Seyfarth Synopsis: In what many employers will see as a “break” from workplace reality, the Supreme Court, in Augustus v. ABM Security Services, Inc., announced that certain “on call” rest periods do not comply with the California Labor Code and Wage Orders. The decision presents significant practical challenges for employers in industries where employees must respond to exigent
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New Year, New Workers’ Comp “Opt Out” Rule For Execs
Seyfarth Synopsis: New legislation effective 2017 will expand California workers’ compensation coverage by requiring coverage for certain high-level individuals unless they affirmatively opt out and waive coverage, thereby reversing the prior rule by which those individuals, to get coverage, had to opt in.
As a general rule, California employers must provide employees with workers’ compensation insurance coverage for work-related and
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Don’t Be An Amateur: Are Your “Professionals” Properly Classified?
By Catherine Dacre, Emily Barker, and Matthew Mason
One would think that an employee would prefer being deemed a “professional.” But when faced with the possibility of receiving additional income, employees often argue to the contrary, claiming that their classification as a “professional” is incorrect.
Under both California and federal law, so-called “white collar” employees, including “professional” employees, are exempt from wage and hour laws concerning overtime payment and breaks. That is, if an employee meets the test for exemption, the employer pays her a set salary, rather than on an hourly basis, and is not required to pay overtime or provide meal and rest breaks, among other things.
However, employers must take care. If an employee who has been classified as exempt later successfully argues that she does not meet the professional exemption, the employer will be on the hook for unpaid overtime going back, potentially, for four years. Plus, the employer may face additional penalties for any missed meal and rest breaks (at a rate of one additional hour of pay per break), failure to keep accurate records, failure to issue accurate wage statements, and, for terminated employees, penalties that accrue each day (up to 30 days) during the time the employee was not paid all she was owed.
Such suits will likely only become more popular in the near future. In March of this year, President Obama issued a memorandum directing the Department of Labor to streamline overtime regulations and make more workers eligible for overtime under federal law. Specifically, he asked the Department to consider how the professional exemption could be simplified to address the changing nature of the American workplace.
So, What Makes A Professional A “Professional”?
The answer to this question is complex, and is different under California law and federal law. As such, an employee may meet the test for the professional exemption under federal law, but fail to meet the test under California law.
In addition, the answer varies depending on whether the employee works in a certified profession, or whether the employee is an artist, writer or in another creative field. Generally, the criteria depend on the types of work the employee does, the level of education or training required to perform the work, and the employer paying at a specified salary threshold.
Types of Work:
Federal Law: Under federal law, an employee is properly classified as an exempt professional when the primary duty is the performance of work requiring “advanced knowledge,” defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment.
The “advanced knowledge” must be in a field of science or learning, and must be customarily acquired by a prolonged course of specialized intellectual instruction.
California Law: In California, an employee may be an exempt professional in one of three ways:
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It’s Not ALL About the Benjamins – What Really Makes an Exempt Executive
By Tim Rusche, Jonathan Brophy and Jennifer Wiegley
It seems simple enough. You hire an employee as a manager, you call her a manager, you pay her like a manager – voila! You don’t have to pay overtime, right? Not so fast.
Entrepreneurial lawyers and disgruntled employees frequently attack “exempt” classifications to recover overtime pay, missed rest break and meal period pay, and other penalties. To avoid being an easy target, it is critical that employers avoid common pitfalls (like reading this blog with less than rapt attention!) and take affirmative steps to protect the exemption.
The Test:
In addition to earning at least two times the minimum wage, generally speaking, the “executive exemption” requires employees to spend most (i.e., the majority) of their time on management tasks, to regularly exercise discretion and independent judgment, and to supervise at least two employees. In addition, their recommendations for changes in employment status, like hiring and firing, must be given particular weight.
Common Pitfalls:
- Bigger Salaries Are Not Always Better. Just because an employee receives a high salary does not make him or her exempt under California law. Regardless of the size of salaries, employees still must meet the other requirements of the exemption.
- A Job Title By Any Other Name Would Smell As Sweet. If an employee is not actually performing managerial or related duties more than 50% of the time or meeting the other requirements of the exemption, neither an impressive job title nor a detailed job description will save the exemption.
- To Deduct, Or Not To Deduct, That Is The Question. Employers cannot deduct from exempt employees’ salaries for poor performance, lack of work, or some kinds of missed work days. Employers must consider alternatives to salary deductions for disciplinary measures in order to protect the exemption.
- Give Them An Inch And They Will Take a Mile. While discretion is the better part of valor, and the exercise of discretion and independent judgment is an essential element of the exemption, unfettered discretion can actually hinder an exemption defense. Employers must allow exempt employees to exercise discretion, but when exempt employees are free to work as they please with zero oversight, employers can face an uphill battle when employees argue that they used their discretion to perform mostly nonexempt duties.
- Lean Is Good But Too Skinny Is Dangerous. While all businesses strive to run efficiently, employers should provide exempt employees sufficient resources so that they are not compelled to spend most of their time performing nonexempt work.
- Independent Contractors May Not Fit the Bill. Exempt employees must supervise at two least other employees. The supervision of independent contractors or employees of contractors may be attacked as insufficient.
- Allow Exempt Employees To Rule The Roost. Oftentimes employers vest hiring and firing decisions in their Human Resources or other departments, or high atop the chain of command. If an exempt employee’s recommendations regarding hiring and firing or other changes in employment status are regularly ignored, the employee may not qualify for the executive exemption.
Workplace Solutions: How can you protect executive exemption classifications? Below are a few tips:
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