california wage and hour law: avoiding common pitfalls with a distributed workforce

California Wage & Hour Law ─ Avoiding Common Pitfalls with a Distributed

Workforce

Featuring Seyfarth Shaw LLP

©2013 Seyfarth Shaw LLP

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Welcome

Michelle Lanter Smith

Chief Marketing OfficerEPAY Systems, [email protected]

Today’s Host


EPAY Systems -- designed to meet the needs of your complex,

distributed workforce

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• Reduce your labor costs by 5% or more

• Keep you in control and in compliance

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Today’s Discussion

Federal court filings of wage and hour class and collective actions have increased more than 500% since 2000.

Are you at risk?


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Our Speakers

Ann Marie ZaletelPartner, Seyfarth Shaw LLPLabor & [email protected](310) 201-1560

Brandon McKelveyPartner, Seyfarth Shaw LLPLabor & [email protected](916) 498-7039

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Ask Your Questions

To ask a question, simply type your question in the “Question”

box on the right side of your screen.

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Polling Question

• Have you struggled with or pulled your hair out over a California wage-hour question in the last six months?

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Why California?

• Federal wage-hour law stems from the Fair Labor Standards Act (FLSA).

• California has its own more extensive regulation of wages and working conditions.

• The FLSA does not preempt California law.


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Sources of California Law

• California Labor Code

• California Industrial Welfare Commission Wage Orders

• Judicial Decisions

• California Division of Labor Standards Enforcement (DLSE) Interpretations


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Compliance With California Wage & Hour Law Is Not Easy

• Meal and Rest Periods

• Employment Classification

• California Overtime

• “Off-the-Clock” Work

• Travel Time

• Expense Reimbursement

• Reporting Time Pay

• “Vacation

• Pay at Termination

• Itemized Wage Statements

• Wage Theft Notice

• Time Rounding


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Pitfall # 1

Failure to Comply with California’s

Meal and Rest Period Requirements


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California Meal Periods:Legal Requirements

Exceptions

• 5 hrs or less – no meal period

• A first meal period is waivable if the employee works 5 hrs but not more than 6 hrs

• The second meal period is waivable if the employee works less than 12 hours.

Rules

• Over 6 hrs and up to 10 hrs – one 30-min unpaid/off duty/ uninterrupted meal period must be provided before the 6th hour

• More than 10 hrs – two 30-min unpaid/off duty/uninterrupted meal periods must be provided.

• What does “provide” mean?


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California Rest Periods:Legal Requirements

• Less than 3.5 hours - not legally entitled to rest period.

• More than 3.5 hours to 6 hours - one ten-minute rest period.

• More than 6 hours to 10 hours - two ten-minute rest periods.

• Over 10 hours – three ten-minute rest periods.


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Meal and Rest Period Proposals

• Compliant written meal and rest period policies

• Written policy requiring accurate recording of meal periods

• Written policy requiring reporting issues with meal and rest periods

• Training for managers and employees on policies

• Employee acknowledgments

• Electronic or paper attestations



Pitfall # 2

Misclassification of Employees under California’s

More Narrow Overtime Exemptions

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Employment Classification

Non-Exempt = Entitled to Overtime

Exempt = Not Entitled to Overtime


Employment Classification ─ Three Tests for Exempt Status

• Salary Level Test

• Salary Basis Test

• Duties Test

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Employment Classification ─Salary Level Test

• For most employees, the minimum salary level required is $640 per week

• The $640 per week may be paid in equivalent amounts for periods longer than one week:

o Biweekly $1,280

o Semimonthly $1,386.67

o Monthly $2,773.33

o Annually $33,280

• The minimum salary level under the federal FLSA is $455 per week, $1,971.66 per month, or $23,660 per year


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Employment Classification ─Salary Basis Test

• Regularly receives a predetermined amount of compensation each pay period (on a weekly or less frequent basis)

• The compensation cannot be reduced because of variations in the quality or quantity of the work performed

• Must be paid the full salary for any week in which the employee performs any work (subject to certain limited exceptions)

• Need not be paid for any workweek when no work is performed


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Employment Classification ─ Duties Test

• Primarily engaged in exempt work that requires the exercise of discretion and independent judgment

• “Primarily” means more than 50% of work time

• California law is more stringent than federal law



Pitfall # 3

Failure to Comply with California’s More Stringent

Overtime Requirements

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Payment of Overtime:When Is It Owed?

