Designing The Workweek To Avoid Paying Overtime

April 25, 2011

A California court held this week that an employer failed to properly pay overtime to its employees by artificially designing the workweek so as to avoid payment of overtime due for the 7th consecutive day of work.  The court further held that on-call time needed to be paid as hours worked where employees were required to sleep aboard the employer’s ships and otherwise be within 45 minutes of the ship. 

In Seymore v. Metson Marine, Inc., the plaintiffs worked 14 day “hitches” (alternating with 14 day rest periods) on the employer’s ships, performing cleanup of oil spills and other environmental hazards. The employer designated the workweek to start and end in such as way as to avoid paying 7th day overtime compensation on the 14th day of work.  As a result, the plaintiffs only received the 7th day premium on the 7th day of work, but not the 14th.  Although the court acknowledged various legal authorities supporting an employer’s right to designate the workweek for payroll purposes, the court held that where the purpose of the designation appears designed solely for the purpose of evading overtime compensation, it is not permissible.  The court held that in this case there was no evidence presented that the designation was for any reason other than evading overtime compensation requirements.

The court also held that the employer failed to properly compensate employees for on-call time.  Within the 14-day work period, the plaintiffs had periods of “off-duty, standy-by” time where they were permitted to leave the ship and do personal errands and the like.  However, they were required to carry a cell phone or pager, refrain from alcohol consumption, and be within 30-45 minutes of the ship in the event of an emergency.  The court held that this stand-by time was hours worked and needed to be paid as such because the employees were subject to the control of the employer.

The only good news for the employer in this case was that the court at least acknowledged that the employees’ sleep time on the ship was not compensable as hours worked.  Plaintiffs had actually sought to be paid for this eight hours of sleep time each day.

It would not be surprising if the employer seeks review of this decision by the California Supreme Court.  In the meantime, employers should use caution in designating their workweeks in such a way as to evade overtime compensation requirements.  Employers with on-call employees are advised to think about changing their schedules consistent with the above.

Service Advisors-Exempt v. Nonexempt

April 17, 2011

We have received many telephone and email inquiries regarding whether or not service advisors are exempt or nonexempt. The article below has been written by Art Silbergeld, Attorney-at-Law, and my long time mentor.

The U.S. Department of Labor has refused to clarify its long-standing position that that service advisors are exempt from overtime.  Although the Department of Labor’s current regulation states that a service manager, service writer, service advisor or service salesman who is not primarily engaged in the work of a salesman, partsman or mechanic is not exempt, since 1987 it has agreed in its enforcement handbook not to deny exempt status to service advisors in enforcing this regulation.

 In 2008, the Department agreed to formally adopt the position that would continue to treat service advisors as exempt from overtime.  Caving in to pressure from the AFL-CIO, however, which would want a member union seeking to represent service department employees to include service advisors in bargaining unit, the Department onApril 5, 2011abandoned its enforcement position.  The Department now regards the regulation as binding and thereafter will hold dealerships responsible for paying service advisors overtime.

 Dealerships must now require service advisors to keep accurate daily time records, including time in, time out to lunch and back, and time out at the end of the day.  Regardless of whether the service advisor is paid on a commission or base plus commission basis, the service advisor will be eligible for overtime pay for work in excess of 40 hours per week and, inCalifornia, for work in excess of 8 hours per day.  Each service advisor’s “regular rate of pay” will be calculated on salary plus commission.  The California Labor Commissioner calculates the regular rate as 1/40th of this amount.  Overtime pay will be calculated at 1.5 times the regular rate times the number of hours over 40 or 8, but not both.

 Dealerships should anticipate litigation from attorneys seeking to represent a class of service advisors seeking back pay.  Whether a court will honor the defense that the dealer relied in good faith on the Department of Labor’s 1987 enforcement guideline remains a prospect.  Dealerships should also anticipate possible audits by the Department of Labor and the California Division of Labor Standards Enforcement.

Arthur F. Silbergeld

(310) 255-9077

Superior Court Judge Rules On Behalf of Technicians-Pay Them Extra for Standing Around!

