California’s Wage and Hour Minefield

John BoggsFine, Boggs & Perkins LLP

May 24, 2012

California’s Wage and Hour Minefield

Speakers

Moderator Presenter

Becky RossMarketing Manager

[email protected]

John P. Boggs, Esq.Fine, Boggs & Perkins LLP

[email protected]

Questions

• If you have questions during the presentation, please submit them using the “Questions” feature

• Questions will be answered at the end of the webinar

– KPA CONFIDENTIAL –

HOT NEWS!!!

Brinker/Brinkley Cases

Meal Breaks and Rest Periods

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#1 Basis for Wage/Hour Suits Against Dealers• 30 minutes for each five hours, unless less then six or less than 12 hours

(can be waived only if first not waived).• Must clock in and out or at the very least keep a record that the lunch

break was taken• 10 minute rest period (paid) for each four hours of

employment


HOT NEWS!!!

Brinker/Brinkley CasesMeal Breaks and Rest Periods

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• Then, in July 2008, a California court of appeal denied class certification for almost 60,000 restaurant employees because the lower court did not properly consider the elements of the employees' claims in determining if they were susceptible to class treatment. Specifically, the court found that:

– While employers cannot impede, discourage or dissuade employees from taking rest periods, they need only provide, not ensure, rest periods are taken.

– Employers need only authorize and permit rest periods every four hours or major fraction thereof and they need not, where impracticable, be in the middle of each work period.

– Employers are not required to provide a meal period for every five consecutive hours worked. – While employers cannot coerce, require or compel employees to work off the clock, they can only be held liable for employees

working off the clock if they knew or should have known they were doing so. • Because rest and meal breaks need only be made available and not ensured, the court also found that

individual issues predominate and, based upon the evidence presented to the trial court, they are not amenable to class treatment.

• Further, the off-the-clock claims are also not amenable to class treatment because individual issues predominate on the issues of whether employees were forced to work off the clock, whether the employer changed time records and whether the employer knew or should have known employees were working off the clock. Brinker v. Superior Court 165 Cal. App. 4th 25 (2008)

• This case was appealed to the California Supreme Court. The Supreme Court currently has the case.


HOT NEWS!!!

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CALIFORNIA’S BRINKER MEAL BREAK AND REST PERIOD RULING Some Steps in a Positive Direction, But a Lot of Fine Print to

Consider and Significant Risks Remain

On April 12, the California Supreme Court issued its long-awaited decision in Brinker Restaurant Corp. v. Superior Court (Hohnbaum), a case with implications for nearly every California employer.

For years, advocates for both sides have argued over whether an employer need only “provide” each required meal period or whether the employer must “ensure” that eligible employees take the meal period and perform no work during meal periods. In its decision, the California Supreme Court confirmed that employers need only provide the meal period, but with qualifications.


HOT NEWS– IMPLICATIONS OF THE BRINKER DECISION

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Because the Court’s definition of “provide” a meal period emphasizes the employer’s duty to relieve employees of all duties and relinquish control over their activities—and requires that the employer be sure to avoid any policies or practices that might be found to discourage employees from taking their meal periods or incentivize them to skip meal periods—the practical effect of the decision is more limited than what some optimistic early reports may have indicated.

Don’t be fooled by quick snippets of employer success. Significant obligations and risk still face California employers.



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Though the Supreme Court made it clear that an employer need not ensure that meal breaks and rest periods are actually taken nor that the employee is forced by the employer not to perform work during the meal breaks, the Court made it equally clear that an employer must still provide the meal break, relinquish all control during the meal break, and make sure that it does not engage in any activity that limits an employee’s level of freedom during a meal break. Those elements will determine whether the employer has satisfied its obligation to provide legally compliant meal breaks and rest periods. According to the Court, an employer satisfies its obligation to “provide” a meal period if it (1) relieves its employees of all duty; (2) relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break; and (3) does not impede or discourage them from doing so, or incentive them to forego the meal breaks. In other words, the Court made it clear that the law does not permit employers to influence employees into foregoing or changing the nature of their meal breaks, whether through the carrot or the stick. So implicit or explicit incentives and/or threats will likely lead to continued liability.