• Federal / FLSA

• all hours worked over 40 in a workweek

• California

• all hours worked over 40 in a workweek

• all hours worked over 8 in a workday

• all hours worked on the 7th consecutive day of work in a single workweek



Payment of Overtime:What Is the Rate of Pay?

Federal

1.5 times the regular rate(Includes hourly pay, non-discretionary

bonuses, and shift differentials)

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Payment of Overtime:What Is the Rate of Pay?

California

1.5 times the regular rate for:

• over 8 hrs. in a workday (up to 12 hrs.)

• over 40 hrs. in a workweek

• first 8 hours on 7th consecutive workday in a workweek

2 times the regular rate for:

• over 12 hrs. in a workday

• any hours over 8 on the 7th consecutive day worked in a workweek



Pitfall # 4

Employees Working

“Off the Clock”

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“Off-the-Clock” Work

o Pre or Post Shift Worko Working from Homeo After-Hours Callso After-Hours E-mailso After-Hours Computer Entryo Overachiever – under

reportero Underachiever – under

reporter


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“Off-the-Clock” Work

• The California Supreme Court endorsed Brinker’s off-the-clock policy:o It is your responsibility to clock in and clock out for every shift you work.

... [Y]ou may not begin working until you have clocked in. Working 'off the clock' for any reason is considered a violation of Company policy. If you forget to clock in or out, or if you believe your time records are not recorded accurately, you must notify a Manager immediately, so the time can be accurately recorded for payroll purposes.

• Review timekeeping policies to ensure they are legally compliant


Pitfall # 5

Failure to Comply with California’s More Stringent

Travel Time Rules

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Travel Time

o Commute time to and from work generally is unpaid.

o Travel time is compensable if the employee is subject to the control of the employer, even if the employee is not working.

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Overnight Travel Time

Federalo Travel time during normal working

hours is “hours worked.”

Californiao All travel time is “hours worked” –

before, during or after normal working hours



Pitfall # 6

Failure to Comply with California’s Expense

Reimbursement Requirements

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Expense Reimbursement

• Under California Labor Code section 2802, California employers must reimburse employees for necessary employee business expenses.o Auto Expenses (Other than For Commuting)o Cell Phone Chargeso Client Entertainment



Pitfall # 7

Failure to Comply with California’s Reporting Time

Pay Requirements

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Reporting Time Pay

• The Company must pay an employee for half of the employee’s usual scheduled day’s work (no less than 2 hrs and no more than 4 hrs) when the employee:o is required to report to work, ando reports to work, ando is not put to work OR is

furnished less than half of the usual scheduled day’s work.


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Reporting Time Pay for Meetings

• In Aleman v. AirTouch Cellular (Cal. App. 2011), the California Court of Appeal held that no reporting time pay is due for training meetings that were scheduled in advance, even though the meetings were scheduled for less than half the amount of time an employee typically worked.

• Reporting time pay only would apply if the employee is furnished work for less than half the scheduled meeting time.


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Polling Question

• Do you offer “personal days” or “floating holidays” that may be used for any purpose (or almost any purpose)? If yes, do you pay out California employees for their unused days?


Pitfall # 8

Failure to Comply with California’s “No Use It Or Lose It” Vacation Rules

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Vacation

• No use it or lose it

• Employers can place reasonable cap on vacation accrual (1.5 times annual accrual is minimum)

• Employers can “cash out” accrued vacation time each year

• Must pay out accrued, unused at termination

• Floating Holidays



Pitfall # 9

Failure to Comply with California’s Final Paycheck

Requirements

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Pay at Termination: The Rules

oVoluntary Resignation

o Involuntary Termination

o Lay Off

©2013 Seyfarth Shaw LLP40 |


Pay at Termination:Waiting Time Penalties

• Exiting employees not paid all wages owed at termination can get “waiting time penalties.”

• Requires “willful” failure to pay, but that is a broad concept under California law .

