Extremely Urgent Update!

June 25, 2013

We have been getting a number of calls as to any update regarding this very serious matter concerning not only technicians but anyone who pays on a commission or by piece rate basis. Here it is directly from the “horse’s mouth!”

Gonzalez v. Downtown LA Motors. Co-counsel for this dealership have filed a petition asking the California Supreme Court to review the decision of the court of appeal which held that dealers must pay service technicians minimum hourly wages for any hour or part of any hour when they are not working on a piece rate (flag hour) task. Amicus (friend of the court) letters asking the Court to hear the case have been filed by major trade associations, including the U.S. Chamber of Commerce, the National Retail Federation, the National Trucking Association, the California Chamber of Commerce, the Western Growers Association, The Employers Group, California Employment Law Council, and, of course, the California New Car Dealers Association. At least two plaintiffs’ lawyers group and a law firm representing labor unions will likely oppose the petition. The dealers’ position, in summary, is that piece rate and commission pay is embodied in the definition of “wages” in the Labor Code and that, when flat rate pay exceeds minimum wage, that pay covers all hours worked in the payroll period. That has been the understanding of the Legislature, the Industrial Welfare Commission, the State Labor Commissioner, and the courts for almost 100 years.
Some dealers have considered converting service technicians to hour pay and paying an additional bonus. If so, the bonus and the hourly pay in the payroll period must be added together and divided by the number of hours worked to determine the regular rate of pay for purposes of overtime.

The risk of back pay liability does not go away if a dealer converts to hourly pay, but the statute of limitations diminishes exposure day-by-day. Art Silbergeld (310) 772-8308, who is experienced in defending such claims and co-counsel on the appeal, has prepared a legal form to stay any related class action litigation while the Supreme Court ponders whether to review Gonzalez.

In the meantime, a federal district court in San Diego has applied the same legal theory used in Gonzalez to sales personnel at Nordstrom: when they are not directly involved in sales activities (for example, when they are stocking shelves or waiting for customers), they must be paid an hourly minimum wage even if their sales commissions in the payroll period far exceed minimum wage. An interim appeal to the Ninth Circuit has been filed. If not overturned, the rationale of the decision would require car dealers to pay sales personnel both a commission and an hourly wage.

Arthur F. Silbergeld
Dickstein Shapiro LLP
2049 Century Park East, Suite 700 | Los Angeles , CA 90067
Tel (310) 772-8308 | Fax (310) 772-8301

Criminal Background Checks: State v. Federal Law in Conflict

June 17, 2013

State and local jurisdictions also have laws and/or regulations that restrict or prohibit the employment of individuals with records of certain criminal conduct. Unlike federal laws or regulations, however, state and local laws or regulations are preempted by Title VII (Federal) if they “purport to require or permit the doing of any act which would be an unlawful employment practice” under Title VII. Therefore, if an employer’s exclusionary policy or practice is not job related and consistent with business necessity, the fact that it was adopted to comply with a state or local law or regulation does not shield the employer from Title VII liability.

Example A: State Law Exclusion Is Job Related and Consistent with Business Necessity. Elijah, who is African American, applies for a position as an office assistant at Pre-School, which is in a state that imposes criminal record restrictions on school employees. Pre-School, which employs twenty-five full- and part-time employees, uses all of its workers to help with the children. Pre-School performs a background check and learns that Elijah pled guilty to charges of indecent exposure two years ago. After being rejected for the position because of his conviction, Elijah files a Title VII disparate impact charge based on race to challenge Pre-School’s policy. The EEOC conducts an investigation and finds that the policy has a disparate impact and that the exclusion is job related for the position in question and consistent with business necessity because it addresses serious safety risks of employment in a position involving regular contact with children. As a result, the EEOC would not find reasonable cause to believe that discrimination occurred.

Example B: State Law Exclusion Is Not Consistent with Title VII. County Y enforces a law that prohibits all individuals with a criminal conviction from working for it. Chris, an African American man, was convicted of felony welfare fraud fifteen years ago, and has not had subsequent contact with the criminal justice system. Chris applies to County Y for a job as an animal control officer trainee, a position that involves learning how to respond to citizen complaints and handle animals. The County rejects Chris’s application as soon as it learns that he has a felony conviction. Chris files a Title VII charge, and the EEOC investigates, finding disparate impact based on race and also that the exclusionary policy is not job related and consistent with business necessity. The County cannot justify rejecting everyone with any conviction from all jobs. Based on these facts, County Y’s law “purports to require or permit the doing of an act which would be an unlawful employment practice” under Title VII.

Employer Best Practices

The following are examples of best practices for employers who are considering criminal record information when making employment decisions.

• Train managers, hiring officials, and decision makers about Title VII and its prohibition on employment discrimination.
Developing a Policy
• Develop a narrowly tailored written policy and procedure for screening applicants and employees for criminal conduct.
Identify essential job requirements and the actual circumstances under which the jobs are performed.
Determine the specific offenses that may demonstrate unfitness for performing such jobs.
 Identify the criminal offenses based on all available evidence.
Determine the duration of exclusions for criminal conduct based on all available evidence.
 Include an individualized assessment.
Record the justification for the policy and procedures.
Note and keep a record of consultations and research considered in crafting the policy and procedures.
• Train managers, hiring officials, and decision makers on how to implement the policy and procedures consistent with Title VII.
Questions about Criminal Records
• When asking questions about criminal records, limit inquiries to records for which exclusion would be job related for the position in question and consistent with business necessity.