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What must the employer to do affirmatively “relieve employees” of all duty? The Court was not clear on just what an employer must do to meet its obligations on this requirement. At one extreme, the Court rejected the argument that an employer has an affirmative obligation to ensure that workers are not performing any work during the meal break.

On the other extreme would be a bare-bones policy instructing the employee of their right to take the meal period, without any ongoing monitoring, training, or reminders.

Because the Brinker rule is clear that the employer must “relinquish control” over the employee and their activities, most prudent employers will put in place a more interactive policy to ensure that employees are relieved of duty for the required meal periods. A conservative approach should include several elements.



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First, every employer should have a written policy in their employee handbook that includes a clear statement of the rule: every employee is relieved of all duties during their meal periods.

This policy statement should also be presented to each employee to sign an acknowledgment as part of a new-hire packet or at issuance of the policy. That is, every personnel file should have a signed acknowledgment from the employee confirming that they knew and understood the rule. HOTLINKHR!!!!!



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Meal Breaks And Rest Periods– SAMPLE POLICY All employees who work five or more hours in a day are entitled and required to take a thirty-minute meal break. The Company may provide you a longer meal break, at its discretion, but all meal breaks will be at least 30 minutes, uninterrupted, during which you will be relieved of all duties and free from the control of the Company. You are not expected to respond to work-related telephone calls or other communications (email, text messages, etc.) during your meal breaks, and are not expected to perform work duties of any kind during a meal break. You are permitted to leave Company premises during meal breaks. A second thirty minute break is required for employees who work more than ten hours in a day. The first thirty minute meal break must be started no later than the end of the employee’s fifth hour of work, and the second thirty minute meal break (if applicable) must be started no later than the end of the employee’s 10th hour of work. Certain exceptions to these rules exist based on the number of hours worked and/or the nature of the employee’s duties, but application of these exceptions is uncommon, and you must have written authorization from the General Manager if you will be taking an on-the-job meal break or will not be taking a meal break. Employees taking their meal breaks must record their time on their timesheets when they begin and end their meal break. In addition, the Company also provides employees a rest period of ten (10) minutes “net” rest time per four (4) hours worked, or major fraction thereof, and which insofar as practicable shall be in the middle of each work period. However, the Company generally will not authorize a rest period for employees whose total daily work time is less than three and one-half (3½) hours. Thus, you will receive one 10 minute rest period for shifts from three and one-half (3½) hours to six (6) hours in length, two 10 minute rest periods for shifts of more than six (6) hours up to ten (10) hours in length, and three 10 minute rest periods for shifts of more than ten (10) hours up to fourteen (14) hours. If you work a shift longer than fourteen (14) hours you will be provided additional rest periods in accordance with applicable law. In the context of an eight (8) hour shift, one rest period should fall on either side of the meal break. Rest periods are counted as hours worked, and thus, employees are not required to record their rest periods on their timesheets. Employees should schedule and take their rest periods within the parameters set forth in this Policy, but consistent with business needs. For example, smokers should use these rest periods to smoke inasmuch as the company permits smoking off the premises or in designated areas. Salespersons and other employees who have inactive time between assisting customers or actively performing their work duties should take their periods during such time. Similarly employees who interrupt their work to handle personal activities, such as making personal telephone calls, responding to personal emails and/or text messages, or having a snack should understand they are using their rest periods for these activities.All missed meal breaks or rest periods are to be reported to your supervisor immediately. Employees understand that they are to do nothing to incentivize to forego, exert coercion against taking, impede, discourage, or dissuade any other employee from taking meal break and rest periods that are required by law. If any other employee, including managers, attempts to incentivize you to forego, exerts coercion against your taking, or attempts to impede, discourage or dissuade you in any way from taking a meal break or rest period as described herein or required by law, you are to immediately notify the General Manager and/or the Human Resources Department. Authorized meal and rest periods cannot be used to shorten your workday or be accumulated for any other purpose. Additionally, rest periods may not be combined with a meal break. Employees also may be required to sign a certification each pay period confirming that, among other things, they have taken all of their required meal breaks and rest periods during the applicable pay period.



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Second, the employer should ensure that managers and employees alike are properly trained in the meal period policy and its practical implications. Policy-specific training in this area will ensure that employees understand that what they choose to do during their lunch period is up to them. And it will ensure that managers understand what to watch out for in identifying and preventing abuse of the policy.



