California Peculiarities Employment Law Blog

Vacation: No Pay for My Time Off? Exploring the Nuances of Unlimited or No Paid Time Policies

Posted in California Leaves, Vacation Series

By Jonathan L. Brophy

Employees are often shocked to learn that employers are not required to provide paid vacations. But it’s true. Legal guarantees of paid leave abound in other advanced economies, but not in the United States, and not even in California. Indeed, the effect of California law is to discourage employers from voluntarily providing paid vacation, because California peculiarly mandates that if the employee offers paid vacation, then the vacation pay must be deemed to vest, with any unused portion being due when employment ends. So “use it or lose it” policies, for example, are not enforceable in California.

In response to this annoying California peculiarity, some employers have considered adopting “no vacation” policies, and “unlimited time off” policies for exempt employees. Below is a quick primer on such policies and some issues to consider before changing existing policies. Continue Reading

Hold The Line: Employers On The Hook For “Reasonable Percentage” Of Personal Cell Phone Expenses If Employee Uses Phone For Work

Posted in 2014 Cal-Peculiarities

By Michele Haydel Gehrke

In a decision significant for employers with Bring Your Own Device (“BYOD”) policies, a California Court of Appeal held in Cochran v. Schwan’s Home Service that employees who must use personal cell phones for work are entitled to reimbursement for “some reasonable percentage” of the personal cell phone bill, irrespective of whether they have incurred additional charges for the work use, whether a third party has paid the bill, or whether the employee has changed plans to accommodate work-related cell phone usage.

If this case remains standing as a published opinion stating California law (we understand the employer is giving serious consideration to appealing this decision), employers will want to evaluate their BYOD and expense-reimbursement policies for compliance. This new ruling may cause employers to reconsider plans that call for a flat level of reimbursement regardless of the level of usage of the phone and that provide no mechanism for employees to request additional reimbursement. 

The Facts

The plaintiff, Colin Cochran, filed a class action alleging that his employer, Schwan’s Home Service, Inc., failed to reimburse customer service managers for expenses pertaining to the work-related use of their personal cell phones. Cochran sought damages for violation of California Labor Code Section 2802 (requiring employers to indemnify employees for all “necessary expenditures” incurred in carrying out their job duties).

The trial court denied Cochran’s motion for class certification because he failed to demonstrate commonality and superiority. The trial court noted that individual inquiries predominated because class members would need to be individually examined as to (1) whether they had unlimited plans for which they did not actually incur any additional expense when they used their cell phone (2) whether cell phone charges were paid for by them or by a third party, and (3) whether they purchased a different cell phone plan because of their work-related cell phone usage. The need to make these inquiries for 1500 class members made any class action unmanageable.

The Appellate Court Decision

The Court of Appeal reversed the trial court’s denial of class certification, reasoning that the trial court had made erroneous legal assumptions about Section 2802. According to the Court of Appeal, the trial court mistakenly assumed that (1) an employee does not incur any expenses if the cell phone charges are paid by a third person or if the employee did not purchase a different cell phone plan because of work-related cell phone usage, and (2) liability could not be determined without examining the specifics of each class member’s cell phone plan.

The Court of Appeal determined that the details of a cell phone plan do not factor into the liability analysis. Rather, when any cell phone use is mandatory, an employer must always reimburse an employee for “some reasonable percentage” of the personal cell phone bill, irrespective of whether the bill is paid by a third party or whether the employee changed plans to accommodate work-related cell phone usage.

What Cochran Means For Employers

With the proliferation of dual-use devices and BYOD policies, the extent to which employees should be reimbursed for work-related use of their personal cell phone or smart phone is an issue that this new Court of Appeal decision makes even more complicated. Because each employee’s level of usage for work purposes and personal cell phone plan may vary, employers face challenges and potential legal pitfalls if they do not carefully design and implement their BYOD policies and procedures.  Consult with the author or your favorite Seyfarth attorney for more guidance in this area.

