away from females because of potential allegations of sexual harassment. Keep in mind, unfortunately, there could be unintended consequences. Let me explain further.

Employers are seeing unintended consequences play out in their efforts to eliminate harassment. Businesses have had policies, practices or procedures in place to educate their workforce. We have begun to get questions/concerns that some males are becoming hesitant about engaging in mentoring relationships with female employees. Companies are losing the benefit of employees sharing valuable experiences and lessons be-cause communications are stifled. But, mentoring is as important today as ever—for both males and females. Mentoring has been a successful business practice in the past and can continue.

While remaining sensitive to harassment issues, employers must challenge employees’ tendencies to simply retreat. Educate employees about the importance of mentoring relationships and appropriate boundaries. Here are a few common-sense tips for managers and for mentoring relationships:

  • Meet in public places.  This may include the corner coffee shop or a windowed conference room at the office.  Be transparent about where the meetings occur.
  • Meet at a respectable hour. Have you heard the saying, “Nothing good ever happens after 12:00 am?” Similarly, a good rule for men-tors/mentees is to avoid meeting one-on-one at night. Try to schedule meetings in the morning or during work hours. Only rarely schedule a meeting for after work and, if it is necessary, immediately after work.
  •  Focus on work issues. What are the mentee’s goals? What obstacles is the mentee currently facing in the workplace?
  • Again, focus on work issues. As a mentor, be very careful not to discuss physical appearance or family responsibilities. Remember, the value in mentoring comes from the ability to learn and grow from what is happening at work, not at home. Leave broader life coaching to life coaches.
  • Mentoring is admittedly tricky. A mentor is not a supervisor and is not conducting an appraisal. Discussions are more wide-ranging than when a manager is completing a performance evaluation. Yet, mentoring is critical to developing your workforce. Just educate your managers and mentors about sexual harassment and encourage them to remain professional at all times. The most important point, tell them to use common sense in their interactions.

Federal Law Proposed Changes

August 5, 2019

Lawsuits against employers alleging that they did not pay employees the correct overtime rate are increasingly common, in significant part due to a lack of clear rules in this area.  In an effort to provide more clarity, the federal DOL has introduced a proposed rule to update the federal regulations under the FLSA regarding types of compensation that may be excluded from the regular rate calculation.  In particular, the DOL’s proposed amendments clarify that the following may be excluded from the regular rate:

  • that the cost of providing wellness programs, onsite specialist treatment, gym access and fitness classes, and employee discounts on retail goods and services may be excluded from an employee’s regular rate of pay;
  • that payments for unused paid leave, including paid sick leave, may be excluded from an employee’s regular rate of pay;
  • that reimbursed expenses need not be incurred “solely” for the employer’s benefit for the reimbursements to be excludable from an employee’s regular rate;
  • that reimbursed travel expenses that do not exceed the maximum travel reimbursement permitted under the Federal Travel Regulation System and meets other regulatory requirements may be excluded from an employee’s regular rate of pay;
  • that employers do not need a prior formal contract or agreement with the employee(s) to exclude certain overtime premiums described in sections 7(e)(5) and (6) of the FLSA; and
  • that pay for time that would not otherwise qualify as “hours worked,” including bona fide meal periods, may be excluded from an employee’s regular rate unless an agreement or established practice indicates that the parties have treated the time as hours worked.

In addition to the foregoing, the proposed regulations clarify that call-back pay (and similar payments) need not be only occasional and sporadic to be excluded from the regular rate.  Furthermore, the proposed regulations attempt to provide clarification on when a bonus may be excluded from the regular rate.  It will remain the law that non-discretionary bonuses must be included in the regular rate, whereas discretionary bonuses may be excluded.  The general rule is that if a bonus is promised in advance to an employee for longevity, meeting certain goals, or similar conditions, then the bonus is non-discretionary and must be included in the regular rate.  Conversely, if both the fact that a bonus will be paid, and the amount of the bonus, are determined in the employer’s sole discretion at or near the end of period for which the bonus will be paid, then it is a discretionary bonus that need not be included in the regular rate.  Despite this definition, it is not always clear which category a bonus falls under.  As such, the proposed regulations add examples of bonuses that are non-discretionary and may be excluded from the regular rate.  These include employee-of-the-month bonuses, bonuses to employees who made unique or extraordinary efforts which are not awarded according to pre-established criteria, severance bonuses, bonuses for overcoming stressful or difficult challenges, and other similar bonuses for which the fact and amount of payment is in the sole discretion of the employer until at or near the end of the period for which it is paid.

In the meantime, California employers are reminded that California wage and hour law is not always consistent with the FLSA.  In significant part, California follows the FLSA regulations concerning the regular rate. However, there are some differences, and it remains to be seen whether California will agree or disagree with any changes to the federal regulations on this subject.

