Seyfarth Synopsis: With the widespread use of direct deposit, the thought of an employee regularly reviewing wage statements may seem inconceivable. Still, employers must ensure that their wage statements strictly comply with California law, as even trivial, inadvertent failures to do so can lead to heavy penalties. We highlight here the information to include on wage statements while pointing out some of the legal landmines trod upon by unwary employers.

Labor Code Section 226(a) Is Pain. Anyone Who Says Differently Is Selling Something.

Much like The Princess Bride, wage statements remain incredibly relevant. Section 226(a) forces employers to report nine items of information on each itemized statement that accompanies a payment of wages:

  1. gross wages earned by the employee,
  2. total hours worked by the employee,
  3. all applicable hourly rates during the pay period,
  4. all deductions taken from the employee’s wages,
  5. the net wages the employee earned,
  6. the pay period that the wage statement reflects, including the start and end date,
  7. the employee’s name and ID number (which can be the last four digits of the Social Security number (SSN)),
  8. the name and address of the legal employer, and
  9. if the employee earns a piece rate, then the number of piece-rate units earned and the applicable piece rate.

(Note that employers must also report available paid sick leave, either on the wage statement or on another document issued at the time of each wage payment.)

Avoiding the Fire Swamp: Wage Statement Line Mines to Avoid

  • If you use a payroll service to prepare the itemized wage statement, can you just “set it and forget it”? No, you can’t. Many excellent payroll services do get it just right. Meanwhile, other companies, operating nationally, have not always heeded each California-specific requirement. And they do not feel it’s their responsibility; it’s yours. They do not offer legal advice or indemnification to prevent and correct wage-statement mistakes. If you are the typical California employer, you are on your own to ensure that your wage statements are sufficiently “Cal-peculiar.”
  • If you create in-house wage statements, can you rely on your IT department to capture all the right payroll information in the format that HR has designed? No, you can’t. Many companies have lamented the discovery that the perfect wage statement designed by the legal or HR department did not emerge quite as envisioned once IT completed all the necessary programming. In the world of wage statements, for every ugly duckling turning into a swan there is a swan turning into an ugly duckling.
  • Many well-regarded employers—national behemoths and local start-ups alike—have tripped over innocent, often trivial wage-statement mistakes to fall into a pit of despair, where they’ve found themselves inundated by millions of dollars in penalties that bear little or no relation to any actual employee harm.
  • Among the alleged hyper-technical violations causing employers to spend heavily to defend themselves—and sometimes causing them to incur huge penalties—have been these:
    • Neglecting to total all the hours worked, even though the wage statement lists all the various types of hours individually.
    • Accidentally showing net wages as “zero” where an employee gets direct deposit.
    • Leaving off either the start or end date of the pay period.
    • Not showing the number of hours worked at each applicable rate.
    • Recording an incomplete employer name (“Summit” instead of “Summit Logistics, Inc.”).
    • Recording an incomplete employer address.
    • Failing to provide an employee ID number, or reporting a full nine-digit SSN instead of a four-digit SSN.
  • And remember to keep a copy of your wage statements (or to have the capability to recreate what the employees have received).

Reaching the Cliffs of Insanity: How Recent Case Law Intensifies the Impact of Section 226

By now, you surely ask, “Can it possibly get any worse than that?” Yes, it can. It has been bad enough, of course, that hyper-technical failures to show an item required by Section 226(a) could create large liability unrelated to any real harm. But, until recently, employers at least had the defense that no penalty was available absent a “knowing and intentional” violation, because that was what a plaintiff had to prove to get penalties ($50 or $100 per employee per pay period) under Section 226(e).

But now, if a recent Court of Appeal decision stands, that defense has been stripped away. Lopez v. Friant & Associates, LLC held that an employer whose wage statement failed to record an employee ID number could be subject to penalties under California’s Private Attorneys General Act (PAGA), even though the mistake was inadvertent and promptly corrected, and even though the employee admittedly suffered no injury by his employer reminding him each pay period what the last four digits of his SSN are. Lopez permitted the employee to sue for PAGA penalties without needing to prove the “injury” and “knowing and intentional” elements of a Section 226(e) claim. In short, Lopez is about as appealing as a Rodent Of Unusual Size (R.O.U.S.). See our detailed client alert on Lopez here.

