Seyfarth Synopsis: With the recent partial shutdown of the federal government, many federal contractors have faced tough decisions balancing their reduced revenue with their desire to keep their workforce intact. One potential solution is to impose mandatory employee furloughs to reduce costs. This cost-saving measure has some risks peculiar to California that are worth a look.

The Partial Federal Government Shutdown

On December 22, 2018, key parts of the federal government shut down after politicians reached an impasse over budget spending. By some estimates, the shutdown, lasting until January 25, 2019, cost the economy over $10 billion. The shutdown affected not only 800,000 federal employees but several million government contractors. Shutdowns of this type—the third since January 2017—look to become a regular feature of American politics.

One obvious shutdown impact is reduced revenue for federal contractors. Companies that perform everything from janitorial services to complex Defense Department analysis are suddenly left with revenue that could be significantly lower than previous projections.

Employee Furloughs

So what do companies do when their biggest client shuts down for days, weeks, or even months? Some companies have turned to employee furloughs in an attempt to solve their revenue gap problem. Furloughs are mandatory time off work without pay. Furloughs can be seen as a good solution because the company reduces its payroll expenses while keeping its workforce in place.

Generally, furloughs fall into two categories, partial-week and full-week. We examine both types of furloughs below, as each raises peculiar issues under California law. Note that this discussion is limited to issues raised by furloughs of exempt employees. Because non-exempt employees are paid on a time-worked basis, furloughs of non-exempt employees do not raise the same legal issues as furloughs of salaried exempt employees.

Partial-Week Furloughs

Partial-week furloughs occur when the employer reduces an employee’s workweek. For example, some employers move employees to a four- or even three-day workweek. Under California law, partial-week furloughs are permissible, but care must be given to the arrangement. First, the salary reductions should be done in advance of the furlough to avoid being seen as a “deduction” from an exempt employee’s salary for missed work days. Advance reductions in salaried employee pay to reflect long-term business needs does not destroy the salary basis for an employee’s exemption. But day-to-day or short-term deductions from an employee’s salary would. Along those lines, employers should consider implementing the changes for a substantial period of time, making it look like more of an adjustment to medium or long-term economic forecasts than a short-term reaction to transitory business conditions. Second, companies must ensure that the reduced salary does not fall below the minimum monthly salary rate for exempt employees, which California currently sets at $4,160 for large employers.

Full-Week Furloughs

The California DLSE has determined that a properly executed week-long furlough of exempt employees will not result in those employee losing an exemption. To be done properly, the furlough must have the employee not performing any work during the defined workweek during the furlough. An employee who performs any work at all must be paid for the full week. Further, reasonable advance notice must be given to employees before the furlough begins. As with the partial-week furlough, the employee’s salary cannot dip below the minimum salary threshold for exempt employees.

Finally, employers should ensure that the furlough is not too long and has a clearly defined return-to-work date. If the furlough is too long or if no return date is designated, it may be deemed a termination, entitling the employee to all final wages, including vacation.

Other Issues Implicated By Furloughs

As if the wage and hour issues raised above were not enough, employee furloughs raise many other legal challenges as well. For example, do your executive contracts have severance provisions that may be triggered with salary reductions over a certain threshold? Does the company’s benefits plan include a definition of eligible employees that may be implicated by furloughs? Indeed, as we have previously discussed in this blog, employee furloughs might even inadvertently trigger California’s WARN notice requirements. All of this is to say employers are well-served by being careful and seeking experienced counsel in this area.

Non-California employers with non-exempt workers who work in California will be interested in the following piece, originally posted on Seyfarth’s Wage Hour Litigation Blog.

Seyfarth Summary: On July 12, 2018, the California Supreme Court agreed to address questions posed by the Ninth Circuit about whether California Labor Code provisions apply to an out-of-state employer whose employees work part of their time in California. Nationwide employers with employees jetting in to work temporarily in California need to return their seats to an upright position and follow this developing story.

