New Overtime Law May Be Delayed!

October 31, 2016

New Overtime Law May Be Delayed

We have been continually keeping our readers updated regarding the new law effective December 1, 2016. As you know, the final rule updating the federal overtime regulations was published in May 2016. The biggest impact of the new rules is the huge increase in the minimum salary required to qualify as exempt from overtime under the FLSA’s executive, administrative, and professional exemptions.  Under the new rules, the minimum salary to qualify for exempt status is $47,476 (more than double the existing minimum) and is subject to further automatic increase on January 1, 2020 and every three years thereafter.  Industry groups have voiced strong opposition to the new rules, prompting members of Congress to introduce legislation seeking to delay implementation of the new rules by six months.  The House passed one such bill, HR 6094.  A similar bill has been introduced in the Senate.  However, President Obama has already vowed to veto these bills should they reach his desk.

Meanwhile, industry groups and a coalition of 21 states have filed two separate lawsuits in the Eastern District of Texas seeking to block the new overtime rules.  A motion for a preliminary injunction to halt the implementation of the new rules is set for hearing on November 16.   The industry groups have also filed a motion for summary judgment with a request for an expedited hearing before December 1.  Both lawsuits allege that the overtime regulations were issued in excess of applicable authority and should be declared unlawful and set aside.  Notably, these lawsuits are pending before the same District Court that just issued an order enjoining most aspects of the Obama administration’s Fair Pay and Safe Workplaces Executive Order (and implementing regulations) that was scheduled to take effect October 25, 2016.

Importantly, as of now, the overtime regulations are still scheduled to take effect December 1, 2016, and employers are still urged to take steps to ensure timely compliance if they have not already done so.  This means that employers should review the compensation levels for their exempt executive, administrative, and/or professional employees to determine which employees’ salaries are below the new $47,476 threshold.  For employees whose compensation does not meet the new minimum salary threshold, employers should determine whether to (1) give the employee a salary increase to at least the new minimum; or (2) re-classify the employee to non-exempt and start tracking hours worked and paying overtime compensation in accordance with the FLSA and applicable state law(s).

Stand by! We will update you after the ruling on November 16th.

Accrued Vacation on the Pay Stub.

As California employers are increasingly aware, California has a unique law requiring employee wage statements (pay stubs) to include specific items of information.  Failure to include all such information, completely and accurately, exposes an employer to substantial penalties.  The plaintiffs’ employment bar has of course seized on the opportunity to profit off of this law because of the automatic right of a prevailing plaintiff to recover attorneys’ fees.  Claims alleging inaccurate and incomplete wage statements and seeking penalties on behalf of all aggrieved employees under PAGA have been filed in droves.  One such lawsuit was filed against Motel 6, alleging that this employer violated California wage statement law by failing to include the monetary amount of employee’s accrued vacation on their pay stubs.  Yesterday, a California Court of Appeal upheld the dismissal of this claim, ruling that California law does not require the monetary amount of accrued vacation time to be included on employees’ pay stubs (unless and until the accrued vacation time is paid out on termination of employment).

The court rejected the plaintiff’s argument that because accrued vacation/PTO is considered a form of “wages” in California and wage statement law requires that gross wages and net wages earned during the pay period be itemized on the pay stub, this means that the monetary amount of vacation “wages” earned during the pay period must be itemized on the pay stub.  Rejecting this argument, the court reasoned that an employee does not have any entitlement to be paid the value of accrued vacation until termination of employment and, as such, until termination of employment accrued vacation is just a benefit and not a wage earned during the pay period that must be itemized on an employee’s pay stub.


By Law: Employers Must Post 2 Hours Paid Voting Time Off!

October 24, 2016

Yes, believe it or not, employers are reminded that California law requires you to post a notice 10 days before the election informing employees of their voting rights under state law. Specifically, employees must be informed that if they do not have sufficient time outside of working hours to vote, they may take off enough working time that, when added to the voting time available outside of working hours, will enable them to vote.  Up to two hours of this time must be paid.  The employer can require that the time off for voting be taken at the beginning or end of the employee’s shift, whichever allows the most free time for voting and the least time off from the regular working shift.

If the employee knows or has reason to believe that time off will be necessary to be able to vote on election day, the employee must give the employer at least two working days’ notice that time off for voting is desired.

Importantly, the law does not include any provision allowing employers to require employees to use accrued paid time off for time taken off to vote.

The polls in California are open from 7:00 a.m. to 8:00 p.m. Accordingly, the vast majority of employees should not require time off to vote. Employers should, however, post the required notice and assess requests for time off, and grant them when justified.  The notice must be posted conspicuously where employees work, or where it can be seen as employees come or go to the place of work.