Workplace Solutions: What Would Miracle Max Do

Though the exact impact of Lopez is unclear at this point (Lopez did not decide whether the extra PAGA penalty would be $250 per employee, under Section 226.3, or $100 per employee per pay period, under Section 2699(f)), Lopez rings the alarm that employers must proactively ensure that their itemized wage statements strictly comply with Section 226(a), lest they be the next to fall in the pit of despair. When is the last time you did your self-audit? Don’t hesitate to reach out to Seyfarth to help you ensure your wage statements are compliant.

Seyfarth Synopsis: 2016 brought a wave of new protections for California employees and scant protection for employers. In this week’s post, we anticipate changes for 2017, in the ever-peculiar world of California employment law.

True to our tradition, we pause at the beginning of the New Year to reflect on last year’s California employment law changes, and consider possible trends. On the good ship Cal-Pecs, our contributors take turns keeping lookout in the crow’s nest. Where, we ask, is the wandering bark of employment law heading in California? What shoals loom ahead?

Despite the sea change that the election of Donald J. Trump represents, including expected changes favoring employers at the federal level, California remains (with apologies to Carey McWilliams) its own “island on the land.” An island of employees who know their rights. While lawmakers in Illinois, New York, New Jersey, and Massachusetts are doing whatever they can to catch up, all three branches of California’s government—legislative, executive, and judicial—continue to tack toward expanding employee rights.

To pick just a few examples: in 2016, California judges, legislators, and municipalities

  • extended the protections of pay equity laws beyond gender, to also prohibit unjustified disparities based on race and ethnicity,
  • shielded applicants from being haunted by juvenile conviction histories,
  • provided that all contracts with California employees will be governed by California law, unless the employee is represented by a lawyer,
  • increased the number of jurisdictions where minimum wage and paid sick time rights exceed state norms,
  • required employers, upon pain of penalty, to schedule work time for certain employees well in advance.

The above developments—which we’ve discussed in more detail here, here, and here—are part of a continuing trend in recent years that emphasizes equal pay, expansion of paid sick and small-necessity leave rights, prevention of ”wage theft,” and increasing work opportunities for historically underprivileged or disenfranchised groups such as immigrants and those with criminal histories.

Against this ever more employee-friendly backdrop, one can only wonder how California will grapple with the challenges of a modern economy, such as job eliminations (caused by more work automation), the increasingly “gig” nature of our state’s economy (resulting in more independent contractors and fewer employees), and the impact of legalization of recreational marijuana (employees can’t be impaired in the workplace, but attempts to limit non-work time use could implicate employee privacy, among other things). One particularly bold effort came in 2016: proposed bill AB 1727 would have given independent contractors the right to organize and negotiate with work providers through “group activities” such as withholding work, boycotting, or critiquing labor practices. That effort died in the Assembly Judiciary Committee. But hear this fearless prediction: we will hear of this again. And we can expect other bold efforts to empower the growing numbers of gig economy workers.

Meanwhile, we anticipate answers on the following workplace issues now pending before the California Supreme Court:

  • Which “employee” test determines whether a class should be certified to determine whether a group independent contractors was misclassified? The IWC definition of “employee” (as construed in Martinez v. Combs, 49 Cal. 4th 35 (2020), or the common law test set forth in S.G. Borello & Sons, Inc., 48 Cal. 3d 341 (1989)? [Dynamex Operations West, Inc., v. Superior Court, S222732]
  • What does it mean that a California employer is to provide “one’s day rest in seven”? [Mendoza v. Nordstrom, S224611]
  • Does the federal de minimis doctrine apply to claims for unpaid wages under California Labor Code Sections 510, 1194 and 1997 (minimum wage and overtime)? [Troester v. Starbucks Corp., S234969]
  • What is the correct way to calculate the rate of overtime pay when a non-exempt employee receives a flat sum bonus? [Alvarado v. Dart Container Corp of California, S232607].

If we can take any guidance from the Supreme Court’s latest wage-hour decision (Augustus v. ABM Security, rewriting the law on required rest breaks [see links to our OMM and prior post on the case here]), the results in the above cases will continue the tide of worker rights that will swamp more than a few employer boats, making management of California employees even more complicated, and increasing the risks of employers incurring inadvertent violations.