Is your business flying high in the current economy? Profits reaching new altitudes? Maybe you have employees residing in one state while working in another. If some work occasionally in California, prepare to fasten your seatbelts for a potentially rough landing. Even if your employees work in California only intermittently (think partial days), and even if your company is not headquartered in the Golden State, the California Supreme Court may soon bring you down to earth.

Background

Traditionally, employers in paying their employees have applied the wage and hour law of the state where the employee sides or most often works, even if the employee occasionally works in another state. In California, however, the rules are peculiar.

In a 2011 decision, Sullivan v. Oracle, the California Supreme Court held that non-California residents working in California for a California-based employer were subject to California daily overtime laws if they performed their in-state work for whole days. Oracle left employers up in the air as to whether California law would apply in other contexts, such as (a) when non-California residents work partial days of work in California, (b) when the employees worked for non-California based employers, or (c) when the wage and hour provisions at issue were something other than the cal-peculiar rules on daily overtime.

The Certified Questions

Which brings us to the current Ninth Circuit cases. Specifically, in three airline cases raising California issues in federal court (two cases against United Airlines, one against Delta), the Ninth Circuit requested the California Supreme Court to address five questions, paraphrased below:

(1) Does the federal Railway Labor Act exemption found in Wage Order 9 bar a wage-statement claim (Labor Code § 226) by an employee who is covered by a collective bargaining agreement?

(2) Does Section 226 apply to wage statements that an out-of-state employer provides to an employee who resides in California, who receives pay in California, and who pays California income tax on her wages, but who does not work principally in California?

(3) Does Section 226 and Labor Code § 204 (governing timely wage payments to current employees) apply to payments that an out-of-state employer makes to an employee who, in the relevant period, works in California only episodically and for less than a day at a time?

(4) Does California minimum wage law apply to out-of-state employers for the California work that their employees perform in California only episodically and for less than a day at a time?

(5) Does California’s peculiar rule preventing pay-averaging for employees paid by commission or piece rate apply to a pay formula that generally awards credit for all hours on duty, but that does not always award pay credit for all hours on duty?

In the underlying lawsuits, United pilots and Delta flight attendants claim that the airlines violated California Labor Code provisions on wage statements, minimum wage, and the timing and completeness of wage payments. United (based in Chicago) and Delta (based in Atlanta) both won at the district court level, successfully arguing that de minimis work within California does not trigger California law, especially when (i) the employers are not based in California, (ii) the employees work only limited amounts of time in the state, and (iii) the employees mostly work in federal air space and in multiple jurisdictions during a single pay period or even a single day.

Why Does This Matter to Employers Based Outside California?

The guidance that the California Supreme Court will issue may ensnare non-California employers in a complex web of Labor Code laws for employees who work in California only sporadically, or who merely stop in California on their way to other work locations. It remains to be seen whether the Supreme Court will stretch to apply California’s peculiar rules on wage statements, daily overtime, and minimum wage to such transitory California work. Or whether California rules on meal and rest beaks, or paid sick time, might also be implicated.

Based on recent emanations from our high court, we would not be surprised to see another extension of California’s employee-protective laws. Any such extension would be highly problematic in light of California’s robust civil and statutory penalties for Labor Code violations. The state’s Private Attorneys General Act authorizes penalty lawsuits brought on a representative basis on behalf of all “aggrieved employees or former employees.” While we do not predict that California will attempt to regulate employment of individuals who merely fly through California airspace, all employers with employees having feet on the ground in California need to sit up, return their tray tables to their original position, and be alert to these pending decisions.

Workplace Solution: The California Supreme Court’s opinion regarding the certified questions will not come down for many months. In the meanwhile, sit back, enjoy the flight, and watch this space for further developments. Feel free to contact your favorite Seyfarth attorney if you would like to discuss.

Seyfarth Synopsis: Dominating this spring’s planting of proposed employment-related legislation are bills aimed at ending sexual harassment and promoting gender equity. Among the secondary crops are bills regarding accommodation, leave, criminal history, and wage and hour law. It threatens to be another bitter fall harvest for California’s employer community.

