California Peculiarities Employment Law Blog

When it comes to paying final wages, ti-i-i-ime is NOT on your side: A Refresher on Labor Code 203

Posted in 2014 Cal-Peculiarities

By Brian P. Long

When you dismiss an employee for poor performance, or when he beats you to the punch by quitting on you, you rarely feel the urge to rush that slacker his final check. But you should. Under the California Labor Code, you must pay all wages due at the time of an involuntary termination. And you must pay resigning employees within 72 hours if they suddenly quit on you. Further, if they are kind enough to toss at least 72 hours’ notice of resignation your way, then you must pay final wages to the resigning employee on the last day of employment.

Because these rules sometimes get lost in the heat of a termination moment, now seems the time to provide some reminders:

If an employee is terminated mid-pay period, can’t I just treat the former employee like everyone else and pay him in the regular payroll cycle?

No. Welcome to another California peculiarity; employers must pay wages to terminated employees on their last day of employment, even if that’s smack dab in the middle of the payroll cycle, or even the very next day after the last paycheck.

This may seem like an unnecessary trouble, but recall that Labor Code Section 203 imposes daily penalties for any willful failure to pay according to the schedule we described above. The penalty is measured in terms of the amount of daily wages, from the date the final wages were due until the date they are paid, up to a total of 30 days.

What kind of money are we talking about?

Suppose an employee who made $20 per hour is fired after working only two hours into the new payroll period. And suppose the employer then observes the normal payroll cycle and waits 13 days to pay the $40 in earned wages. The penalties for this seeming trivial infraction could be a startling $2,080 ($20 per hour x 8 hours per day x 13 days). In other words, waiting less than two weeks in this situation to pay the final wages could ultimately cost more than 50 times what the employee was actually owed. And yes, all days of delay are counted, including weekend days. The penalties just keep on rolling.

I fired an employee and now she claims she is due additional wages for dates that she did not actually work. I don’t want to face these pesky waiting time penalties, but do I have to pay?

Not necessarily. You need only pay the wages you concededly owe. If you have a good faith dispute as to whether you actually owe wages, then you have a defense to a claim for waiting time penalties. This is because assessment of the penalty is not automatic, and a “good faith dispute” that any wages are due is a defense to a penalty claim.

An employee on his way out the door just handed me 27 pages of business expense reimbursements. There’s no way I can verify and process these in 72 hours! Will I owe waiting time penalties?

No. The penalty is for failing to pay “wages.” A wage is money owed for labor performed. Expense reimbursements are not wages. Obviously, you don’t want to drag your heels on paying any expenses you owe. But no waiting time penalties should accrue while you work that number out.

An employee who just quit says, “Oh, by the way, I was denied meal breaks.” Will waiting time penalties accrue if I do not pay premium wages for missed meal breaks?

Some might argue Yes, but the best answer is No. While some argue that waiting time penalties can accrue solely for a failure to make premium payments for missed meal or rest breaks, the California Supreme Court, in Kirby v. Imoos Fire Protection, Inc., 53 Cal. 4th 1244, 1255 (2012), undermined that argument. The Kirby court said that meal and rest payments are not “wages” for the purpose of Labor Code section 218.5, which permits recovery of attorney’s fees in an action brought for nonpayment of wages. Rather, Kirby said, those payments are a form of a penalty, for purposes of that statute. Kirby’s language supports an argument that premium payments, if not “wages” for purposes of Section 218.5, are also not “wages” for purposes of Section 203. At least some courts have recognized the common sense of applying Kirby’s language in this context. Accordingly, employers have at least a good-faith argument that non-payment of meal and rest premiums would not be non-payment of “wages,” and a good-faith argument is all you need to avoid penalties under Section 203.

Workplace solutions:  If it’s been a while since you’ve checked in on those who process your California terminations, it’s a good idea to remind them of the rules and the consequences for ignoring them. Also, ensure you have a practice in place whereby you can process a payroll the same day, just in case an immediate termination occurs. And, of course, if you have any questions about any final pay issues, reach out to your favorite member of the California Workplace Solutions team.

Regarding the Title: In apologizing for this obscure temporal allusion, we invite the culturally challenged to consult http://en.wikipedia.org/wiki/Time_Is_on_My_Side.

Edited by Chelsea Mesa

Managing the Two P’s: Profanity and Politics in the Workplace

Posted in 2014 Cal-Peculiarities

By Nick Geannacopulos and Emily Barker

You have likely noticed that business interactions and the way people communicate professionally have declined in formality over recent years.  The “Friday Casual” day has become the casual week.  Formal letters have turned into short emails.  Even slang has devolved to emoticons and language unheard of in the workplace a decade ago.  Navigating through these trends in the working environment is not always easy.  This is especially true given California’s unique employment laws.