As in past years, we invite you to contact us with any comments, suggestions, or disagreements you may have regarding any of our posts, or if you would like to be a guest author.

We look forward to keeping you apprised of continuing ebbs and flows in California employment law during the year to come.

Seyfarth Synopsis: Governor Jerry Brown recently signed pay equity legislation to build on SB 358, a gender pay equity bill that he signed just last year.

Recent state pay equity initiatives (in Massachusetts, New Jersey, New York) have focused on gender. California is different. Leave it to the state that last year passed the nation’s strictest pay equity law as to gender to take it up another notch.  SB 1063, dubbed the “Wage Equality Act of 2016,” extends last year’s Fair Pay Act amendments to Labor Code section 1197.5 to cover unequal pay as to race and ethnicity. Thus, effective January 1, 2017, California employers must not pay employees a wage rate less than the rate paid to employees of a different race or ethnicity for substantially similar work. (Read our prior alert for a description of the Act’s requirements and prohibitions.) Meanwhile, newly enacted AB 1676 will prohibit employers from using an employee’s prior salary as the sole basis to justify a pay disparity. In the process, however, California has declined to follow the Massachusetts example of forbidding employer inquiries into an applicant’s prior salary.

SB 1063 was introduced in February 16, 2016, just four months after Governor Jerry Brown signed into law SB 358 (one of the nation’s most aggressive gender pay equity bills). The move to include race and ethnicity was foreshadowed last summer when the California National Organization of Women—sponsor of this year’s bill—opposed the Fair Pay Act (SB 358) for its failure to include pay equity protections for various additional categories protected by anti-discrimination laws (such as race, ethnicity, sexual orientation, gender identity, and disability status).

Senator Hall, who authored the Wage Equality Act of 2016, justified the opposition by saying that “the 65 year old California Equal Pay Act fails to include one of the largest factors for wage inequity—race and ethnicity.” Senator Hall cited a 2013 study by the American Association of University Women reporting that “Asian American women make 90 cents, African American women make 64 cents, and Hispanic or Latina women make just 54 cents for every dollar that a Caucasian man earns. The wage gap isn’t only between men and women, as African American men earn just 75% of the average salary of a Caucasian male worker.”

Opponents of SB 1063 objected that it would go too far, too fast: SB 358 is still in its infancy,with its standards likely to be tested over the next several years in litigation. Therefore, the opponents argued, “the legislature should allow time for employees, employers, and the courts to interpret and implement the new boundaries of the equal pay law before seeking to amend and expand it even further.” Opponents also noted that employees have other ways to challenge pay discrimination. The Fair Employment and Housing Act already prohibits discrimination against people in many classifications, including race and ethnicity.

AB 1676, which was passed concurrently with SB 1063, will amend Section 1197.5 (the same section SB 1063 amends) to prohibit employers from using prior salary as the sole justification for a pay disparity. In its original proposed form, AB 1676 would have prohibited employers from seeking an applicant’s salary history information, just as its vetoed predecessor, AB 1017, had attempted to do last year. In vetoing AB 1017, Governor Brown stated that further gender pay equity changes should wait until we see how SB 358 plays out. The removal of any ban on asking about salary history likely made AB 1676 palatable to the Governor, and kept California from matching the new Massachusetts law, which prohibits Massachusetts employers from requesting an applicant’s pay history, unless the applicant has voluntarily disclosed that information.

What’s an employer to do? First, self-assess where your company is on pay equity. If you’ve not analyzed the issue before, conducting a proactive pay equity analysis could be the first and best step to take to achieve fair pay and diminish legal risk. Through the use of statistical models and analyses (conducted by a labor economist), employers can test the extent to which permissible factors explain existing pay differentials. This “look under the hood” is especially important for companies considering making public proclamations about the company’s state of pay equity. With SB 1063 now looming on the horizon, companies should not limit these analyses to gender. Engaging legal counsel to direct and conduct this work under attorney-client privilege minimizes risk that this analysis and related deliberations might be discovered in litigation. Even companies that are well-versed in pay equity are wise to revisit the issue with an eye to race and ethnicity. And all companies should review their written policies, practices, and hiring, promotion, and compensation factors to ensure that all comply with the requirements of the California Fair Pay Act.