 

 


Racial Hairstyles are Now Protected and Non-slip Shoes are not Reimbursable!

July 29, 2019

California Enacts Explicit Protection From Discrimination For Racial Hairstyles

The California Legislature recently passed a bill (SB 188) to amend California’s Fair Employment and Housing Act (FEHA) to make it clear that the Act’s prohibition against race discrimination includes discrimination against a person because of the person’s hair texture or “protective” hairstyle that is historically associated with race.  “Protective hairstyles” includes braids, locks, and twists.  California’s Governor signed SB 188 into law earlier this month.  The new law takes effect January 1, 2020.

California law, like federal law, has long prohibited race discrimination in employment, and courts have interpreted this ban on race discrimination as prohibiting discrimination against a person based on natural hairstyles such as an afro.  However, at least one federal court has held that the federal anti-discrimination law (Title VII) does not protect other hairstyles, such as dreadlocks (reasoning that a person chooses this hairstyle, rather than the hairstyle being a natural trait).  SB 188 was introduced and enacted in response to these court decisions, to make clear that California’s FEHA protects blacks against race discrimination based on additional hairstyles, including braids, locks, and twists.

In terms of impact on California employers, this means that an employer generally should not have a dress code policy that prohibits racially-associated hairstyles such as afros, braids, locks, or twists.  Taking adverse action against an applicant or employee based on a racial hairstyle could subject an employer to liability for race discrimination under FEHA.  Managers and human resources personnel should be trained accordingly.  If there are unique concerns presented by the workplace environment, they should be addressed on an individual basis.

Slip-Resistant Shoes Are Not Reimbursable Business Expenses

A California court recently considered whether an employer must reimburse employees for the cost of slip-resistant shoes they were required to wear to work.  In Townley v BJ’s Restaurants, Inc., the court held that the answer is no.  In that case, the employer, which operates a number of restaurants in California, required its hourly restaurant employees, for safety reasons, to wear black, slip-resistant, close-toed shoes in the workplace.  BJ’s did not require a specific brand, style, or design of shoe, and employees were free to wear their shoes outside of work.  BJ’s did not pay for the cost of these shoes and did not reimburse employees for the expense of purchasing them.  Because this is California, BJ’s of course got sued by a former server seeking penalties under PAGA on behalf of all aggrieved employees of BJ’s in California.  The server alleged that the shoes were a required uniform item that BJ’s was required to provide (or reimburse employees’ expense for purchasing them).

Rejecting the employee’s claim and holding that BJ’s was not required to pay for the cost of slip-resistant shoes, the court, relying on guidance from the Division of Labor Standards Enforcement and the Ninth Circuit in a similar case, held that this was not a reimbursable business expense because the slip-resistant shoes were non-distinct and generally usable by employees in any restaurant occupation.  As such, they could not be considered a “uniform” that BJ’s was required to provide or reimburse.


1099 Option Needs Specific Criteria!

July 21, 2019

We have been down this path however, employers still have a tendency to lean toward making employees independent contractors under certain circumstances. Understand, to be a contractor, the idea has to meet specific criteria. You can’t simply say, “I’d like this employee to be a contractor!” The federal government has strict standards, and California is even stricter than the IRS.

To be a contractor, the following has to happen:

  • She must be independent — she needs to determine how, when and where she does her work.
  • Her work cannot be part of the core business function.
  • She must be independently established and free to have additional clients. (And should have additional clients.)
  • She must use her own equipment.
  • Typically, the contractor bills the business.
  • There must be a written contract between the business and the contractor.
  • There must be an end date.

If the employee would be doing the same job with the same equipment, she/he would not be independent.

The real question is why does the employer or manager want to make an employee a contractor? Why make the change? The employee will suggest it for their own benefit. The employer sees it as a positive to avoid taxes and benefits.

Human relations representatives, need to get at the heart of why a manager wants to make such a change. Are there problems with performance? Does she/he have difficulty managing someone who works remotely? Are other people in the organization upset that the individual is allowed to work at home full time?

The times are changing and employees and some employers are looking toward having employees work from home. Remote workers, arguably, can be good but there can be limitations. If the manager sees issues, the solution isn’t to change the telecommuter into a contractor, but find a solution that works for the business.

If there are serious problems with performance that the previous manager ignored that could be corrected by bringing her into the office, then it’s possible to issue an ultimatum — but not one about being a 1099 worker. It would be, “Either work in the office, or we’ll have to let you go.” That can be a reasonable thing to ask, depending on the circumstances. However, if there have been no problems and she’s continuing to do a good job, her response will probably be, “Thanks, but no thanks.” Then you will be faced with replacing a good employee, and that is going to be expensive and time-consuming.

So get to the bottom of the “why” to help you come up with a solution. It needs to be a good and legal solution, and changing her to be a contractor is neither good nor legal.