April 11, 2011

A Los Angeles Superior Court Judge in her infinite wisdom has ruled that technicians are entitled to be compensated for standing around as they are awaiting their next job assignment. The decision has a far reaching effect because it could/will potentially involve any employee who is being paid by “piece rate.”  

This particular case was a wage and hour class action lawsuit filed by 108 current and former service technicians of a car dealership (I am deliberately withholding the name!) who worked between April 2002 and June 2008. As you can see this case has been going on for awhile. The techs in this case had three initial issues that were presented on their behalf. The first was based on missed meal periods, the second; uncompensated time spent while on the clock (waiting time); and the third for penalties for failure to pay the waiting time at the time of termination. The meal period claim was eventually tossed out and the main focus of the case was the issue as to whether the techs in question should be paid (while on the clock) as they stood around waiting for their next assignment.   

Now, understand what this means. The techs clock in every day and as we know they get either their flag hours or they get paid for their actual clocked hours whichever is greater. Documentary evidence at the trial showed that the techs may have stood around (as an average) .3 and .8 of an hour during one time frame (going back to 2002) but between 2006 and 2008 they averaged 1.85 hours per day.

The Judge determined that even though the employer paid the techs the minimum wage of $16.00 per hour for all clocked hours, and were paid the greater of those hours and flagged hours, the techs should have also been paid for the time during which the techs was still subject to the control of the employer whether he had an actual assignment or not.

This is a ridiculous decision! If the techs are being paid for the clocked hours or flagged hours, why should they be paid an additional amount for merely waiting for their next assignment? This Judge is requiring they the techs clock the time that they are standing around to determine what the additional amount they would be owed (pinch me mama I must be dreaming!!). This is going to create a nightmare for record keeping as well as open the flood gates of litigation for similar claims.

This is a case that is probably heading to the California Supreme Court which means this issue will be lingering for the next couple of years. In the interim, it is hard to determine what employers should do because they same issue could be argued at the Labor Board level or another court action all of which render a contrary decision. At a minimum employers need to keep accurate time keeping records as to any time a tech is not physically working on an assignment. A log of some sort may be helpful. I am shooting from the hip on this because the truth is we just don’t know what this judge expects employers to do moving forward.

NEW Proposed Legislation Requires Accommodation Of Medical Marijuana

April 4, 2011

Here we go again! A few weeks ago we reported a favorable decision that employers did not have to accept medical marijuana certificates, the California Legislatures are weighing in!This ongoing debate on California employers’ right to enforce a drug free workplace has been revived in Sacramento as the Legislature considers Senate Bill 129.  SB 129, similar to legislation previously vetoed by then-Governor Schwarzenegger, “would declare it unlawful for an employer to discriminate against a person in hiring, termination, or any term or condition of employment” for the lawful use of medical marijuana, “except as specified.”  The “as specified” language permits termination or discipline of an employee “who is impaired on the property or premises of the place of employment, or during the hours of employment.”  In other words, SB 129 prohibits employers from taking corrective action against employees using medical marijuana, unless the drug use “impairs” job performance.  Under the proposed legislation, an employee who returns from lunch smelling strongly of marijuana cannot be disciplined unless the employer can demonstrate that the employee’s job performance is impaired as a result of the drug use.  In contrast, an employer is permitted to prohibit alcohol consumption during the workday, regardless of whether the alcohol impacts job performance.  What is more, denial of employment to a cannabis-using job applicant is prohibited under the proposed legislation.  California employers would not be able to deny employment based on an applicant testing positive for “medical” marijuana in the course of pre-employment drug screening.

Given the ease of obtaining a medical marijuana “prescription,” should SB 129 pass, employers can expect to see an increase in discrimination claims as employees allege that that their termination was based not on poor job performance, but on legal use of marijuana.

This is going to be interesting. The Feds have held in the past that California employers do not have to accept these marijuana certificates and have even raided the marijuana vending machine outlets from time to time. Since Jerry Brown is back as Governor, the odds are good that should the bill reach his desk he will sign it into law. I will keep you posted.