January 2017 Update
Effective January 1, 2016, company owners, directors, officers, or managing agents may be held individually liable as the employer for wage and hour violations. Lab C §558.1. See §1.3.
Labor Code §220(a) exempts the State of California from compliance with certain provisions governing the timing and location of wage payment. The state remains responsible for waiting time penalties under Lab C §203 for wages owed at separation to employees who are terminated, resign, or retire. See McLean v State (2016) 1 C5th 615. See §1.10.
Effective January 1, 2017, Lab C §925 prohibits employers from requiring employees who primarily reside and work in California, as a condition of employment, to agree to contract provisions that apply another state's law, require adjudication of labor disputes in another state, or deprive the employee of the substantive protection of California law with respect to a controversy arising in California. See §1.12.
The current minimum wage for employers with more than 25 employees is $10.50 per hour, effective January 1, 2017. Lab C §1182.12; Wage Order No. MW-2014 (8 Cal Code Regs §11000). Beginning January 1, 2017, California began staging incremental increases to the minimum wage, to reach $15.00 per hour by January 1, 2022 (companies with more than 25 employees) and January 1, 2023 (companies with 25 employees or less). See §§1.15, 5.15.
The California Supreme Court has granted review on the issue of whether California applies the federal de minimis standard (permitting employers to disregard a few seconds or minutes of work beyond scheduled working hours) to wage claims. Troester v Starbucks Corp. (review granted Aug. 17, 2016, S234969) 2016 Cal Lexis 6801 (question of state law certified to the court by the U.S. Court of Appeals for the Ninth Circuit under Cal Rules of Ct 8.548). See §1.19.
The California Supreme Court granted review in Alvarado v Dart Container Corp. of Cal. (review granted May 11, 2016, S232607; superseded opinion at 243 CA4th 1200), to address the proper method for calculating the rate of overtime pay when an employee receives both an hourly wage and a flat sum bonus. See §1.24.
Failure to pay premium wages for meal and rest period violations constitutes a predicate for restitution claims under the Unfair Competition Law (UCL) (Bus & P C §§17200–17210). Safeway, Inc. v Superior Court (2015) 238 CA4th 1138. See §1.37.
Attorney's fees recoverable under Lab C §203 for waiting time penalty claims may not be premised on Lab C §226.7 violations. Ling v P.F. Chang's China Bistro, Inc. (2016) 245 CA4th 1242, 1261. See §1.37.
Federal district courts are split on whether premiums owed at separation from employment give rise to claims for waiting time penalties under Lab C §203. See, most recently, Parson v Golden State FC, LLC (ND Cal, May 2, 2016, No. 16-cv-00405-JST) 2016 US Dist Lexis 58299 (permitting Lab C §203 claims). But see Jones v Spherion Staffing LLC (CD Cal, Aug. 7, 2012, No. LA CV11-06462 JAK (JCx)) 2012 US Dist Lexis 112396 (denying Lab C §203 claims for Lab C §226.7 violations). See §1.37.
District courts have declined to find interest recoverable for claims under Lab C §226.7. See, e.g., Van v Language Line Servs. (ND Cal, June 6, 2016, No. 14-CV-03791-LHK) 2016 US Dist Lexis 73510 ("because this claim is not an ‘action brought for the nonpayment of wages'"). See §1.37.
An initial 12-month waiting period before vacation benefits accrue, and satisfaction of minimum hours of service requirements do not violate the anti-forfeiture protections of Lab C §227.3. Tschudy v J.C. Penney Corp. (SD Cal, Mar. 30, 2016, No. 11cv1011 JM (KSC)) 2016 US Dist Lexis 44221. See §1.42.
When employers make salary decisions during the hiring process based on prospective employees' prior salaries or require women to disclose their prior salaries during salary negotiations, women often end up at a sharp disadvantage, especially if they're returning to the workplace following extended time off. The result: Historical disparities in pay between men and women get perpetuated. An amendment to the California Fair Pay Act (Lab C §1197.5) addresses this issue by not allowing employers to use prior salary, by itself, to justify a disparity in compensation. Lab C §1197.5(a)(3), discussed in §1.49A.