California legislators stormed into the second half of the 2017-18 legislative session, introducing over 2,000 bills by the February 16 bill introduction deadline. With Spring upon us, one must ponder what L&E-related bills planted thus far will grow into by the time of the legislative harvest this fall. By that time some will have died on the vine in the summer heat, and some, fully ripened, will go to the Governor. Will the Governor, among the closing acts of his term, approve or reject them?

Meanwhile, the newly planted bills will get a week to rest as legislators head for Spring Break today, March 22. The Legislature reconvenes on April 2 for committee hearings and amendments. June 1 is the deadline for legislation to pass out of its house of origin. Stay tuned for more in-depth analyses of the proposed bills as the session continues.

Sexual Harassment

No fewer than ten bills address the issue of sexual harassment. Some are merely spot bills, while others are more developed. Because you all have day jobs, we have read the bills so you won’t have to. A brief summary of each follows. Contact us if you want to know more. Or even just to vent.

AB 1867 would require employers with 50 or more employees to retain records of all internal employee sexual harassment complaints for ten years, and would allow the Department of Fair Employment and Housing (DFEH) to seek an order compelling non-compliant employers to do so.

SB 1300 would amend the Fair Employment and Housing Act (FEHA) to (1) absolve a plaintiff who alleges that his/her employer failed to take all reasonable steps necessary to prevent discrimination and harassment from occurring from proving that sexual harassment or discrimination actually occurred, (2) prohibit release of claims under FEHA in exchange for a raise or a bonus or as a condition of employment or continued employment, and (3) require employers, regardless of size, to provide two hours of sexual harassment prevention training within 6 months of hire and every two years thereafter to all employees—not just supervisors.

SB 1343, which closely resembles SB 1300, would require employers with five or more employees to provide at least two hours of sexual harassment training to all employees by 2020 and then once every two years thereafter. SB 1343 would also require the DFEH to produce and publish a two-hour video training course that employers may utilize.

SB 224 would extend liability for claims of sexual harassment where a professional relationship exists between a complainant and an elected official, lobbyist, director, or producer. AB 2338 would require talent agencies to provide to employees and artists, and the Labor Commissioner to provide minors and their parents, training and materials on sexual harassment prevention, retaliation, nutrition, reporting resources, and eating disorders.

Assembly Member Gonzalez-Fletcher introduced a package of spot bills (to which substance will later be added) targeting “forced arbitration agreements” and increasing protections for sexual harassment victims. AB 3080 would prohibit (1) requiring employees to agree to mandatory arbitration of any future claims related to sexual harassment, sexual harassment, or sexual assault as a condition of employment and (2) non-disclosure provisions in any settlement agreement. AB 3081 would create a presumption that an employee has been retaliated against if any adverse job action occurs against that employee within 90 days of making a sexual harassment claim, and would extend current sexual harassment training requirements to employers with 25 or more employees. AB 3082 would create a statewide protocol for public agencies to follow when In Home Support Service (IHSS) workers encounter harassment and sexual harassment prevention training for IHSS workers and clients. AB 2079—soon to be named the “Janitor Survivor Empowerment Act”—would enact specific harassment training rules for the janitorial service industry. AB 2079 builds upon AB 1978—the Property Services Workers Protection Act, effective July 1, 2018—which established requirements to combat wage theft and sexual harassment for the janitorial industry.

AB 1761 would require hotels to (1) provide employees with a free “panic button” to call for help when working alone in a guest room, (2) maintain a list of all guests accused of violence or sexual harassment for five years from the date of the accusation and decline service for three years to any guest on that list when the accusation is supported by a sworn statement, and (3) post on the back of each guestroom door a statement that the law protects hotel employees from violent assault and sexual harassment.

SB 1038 would impose personal liability under FEHA on an employee who retaliates by terminating or otherwise discriminating against a person who has filed a complaint or opposed any prohibited practice, regardless of whether the employer knew or should have known of that employee’s conduct. (Personal liability already exists for harassment, but not for retaliation.)