If you need the notice contact the office and we can fax or email it to you. We have it in both English and Spanish.

Overtime Credit for Paid Lunches?

October 17, 2016

The Fair Labor Standards Act does not require paid lunches for employees. Indeed, quite to the contrary, the FLSA provides that meal breaks can be unpaid. What happens, however, to an employee’s overtime compensation if the employer pays an employee for non-working lunches? Is the employer entitled to use the extra compensation for the paid lunches to offset other overtime compensation? Nothing in the FLSA authorizes this type of offsetting where an employer seeks to credit compensation that it included in calculating an employee’s regular rate of pay against its overtime liability.

Instead, one federal court decision points out, the FLSA only permits employers to take an offset against overtime payments in three limited circumstances, each of which involves some component of premium pay in excess of an employee’s regular hourly rate:

  • Extra compensation provided by a premium rate paid for certain hours worked by the employee in any day or workweek because for hours worked in excess of eight in a day or in excess of the employer’s defined maximum workweek.
  • Extra compensation provided by a premium rate paid for work by the employee on Saturdays, Sundays, holidays, or regular days of rest, or on the sixth or seventh day of the workweek, where such premium rate is not less than one and one-half times the rate established in good faith for like work performed in non-overtime hours on other days.
  • Extra compensation provided by a premium rate paid to the employee, in pursuance of an applicable employment contract or collective-bargaining agreement, for work outside of the hours established in good faith by the contract or agreement as the basic, normal, or regular workday (not exceeding eight hours) or workweek (not exceeding the employer’s defined maximum workweek), where such premium rate is not less than one and one-half times the rate established in good faith by the contract or agreement for like work performed during such workday or workweek.

Come December 1, the DOL is adding more than four million employees to the doles of overtime eligibility. Employer are doing to look for ways to limit their overtime exposure to keep payrolls under control. Be aware, however, that taking a credit against overtime for paid lunches is one option not available to employers.


Pending Laws That Are Now Reality!

October 10, 2016

As previously reported, September 30 was the last day for Governor Brown to sign or veto bills passed by the California legislature this session.  Here is the final report on bills that were signed into law and vetoed:


SB 654 (Expanded Parental Leave Rights):  This bill would have required an employer having 20 or more employees within 75 miles of a requesting employee’s worksite to provide the employee up to 6 weeks of leave to bond with a new child, if the employee has at least 12 months of service and has worked at least 1250 hours in the 12 months preceding the request for leave.  The employee would be entitled to use accrued paid time off during the leave and the employer would be required to continue group health benefits during the leave.  The employee would be entitled to an upfront guarantee of reinstatement to the same or comparable position.  This leave would have been on top of the four months of pregnancy disability leave California employers are required to provide to employees disabled because of pregnancy, but would not have been on top of any FMLA/CFRA leave entitlements.

Signed Into Law:

AB 1066 (Overtime Pay and Meal and Rest Periods for Agricultural Workers):  This bill will eliminate the present exemption from meal and rest break and day of rest requirements for agricultural workers, and will also phase in overtime compensation requirements for these workers over the next several years.  For employers with more than 25 employees, agricultural workers will have to be paid time and one-half for hours worked in excess of 9.5 hours per day and/or 55 hours per week, starting January 1, 2019.  Starting January 1, 2020, the time and one-half obligation kicks in for all hours worked in excess of 9 hours per day or 50 hours per week.  Starting January 1, 2021, the time and one-half obligation kicks in for all hours worked in excess of 8.5 hours per day or 45 hours per week, and starting January 1, 2022, time and one-half will be owed for all hours worked in excess of 8 per day or 40 per week.  For employers with 25 or fewer employees, the overtime phase-in schedule does not start until January 1, 2022.

SB 1241 (Choice of Forum/Choice of Law Provisions):  This bill adds section 925 to the Labor Code and will apply to contracts between employers and employees that are entered into, modified, or extended on or after January 1, 2017.  This new law prohibits employees who primarily reside and work in California from being required, as a condition of employment, to agree to a forum outside California for adjudication of disputes.  It also prohibits these employees from being required to agree to a choice of law provision stating that the laws of a state other than California will govern a dispute between the employer and the employee, if the choice of law provision would deny the employee a substantive protection of California law (e.g. a state law that permits non-compete agreements whereas California law generally does not).  This law applies to both court and arbitral forums for resolution of disputes.  Any contractual provision that is contrary to the new law is voidable by the employee, and the employee is entitled to recover attorneys’ fees incurred to enforce his or her rights under the new law.  These choice of forum/choice of law prohibitions would not apply to a contract negotiated between an employer and an employee where the employee was represented by legal counsel in negotiating the agreement.