Join members of Seyfarth’s Pay Equity Group and top labor economists on November 30 for a robust discussion around strategies for navigating the complexities of “pay equity”.

Seyfarth Synopsis: A court has temporarily suspended the deadline for employers to elect the statutory “safe harbor” for purposes of complying with recent legislation that makes it even more difficult for employers that pay with a piece rate rather than an hourly rate for any portion of an employee’s work.  

As we previously reported, the California Legislature’s enactment of AB 1513 (commonly known as the “piece rate pay law”), which became effective on January 1, 2016, has created significant challenges for California employers that pay employees on a piece-rate basis for any part of their work. This new law requires employers to pay piece-rate employees separately for rest and recovery periods and for “other non-productive time,” based on a specific formula, and requires detailed disclosures in wage statements.

AB 1513’s “Safe Harbor” for Past Violations

AB 1513 creates an affirmative defense to wage claims for employers that follow the law’s very specific “safe harbor” provisions. To come within the safe harbor, employers must (1) provide written notice of their intent to utilize the safe harbor procedures by no later than July 1, 2016, and (2) pay employees for all previously uncompensated rest and recovery periods and other non-productive time, plus interest, for the period from July 1, 2012, through December 31, 2015, by December 15, 2016.

Challenge to the Piece Rate Pay Law

An agricultural employer group, Nisei Farmers League, filed a lawsuit challenging AB 1513 on constitutional grounds. The lawsuit argues that AB 1513 is unconstitutionally vague, fails to provide employers with fair notice of its requirements, and is impermissibly retroactive. The League sought to enjoin enforcement of certain provisions of AB 1513, including the safe harbor, pending a trial of their claims.

On June 30, 2016, one day before the deadline to elect the safe harbor, the court entered an Order to Show Cause re Preliminary Injunction and Temporary Restraining Order. This Order restrains the Department of Industrial Relations from enforcing the deadline until at least July 18, 2016, the date of the hearing on the Order to Show Cause. If the court enters a preliminary injunction at the hearing, the DIR will be enjoined from enforcing the deadline until thirty days after the preliminary injunction expires, and from enforcing the payment requirement until 197 days after the preliminary injunction expires. If the court does not enter a preliminary injunction, then the deadline will become effective ten days later (on July 28, 2016).

What Does This Mean for Piece Rate Employers?

The Order provides piece-rate employers with some additional time (at least until July 28, 2016, and longer if the court enters a preliminary injunction) to decide whether to invoke the safe harbor if they have not already done so. Employers that already made this election may have additional time to comply with the back-pay requirements if the court enters a preliminary injunction on July 18. In either case, the many California employers struggling to comply with the unclear and burdensome requirements of AB 1513 should watch this legal challenge closely.

Seyfarth Synopsis:  Changes to the FLSA regulations increasing the minimum weekly salary for exempt employees will impact California employees who currently are being paid less than $47,476 per year. Wise employers will start planning now to make the adjustments required to ensure compliance with both state and federal exemption laws. 

If you have white-collar exempt employees in California, you know that to qualify as an exempt executive, administrative or professional employee, an employee must (among other things) be paid by a salary that is at least twice the state minimum wage. With the California minimum wage currently set at $10 per hour (at least until next January, when it will increase to $10.50/hour), a little math tells us that the California salary threshold for white-collar exempt employees is $41,600/year [40 hours per week x $10.00 = $400/week x 52 weeks = $20,800; times 2 = $41,600].

If you have been catching the national news on the Department of Labor’s recent amendments to the FLSA regulations, you know that the federal salary threshold for white-collar exemptions is going up dramatically—to $913 per week, or $47,476/year.

The federal changes will go into effect on December 1, 2016. There are a number of options for responding to the new regulations, ranging from simply raising salaries to the federally-required level to re-classifying positions to non-exempt. You can access tons of relevant, helpful and interesting information here at Seyfarth’s FLSA Exemption Resource Center.

Until now, we in the Golden State did not often worry about the federal salary minimum for exemptions, because it was so much lower than what was required here. Now, however, we must take note—and make adjustments—for any employees who are currently classified as exempt and who are not being paid at least the equivalent of $47,476 per year.