• Keep information about applicants’ and employees’ criminal records confidential. Only use it for the purpose for which it was intended.

Note: Do not ask about arrests. An arrest is not a conviction. It is illegal, especially in California, to ask if an applicant has ever been arrested. If you are using a third party administrator to conduct criminal background checks on applicants make sure their paperwork does not ask about arrests. You can still be held liable because you are ultimately making the hiring decision.

Another Emerging Trend: Miscalculation of Overtime Compensation

June 10, 2013

Two recent class action lawsuits illustrate an emerging trend in wage and hour class action litigation, namely, claims for failure to pay overtime wages based on the improper calculation of the employees’ overtime rates.

The first lawsuit, filed against clothing retailer Forever 21 by a former 13-year employee, alleges that employees were not paid all of their overtime wages due to Forever 21’s failure to take into account non-discretionary bonuses and incentive pay when calculating the employees’ overtime rates. Juana Diaz, the plaintiff in this lawsuit, seeks to represent all of Forever 21’s hourly warehouse employees in the State of California. This lawsuit was filed May 24, 2013 in the Los Angeles County Superior Court.

In the second lawsuit, plaintiff William Sullivan seeks to represent non-exempt employees of Lyon Management Group, a property management company, in a similar claim. Sullivan alleges that Lyon failed to include the employees’ commissions and bonuses when calculating their overtime rates. This lawsuit was filed May 8, 2013 in the Orange County Superior Court.

Although the outcome of these cases remains to be seen, two recent decisions finding such claims suitable for class certification confirm the viability of class certification of claims based on the improper calculation of overtime rates. In a May 10, 2013 decision in the case of Faulkinbury v. Boyd & Associates, Inc., a California appellate court ruled that the question of whether annual bonuses must be included in calculating the overtime rates of the proposed class was appropriate for class certification. On May 28, 2013, the federal Court of Appeals for the Ninth Circuit overturned a lower court decision denying class certification in Levya v. Medline Industries, Inc. The plaintiffs in that action sought to represent over 500 employees on a number of claims, including a claim that nondiscretionary bonuses had been improperly excluded from overtime rates. The federal court ordered the proposed class certified.

The calculation of an employee’s overtime rate varies from case to case. Federal and California laws state that an employee’s overtime rate is based on that employee’s “regular rate of pay,” which includes all of the compensation the employee normally receives for the work performed for the employer. In many cases, it is not enough to look only at the employee’s hourly rate. The employer must also include any other compensation normally paid to the employee for their work including salary, piecework earnings, non-discretionary bonuses, and commissions in the regular rate of pay. Conversely, discretionary bonuses, payments in the nature of gifts on special occasions, and contributions by an employer to certain welfare plans generally are not included in the calculation of the “regular rate of pay.” Whether a particular type of compensation should be included in the regular rate of pay is a very fact-specific determination. The cases above make clear that employers of all sizes should review their practices to ensure that the regular rate is being properly calculated. As cases have illustrated, this is an issue that lends to class certification, which greatly increases the risk and exposure of a potential claim.

New Regulation Permits Employees to Bring Animals to Work-Ducks? Pigs? Birds?

June 3, 2013

California’s newest regulations pertaining to the rights of the disabled in the workplace require employers to allow “assistive animals” in the workplace as a reasonable accommodation to certain disabled employees.

While service dogs for the visually and hearing impaired have become a more common sight in California’s workplaces, the regulations specifically permit other animals that provide “emotional or other support to a person with a disability….”

An employer need not play “possum” when confronted with an employee’s request to bring an assist animal to the office. First, an employer may require the employee to provide medical certification from the employee’s health care provider (which, broadly defined, now includes therapists, acupuncturists, dentists, physicians, clinical social workers, nurse practitioners, midwives, chiropractors, optometrists, psychologists, and podiatrists) certifying that the employee has a disability and that explains why the assist animal provides an accommodation.
Still got your goat? An employer may also require a certain level of training, namely that the assist animal
• is free from offensive odors and displays habits appropriate to the work environment, for example, the elimination of urine and feces;
• does not engage in behavior that endangers the health or safety of the individual with a disability or others in the workplace; and
• is trained to provide assistance for the employee’s disability.

But an employer must act jackrabbit quick, because it is only within the first two weeks that the assist animal is reporting to the workplace that an employer is expressly permitted to challenge the animal, based on objective evidence of offensive or disruptive behavior. (It is not clear what happens if an animal becomes violent, dangerous or its toilet training breaks down after the first two weeks). Thereafter, annually, the employer may (and should) require annual re-certification of the employee’s continued need for the support animal.
As assist animals become more common in the workplace, employers will increasingly be confronted by the potential conflict and disruptions that service animals will provide. Not only the distraction from the getting the job done, but other employees’ claims of allergy and other reactions to the animals which may then require additional accommodations. It is not clear how the courts will react to these cases as there is no precedent.

Here we go again!!