AB 2366 would extend existing law, which already protects employees who take time off work related to their being a victim of domestic violence, sexual assault, and stalking. AB 2366 would also protect employees who take time off because an immediate family member has been such a victim. AB 2366 would also add sexual harassment to the list of reasons for which this protection applies.

AB 2770 addresses the apprehension that harassment complaints and employer responses might trigger defamation suits. AB 2770 creates a “privilege” for complaints of sexual harassment by an employee to an employer based upon credible evidence, for subsequent communications by the employer to “interested persons” and witnesses during an investigation, for statements made to prospective employers as to whether an employee would be rehired, and for determinations that the former employee had engaged in sexual harassment. The California Chamber of Commerce has sponsored this bill.

AB 1870 would extend the time an employee has to file a DFEH administrative claim (including, but not limited to, a sexual harassment claim). The current deadline is one year from the alleged incident. AB 1870 would make it three years! In a similar bill, AB 2946 would extend the time to file a complaint with the DLSE from six months to three years from the date of the violation. This bill would also amend California’s whistleblower provision to authorize a court to award reasonable attorney’s fees to a prevailing plaintiff.

AB 1938 would limit employer inquiries about familial status during the hiring or promotional process. AB 1938 would make it unlawful to make any non-job related inquiry about an individual’s real or perceived responsibility to care for family members.

SB 820, the “Stand Together Against Non-Disclosure” (STAND) Act, would prohibit provisions in settlement agreements entered into on or after January 1, 2019 that require the facts of the case to be kept confidential, except where the claimant requested the provision, in cases involving sexual assault, sexual harassment, and sex discrimination. SB 820 would allow settlement amounts to be kept private. The bill is sponsored by the Consumer Attorneys of California and the California Women’s Law Center.

AB 3109 would void any contract or settlement agreement entered into on or after January 1, 2019 that waives a party’s free speech and petition rights, meaning one that would limit a party’s ability to make any written or oral statement before or in connection with an issue before a legislative, executive, or judicial proceeding, or make any written or oral statement in a place open to the public or a public forum in connection with an issue of public interest. The bill would also prohibit contracts or settlement agreements that restrict a party’s rights to seek employment or reemployment in any lawful occupation or industry.

Pay Equity

SB 1284 is another effort to mandate annual reporting of pay data. It follows last year’s vetoed AB 2019 attempt at a pay data report, though it more closely resembles last year’s failed revised federal EEO-1 report. SB 1284 would require employers with 100 or more employees to report pay data to the Department of Industrial Relations on or before September 30, 2019 and on or before September 30 each year thereafter. The report is to include the number of employees by race, ethnicity, and sex; all levels of officials and managers; professionals; technicians; sales workers; administrative support workers; craft workers; operatives; laborers and helpers; and service workers; and each employee’s total earnings for a 12-month period. Non-compliant employers would be subject to a $500 civil penalty. In contrast, last year’s AB 1209 would have required California employers with 500 or more employees to gather information on pay differences between male and female exempt employees and male and female board members and report the information annually to the Secretary of State for publishing (i.e., public shaming).

Wage/Hour

Pay Statements: SB 1252 would grant employees the right “to receive” a copy (not just inspect) their pay statements. AB 2223 would provide employers the option to provide itemized pay statements on a monthly basis in addition to the currently required semi-monthly basis or at the time wages are paid. Conversely, AB 2613 would impose penalties of $100 for each initial violation plus $100 for each subsequent calendar day, up to seven days, and more than double for subsequent violations, payable to the affected employees, on employers who violate Labor Code provisions requiring payment of wages twice per month on designated paydays, and once per month for exempt employees.

Flexible Work Schedules: AB 2482 would allow non-exempt employees working for private employers and not subject to collective bargaining agreements to request a flexible work schedule to work ten hours per day within a 40-hour workweek without overtime for the 9th and 10th hours, as long as the employee does not work more than 40 hours in the workweek.