What types of employees are we talking about? Employees who are likely to fall into this category in California include the ranks of a company’s exempt staff currently being compensated at or close to the current state minimum allowable salary; in other words, those being paid at or above $41,600, but less than $47,476. Examples might include some managers, executive assistants, human resources professionals, business development or marketing professionals, teachers, accountants, engineers, and creative professionals.

Even though the FLSA amendments will not go into effect until December 1, one question has already surfaced as a Cal-Peculiarity:  what to do with part-time exempt employees? It was, and remains, permissible (if perhaps uncommon) to have exempt employees who work part-time schedules, as long as they are paid at least the salary minimum (federal and CA) for each week of work, as the federal regulations do not allow pro-ration of weekly salary. As of December 1, 2016, any part-time exempt employees will have to be paid at least $913 per week.

If paying the higher weekly amount to part-time exempt folks is not a good option for the employer, a solution (in theory) under federal law would be to convert the employee to salaried non-exempt, and pay the employee for any overtime incurred according to the fluctuating workweek method (a method of calculating the regular rate of pay that varies according to the number of hours worked in a particular week). Not so fast. This method is not permitted in California, and converting California part-time exempt to salaried non-exempt employees could have expensive, unintended consequences if overtime were incurred. So, that solution may not be your best bet under California law.

Employers in California, as elsewhere, still have time to consider their workforces and make and implement plans for any necessary adjustments to their current exempt positions. But, we recommend that you begin your review and planning now.

Seyfarth Synopsis: New FAQs from DLSE offer some guidance on California’s “new and improved” Equal Pay Act. Most helpful is discussion of factors (skill, effort, responsibility) affecting whether work by different employees is “substantially similar” enough to require equal wages. 

As Seyfarth has reported previously here, as of January 1, 2016, California has one of the most aggressive pay equity laws in the country. On April 6, 2016, California’s Division of Labor Standards Enforcement issued a “Frequently Asked Questions” on the California Equal Pay Act, as strengthened by enactment of the California Fair Pay Act of 2015.

While the FAQ provides a handy roadmap for employees wishing to sue, it provides little guidance for an employer hoping to avoid claims of unequal pay or, if a claim is made, to defend itself. The phrasing of the FAQs is employee-focused. For example, the document addresses these questions for employees:

“What do I have to prove to prevail on my Equal Pay Act claim?”

“When do I have to file my claim?”

“What do I get if I prevail?”

But the advice for employers is limited.

As a quick reminder, the CA Equal Pay Act (Labor Code section 1197.5) requires employers to pay employees of both sexes the same “wage rates” for “substantially similar work,” unless the employer proves that the wage differential is based on (a) seniority, (b) merit, (c) a system that measures earnings by quantity or quality of production, or (d) some other bona fide factor other than sex, such as education, training or experience.

In the FAQs, the DLSE recaps the key differences in the current law from its predecessor: employees can be compared even if they do not work at the same establishment or hold the “same” or “substantially equal” jobs, and employers have the burden to justify pay differentials based on a limited number of factors. Also new: employers must keep records of wages, wage rates, job classifications, and other terms and conditions for three years (rather than two), and (consistent with existing law) employers may not prohibit employees from discussing their wages.

What Employers Need To Consider In Light Of The FAQs

The DLSE leaves many questions unanswered from the employer’s perspective. Perhaps this is not surprising, given the nuanced and fact-specific nature of the questions with which employers must grapple to comply with the law. Nonetheless, there are a few nuggets of information that employers should take to heart when performing pay equity analyses.

The meaning of “substantially similar work.” As noted, the law requires employers to pay employees of both sexes the same wage rates for “substantially similar work.” The FAQs define substantially similar work to mean “work that is mostly similar in skill, effort, responsibility, and performed under similar working conditions.” (The imprecise term “mostly similar” is arguably an improvement on the “when viewed as a composite of” language used in the statute.) The FAQs go on to define (more helpfully) the terms “skill,” “effort,” “responsibility,” and “performed under similar working conditions”:

Skill = experience, ability, education, and training required to perform the job;

Effort = the amount of physical or mental exertion needed to perform the job;

Responsibility = the degree of accountability required in performing the job; and

Performed under similar working conditions = the hazards and physical surroundings of the job such as temperature, fumes, and ventilation.