Wage Order Series, Part II: Money for Nothing? Hours “Worked” And California’s Wage Orders

Posted in Wage Order Series

By Michael Kopp and Sarah Hamilton

In a simpler world, only the time an employee spent working would count as “hours worked.”  In the world we live in, the employer may need to keep the pay clock running to track time that might be regarded as off duty, such as time spent sleeping, traveling, on call, or at rest. With a rising number of lawsuits now seeking to recover pay for idle time, let’s review some main issues.

The big picture: it is employer control, not employee productivity, that matters. California’s Wage Orders uniformly define “hours worked” as “the time during which an employee is subject to the control of an employer, and includes all time the employee is suffered or permitted to work, whether or not required to do so.” So the key question often is not whether the employee is actually working during the time in question, but whether the employee merely is subject to the employer’s control.

When do I need to pay employees for not (really) working?

  • When can sleeping on the job be “hours worked”? In California, the final answer remains to be seen. Federal law allows employers and employees to agree to exclude up to 8 hours of a 24-hour shift as unpaid sleep time, as long as: (1) the employer provides adequate sleeping facilities, (2) the employee has at least 5 hours of uninterrupted sleep, (3) the employee agrees to the sleep deduction, and (4) sleep-time deductions are only permitted from a 24-hour shift.  California courts traditionally followed the federal approach. See Monzon v. Schaefer Ambulance Serv., Inc., 224 Cal. App. 3d 16 (1990). But stay tuned—whether California will continue to permit such agreements, and on what terms, is the central issue pending before the California Supreme Court in Mendiola v. CPS Security Solutions, Inc. We will keep you updated here at CalPecs with new developments!
  • Are rest and recovery breaks “hours worked”?  California’s Wage Orders provide that the 10-minute rest breaks mandated for every 4 hours of work (or major portion thereof) are counted as  “hours worked.” That means they must be paid for and counted in determining whether the employee worked overtime.

But did you know there are other potentially paid breaks?  Required lactation breaks can be compensable time, to the extent those breaks coincide with the standard 10-minute rest periods mandated by the Wage Orders. (But lactation breaks taken outside of or in excess of the standard 10-minute rest periods are, to that extent, not compensable time.)  Also, for employers with outdoor places of employment, mandated “cool down” recovery time, for the purpose of heat illness prevention, is compensable time. See our previous article here for more details.

  • The daily commute: is heading to work also work?  Generally, the daily work commute (home-to-work and work-to-home) is not compensable as “hours worked” under either federal and California law. But if the employee performs work during the commute, such as reviewing reports while on the train, that time may be compensable.

Are there any other potential commuting pitfalls for the unwary employer?  Yes. California courts have held that employer-provided shuttles to work can convert this daily commuting time into “hours worked,” where the employer requires employees to use the employer-provided transportation. Morillion v. Royal Packing Co., 22 Cal. 4th 575 (2000). In contrast, commuting on truly optional employer-provided work shuttles need not be compensated. Overton v. Walt Disney Co., 136 Cal. App. 4th 263 (2006).

Minimum Wage Hike and Paid Sick Time Coming to San Diego

Posted in 2014 Cal-Peculiarities

By Joshua Seidman

Last week, San Diego became the latest jurisdiction to catch the paid sick leave and minimum wage bug that has been spreading throughout the country in 2014.  Specifically, on Monday, July 28, 2014, the San Diego City Council gave final approval to the City of San Diego Earned Sick Leave and Minimum Wage Ordinance (the “Ordinance”). While San Diego Mayor Kevin Faulconer has indicated an intention to veto the Ordinance, it is still likely to be implemented since the City Council can override a veto with six votes, and the Ordinance passed by a vote of six to three.

Minimum Wage

As suggested by the Ordinance’s name, San Diego’s minimum wage is set to undergo significant changes, increasing incrementally to $11.50 by 2017.  The Ordinance will raise the local minimum wage to $9.75 per hour on January 1, 2015, then to $10.50 per hour on January 1, 2016, and finally reaching the $11.50 mark a year later.  It also provides that beginning on January 1, 2019, and each subsequent year thereafter, the city’s minimum wage will be indexed to inflation.