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Third, the employer should establish a monitoring process to empower managers to oversee and document compliance with the policy. Employers should require employees to confirm in writing that they understand the policy and that they have been relieved of all duties and actually provided the required meal periods. Any exceptions should be logged and explained. These certifications will also complement the management and employee training, opening up a dialogue between management and employees about how the policy is intended to work in practice.



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EMPLOYEE TIME CARD CERTIFICATION-- SAMPLE I hereby certify under penalty of perjury under the laws of the State of California that I personally entered all time entries on the time card/record pertaining to the pay period(s) applicable to this Certification and that the information is true and correct. I also certify that I was permitted and authorized to take any and all legally required rest periods and meal breaks and that I took all such periods and breaks even though my time card may not indicate that such meal breaks and rest periods were taken or may not indicate that I clocked out during the meal breaks. Any exceptions (i.e., missed rest periods and meal breaks) are specifically identified and handwritten in below by me to indicate the meal breaks or rest periods were not taken on any given day. In making this certification, I acknowledge that: (1) I was permitted to leave Company premises during all legally required meal breaks; (2) all meal breaks provided were of at least 30 minutes, uninterrupted, during which I was relieved of all duties and free from the control of the Company; (3) I was not expected to respond to work-related telephone calls or other communications (email, text messages, etc.) during my meal breaks and was not induced or encouraged to perform work duties of any kind during my meal breaks; and (4) I was provided a second thirty minute meal break when I worked more than ten hours in a day. I further certify that I was scheduled to and started my first thirty minute meal break no later than the end of the my fifth hour of work each day, and the second thirty minute meal break (if applicable) no later than the end of my 10th hour of work. Any deviation from this meal and rest period schedule/policy (missed, incomplete, interrupted, late, or short meal/rest periods) was made solely at my own personal discretion, and not at the direction of any other employee or the Company, and all such deviations are noted below. I further certify that no other employee, including managers, said or did anything to incentivize me to forego, exerted coercion against my taking, and did not attempt to impede, discourage or dissuade me in any way from taking a meal or rest period as described herein or required by law. If such activities occurred, I have given a complete description of such activities in the space marked “Notes” below (and attached additional pages as needed).

Date(s) Missed Meal Break or Rest Period? Reason Missed(circle one)

___________ Meal Break / Rest Period ____________________________________ ___________ Meal Break / Rest Period ____________________________________ Notes:_______________________________________________________________________________________________________________________________

___________________________________ ____________________________________Print Employee Name Applicable Pay Period ___________________________________ ____________________________________Employee Signature Date Signed



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What must an employer do to avoid creating incentives to forego legally required breaks? What types of policies or practices might be considered impediments to or discouragement of employee meal periods?Nothing in the Brinker decision raised more unanswered questions about employer obligations than its pronouncement that “[t]he wage orders and governing statute do not countenance an employer’s exerting coercion against the taking of, creating incentives to forego, or otherwise encouraging the skipping of legally protected breaks.” On one extreme, the Court has reprimanded employers who establish such tight schedules that employees who elect to take an uninterrupted, duty-free meal period cannot finish their work on time. On the other hand, what about a commission pay plan or flat-rate compensation plan that, by its very nature, provides a financial incentive for employees to work as much as possible? An example of this might be a flat-rate incentive pay program that pays increasing flag rates based on efficiency—thereby incentivizing the employee (perhaps with the employer’s knowledge) to flag hours “off-the-clock” to increase efficiency rates. Or, perhaps the employer’s practice or rule is that when a salesperson is on a meal break and a customer comes in and asks for the salesperson, the employer requires that another salesperson who is not on break assist the customer and received ½ of the commission and unit credit; or, perhaps where a salesperson loses his/her place in the “UP” queue if he/she takes a meal break. What about a technician who feels pressure to complete work for which a customer is waiting, knowing that his or her CSI bonus may be affected by lunch period delay? These are all examples of where plaintiffs’ attorneys will argue that policies/practices of the employer discouraged from taking and/or incentivized the employee not to take the meal break.



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While it would not appear that the Court intended to do away with such incentive-based compensation agreements as a whole, it did warn employers that policies and practices that punish employees for taking breaks or reward them for skipping breaks will be suspect.