How do you define “wage rates”? The FAQs do not define “wage rates”; it merely repeats what we already knew—the law refers to wages or salary paid, and other forms of compensation and benefits. Notwithstanding the lack of guidance, we think employers should consider all forms of compensation, not just base or hourly pay, and give special attention to setting starting salaries for new hires.

Employee questions about wages. As the DLSE points out, an employer cannot retaliate against employees who talk or inquire about their own wages or the wages of others. At the same time, the employer continues to have no duty to disclose wages of other employees.

Seyfarth’s Pay Equity Group Is Positioned To Assist Employers

Seyfarth has been at the forefront of assisting employers to interpret pay equity laws and conduct pay analyses. The Seyfarth Pay Equity Group, which includes experienced attorneys and analysts, regularly advise clients regarding the California Fair Pay Act. Contact your Seyfarth attorney to discuss how Seyfarth’s Pay Equity Group may benefit you.

On April 4, 2016, Governor Jerry Brown signed SB 3, increasing the statewide minimum wage to $15.00 per hour. The increase will be phased in over the next six years.

First introduced in the state Senate by Senator Leno on December 1, 2014, SB 3, was subject to contentious debate on both the Assembly and Senate Floors on March 31st. Those interested in watching legislators argue for and against the wage hike can watch the Assembly debate here and the Senate debate here.

SB 3, which amends Section 1182.12 of the Labor Code, increases the minimum wage according to different schedules, depending on the number of employees. Here is the schedule of new minimum wages applying to employers who employ 26 or more employees:

  • January 1, 2017 – $10.50
  • January 1, 2018 – $11.00
  • January 1, 2019 – $12.00
  • January 1, 2020 – $13.00
  • January 1, 2021 – $14.00
  • January 1, 2022 – $15.00

For an employer who employs 25 or fewer employees, each yearly scheduled increase comes one year later, beginning with January 1, 2018 and capping out on January 1, 2023.

After $15.00 has been reached, the Department of Finance will continue to calculate a yearly minimum wage increase at either a rate of 3.5% or the rate of change in the averages of the preceding year’s U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers (U.S. CPI-W), whichever is the lesser amount. The adjusted minimum wage will continue to take effect on the following January 1st. The minimum wage will stay the same if that year’s U.S. CPI-W is negative.

A feature of the new law of particular interest is that the Governor can pause the wage hikes based on economic conditions. The law requires “the Director of Finance to annually determine whether economic conditions can support a scheduled minimum wage increase and certify that determination to the Governor and the Legislature.” The Governor may suspend the scheduled increases a maximum of two times. The Assembly Bill Analysis can be found here and the Senate Bill Analysis here.

We previously reported here  (when the $10 state-wide minimum wage went into effect on January 1, 2016) on the impacts that an increasing minimum wage has on various other compensation determinations, such as the salary threshold for the white collar exemptions under California law. If you have any questions about how forthcoming minimum wage increases will affect your business, please reach out to our California Workplace Solutions team or any member of Seyfarth’s Labor and Employment Group.

Edited by David Kadue and Colleen Regan.

With March Madness in full swing, we interrupt your crumbling tournament brackets to ensure you’re aware of a truly maddening development. California law now makes individuals potentially liable for employer violations of many often-convoluted wage and hour rules.

That’s right—individuals, not just companies, may be liable for wage and hour violations.

We mentioned this legislation here last Fall, when it was part of “A Fair Day’s Pay Act” (SB 588).  We described it there as what it is: an enhancement to the Labor Commissioner’s enforcement authority. The bill’s introductory summary explained that the “bill would authorize the Labor Commissioner to provide for a hearing to recover civil penalties against any employer or other person acting on behalf of an employer … for a [wage and hour] violation.” The Senate Bill Analysis opined that the bill targeted “willful” wage theft and would give the “Labor Commissioner” additional avenues to enforce its judgments. The Senate Bill Analysis can be found here, and the full text of the bill can be found here.