Currently, San Diego’s minimum wage is connected to the California state minimum, which, as we previously reported, was raised last month from $8 to $9 per hour.

Paid Sick Leave

The paid sick leave portion of the Ordinance requires employers, regardless of the number of employees, to provide one hour of paid sick leave for every 30 hours of paid work performed in San Diego, up to a maximum of 40 hours (5 calendar days) of sick leave in a year. Notably, employers that maintain a paid leave policy equal to or more generous than the Ordinance’s requirements need not offer additional leave to employees, provided that time off can be used under the same conditions.  The Ordinance makes San Diego the second city in California to have passed a paid sick leave law, following the lead of San Francisco, which has mandated paid sick leave since February 5, 2007.

If Mayor Faulconer and the City Council hold true to form, San Diego employees will begin accruing paid sick time on April 1, 2015, or the commencement of their employment, whichever is later.  Employees are then entitled to start using their earned sick leave 90 days after they begin their employment or on July 1, 2015, whichever is later.  Employees will also be able to carry over up to 40 hours of accrued, but unused paid sick time to the next year.  However, employers are not required to provide an employee with more than 40 sick leave hours in any single year, thereby preventing employees from “stockpiling” sick leave hours from one year to the next.

The Ordinance creates a private right of action for individuals claiming harm under the earned sick leave law.  Claimants are entitled to all legal and equitable relief, including, but not limited to, the payment of back wages, damages for an employer’s denial of the use of accrued earned sick leave, reinstatement of employment or other injunctive relief, and reasonable attorney’s fees and costs.  Furthermore, employers could face various civil penalties—capped at $2,000—for violating the Ordinance’s provisions.

For more details on San Diego’s mandatory paid sick leave law, including a) the circumstances employees can use the paid sick leave, b) employer rights and limitations under the law, c) notice and posting requirements, and d) record retention requirements, please see our previous Management Alert.

Wage Order Series, Part I: Is Pay For Performance Effectively Extinct?

Posted in Wage Order Series

By Mark Grajski and Maya Harel

In theory, the California Labor Code and the Wage Orders allow employers the freedom to do what employers traditionally have done: pay employees solely with commissions or solely with piece rates. This idea of incentive pay—you reap what you sow— has been around a long time!

But a wave of California judicial court decisions has eroded the once-solid foundations of traditional incentive pay systems. In response, employers have been moving towards complicated hybrid compensation systems.

So what do you need to know when deciding to use one of these incentive or hybrid compensation systems?

Beware: Averaging Earnings Over the Pay Period Is Not Allowed to Satisfy Minimum Wage

Federal law allows employers to average wages over a pay period to meet minimum wage requirements (dividing total compensation by total number of hours worked). California does not. Courts have read California’s minimum wage statute to require employers to pay the minimum wage separately for each hour worked.

The tension between this requirement and traditional commission and piece-rate pay systems became apparent in 2005 in the California Court of Appeal decision in Armenta v. Osmose. In Armenta, employees earned their pay solely through piece rates. The Armenta court held that while the piece rate compensated employees for their “productive time”—time spent actually working on piece-rate tasks—the piece rate did not compensate them for their “non-productive time”—time spent doing anything else.

  • What Kinds of Pay Systems Have Employers Used In Response, and Do They Pass Legal Muster?

In an attempt to comply with Armenta, many employers created complicated hybrid hourly and incentive compensation systems. Unfortunately, even these laudable efforts to comply with California law may still expose well-intentioned employers to liability.

For example, in Bluford v. Safeway, the employer paid its truck drivers a certain figure to each mile driven, a piece rate for certain non-driving tasks, an hourly rate for other tasks, and a different hourly rate for unexpected driving delays. Even so, an unsympathetic Court of Appeal held that Safeway’s system violated the Wage Order because the system did not provide separately for an hourly rate for rest breaks, which the Wage Order designates as “hours worked.”