Because the decision is both so new and so general in description, it is not yet clear just how these rules will be applied. So, precautions must be taken to protect oneself from liability.

The first step to managing compliance here is to ensure that the policy language and training components make it clear that the employer is employing neither a carrot nor a stick to undermine the employees’ opportunity to take the legally permitted meal periods. Policy language should make it clear that neither managers nor other employees are permitted to do anything to interfere with any other employee’s meal period, whether through incentives, coercion, impeding, discouraging, or dissuading.

Employees should be trained to act: if any other employee, including managers, attempts to incentivize the employee to forego, exerts coercion against taking, or attempts to impede, discourage or dissuade in any way from taking a meal or rest period as described herein or required by law, they are to contact senior management immediately. In addition, employees should be informed (in policy statements, in training materials, and in compensation agreements) that nothing in the compensation agreement is intended to imply any incentive or impediment to employee enjoyment of their duty-free meal periods.

Employees should be encouraged to contact senior management immediately if they believe that any provision in their compensation agreement might seem to suggest otherwise.

More important, however, will be the ongoing compliance monitoring.



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How can employers prove after-the-fact that any decision to work through a statutory meal period was the employee’s decision, uninfluenced by the employer? Again, the three steps discussed above will help employers not only to establish a policy that works both in theory and in practice, but each will be important to demonstrate the employer’s good-faith compliance with the requirements. (1) Establishing a policy that each employee acknowledges in writing (both as part of the

handbook and as a stand-alone document during the new-hire process) will show that the each employee understood the rules.

(2) Conducting training (with attendance certification) will underscore this, and

(3) Periodic timecard certification and monitoring by management will generate ongoing documentary evidence that the employer is serious about meeting its obligations.



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The Court did clarify meal period and rest period timing requirements

The Court also addressed the timing of meal and rest breaks. The Court ruled that meal periods must be taken anytime within the first five hours of work (or the second meal break within the first ten hours of work) and rejected arguments that meal periods must fall in the middle of shifts. The Court clarified the timing for rest periods, as well.

Generally, employees will receive one 10 minute rest period for shifts from 3.5 to 6 hours in length, two 10 minute rest periods for shifts of more 6 hours up to 10 hours in length, and three 10 minute rest periods for each four hours thereafter on the same basis.

Employers still have a “duty to make a good faith effort to authorize and permit rest breaks in the middle of each period,” but exceptions may be made for practical considerations. If you believe that such practical considerations exist in your workplace, you may want to contact CNCDA/HotlinkHR employment counsel to review your options.



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Compliance Recommendations

The significance of this ruling is making waves throughout the state, with many commentators, industry organizations, and advocacy groups hailing the pro-employer core of the decision as seen through their rose-colored glasses. But as with most such decisions, the devil remains in the details, and while employers should applaud the Court’s recognition of an employee’s right to work through lunch, the decision is too complex and too important to let sound bites drive company policies and practices.

We recommend that employers immediately review their existing policies, training regimens, employee acknowledgment forms, and recordkeeping procedures to ensure not only that they are in compliance with these newly clarified standards, but that the employer is prepared to meet any challenge with documentary evidence to prove that it met its legal obligations.



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Commission Agreements (AB 1396)

Did we mention that California is at it again?!

Effective January 1, 2013, ALL employment agreements that involve the payment of “commissions” must be put into writing!

And that’s not all! There’s even more RED TAPE. The following must also happen:

Pay plan must include an explanation of the “method” to compute and pay commissions.

Signed copy of pay plan must be given to the employee.

Commission Agreements (AB 1396)Cont’d

Continuing with the RED TAPE:

Employer must receive a signed receipt from employee acknowledging receipt of the pay plan.

If the agreement or pay plan expires, and the parties continue to work under those terms, the terms are in full force and effect until a new contract or pay plan is signed.

HotlinkHR can be used to satisfy these requirements by using the Pay Plan Builder and the automated publication and Signature tracking features. CNCDA and Fine, Boggs & Perkins LLP are doing their best to get amendments before it goes into effect.


What You Must Do:

Ensure that all employment agreements that include payment by commission be put into writing.