Even though the limited purpose of the new law is clear, enterprising members of the plaintiffs’ bar have recently sought to read the new law as authorizing a private right of action against individual managers. These lawyers have seized upon a legislative oversight. Although 12 of the 13 bill’s enactments refer to the Labor Commissioner, the 13th provision—Section 558.1 of the Labor Code—does not expressly mention “Labor Commissioner.” These lawyers have seized upon this obvious oversight to argue that Section 558.1 goes further than its 12 companion provisions and somehow creates a private right of action against individuals.

The personal liability language of Section 558.1 is not complex: any employer or “other person acting on behalf of an employer” “may be held liable as the employer for” violations of the directives in the Wage Orders and in various provisions of the Labor Code. Thus, the Labor Commissioner may now hold individuals liable for certain wage and hour violations, including California’s big six: unpaid overtime, unpaid minimum wage, denied meal/rest breaks, untimely termination pay, inadequate wage statements, and failure to reimburse for employee business expenses.

The Legislature defines “other person acting on behalf of an employer” as “a natural person who is an owner, director, officer, or managing agent of the employer.” The “managing agent” definition mirrors that found in California’s punitive damages statute. Under that statute and case law, “managing agents” are all employees who exercise substantial independent authority and judgment in their corporate decision-making such that their decisions ultimately determine corporate policy.

But while this statutory language thus creates the potential for individual liability at the hands of the Labor Commissioner, none of the foregoing statutory language nor anything in the legislative history of the bill’s enactment creates a private right of action. As the California Supreme Court has explained, it takes more than statutory silence in a Labor Code provision to create a private right of action: the statute must contain “clear, understandable, unmistakable terms, which strongly and directly indicate that the Legislature intended to create a private cause of action”; and if the statute lacks that language, the statute’s legislative history must be examined. Applied here, that analysis would show that the plaintiffs’ lawyers are out of line, and should seek their easy pickings elsewhere.

We expect courts to remedy the plaintiffs’ interpretive overreaching. Meanwhile, however, the new statute remains significant for high-level managers regardless of who is empowered to enforce it. What’s clear is that now, more than ever, employers and their corporate policy-makers may have a personal stake in ensuring that the company’s wage and hour house is in order and ensuring that employees are paid properly. Employers would be well-advised to take proactive measures to ensure compliance with California’s unique wage and hour landscape, such as auditing current pay practices and policies.

If you would like assistance in ensuring your company’s wage and hour compliance, or if have questions regarding the issues raised in this post, then please do not hesitate to contact the authors or any other member of Seyfarth’s Labor and Employment Group.

When an employee dies, employers ask, “Who gets the employee’s wages, and how do I pay them without getting into trouble?” While employers might be tempted to consult the California Labor Code (see discussion of payment of wages to a terminated employee here), under certain circumstances, paying wages earned by a deceased employee is governed by the California Probate Code.

Sections 13600-13606 address when and to whom an employer should pay wages owed to a deceased employee. We focus here on cases where the deceased employee has left a surviving spouse. Section 13600 provides a method much more expedient that the usual probate process by which a surviving spouse may receive the wages owed to the deceased spouse. (Other states differ. In New York, for example, employers can make reasonable efforts to contact the administrator of the estate of the deceased employee to pay wages within the time wages generally must be paid).)

Upon the death of an employee, a California employer must pay the deceased’s spouse the earned “salary or other compensation … including compensation for unused vacation, not in excess of fifteen thousand dollars.”  Cal. Prob. Code § 13600. The surviving spouse (or the conservator of the estate of the surviving spouse) must state under penalty of perjury this information:

(1) The name of the decedent.

(2) The date and place of the decedent’s death.

(3) The declarant is either (A) “the surviving spouse of the decedent” or (B) “the guardian or conservator of the estate of the surviving spouse of the decedent.”

(4) “The surviving spouse … is entitled to the earnings of the decedent under the decedent’s will or by intestate succession and no one else has a superior right to the earnings.”

(5) “No proceeding is now being or has been conducted in California for administration of the decedent’s estate.”

(6) “Sections 13600 to 13605, inclusive, of the California Probate Code require that the earnings of the decedent, including compensation for unused vacation, not in excess of fifteen thousand dollars ($15,000) net, be paid promptly to the … declarant.”