Contractor Liability: AB 1565 is an urgency statute that would take effect immediately upon receiving the Governor’s signature. AB 1565 would repeal the express provision that relieved direct contractors for liability for anything other than unpaid wages and fringe or other benefit payments or contributions including interest owed. The law currently extends liability in construction contracts for any debt owed for labor to a wage claimant incurred by any subcontractor acting under, by, or for the direct contractor or the owner.

PAGA: AB 2016 would require that the employee’s required written PAGA notice to the employer include a more in-depth statement of facts, legal contentions, and authorities supporting each allegation, and include an estimate of the number of current and former employees against whom the alleged violations were committed and on whose behalf relief is sought. AB 2016 would also prescribe specified notice procedures if the employee or employee representative seeks relief on behalf of ten or more employees. The bill would exclude health and safety violations from PAGA’s right-to-cure provisions, increase the time the employer has to cure violations from 33 to 65 calendar days, and provide an employee may be awarded civil penalties based only on a violation actually suffered by the employee. (In sum, a valiant effort to provide employers with some modicum of due process in PAGA case, but it doesn’t stand a chance.)

Accommodations

Lactation: AB 1976 would clarify existing law so that employers must make reasonable efforts to provide a room or location for lactation, other than a bathroom. This bill cleared its first hurdle—the Assembly Labor and Employment Committee—by receiving unanimous approval on March 14. SB 937 would require even more: a lactation room must be safe, clean, and free of toxic or hazardous materials, must contain a surface to place a breast pump and personal items, must contain a place to sit, and must have access to electricity. SB 937 would also require employers to develop and implement a new lactation accommodation policy. The policy must describe an employee’s right to a lactation accommodation, how to request an accommodation, the employer’s obligation to provide accommodation, and the employee’s right to file a request with the Labor Commissioner. Employers would be required to respond to an employee’s accommodation request within five days and provide a written response if the request is denied, and maintain accommodation request records for three years. SB 937 would make employers with fewer than five employees eligible for an undue hardship exemption from the room or location requirement. The bill would also charge the DLSE with the responsibility of creating a model lactation policy and request form and making it available to employers on the DLSE website.

Marijuana: About a dozen states now protect medical cannabis users from employment discrimination. California, meanwhile, has permitted employers to enforce policies against the use of cannabis, which remains illegal under federal law. AB 2069 would change that. AB 2069 would prohibit employers from refusing to hire, taking adverse action against, or terminating an employee based on testing positive for cannabis if the employee is a qualified patient with an identification card or their status as one. The bill would permit employers to take corrective action against an employee who is impaired while on the job or on the premises, and would not apply to employers who would lose a monetary or licensing benefit under federal law if they hired or retained such an employee.

Sick & Other Leaves

AB 2841 would increase an employer’s alternate sick leave accrual method from 24 hours by the 120th calendar day of employment to 40 hours (or 5 days) of accrued sick leave or paid time off by the 200th calendar day of employment. But an employee’s total sick leave accrual would not need to exceed 80 hours (or 10 days). An employer would be able to limit the amount sick leave carried over to the following year to 40 hours or 5 days. This increase would apply to IHSS providers beginning January 1, 2026.

AB 2587 would remove an employer’s ability to require an employee to take up to two weeks of earned but unused vacation before the employee receives family temporary disability insurance benefits under the paid family leave program to care for a seriously ill family member or to bond with a minor child within one year of birth or placement during any 12-month period the employee is eligible for these benefits.

Criminal History

Following the state-wide Ban-the-Box law that went into effect on January 1, 2018, AB 2680 would require the California Department of Justice (DOJ) to create a standard consent form that employers must use when requesting that a job applicant consent to a DOJ criminal conviction history background check. Meanwhile, the “Increasing Access to Employment Act,” SB 1298, would limit the criminal history information the DOJ will provide employers to recent misdemeanors and felonies (within five years), and other offenses for which registration as a sex offender is required. The bill would also prohibit the disclosure of any convictions that have been dismissed, exonerations, or arrests that have been sealed.