The California Legislature has taken the next logical step toward the goal of equal pay for equal work with another amendment to the Fair Pay Act. Effective January 1, 2017, the Act provides that an employer must not pay any of its employees at wage rates less than the rates paid to employees of another race or ethnicity for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions. Lab C §1197.5(b). See §1.49A.
Labor Code §2802 precludes an employer from requiring employees to reimburse mandated training costs. In re Acknowledgment Cases (2015) 239 CA4th 1498. Optional educational expenses are subject to repayment. USS-Posco Indus. v Case (2016) 244 CA4th 197. See §1.51.
The Labor Code Private Attorneys General Act of 2004 (PAGA) (Lab C §§2698–2699.5) can be used to enforce penalties for suitable seating requirement violations. In these actions, the California Supreme Court has ruled that an objective inquiry, involving a "totality of the circumstances" approach, should be used, considering tasks together based on their location and the feasibility of allowing seated work, as well as an employer's reasonable expectations and the physical layout of the workspace. Kilby v CVS Pharmacy, Inc. (2016) 63 C4th 1. See §1.54.
The Department of Labor has changed the overtime exemption under the Fair Labor Standards Act of 1938 (FLSA). The regulations change both the salary and duties test. The changes were effective on December 1, 2016. The initial increase to the salary level changed from $455 to $913 per week. Future automatic updates will occur every 3 years, beginning on January 1, 2020. 29 CFR pt 541. See §2.2.
The Department of Labor has released a new guidance on joint employment under federal law: DOL Wage and Hour Division Administrator's Interpretation No. 2016–1, Joint employment under the Fair Labor Standards Act and Migrant and Seasonal Agricultural Worker Protection Act (Jan. 20, 2016). See §§3.37, 15.25.
Whether a particular compensation plan is appropriately characterized as a piece-rate pay plan is an issue of fact. Where employees were given a specified amount of time to perform a task but could adjust that time if the time actually spent varied from the specified amount, the employees were not paid on a piece-rate basis. Vasquez v First Student, Inc. (CD Cal, Mar. 12, 2015, No. 2:14-CV-06760-ODW (Ex)) 2015 US Dist Lexis 30631. See §4.5.
Effective January 1, 2016, the judicial limitations on the activities for which a piece rate can provide compensation were codified in Lab C §226.2. Section 226.2 requires compensation for rest and recovery periods and for nonproductive time that is separate from piece-rate compensation. See §4.5.
A failure to provide separate compensation for nonproductive time may be a violation of Lab C §221. Villalpando v Exel Direct Inc. (ND Cal, Sept. 3, 2015, No. 12-cv-04137-JCS) 2015 US Dist Lexis 118065. See §4.5A.
In Corbin v Time Warner Entertainment–Advance/Newhouse Partnership (9th Cir 2016) 821 F3d 1069, the court found that cumulative over- and underpayments from rounding resulted in a de minimis claim that was not cognizable. See §4.7.
The California Supreme Court will determine the extent to which the federal de minimis rule applies under California's wage payment laws. Troester v Starbucks Corp. (review granted Aug. 17, 2016, S234969) 2016 Cal Lexis 6801 (question of state law certified to the California Supreme Court by the U.S. Court of Appeals for the Ninth Circuit under Cal Rules of Ct 8.548). See §4.9A.
In Balistreri v Menlo Park Fire Protection Dist. (9th Cir 2015) 800 F3d 1094, the court held that firefighters who were free to take gear home were not entitled to compensation for gathering and transporting that gear to work, as those activities were not "intrinsic" to the primary activity of fighting fires. See §4.11.