(7) “Neither the surviving spouse, nor anyone acting on behalf of the surviving spouse, has a pending request to collect compensation owed by another employer for personal services of the decedent under Sections 13600 to 13605, inclusive, of the California Probate Code.”

(8) “Neither the surviving spouse, nor anyone acting on behalf of the surviving spouse, has collected any compensation owed by an employer for personal services of the decedent under Sections 13600 to 13605, inclusive, of the California Probate Code except the sum of _____ dollars ($_____) which was collected from _____.”

(9) “The … declarant requests … the salary or other compensation owed by you for personal services of the decedent, including compensation for unused vacation, not to exceed fifteen thousand dollars ($15,000) net, less the amount of _____ dollars ($_____) which was previously collected.”

(10) “The … declarant affirms or declares under penalty of perjury under the laws of the State of California that the foregoing is true and correct.”

Cal. Prob. Code § 13601.

The employer, upon receiving such a statement and “reasonable proof of identity of the surviving spouse,” must “promptly pay” the surviving spouse “the earnings of the decedent, including compensation for unused vacation, not in excess of fifteen thousand dollars.” Cal. Prob. Code §§ 13601(b), 13602.

If the surviving spouse’s statement satisfies the requirements of Probate Code section 13601, and adequate identification is provided, the employer is discharged “from any further liability with respect to the compensation paid. The employer may rely in good faith on the statement and has no duty to inquire into its truth. Cal. Prob. Code § 13603.

If an employer refuses to pay wages under Section 13600, the surviving spouse can sue  to recover the wages, and, if the employer “acted unreasonably in refusing to pay,” can collect reasonable attorney fees. Cal. Prob. Code § 13604. Actions to recover wages would likely be brought in the Probate Division of the California Superior Court, as the action arises under the Probate Code.

By following California Probate Code sections 13600-13606, employers can thus discharge their liability regarding the deceased’s wages through a relatively straightforward process that also affords the surviving spouse ready access to earned wages and earned but unpaid vacation pay.

Edited by Coby M. Turner.

From high profile cases in Hollywood to the Silicon Valley, to high-profile legislation, gender pay equity has been top of the news in the past year.  On January 1, 2016, the California Fair Pay Act — widely publicized as the toughest (gender) pay equity law in the nation — became effective.  Other states (Massachusetts, New Jersey, New York) and even the EEOC have since pursued similar action, through various means.  Just as companies are struggling to get a handle on the new gender pay equity requirements, the California Legislature (not unexpectedly) is looking to expand the law further.

Just two days ago, on February 16, 2016, California Senator Isadore Hall (D-South Bay) introduced Senate Bill 1063, dubbed the “Wage Equality Act of 2016,” which seeks to extend last year’s Fair Pay Act amendments virtually verbatim to Labor Code section 1197.5 to race and ethnicity. As such, SB 1063 would prohibit employers from paying employees a wage rate less than the rate paid to employees of a different race or ethnicity for substantially similar work.

The Fair Pay Act was billed as the  toughest equal pay law in the U.S. — but it only addressed gender.  Senator Hall noted that despite last year’s legislation, “the 65 year old California Equal Pay Act fails to include one of the largest factors for wage inequity — race and ethnicity.”  The Wage Equality Act of 2016 is again being touted as creating (an even stronger) strongest wage equality law in the nation.

In support of the bill, Senator Hall press release cites a “2013 study by the American Association of University Women [which] revealed that Asian American women make 90 cents, African American women make 64 cents, and Hispanic or Latina women make just 54 cents for every dollar that a Caucasian man earns. The wage gap isn’t only between men and women, as African American men earn just 75% of the average salary of a Caucasian male worker.”

The bill’s sponsor is the California National Organization of Women (“NOW”) — a group that opposed last year’s Fair Pay Act because it did not include protections for wage discrimination for categories such as race, ethnicity, LGBTQ, and disability status, that are protected under other anti-discrimination laws.  Since the California Equal Pay Act places a different of burden of proof on employers, CA NOW thought it wrong to deny certain employees full protections under the new legislation.

The bill may be acted upon after March 18, 2016.  We’ll continue to monitor it and other new legislation through the process and keep you, loyal readers, posted.