AB 1676 (Equal Pay Act Amendment):  This bill amends California’s Equal Pay Act, which makes it unlawful to pay employees of one gender less than similarly situated employees of the opposite gender, to expressly provide that prior salary alone is not alone a sufficient justification for a pay disparity.

AB 1843 (Juvenile Convictions):  This bill amends California Labor Code section 432.7 to prohibit employers from inquiring about, or from utilizing as a factor in determining any condition of employment, information relating to convictions, arrests, or similar actions under the jurisdiction of a juvenile court.

AB 2899 (Labor Commissioner Proceedings): This bill amends Labor Code 1197.1 to provide that an employer wishing to appeal (by writ of mandate) a citation issued by the Labor Commissioner for payment of less than minimum wage must first post a bond with the Labor Commissioner covering the amount of unpaid wages found to have been owed.

SB 1001 (Remedy for Unlawful Verification of Right to Work):  This bill adds section 1019.1 to the Labor Code and makes it an unlawful employment practice for an employer, in the course of verifying an applicant’s authorization to work, to (1) request more or different documents than are required under federal law; (2) refuse to honor documents tendered that on their face appear to be reasonably genuine; (3)  refuse to honor documents or work authorization based upon the specific status or term of status that accompanies the authorization to work; or (4) attempt to reinvestigate or re-verify an incumbent employee’s authorization to work using an unfair immigration-related practice. An applicant or employee subject to a violation of this law is entitled to file a complaint with the Department of Labor Standards Enforcement and recover a penalty of $10,000 per violation.

AB 2337 (Notice to Employees of Rights Concerning Domestic Violence/Stalking):  Existing California law provides employees who are victims of domestic violence, sexual assault, and/or stalking the right to take time off from work in specified circumstances.  This bill will now require employers to give new employees written notice of these rights upon hire and to provide notice to current employees upon request.  The bill also requires the Labor Commissioner, by July 1, 2017, to prepare a form notice for employers to use to satisfy the requirements of this new law.  Employers are not required to comply with the notice requirements until the Labor Commissioner’s notice form is posted on its website.

SB 1063 (Equal Pay – Race and Ethnicity):  This bill expands California’s equal pay law, which currently prohibits wage differentials based on gender, to prohibit employers from paying employees of one race or ethnicity less than similarly situated employees of a different race or ethnicity.

SB 1167 (Heat Illness Prevention for Indoor Workers):  This bill requires Cal-OSHA, by January 1, 2019, to propose standards for heat illness prevention for indoor workers, similar to those currently in place for outdoor workers.

AB 2535 (Wage Statements): This bill clarifies the requirements of California wage statement law to make clear that wage statements need not include hours worked data for employees who are exempt and not paid based on hours worked.

New laws take effect January 1, 2017 unless otherwise noted.


Update: New Exempt Law Might be Stalled!

October 3, 2016

On December 1, the Department of Labor’s new salary test for exempt employees is set to take effect, raising the salary level to qualify for certain white collar overtime exemptions from $455 per week to $913 per week. That is, it is set to take effect if the two lawsuits filed yesterday don’t delay or outright stop the rules from taking effect. Recently, Ohio joined Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, Nevada, New Mexico, Oklahoma, South Carolina, Texas, Utah, and Wisconsin in a lawsuit against the United States Department of Labor, its secretary, and other federal officials seeking to halt the new overtime rules. Separately, but in the same court, a coalition of more than 50 business groups, including the U.S. Chamber of Commerce, the National Association of Manufacturers, the National Retail Federation, National Automobile Dealers Association, and the National Federation of Independent Business, also filed a lawsuit.

The U.S. Chamber of Commerce also is in opposition to the impending overtime rule and stated:

“The DOL went too far in the new overtime regulation. We have heard from our members, small businesses, nonprofits, and other employers that the salary threshold is going to result in significant new labor costs and cause many disruptions in how work gets done. Furthermore, the automatic escalator provision means that employers will have to go through their reclassification analysis every three years. In combination, the new overtime rule will result in salaried professional employees being converted to hourly wages, and it will reduce workplace flexibility, remote electronic access to work, and opportunities for career advancement.”

Now it is up to a federal judge in Sherman, Texas, to decide whether, and when, the new FLSA’s new salary threshold takes effect. We are less than two months away before these new regulations are to take hold. It remains to be seen what impact, if any, this lawsuit has on these regulatory changes. Given that these lawsuits could have been filed in just about any federal court, one must assume that there is some logic to the filing in the Eastern District of Texas and some belief that its forum will be favorable to the plaintiffs. We should get some guidance in advance of December 1 on the requests for preliminary injunctive relief.

There may be hope yet! I will keep you posted.