Two categories of communication stand out in California as traps for the unwary employer: profanity and politics.  This post covers the first of those topics—profanity at work.  For a more detailed look at issues surrounding politics in the workplace, please stay tuned for a future blog post.

Profanity in the Workplace:

Profanity is not rare in the work environment but employers do not always know how to respond.  For example,

  • Can you terminate and or discipline an employee who directs the F-word to his supervisor?

  • What if it is the supervisor who is using profanity?  Can the employer ignore it?

The answer is:  “It depends.”  Traditionally, one would expect that cussing out your boss would constitute good cause for termination.  But the context of the offensive language is key.

Any workplace is populated by a range of employees.  It’s only natural that a supervisor might wish to give benefit of the doubt to a good employee who makes a linguistic slip-up, but may terminate a less good employee whose unsavory comment is the “last straw.”  However, any time you terminate someone for use of foul language, you should consider the history and the available evidence.  Was one employee treated differently than another for the same conduct?  Discipline in one instance and not the other may put the company at risk for claims that the off-color language was a pretext for discrimination under the FEHA.  Further, an employee could be found to have a right to express himself or herself in a heated manner, depending on the context.

On the other hand, a supervisor’s use of profanity in the workplace could be found to create a hostile work environment, depending on the frequency and—you guessed it—context.  For this reason, all employee complaints about profanity must be taken seriously.

  • And, bring on the California Peculiarities!  In California, profanity should also now be considered in light of new legislative standards on “abusive conduct” under AB 2053, which will become effective January 1, 2015.  That law [see our Legislative Update post here] will require employers operating in California who provide anti-harassment training to supervisors every two years (under Gov’t Code § 12950.1) to include “prevention of abusive conduct” as a component of that training.  While the law does not create any new cause of action under the FEHA, or mandate that employers adopt an anti-bullying policy, it does define “abusive conduct” as “conduct of an employer or employee in the workplace, with malice, that a reasonable person would find hostile, offensive and unrelated to an employer’s legitimate business interests.  Abusive conduct may include repeated infliction of verbal abuse, such as the use of derogatory remarks, insults, and epithets, verbal or physical conduct that a reasonable person would find threatening, intimidating, or humiliating, or the gratuitous sabotage or undermining of a person’s work performance.”  It is a fair guess that profanity may fall under that definition.

  • Also, in what seems to be a trend in this area, the National Labor Relations Board has come out fairly strongly against employers in the union environment, as well:  an employee who called his boss a “f++++ mother f*****” and an “A**hole” was found entitled to reinstatement and back pay because the Board determined his words were a protected complaint about working conditions.  The Board has also found broad civility and code of conduct policies prohibiting vulgar language unenforceable and illegal on the ground they may chill protected speech.  The struggle for employers in union environments is that virtually all swearing outbursts at work can be seen as either directly or indirectly related to “terms and conditions of employment.”

Workplace Solutions:  If you’re wondering what to do with your foul-mouthed employees, consider the above government moves toward legislating civility in the workplace, and contact your Seyfarth attorney to give you advice for these unique situations.  In addition, Seyfarth Shaw at Work has put together some great training materials on the new law about “abusive conduct” training that should help employers stay in compliance.  You can contact us for more information on those trainings here.  Last but not least, keep your eye out for our California Legislative Update webinar, where members of the California Workplace Solutions group will dig deep on the new laws and how they’re affecting California employers.

Edited by Coby Turner

When Do Employers Get a Break From Meal Period Rules?

Posted in 2014 Cal-Peculiarities, Exemption Series, The Battle After Brinker, Work Time Series

By Colleen M. Regan

Over the past decade, plaintiffs have filed hundreds of class actions alleging that California employers have failed to “provide” meal breaks.  The California Supreme court finally handed down some rules in 2012, in Brinker Restaurant Corp. v. Superior Court, 53 Cal. 4th 1004: 

  • An employer may not employ a person for more than 5 hours in a day without providing a meal break of at least 30 minutes, or more than 10 hours without providing a second 30 minute meal break. 
  • An employer must relieve the employee of all duty for a required meal break, but the employer need not ensure that the employee does no work:  “The employer satisfies this obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30–minute break, and does not impede or discourage them from doing so.”  Brinker, 53 Cal. 4th at 1040. 
  • Absent a waiver by the employee, a first meal break must begin no later than the start of an employee’s sixth hour of work.
  • Absent a waiver by the employee, a second meal break must begin no later than the start of the 11th hour of work, but the second meal break may begin later than 5 hours after the end of the first meal period.

But, you may ask, does the government mandate over employee eating schedules know no bounds?  Are there no exceptions? Continue Reading

CA Legislature and Governor Pass More Employment Laws: End of 2014 Session Summary

Posted in 2014 Legislative Updates

By Kristina Launey, Dana Howells, and Christina Jackson

The California Legislature adjourned in the wee hours of the morning on August 30, in advance of the official August 31 close of the 2013-14 Legislative Session.  It sent a number of employment-related bills to Governor Brown for consideration by his September 30, 2014 deadline to sign or veto the bills.