In USS-Posco Indus. v Case (2016) 244 CA4th 197, the court held that a voluntary training, which was one of several ways to satisfy a training prerequisite for a job and which did not include any employer-specific training, was not "required" training such that the obligation to reimburse expenses under Lab C §2802 was triggered. See §4.18.
California considers the compensability of standby time under somewhat different terms than those used under the Fair Labor Standards Act (FLSA) (29 USC §§201–219), but many of the same criteria are used to determine whether standby time is work time. See Mendiola v CPS Sec. Solutions, Inc. (2015) 60 C4th 833, 841. See §4.23.
Although there is no legal requirement that a waiver of a meal period be in writing, employers should obtain those waivers in writing. Otherwise, an employer may not be able to meet its burden of showing that meal periods, which by employees' time entries appear to have been missed, were, in fact, waived. Safeway, Inc. v Superior Court (2015) 238 CA4th 1138. See §§4.30, 4.33.
An employer's failure to apportion commissions between an employee who wishes to take a meal and his or her substitute, may result in an impermissible incentive to skip meal periods. Klune v Ashley Furniture Indus., Inc. (CD Cal, Apr. 3, 2015, No. CV 14-3986 PA (FFMx)) 2015 US Dist Lexis 44855. See §4.33.
The exact nature of the premiums for missed meal and rest periods has not been fully determined. The 1 hour of pay was deemed to be a wage and not a penalty for purposes of the statute of limitations. Murphy v Kenneth Cole Prods., Inc. (2007) 40 C4th 1094. The premiums are not, however, wages for purposes of determining prevailing-party attorney fee awards. Kirby v Immoos Fire Protection, Inc., supra. See also Parson v Golden State FC, LLC (ND Cal, May 2, 2016, No. 16-cv-00405-JST) 2016 US Dist Lexis 58299 (concluding that meal period premiums are wages for purpose of waiting time penalties, acknowledging split of authority regarding issue). See §4.34.
In Saechao v McCormick & Schmick Restaurant Corp. (ND Cal, Mar. 15, 2016, No. C 15-00815 WHA) 2016 US Dist Lexis 33409, the court noted the division of authority as to whether an employee voluntarily scheduling a split shift would trigger a split-shift premium. See §4.39.
In Mendoza v Nordstrom, Inc. (review granted Apr. 29, 2015, S224611) 2015 Cal Lexis 2399, three questions of state law were certified to the California Supreme Court by the U.S. Court of Appeals for the Ninth Circuit under Cal Rules of Ct 8.548:
1. Is the day of rest obligation calculated based on workweeks or periods of 7 consecutive days?
2. Is the day of rest obligation avoided when an employee works fewer than 6 hours on any day of the applicable week?
3. What does it mean to "cause" an employee to work more than 6 days in 7?
Beginning January 1, 2017, employers with ten or more employees must electronically submit employment tax returns, wage reports, and payroll tax deposits to the Employment Development Department (EDD). All remaining employers will be subject to this requirement beginning January 1, 2018. Un Ins C §1112(a). See §5.6.
Assembly Bill 2535, effective January 1, 2017, amends Lab C §226 and clarifies that total hours worked do not need to be reported for those employees who are exempt from minimum wage and overtime and whose pay is not determined by hours worked, in addition to exempt salaried employees (e.g., outside sales employees). See Lab C §226(j). See §5.6.
As noted above, in Parson v Golden State FC, LLC (ND Cal, May 2, 2016, No. 16-cv-00405-JST) 2016 US Dist Lexis 58299, the court reviewed the relevant case law and concluded that payments required by Lab C §226.7 should be considered wages; accordingly, plaintiffs may bring derivative claims under Lab C §204. The court found there is no authority to suggest that wages awarded under Lab C §226.7 should be treated any differently than other wages earned by employees. See §5.11.
Missed meal and rest break premiums are not "wages" covered by Lab C §203. Consequently, waiting time penalties cannot be awarded based on an employer's alleged failure to pay missed break premiums. Ling v P.F. Chang's China Bistro, Inc. (2016) 245 CA4th 1242. See §5.13.