• Unless you have reasonable defense to paying the wages, you generally owe the penalties.

• Ignorance of the law is no excuse!

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Pitfall # 10

Failure to Comply with California’s Itemized Wage Statement Requirements

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Itemized Wage Statements ─ Required Information

• Gross wages earned

• Total hours worked (not for salaried exempt employees)

• Number of piece-rate units earned and any applicable piece rate

• All deductions

• Net wages earned

• Dates of the pay period

• Employee name and last four digits of SSN or other employee ID.

• Name and address of the employer

• All applicable hourly rates for the pay period with number of hours worked at each rate

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“Wage Theft” Notice

• Law went into effect January 1, 2012, but many employers are not following it. Must provide a written notice to new non-exempt employees, which states:o Pay rate(s) and basis, whether by the hour, shift, day, week, salary, piece,

commission, or otherwise, including any rates for overtimeo Allowances, if any, claimed as part of the minimum wage, including meal or

lodging allowanceso The regular payday designated by the employer o The name of the employer, including any formal or informal "doing business

as" names used by the employero The physical address of the employer's main office or principal place of

business, a mailing address (if different) and the telephone # of the employer

o Name, address, and telephone number of the employer's workers' compensation insurance carrier

o Any other information the Labor Commissioner deems material and necessary


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Polling Question

• Does your company round time entries for hourly employees (e.g., to the nearest 5 minutes, 10 minutes, or 15 minutes)?

©2012 Seyfarth Shaw LLP46 |

Wage Theft Notice: Template Released April 12, 2012 http://www.dir.ca.gov/dlse/Governor_signs_Wage_Theft_Protection_Act_of_2011.html


Pitfall # 11

Rounding Time Entries

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Rockin Around the Clock

o Trial court judge in class action against See’s Candy Shops said rounding of any kind violates California law

o Good News for Employers: The Cal Court of Appeal adopts the DOL and DLSE position: unbiased rounding is ok as long as it does not works to the disadvantage of the employee over a period of time

o But Beware: Do you know how your rounding policy works over a period of time?


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EPAY Systems

Michelle Lanter Smith

Chief Marketing OfficerEPAY Systems, Inc.

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EPAY -- In Time with You

Uniquely flexible

Mobile workforce,

union contracts,

multiple job assignments?

Complex pay rules?

No problem!

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Reduce your labor costs

Eliminate erroneous pay calculations, time rounding, and management inconsistencies

Eliminate buddy punching

Biometric time clocks with camera and finger print reader

Reduce costs associated with paper checks. Save an average of $2.87 per pay period/per employee.

or more!

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• Audit Trails• Overtime• Meal Breaks• Pay Differentials• Privacy and Security• Reduce Workers

Comp Claims• Did you have an

accident free day?

Minimize Compliance Risk

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Over 40,000 customer sites

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Blueforce adapts to how YOU do business

Easy, Anywhere Time Tracking

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Upcoming Education

Compliance Webinar Series with Seyfarth Shaw LLP

• Understanding the Affordable Care Act: Should You Pay or Play? Sept 10: 12:00 cst

• How to Avoid Costly Wage & Hour Pitfalls for Healthcare Employers with a Distributed Workforce. Sept 25: 12:00 cst

• How to Avoid Costly Wage & Hour Pitfalls for Employers in the Hospitality Industry. Nov 6: 12:00 cst

Register at www.EPAYsystems.com

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Thank You!


Ann Marie ZaletelPartner, Seyfarth Shaw LLPLabor & [email protected](310) 201-1560

Brandon McKelveyPartner, Seyfarth Shaw LLPLabor & [email protected](916) 498-7039

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Connect with us

Bonus! Seyfarth Shaw’s 2013 Cal-Peculiarities: How California Employment Law Is Different

Connect with EPAY on:o LinkedIn – follow our company page at EPAY Systemso Twitter -- @EPAYsystemso Sign up for our e- newsletter at EPAYsystems.com

Connect with Seyfarth Shaw LLP:o Wage & Hour Litigation Blog

http://www.wagehourlitigation.com/o California Peculiarities Blog

http://www.calpeculiarities.com o Twitter - @SeyfarthShawLLP


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Thank You!


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