  • Another Possibility: What About the Commissioned Salesperson Exemption? Continue Reading

Time to Revisit Your Pay Stubs?

Posted in Work Time Series

By Nicholas Clements and Kerry Friedrichs

Well-intended employers often lament the various gotchas that await them down the dark and winding road that is the California Labor Code. Perhaps no turn in the road is more treacherous than the one at Wage Statement Junction. Here one crosses at extreme peril, for the California Legislature, in Labor Code section 226, has planted legal land mines that can blow up at the slightest provocation.

A Common Sense Question With a Less-Than-Intuitive Answer:  “Can’t I avoid hazards if I just pay them the right amounts and on time?” Sadly, no, there’s much more to it. Labor Code section 226(a) lays out a long list of other requirements, some more sensible than others.

Not so Simple. Timely paychecks must be accompanied by a “simple” wage statement at least semi-monthly, and the wage statement must include nine distinct pieces of information for each employee: Continue Reading

We Need Your Votes! – California Peculiarities Employment Law in the Running for Top 100 Legal Blogs

Posted in 2014 Cal-Peculiarities

The American Bar Association is holding its annual competition for the 100 best legal blogs and Seyfarth’s California Peculiarities Employment Law blog is in the running.

Whether you are an avid reader of our timely legal and news updates, look forward to our popular Cal-Peculiarities publication, enjoy our complimentary webinars, or simply utilize our legal resources page, we would greatly appreciate your support in helping our blog make the ABA’s top 100 list.

You can cast your vote at http://www.abajournal.com/blawgs/blawg100_submit/.

Hurry, the deadline to vote is August 8, 2014.

Thank you for your support.

Avoid the Summer Heat! Sweat the Details of California’s “Cool-Down” Periods and Avoid the Burn of Wage and Hour Class Litigation

Posted in 2014 Cal-Peculiarities, 2014 Legislative Updates, Work Time Series

By Geoffrey C. Westbrook and Joshua M. Henderson

Just when one might have thought California employment law couldn’t get any stickier for employers, in January 2014 the California Legislature turned up the heat by expanding meal and rest break penalty provisions. Now there’s a new penalty for failure to provide “cool-down,” or recovery, periods to prevent heat illness.

Before, heat illness prevention laws were enforced only by the limited resources of Cal-OSHA. Now, newly amended Labor Code Section 226.7 authorizes private enforcement through class, individual, and multi-plaintiff actions, as well as by the DLSE. Monetary incentives, in addition to ambiguities on many aspects of the law, will likely trigger increased Cal-OSHA enforcement and new litigation, just as the remedies for meal and rest break violations have produced a heat wave of class action litigation. Talk about a scorcher!

But What is a “Cool-down” Period? California employers with “outdoor places of employment” must implement a heat illness prevention program, including allowing and encouraging employees to take a “cool-down rest in the shade for a period of no less than five minutes at a time when they feel the need to do so to protect themselves from overheating.” During these periods, employees must get continuous access to shade and drinking water.

While these obligations existed for almost a decade under Cal-OSHA’s oversight, private enforcement officially began January 1, 2014 with the amendment to Labor Code Section 226.7. Now, “an employer shall not require an employee to work during a meal or rest or recovery period” required by law. As a penalty, employers must pay non-exempt employees one additional hour of pay for each workday in which a meal or rest or recovery period is not provided. Penalties are cumulative, meaning it is now theoretically possible under Section 226.7 for an employer to incur three penalties in a given workday for each affected employee.

So, What are “Outdoor Places of Employment?” This term, not defined in the regulations, may seem self-evident. “Outdoor” really means “out of doors” in an open air environment. But how much time must one spend out of doors to make it a “place” of employment? Reasonable minds could differ here: is 50% of a workday spent outdoors sufficient to trigger the law, or will a mere 25% suffice?