A nondiscretionary bonus based on quarterly sales goals may be paid quarterly, provided the regular hourly wage payments exceed the minimum wage and are paid each pay period. DLSE Opinion Letter 2016.03.23. See §5.14.
Many cities and counties throughout California have enacted local living wage ordinances or have currently pending legislation. As of the date of this update, those jurisdictions include: Albany, Berkeley, Emeryville, El Cerrito, Fairfax, Hayward, Los Altos, Los Angeles, Long Beach, Malibu, Marin, Mountain View, Oakland, Oxnard, Palo Alto, Pasadena, Petaluma, Richmond, Sacramento, Santa Barbara, Santa Clara, Santa Cruz, San Diego, San Leandro, San Mateo, Santa Monica, San Francisco, San Jose, Sonoma, Sunnyvale, and Ventura. See §5.15.
Meal and lodging credits have been updated. See §5.18.
In Oregon Restaurant & Lodging Ass'n v Solis (D Or 2014) 948 F Supp 2d 1217, an Oregon district court ruled that the Department of Labor's (DOL's) amendments to 29 CFR §§531.52, 531.54, and 531.59, which prohibit employers that do not take a tip credit from contracting with their tipped employees to establish a tip pool that includes nontipped employees, are inconsistent with the FLSA. The court relied on Cumbie v Woody Woo, Inc. (9th Cir 2010) 596 F3d 577, in which the Ninth Circuit held that a restaurant did not violate the FLSA by requiring wait staff to participate in a tip-pooling arrangement in which the kitchen staff received a portion of the tips, when the employer did not take a tip credit. However, the Ninth Circuit in Oregon Restauraunt & Lodging Ass'n v Perez (9th Cir 2016) 816 F3d 1080, reversed and remanded this decision, holding that the DOL's 2011 amendments prohibiting employers from including nontipped employees in a tip pool regardless of whether the employer takes a tip credit against the minimum wage, were consistent with the FLSA's language, legislative history, and purpose. The Ninth Circuit stated that it was not altering the Cumbie ruling; instead, the court found that Cumbie did not foreclose the DOL's ability to regulate tip-pooling practices of employers who do not take a tip credit. See §5.21.
Courts continue to uphold an employer's right to set the basic parameters of vacation benefits. In Tschudy v J.C. Penney Corp. (SD Cal, Mar. 30, 2016, No. 11cv1011 JM (KSC)) 2016 US Dist Lexis 44221, the court held that the employer's vacation policy, which provided for an initial 12-month waiting period before vacation benefits began to accrue or vest, and required satisfaction of a minimum number of hours of service, did not violate Lab C §227.3. The vacation policy specifically provided that employees become eligible and receive their first vacation deposit "on the first day of the month following 12 months of employment if you average 25 or more hours during the first 48 weeks of employment." See §5.22.
Beginning July 1, 2018, employees who provide in-home supportive services will be entitled to paid sick leave. Lab C §246(a), (e). See §5.23A.
In USS-Posco Indus. v Case (2016) 244 CA4th 197, the court found an agreement that the employee would reimburse the employer for a voluntary 3-year employer-sponsored, optional training program if the employee quit within 30 months of completing the program was enforceable and did not implicate wage statutes. As in City of Oakland v Hassey (2008) 163 CA4th 1477, the court held that the reimbursement agreement was not an invalid restraint on employment under Bus & P C §16600. See §5.25.
In Bains v Department of Indus. Relations (2016) 244 CA4th 1120, the court distinguished between agricultural workers engaged in the process of harvesting fruit from the trees and those drying the fruit in fixed sheds next to the orchard, and held that those engaged in drying properly came under Wage Order No. 13–2001 (8 Cal Code Regs §11140(2)(D)), and could receive more generous overtime rates than the harvesters. See §6.4.