Ensure that the agreement includes a specific breakdown of how the commissions are to be calculated and paid. Provide a signed copy of the contract to the employee.

Receive a signed receipt for the contract from the employee.


SAMPLE LANGUAGE:

Commissionable Gross. Commissionable Gross is the vehicle’s selling price plus dealer-installed aftermarket products (but excluding security systems, insurances, warranties, sealants, etc.) minus the total expenses associated with those vehicles as determined by normal and customary company accounting procedures. Commissionable Gross does not include: (1) the vehicle's cost as defined below; (2) Commissionable Gross Reserve, as defined below; (3) all costs in any way associated with the sale of the vehicle including but not limited to: costs related to dealer trades or similar transportation costs, costs related to commitments made by the dealership to the customer at the time of the sale for additional equipment, accessories or alterations or repairs, bank and finance company fees, management fees. Such costs may also include sublet fees with mark-up, an internal cost-basis between departments and/or retail rates charged to the department by other departments and/or outside entities; (4) a pre-delivery preparation fee of $ ______ (which includes such items as detailing, preparation for sale, and alarm wiring harness, etc.); (5) the difference between the trade allowance credited to the customer for their trade minus the trade's actual cash value determined by the dealership (over allowance amount); (6) compensation to personnel who share in the Closed Sale; and (7) good-will adjustments made to obtain the sale or to maintain the sale as a Closed Sale. Commissionable Gross also does not include factory incentives, holdback paid to the dealer or the amount of an under allowance on a trade.


SAMPLE LANGUAGE: Commissionable Gross Reserve. Certain products may include a Commissionable Gross Reserve (which is an amount of the Commissionable Gross on which a commission is not paid and is determined by the dealership at its sole discretion and which may vary) in an amount established from time to time in the sole discretion of the company that is added to the actual net cost. That Commissionable Gross Reserve will be available for review upon request. The standard Commissionable Gross Reserve on new vehicles is $ and on used vehicles is $ . A non-standard Commissionable Gross Reserve may be included with certain vehicles (including, but expressly not limited to, specialty vehicles, custom vehicles, special allocation vehicles and/or limited supply vehicles) which may be different from the standard Commissionable Gross Reserve and will vary from vehicle to vehicle. The amount of the non-standard Commissionable Gross Reserve in these cases shall be set by the dealership in its discretion prior to placing the vehicle up for sale and the exact amount of that Commissionable Gross Reserve may be obtained by any employee by asking the General Manager prior to selling the vehicle. Vehicle Cost. The vehicle's cost, for a new vehicle, is the vehicle's 'invoice' cost plus the costs related to any equipment, flooring fees, accessories or alterations or repairs made to the vehicle and any related factory delivery fees or charges (e.g. Express Delivery fees). The vehicle's cost, for a used vehicle, is the vehicle's actual cash value or its acquisition cost (or the averaged or adjusted cost) plus all costs related to the vehicle's acquisition, reconditioning, and warranting including but not limited to: buyer fees, transportation fees, auction and bank fees, all reconditioning costs, costs related to accessories and alterations, lot damage costs, flooring costs and/or management fees determined by the dealership, and costs related to warranties included as standard equipment on the vehicle. Costs of sale (as used herein) and specifically costs of reconditioning or repair may include sublet fees with mark-up, an internal cost-basis between departments and/or retail rates charged to the department by other departments and/or outside entities.