Recovery Periods: A “Hotbed” for Litigation? There are no published decisions yet on cool-down periods, and the law is rife with ambiguities that only litigation will resolve. These uncertainties, and the prospect of penalties that will be very large when considered on a cumulative basis, may prompt private litigants to initiate civil actions against unsuspecting employers in industries with some outdoor work that haven’t traditionally been the focus of enforcement initiatives. These industries may include engineering, warehousing, carwash, outdoor recreation, automotive sales, security, country clubs, valets, summer camps, and janitorial businesses.

The following are areas where employers may face “cooling down” challenges: Continue Reading

After Iskanian, What’s Next For Defending PAGA Actions?

Posted in PAGA Series

By David D. Kadue and Simon L. Yang

Remember the Black Knight in Monty Python and the Holy Grail? The overconfident fellow who refuses to desist, even after losing four limbs in combat? Some lawyers are like that.

Although the California Supreme Court in Iskanian (June 23, 2014) upheld employer efforts to force waivers of class-action claims in mandatory arbitration agreements, some plaintiffs’ lawyers say that the real take-away from Iskanian is its holding that those agreements cannot be used to waive an employee’s right to bring representative PAGA actions. Moreover, say these lawyers, PAGA actions are particularly potent for plaintiffs because they are categorically unremovable to federal court, thus permitting the plaintiff to remain in more favorable state court.

So does this mean that Iskanian really was a disaster, signaling a new reign of terror for hapless employers who now must confront “gotcha” claims of obscure wage and hour violations while being subject exclusively to the tender mercies of California Superior Court?

Well, perhaps there are a couple of chinks in the Black Knight’s armor.

First, how solid is the dogmatic view about categorical unremovability of PAGA claims? PAGA cases once were routinely removed to federal court under diversity-of-citizenship jurisdiction, where the defendant employer was a non-California citizen and the amount in controversy exceeded the jurisdictional threshold ($75,000 in an individual action or $5,000,000 in a class action, although PAGA claims need not be brought as class actions). The amount in controversy was often easy to establish, as PAGA penalties mount rapidly: $100 per employee per pay period, even if one counts only the 25% of the penalties that go to the employees (75% go to the State of California).

But recent Ninth Circuit decisions dropped flies in the removal ointment. They rejected the efforts of removing defendants, in calculating the amount in controversy, to aggregate the potential individual recoveries of all the employees the plaintiff purported to represent. These decisions now suggest that one should consider only the PAGA plaintiff’s individual recovery, which would be well below $75,000. And the Ninth Circuit has stated, rather elliptically, that the State of California is not a citizen, suggesting that this observation precludes a finding of diversity of citizenship. Hence the basis for a new conventional wisdom that PAGA claims are categorically unremovable. But is this necessarily so? Continue Reading

Checking Out Applicants (Part 3): DIY Background Checks

Posted in Recruiting and Hiring

By Pam Devata and Dana Howells

Previously in this three-part series, we discussed employer obligations concerning background checks furnished by investigative consumer reporting agencies.  In this third and final segment, we highlight the requirements for California employers who do their own background checks without utilizing the services of a consumer reporting agency. 

Public Records Searches and Disclosure Obligations.  In the Internet age, many types of public records are instantly searchable. Employers who do their own public records searches (either on-line or using old fashioned techniques) must beware of a little-known California law.  Civil Code Section 1786.53(a)  provides broadly that any person who uses personal background information—even information that is a matter of public record—for employment purposes must provide that information to the consumer within 7 days.  “Public records” are defined as records documenting an arrest, indictment, conviction, civil judicial action, tax lien or judgment.

Here’s the most peculiar twist:  the obligation to provide the public records exists regardless of whether the employer obtained actual copies of  public records or simply obtained a verbal summary of the contents.  

  • For example, an in-house researcher may give a verbal report that an applicant has convictions instead of obtaining hard copies of the court records.  Does the employer have any disclosure obligations? Continue Reading