Farmworkers in the nation's largest agricultural state can finally look forward to the same overtime protections most other hourly workers enjoy. The Phase-In Overtime for Agricultural Workers Act of 2016 (Lab C §§857–864), which will be phased in over 4 years beginning in 2019, is the first of its kind in the nation and will end the 80-year-old practice of applying separate labor rules to agricultural workers. See new §6.4A.
In Alvarado v Dart Container Corp. (2016) 243 CA4th 1200, the court held that California law does not provide a method of calculating overtime rates of pay when the employer pays its employees an hourly rate plus a flat sum bonus. Accordingly, an employer may use the formula set out in 29 CFR §778.209(a). The plaintiff argued that Marin v Costco Wholesale Corp. (2008) 169 CA4th 804 provides the appropriate method to calculate overtime on bonuses. The California Supreme Court has granted a petition for review in Alvarado, and will examine what is the proper method for calculating the rate of overtime pay when an employee receives both an hourly wage and a flat sum bonus. See §6.18.
In Balestrieri v Menlo Park Fire Protection Dist. (9th Cir 2015) 800 F3d 1094, 1103, the Ninth Circuit held that payments made to firefighters under a buyback program in a combined sick leave and vacation leave policy should not be included in calculating their regular rate of pay. See §6.23.
The discussion of DLSE's enforcement of prevailing wage laws for public works has been updated to include a new 30-day requirement for releasing escrowed funds added by AB 326 (Stats 2016, ch 345). See §11.27B.
A new chapter 13A, authored by Michael D. Singer, has been added to the book. The subject of the chapter is PAGA claims. This chapter includes the most recent amendments to PAGA by SB 836 (Stats 2016, ch 31), effective June 27, 2016. The following are some highlights of those amendments, which apply prospectively to all pending PAGA cases, as well as new filings:
All new PAGA claim notices must be filed online, with a copy sent by certified mail to the employer;
All employer cure notices or other responses to a PAGA claim must be filed online, with a copy sent by certified mail to the aggrieved employee or aggrieved employee's representative;
A filing fee of $75 is required for a new PAGA claim notice and any initial employer response (cure or other response) to a new PAGA claim notice;
The time for the Labor and Workforce Development Agency (LWDA) to review a notice under Lab C §2699.3(a) has been extended from 30 to 60 days;
When filing a new PAGA lawsuit in court, a filed-stamped copy of the complaint must be provided to the LWDA (applies only to cases in which the initial PAGA claim notice was filed on or after July 1, 2016);
Any settlement of a PAGA action must be approved by the court, whether or not the settlement includes an award of PAGA penalties. A copy of a proposed settlement must be provided to the LWDA at the same time that it is submitted to the court; and
A copy of the court's judgment and any other order that awards or denies PAGA penalties must be provided to the LWDA.
In connection with legislation proposed in 2016, the governor's office noted that the LWDA had received 29,474 PAGA notices from 2010 through 2014. In the first 10 years of PAGA's operation, employers paid some $31,000,000 in penalties to the LWDA. See §13A.1.
In Williams v Superior Court (2015) 237 CA4th 642, the court held that a representative PAGA claim cannot be split into an arbitrable individual claim and a nonarbitrable representative claim. See §13A.9.
In Monaghan v Telecom Italia Sparkle of N. Am. (9th Cir 2016) 647 Fed Appx 763, 770, the Ninth Circuit, noting a lack of California appellate authority, found that PAGA applies only to employee suits brought in a representative capacity. See §13A.9.
An individual officer, director, or owner of a business may be personally liable for a PAGA claim. Sarmiento v Wells Fargo Bank, N.A. (CD Cal, Apr. 17, 2015, No. CV 15-01181-RGK (PLA)) US Dist Lexis 51159. See §13A.11.
One court has found PAGA penalties available in addition to meal and rest period premiums under Lab C §226.7. In re Taco Bell Wage and Hour Actions (ED Cal, Apr. 8, 2016, No. 1:07-cv-01314-SAB) 2016 US Dist Lexis 48557. See §13A.14.