If you’re looking to hire a contractor, remember that contractors must pay for their own benefits, including workers compensation and pay their own self-employment taxes. Follow the strict guidelines or stay away from this course of action.

 


Key Reminders for the Ten Minute Rest Break!

July 15, 2019

With all of the wage & hour litigation taking place, we are getting calls regarding the ten minute rest break. Here are some reminders.

  1. Timing of rest breaks

The 10-minute rest break must be provided to employees who work over three and a half hours.  Employers must authorize and permit employees to take 10-minute rest breaks for every four hours worked, or “major fraction” thereof.  A “major fraction” of four hours is anytime more than two hours.  Insofar as practicable, the rest breaks should be in the middle of each four-hour work period.

  1. Rest breaks must be paid and employees must be relieved of all duties

The rest period is considered time worked and must be paid.

Employees must be relieved of all duties during the rest break, and cannot be required to monitor a pager, phone, or other device during the rest break.  The Court in Augustus v. ABM Security Services, Inc., ruled that “one cannot square the practice of compelling employees to remain at the ready, tethered by time and policy to particular locations or communications devices, with the requirement to relieve employees of all work duties and employer control during 10-minute rest periods.” The Court made clear that the employee must be “free from labor, work, or any other employment-related duties. And employees must not only be relieved of work duties, but also freed from employer control over how they spend their time

3. Rest breaks need to be “authorized and permitted”

Employers are required to “authorize and permit” rest breaks, and there is no affirmative duty for employers to require that employees take rest breaks.  Employers need to ensure that they do not interfere with an employee’s ability to take the rest break, and if the demands of work are such that employees cannot take the rest break, employers should have a system in place to compensate the employee the applicable “wage premium” of one hour of pay at the employee’s regular rate of pay for any violations.

  1. Rest breaks do not need to be recorded

Unlike the 30-minute meal break, the 10-minute rest break does not have to be recorded in the timekeeping system.

  1. Piece rate employees must be paid separately for rest breaks

Employers who paid employees on a piece rate basis need to ensure they comply with Labor Code section 226.2, which took effect in January 2016.  Under Labor Code section 226.2, employers who paid employees on a piece rate basis must pay employees for “rest and recovery periods and other nonproductive time separate from any piece-rate compensation.”  The law requires employers to calculate the regular rate of pay for each workweek, and then pay the piece-rate employees the higher of this regular rate of pay or the applicable minimum wage for rest break time.  The law also requires employers to pay piece-rate employees for “nonproductive time” which is defined as “time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis.”  The nonproductive time is required to be paid at a rate no less than the applicable minimum wage rate.  In addition, employers who pay employees on a piece-rate basis need to report the pay for rest breaks, recovery periods, and nonproductive time separately on the employees’ pay stubs.  Employers with piece rate employees should consult with experienced counsel to ensure the correct amounts of time are being calculated and paid for under this law.


Reminder: Bonuses and Overtime Pay for Non-exempt Employees

July 8, 2019

Last week an employer announced a new bonus plan that could earn its employees up to an extra month of pay each year. The program is offered quarterly and can result in a bonus worth one week’s pay, calculated as an individual’s average weekly pay per quarter. To qualify for the quarterly bonus program, certain sales goals must be met.

This bonus program has the potential to be a great way for the employer to attract talent. It also, however, has the potential to pose an FLSA nightmare. Bonus payments often count as part of a non-exempt employee’s regular rate of pay, thereby increasing the overtime premium owed to that employee.

Section 7(e) of the Fair Labor Standards Act requires the inclusion in the regular rate of pay all remuneration for employment—except seven specified types of payments). Non-discretionary bonuses do not full under one of those seven exempted categories so for the purpose of this article don’t worry about it. A bonus paid pursuant to an incentive program (like the program the employer just announced) is the definition of “non-discretionary,” and therefore must be accounted for in the calculation of an employee’s regular rate of pay for overtime calculation purposes.

For purposes of calculating the regular rate of pay, the bonus does not have to be included in its entirety in the week it is paid. Instead, an employer can apportion the bonus amount back over the workweeks of the period during which it was 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 allocated to the bonus for that week multiplied by the number of statutory overtime hours worked during the week. If it is impossible to allocate the bonus, an employer can select some other reasonable and equitable method of allocation.

If a bonus payment already accounts for the overtime premium, then no additional payment is required. For example, a bonus plan may pay, as a bonus, a 10% premium of an employee’s total compensation, including overtime premiums. In this instance, the payment already covers overtime, and no additional overtime is required.

Like most wage and hour issues, the handling of bonus payments to non-exempt employees is complex, and presents a real trap for the unwary employer. If you are considering paying bonuses to hourly and salaried non-exempt employees, you should run it past employment counsel before making the payments to ensure you are committing an FLSA violation in the mechanics of the bonus payment.