SB 1412 would allow employers to inquire into a job applicant’s particular conviction, regardless of whether that conviction has been judicially dismissed or sealed, under these specified conditions: (1) the employer is required by state or federal law to obtain information about the particular conviction, (2) the job applicant would carry or use a firearm as part of the employment, (3) the job applicant with that particular conviction would be ineligible to hold the position sought, or (4) the employer is prohibited from hiring an applicant who has that particular conviction.

AB 2647 would prohibit evidence of a current or former employee’s criminal history from being admitted, under specified circumstances, in a civil action based on the current or former employee’s conduct against an employer, an employer’s agents, or an employer’s employees.

In a category all its own, yet still notable:

SB 954 would require an attorney representing a party in mediation to inform the client of the confidentiality restrictions related to mediation and obtain informed written consent that the client understands these restrictions before the client participates in the mediation or mediation consultation.

Workplace Solutions.

Don’t fret yet! Spring has only just sprung, and these bills all have a lot of growing to do (with some pruning for improvement?). Stay tuned … . We’re keeping our eyes and ears glued on the Capitol.

Seyfarth Synopsis: Yes, it’s true: California employees can be entitled to pay for time they haven’t worked. Here, we highlight two common instances: split shifts and reporting time.

Your head—already spinning if you’ve wrapped it around California’s quirky wage and hour laws—may explode when you consider the notion of having to pay for time not worked. The duties to pay split-shift and reporting-time premiums are not new, but don’t worry: you’re not alone if you haven’t heard of them. Reading this piece will deepen your appreciation of just how peculiar California can be!

Split Shift Pay

What is it? Split-shift pay is governed by the Wage Orders (generally Section 4(C)). A split shift occurs when (1) a work schedule includes a block of unpaid time that is longer than 60 minutes (that is not a meal period) in a workday, (2) the block of time interrupts two work periods, and (3) the total daily wage does not exceed the minimum wage for all hours worked, plus one additional hour. The idea behind requiring split-shift pay is that the employee is not really free of duty between shifts because of the looming shift later in the day.

When a split shift occurs, employers must pay a premium of one hour of pay (unless the break qualifies as a “bona fide” rest or meal period).

What’s an example? For an eight-hour workday, the employer schedules a first shift from 9:00 a.m. to 1:00 p.m., and a second shift from 3:00 p.m. to 7:00 p.m.

How is the premium calculated? The split-shift premium generally would be an hour of pay at the minimum wage.

But it can get tricky. If the hourly wage exceeds the minimum wage, a split-shift premium may not be due. To see if one is due, you multiply the difference in rate (between the hourly wage and the minimum wage) by the hours worked that day. If the product of those numbers exceeds the split-shift premium (one hour at minimum wage), then the split shift premium is offset and not owed.

Suppose that two employees of a large employer both work the split shift described in our example. One employee makes the 2018 California minimum wage: $11.00. The other employee’s wage is $13.00. Here are the calculations:

Employee 1—earns $11.00/hr Employee 2—earns $13.00/hr

(1) $11.00 * 8 = $88.00 (daily wage)

(2) Add $11.00 premium

(3) $88.00 + $11.00 = $99.00

Split shift premium owed: $11.00

Total due for that workday =  $99.00 [($11 * 8 hours) + $11.00 premium]

 

(1) $13.00 * 8 = $104.00 (daily wage)

(2) $13.00 – $11.00 = $2.00 (difference between hourly and minimum wage)

(3) $2.00 * 8 = $16.00

Split shift premium owed: None (because $16.00 > split-shift premium of $11.00, the premium is offset and thus not owed)

Total due for that workday = $104.00

Nuance: While split-shift payments are considered wages, they need not be included in the regular rate when calculating overtime pay.