Arbitration clauses purporting to require employees to waive their right to prosecute PAGA representative claims are contrary to public policy and unenforceable. Sakkab v Luxottica Retail N. Am., Inc. (9th Cir 2015) 803 F3d 425. See §13A.21.
Effective January 1, 2016, the California Labor Code provides that any natural person acting on behalf of an employer who is an officer, director, owner, or managing agent of the employer may be held liable "as the employer" for violations of Lab C §§203, 226, 226.7, 1193.6, 1194, and 2802. This amendment substantially closes the loophole left open by Reynolds v Bement (2005) 36 C4th 1075, and ensures that employees have a means of holding members of an employer's control group liable for wage and hour violations. See §14.13.
There has been a recent seismic shift in the Ninth Circuit's view of class action waivers. For years, the vast majority of courts disagreed with the holding of D.R. Horton Inc. & Cuda (2012) 357 NLRB No. 184, and rejected arguments that class action waivers in arbitration agreements violate employees' right to engage in concerted activity under §§7 and 8 of the National Labor Relations Act (NLRA). However, in August 2016, the Ninth Circuit expressly adopted the National Labor Relations Board's reasoning, and held that class action waivers are unlawful and unenforceable under the NLRA. Morris v Ernst & Young, LLP (9th Cir 2016) 834 F3d 975. Although it did not mention Morris, the U.S. District Court for the Central District of California came to the same conclusion in Totten v Kellogg Brown & Root, LLC (CD Cal 2016) 152 F Supp 3d 1243, 1258. See §14.15.
Federal Rule of Civil Procedure 23(b)(3) demands a showing that "questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Following Wal-Mart Stores, Inc. v Dukes (2011) 564 US ___, 131 S Ct 2541, the commonality requirement has not proved to be a significant impediment to certification of employment claims. See Perez v Wells Fargo & Co. (ND Cal, Aug. 8, 2016, No. 14-cv-0989-PJH) 2016 US Dist Lexis 104385, *16 (finding commonality; "In the Ninth Circuit, Rule 23(a)'s commonality requirement is ‘limited'"). See §14.41.
In opposing class certification, some employers have argued that class treatment is not the superior means for adjudicating wage and hour claims because the California Division of Labor Standards Enforcement provides a more convenient and efficient forum for the resolution of Labor Code violations. The California Supreme Court has definitively rejected this argument. Gentry v Superior Court (2007) 42 C4th 443, 464, overruled on other grounds in Iskanian v CLS Transp. Los Angeles, LLC (2014) 59 C4th 348, 360. See also Tapia v Zale Delaware Inc. (SD Cal, Apr. 6, 2016, No. 13-CV-1565-BAS (PCL)) 2016 US Dist Lexis 48046, *28 (finding that although a DLSE administrative hearing is a quick procedure, the class mechanism offers advantages to workers asserting wage and hour claims). See §14.41.
Although the Ninth Circuit has not yet issued a definitive decision on the issue, it has recognized the fundamental differences between PAGA actions and class actions. See Sakkab v Luxottica Retail N. Am., Inc. (9th Cir 2015) 803 F3d 425, 435; Zackaria v Wal-Mart Stores, Inc. (CD Cal 2015) 142 F Supp 3d 949, 954. See §14.51.
In Tyson Foods, Inc. v Bouaphakeo (2016) 577 US ___, 136 S Ct 1036, the U.S. Supreme Court held that employees in a class action were entitled to overtime pay for the time they spent donning and doffing protective equipment at a pork processing plant. The amount of time spent in those activities was established in part by a study performed by an industrial relations expert who conducted 744 videotaped observations and analyzed the average length of time that various donning and doffing activities took for different departments in the plant. The Supreme Court held that the employees could rely on the expert's sample as a permissible means of establishing hours worked. See §15.86.