View a full summary of each of the approved, vetoed, and failed bills here

In the coming weeks, we’ll blog about how more of the new laws, including the following, may affect employers doing business in California, and our thoughts for Workplace Solutions.

The most notable bills include:

  • New paid sick days law;
  • Harassment prohibition for unpaid interns;
  • Nondiscrimination law regarding drivers licenses;
  • Changes to mandatory sexual harassment training and education for supervisory employees;
  • New Child Labor Protection Act;
  • Changes to notice regarding health care coverage waiting periods;
  • Changes to wage and hour laws including:
    • Mandatory rest or recovery period counted as hours worked;
    • Clarification of statute of limitations affecting recovery of liquidated damages for failure to pay minimum wage; and
    • Changes to Labor Commissioner’s authority regarding citations for failure to pay minimum wage.

Stay Tuned.

Edited by Julie Yap

Let’s Get Creative: The Creative Professional Exemption

Posted in Exemption Series

By Pamela L. Vartabedian and Justin T. Curley

Unlike its two conformist siblings—the licensed professional and learned professional exemptions—the “creative professional” exemption is an artsy rebel that does not depend on an employee’s professional field, advanced knowledge, or educational degree. Determining whether an employee meets the creative professional exemption involves a fact-specific inquiry regarding the exact nature of the work performed by the employee.

Who is an exempt creative professional?

Federal law: To qualify as an exempt creative professional under federal law, the employee must be compensated at least $455 per week and the employee’s “primary duty” must be the performance of work that requires invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.

California law: The California standard differs from the federal standard, and requires that the employee (1) receive a salary of no less than two times the state minimum wage for full-time employment (currently equivalent to $37,440 per year), (2) spend more than 50% of the time performing work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor, and (3) regularly exercise discretion and independent judgment in the performance of the job duties.

Just how creative must the work be?

Whether an employee is exempt as a creative professional turns on the extent of the invention, imagination, originality, or talent that the employee exercises. For example: Continue Reading

Commission Pay Post-Peabody

Posted in Commission Plans, Uncategorized, Wage Order Series

By: Emily Schroeder 

In a recent blog post, we discussed how recent California judicial court decisions may erode the once-solid foundation of traditional incentive pay systems. Specifically, Armenta v. Osmose and Bluford v. Safeway held that while a 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 worked doing anything else.

The California Supreme Court has added to this line of cases in Peabody v. Time Warner Cable, Inc., where the timing of commission payments came under attack. In Peabody, the Supreme Court held that commission wages paid in one pay period cannot be attributed to earlier pay periods to satisfy minimum and overtime wage requirements.

The Pay Practice

The Plaintiff, Susan Peabody, worked for Time Warner as a commissioned sales person. She was paid biweekly, but only the final paycheck of the month contained her commissions. Her first paycheck, meanwhile, generally paid an hourly rate of less than 1.5 times the minimum wage for the hours worked during the pay period corresponding to that paycheck. 

Peabody filed a class action lawsuit against Time Warner, claiming that (1) she regularly worked overtime but did not receive overtime wages, and (2) she earned less than the minimum wage during those weeks in which she worked more than 48 hours.

Time Warner argued that (1) Peabody was exempt from overtime pay under the California Wage Order exemption for commissioned employees whose earnings exceed 1.5 times the California minimum wage and who earn more than one-half of their compensation in the form of commissions, and (2) Time Warner should be able to assign the commissions paid in one pay period to the earlier pay period to satisfy minimum and overtime wage requirements. 

The California Supreme Court Decision

When a federal district court court granted summary judgment for Time Warner, Peabody appealed to the Ninth Circuit. The Ninth Circuit, finding no controlling California precedent, asked the California Supreme Court to determine whether the timing of Peabody’s commission payments resulted in underpayment of minimum and overtime wages.

As an initial matter, the Supreme Court rejected Time Warner’s argument that it was permissible to use a monthly pay period for paying commissions; the Court reasoned that, except for employees subject to certain special exemptions, wages must be paid at least as often as semi-montly. Second, the Suprme Court held that commissions paid in one pay period could not be attributed to earlier pay periods to satisfy minimum and overtime wage requirements. The Supreme Court cited statutory construction principles that require it to construe statutes in a manner favorable to the employee.

Additionally, the Supreme Court cautioned employers against relying on federal law in establishing pay practices, as California law is often significantly more favorable to employees.