A strange split-shift issue can arise if an employee’s work crosses the defined workday. Consider a night-shift employee subject to a typical workday—starting at midnight—who works at minimum wage from 12:01 a.m. to 4:00 a.m. and then again from 10:00 p.m. to 4:00 a.m. That employee would be entitled to a split-shift premium, because of the long block of time separating work shifts within the same workday. The result would differ, however, had the workday been defined to start at 9:00 p.m. In that case, the employee would not experience a block of time separating work shifts during the same workday. An employer can redefine the workday for a group of employees so long as the workday definition is not a temporary means to avoid overtime.

Reporting Time Pay

What is it? Reporting-time pay is governed by the Wage Orders (Section 5). When an employee reports to work at the regularly scheduled time, but then gets sent home (usually for lack of work), the employer must pay for at least one-half the scheduled hours, at the regular rate. In no case, however, is the employee entitled to less than two hours of pay or to more than four. Here, the idea is that the employee who honored the employer’s schedule, expecting to work, should be compensated for the lack of work.

What are some examples?

  • Employee 1 is scheduled for an eight-hour shift, but then gets sent home after working just one hour. The employer must pay four hours at the regular rate—one for the hour worked and three more for reporting time—because four hours is one-half of the scheduled eight hours of work. Note that only the one hour actually worked, however, would count as hours worked for purposes of determining eligibility for weekly overtime pay.
  • Employee 2 is scheduled to report to work a second time in a workday, but then gets furnished less than two hours of work. The employer still must pay for two hours at the regular rate.

The DLSE has identified certain exceptions to reporting-pay rules, applying when

  • operations cannot begin or continue because of threats to employees or property, or when civil authorities recommend that work not begin or continue;
  • public utilities fail to supply electricity, water, or gas, or there is a failure in the public utilities, or sewer system; or
  • the interruption of work results from a cause beyond the employer’s control (such as an earthquake).

Nuance: The reporting-time pay provisions do not apply to employees on paid standby status, or to employees who have a regularly scheduled shift of less than two hours, such as a relief cashier who works a one-hour shift in the middle of the day.

Workplace Solutions

Employers should carefully review their practices to ensure that they adequately pay employees on split shifts. Employers should also be sure to incorporate reporting-time pay requirements into their policies. Doing this can avoid an obligation to pay back wages and penalties. If you have any questions about work schedules or compensation for your employees, please do not hesitate to reach out to one of our wage and hour experts at Seyfarth Shaw.

Authored by Christopher A. Crosman.

We are excited to announce the 16th edition of Seyfarth Shaw’s publication Litigating California Wage & Hour and Labor Code Class Actions. As in previous editions, this publication reviews the most commonly filed wage and hour and Labor Code class and representative claims and the development of the law over the last several years, and discusses and analyzes the various types of wage & hour class actions that affect many California employers. This new edition has been updated to reflect the latest developments in the law and promises to delight.

Download the publication using this convenient link today!

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.

The California Legislature seems intent on ending piece-rate pay as we have known it. A law effective January 1, 2016, goes beyond the previously discussed Bluford and Gonzalez decisions to mandate that employees who earn piece-rate wages be paid a special, separate rate for rest and recovery periods, as well as for all “other non-productive time.” Further, that rate will require special calculation and the itemized wage statement must report additional information (number of hours of each activity and the corresponding rates of pay). But don’t take our word for it. Read it and weep here.

Defense and attack .fatBy David Kadue

The traditional posture of California employers apprehensive about “gotcha” wage and hour claims is to hunker down and wait for the next lawsuit. But a few brave souls have taken the offensive. We celebrate two examples here. We cannot guarantee the success of their efforts, but we applaud their courage.

Declaratory relief action against California Labor Commissioner

One annoying peculiarity of California employment law is the Bluford doctrine, announced in a 2013 Court of Appeal decision called Bluford v. Safeway Inc. The Bluford case announced that truck drivers—already paid handsomely by mileage rates and by hourly rates for specified tasks and situations—were entitled to additional, separate pay for each rest period, under a notion that “employees must be compensated for each hour worked at either [1] the legal minimum wage or [2] the contractual hourly rate.” The court found it immaterial that the truck drivers earned, on an hourly average, far more than the minimum wage. Although Bluford was a controversial decision, the California Supreme Court declined to grant the employer’s petition for review.

OK. Fair (or unfair) enough. Then came the California Labor Commissioner and the Division of Labor Standards Enforcement, to rub salt in the Bluford wound. The DLSE determined that employers who pay on a piece-rate basis not only must separately pay for rest periods, but also must pay for those periods at a rate higher than the minimum wage or a contractual wage. According to the DLSE, an employer must pay piece-rate workers for rest periods at a rate equal to their average hourly piece-earning rate (which would vary on a continuous basis and which could greatly exceed the minimum wage). The DLSE announced this determination in a November 2013 internal memorandum, developed without the benefit of a rule-making process. The resulting “underground regulation” robs piece-rate paying employers of the certainty of paying rest periods at a fixed, pre-determined hourly rate.

Certain agricultural employers, heavily reliant on piece-rate labor, got mad as heck and decided not to take it anymore. In April 2015, in a case entitled Ventura County Agricultural Association v. Su, employer associations sued the government. They brought a petition for writ of mandate and a complaint for declaratory and injunctive relief in Sacramento County Superior Court. They argue that the DLSE has issued an unlawful regulation and one that is contrary to Bluford. We wish them well.

Making a federal case out of compelling a plaintiff to arbitrate PAGA claims Continue Reading Sticking up for Their Rights: Employers Taking the Offensive

April the first, Fool's day, on table calendarBy our source in Sacramento

Emergency legislation promises to revitalize the California economy and place our state in the forefront of jurisdictions promoting economic growth and employment opportunity.

The California’s Open for Business—Really!—Act (“COBRA”), AB 666, effective April 1, works the following reforms in California employment law.

PAGA repeal. Article I of COBRA repeals the Private Attorneys General Act of 2004. The legislative finding reports that PAGA, during its first ten years, did little more than enrich opportunistic plaintiffs’ counsel by creating collateral settlement leverage in wage and hour class actions.

Other wage and hour reform: Systematic Labor Code amendments advance a new general principle that pay practices that are lawful under federal law are also lawful in California, absent express statutory language stating a clear intent to deviate from the employment law followed in America generally. Under COBRA, judges no longer can invent special rules to burden California employers. The Legislature has thus restored California to the national fold with respect to a business’s use of piece rates, commission plans, temporary employment agencies, independent contractor relationships, and other traditional methods of securing services.

Litigation reform: Employees suing employers must now make a written monetary demand before they sue. Plaintiffs’ lawyers cannot recover attorney’s fees or costs unless the final outcome of the case is more favorable to the employee than the amount of the initial demand. And defendants filing summary judgment motions can now do so with 28 days’ notice (as is often the case in federal courts), rather than the excessive 75 days’ notice that California now requires.

Leave law reform: COBRA repeals California’s new mandatory paid sick leave act, and preempts municipal ordinances that require paid sick leave.

In his signing statement, Governor Jerry Brown praised the Legislature’s historic bipartisan accomplishment: “When we got to talking about this, everyone realized that we were tired of California being the laughing stock of the nation. No prudent business was even thinking about starting or expanding operations here with all the crazy labor laws we’ve created. They were just driving up costs and impairing efficiency while encouraging shake-down ‘gotcha’ lawsuits. Now we can truly welcome the businesses that create jobs for California families.”

Governor Brown continued: “We finally realized that our labor law has been prescriptive without being clear, mandatory without accounting for how working relationships vary, and onerous to employers while not producing significant benefits for workers. Enough already!”

If you would like to discuss this exciting new development, then please contact your favorite Seyfarth lawyer.

Or you might skip that step because you know that any news about California actually reducing burdens on employers would have to be an April Fool’s joke.

Edited by Chelsea Mesa

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