Workforce Solutions

In the wake of Peabody, employers with commissioned employees may want to review their current payroll practices to ensure that these employees are paid more than 1.5 times the California minimum wage during each pay period, to take advantage of the Wage Order overtime exemption for commissioned salespeople.  Peabody is also a further reminder that California employment law is peculiar: California employers should always be wary of the differences between federal and state law when establishing pay policies.

Edited by Julie Yap

Get out there and sell! The Quantitative/Qualitative Outside Sales Problem

Posted in Exemption Series

By John R. Giovannone and Hayley E. Macon

While its administrative and executive siblings often get more publicity, the “outside sales exemption” presents unique challenges for California employers, particularly those that employ large sales teams (even setting aside the administrative challenges surrounding cell phone and other business expenses).

California’s rationale for exempting outside sales personnel from overtime and similar wage-related requirements is straightforward:  “Outside sales[people] have historically been exempt ‘because ‘it’s very difficult to control their hours and working conditions. They set their own time, and they’re on the road, they call on their customers . . . . [R]arely do you know what they are doing on an hour-by-hour basis.’” DLSE Op. Ltr. (September 8, 1998).

But although the outside sales exemption reflects the difficulty of tracking hours in connection with sales activity, California still requires employers to know what hard-to-track sales employees are doing “on an hour-by-hour basis” to defend the application of that exemption.

Who is an exempt outside sales person?

Federal law:  Employees whose “primary duty” is making sales and who regularly work away from the employer’s place of business may be exempt from minimum wage and overtime pay requirements. 20 CFR § 541.500(a). This federal rule is often described as being a  “qualitative” test.

California law:  The California version of the outside sales exemption (Lab. Code § 1171) is peculiar, by federal standards. Like the federal rule, California’s exemption covers sales people who regularly work away from the employer’s place of business. But California imposes an additional “quantitative” requirement: the employee must spend most of the work day away from the employer’s place of business, engaged in sales activities. California also limits the exemption to sales people who sell tangible or intangible items, or obtain orders or contracts for products, services, or use of facilities. IWC Wage Order 1-2001(2)(j). As a result, California’s outside sales exemption is narrower than the federal exemption.

Why is the California definition problematic? Continue Reading

New Sick Pay Law Will Nauseate Some California Employers

Posted in 2014 Cal-Peculiarities, California Leaves

By Kristina Launey and Christie Jackson

On August 30, 2014, California Governor Jerry Brown commented on the Legislature’s passage of a bill entitled the “Healthy Workplaces, Healthy Families Act of 2014”: “Tonight, the Legislature took historic action to help hardworking Californians. This bill guarantees that millions of workers – from Eureka to San Diego – won’t lose their jobs or pay just because they get sick.”  The bill, which he signed into law September 10, will require employers statewide to provide paid sick leave.

Though the requirement that employees receive paid sick leave under the Act does not kick in until July 1, 2015, the Act already has employers sweating the law’s myriad of new provisions, mindful of the compliance headaches the new law’s vagaries are certain to bring. If only there were a vaccine… For now, as is often the case, the only sure cure is prevention. Awareness and proactive preparation is the only way to weather the worst of this latest legislative virus.

Employees May Earn 24 Hours of Paid Sick Leave Per Year: The Act grants a right to earn paid sick days to employees who—on or after July 1, 2015—work in California for 30 or more days within a year. Paid sick days will accrue at the rate of one hour for every 30 hours worked. The employee may use the accrued sick days beginning on the 90th day of employment. Exempt employees’ accrual is based on a presumed 40 hour-workweek; except that an exempt employee whose normal workweek is fewer than 40 hours will accrue paid sick days based on that employee’s normal workweek.

An employer can limit use of paid sick days to 24 hours or three days in each year of employment. No accrual or carry over is required if the full amount of leave is received at the beginning of each year. The Act does not require extra paid sick days to be paid by employers whose paid time off policies already provide as many sick days as the Act now requires.

Qualifying Reasons for Use:  Continue Reading

Spotlight on San Francisco: New Proposals To Benefit Part-Time and Minimum-Wage Employees

Posted in San Francisco Ordinances

By Daniel Kim and Michele Haydel Gehrke

Two proposed San Francisco ordinances could mean more hours and more money for San Francisco’s part-time and minimum-wage employees. San Francisco Supervisor Eric Mar’s recent proposal will give additional rights to part-time employees, including more hours, and a new ballot initiative for November proposes to raise the minimum wage rate in San Francisco.

Special protections for part-time employees?

The San Francisco Supervisors’ Land Use and Economic Development Committee is currently evaluating a city-wide ordinance that would provide additional protections for part-time employees. Eric Mar, a San Francisco Supervisor, recently proposed a new city ordinance covering the first half of what has been named the Retail Workers Bill of Rights. The proposal is sponsored through the San Francisco chapter of Jobs With Justice, an alliance of numerous coalitions relating to workers’ rights.

The proposed ordinance would: Continue Reading

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 employer 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