SAMPLE LANGUAGE: From time to time at the dealership’s sole discretion, the dealership may, and has the right to, average the vehicle cost’s between two or more vehicles purchased by the dealership, may make internal cost allocations between different departments, or may adjust the vehicle’s cost up or down to reflect market conditions or the vehicle’s history (e.g., the length of time the vehicle has been in stock). The adjustment or averaging in these cases shall be set by the dealership in its discretion prior to placing the vehicle up for sale and that adjustment may be obtained by any employee by asking the General Sales Manager prior to selling the vehicle. Closed Sales. No commission or unit credits will be awarded on any sale until the sale is 'closed.' A sale is not 'closed' until the Dealership has been paid in full on the transaction and all related paperwork is properly completed and approved. To be a closed sale, the vehicle or product must have been delivered to the customer and/or installed on the vehicle. A sale (including a special order vehicle) is not a Closed Sale until all paperwork is completed, the sale is fully paid for and/or funded by a financial institution, the vehicle or product is delivered to the customer, and the deal meets the requirements of Earned Commissions, as defined below, and at least 120 days have passed since the delivery of the vehicle to permit for return, adjustment, cancellation, etc. Earned Commissions. Employee must be an employee of the Company at the time a sale becomes a closed sale for any Commission or Bonus to be considered earned, regardless of the work done or the fact that Employee was employed when the sales agreement was entered into or the order was taken. In simple terms, Employee must be employed at the dealership at the time the deal(s) become Closed Sales. Until that time, no commission or bonus has been earned by Employee. Split Commissions. Occasionally it will be necessary to split the commission and the unit credit on the sale of a unit between two or more people. Management reserves the right to split all relevant commissions and unit credit by any percentage it deems appropriate. The decision of the General Manager on the division of commissions and unit credits is final. A split commission equals less than a full unit for the purpose of a Close Sale, but can be combined with other Split Commissions in full units (Closed Sales). For example, two 50%-split commissions equals a full unit (that is, one Closed Sale.)


Impact:

ACCOUNTABILITY! This new law is going to pose a HUGE compliance challenge. Dealers must set up a process of “accountability” and “checklists” for the development and issuance of any commission pay plans.

No more “cocktail napkin” pay plan.

HOTLINKHR SOLVES THIS PROBLEM!!!!!

POPULAR WAGE- HOUR LAWSUITS

Overtime Exemptions ChallengesFlat rate per unit

CarMax Case

Hybrid where commissions not more

Service Advisors-- sell, not just warranty

“Packs” represent potential problems, if they are used, they should be specifically identified by dollar amount (no “hidden” “undisclosed” packs) in a signed pay plan. Packs should never be identified as a way to allocate overhead or expenses but instead should be described as “an amount of the gross profit on which the salesperson is not paid a commission.”

Shop Bills (Repair Orders)– mark-up

If salespeople are not paid on under-allowances, or if over-allowances are charged against commissionable gross, that should also be identified. Likewise, if salespeople are not paid on factory incentives and/or holdback, that should be made clear in the pay plan.

Used Car Warranty

Policy Adjustment Accounts

Bad Debt Issues

Unlawful Deductions from Pay

Charge-Backs

“Costs of Doing Business”

Trending Topics in Wage and Hour Litigation

Overtime Compensation– State versus Federal Overtime– Overtime for hybrid compensation plans

• Hourly (or salary) plus bonus• BDC telesales with base hourly rate and small

monthly bonus• Service Writer with base hourly rate and

significant monthly bonus

Minimum Wages– Idle / Waiting Time for Technicians– Examples:

• Technicians idled because there are no vehicles to service

• Technicians idled while waiting for parts• Free Multi-Point Inspections

Back-Flagging– Pay plan language critical to identify when work is

“closed” or “earned.”– Specific language for right to charge-back advances– Consistency

Deductions from Wages

Uniforms

The California Labor Code (section 224) specifically authorizes employers to deduct only certain things from an employee’s paycheck, including taxes or deductions “expressly authorized in writing by the employee to cover insurance premiums, hospital or medical dues, or other deductions not amounting to a rebate or deduction from the standard wage … or when a deduction to cover health and welfare or pension plan contributions is expressly authorized by a collective bargaining or wage agreement.” The Labor Code (section 221) also makes it unlawful for an employer to “collect or receive from an employee any part of wages theretofore paid by said employer to said employee.” In short, this provision prohibits an employer from receiving from an employee any wages paid by the employer to the employee either by deduction or recovery after payment of the wage. questions or doubts about whether a deduction is lawful, contact counsel for guidance before making the deduction.


Uniforms

Because the Labor Code specifically authorizes only certain types of deductions from an employee’s wages, the courts and the Labor Commissioner generally take the position that deductions not specifically authorized are prohibited. And the courts recognize a strong “public policy” in favor of safeguarding employees’ wages and against an employer’s “self-help” attempt to recover losses by deducting wages, finding that employers that engage in this practice do so at their own risk. recover any amounts due through the legal system – such as a small claims action – but that is usually time-consuming and may not be worth the effort.


Uniforms

Often employers wrongly believe they can deduct damage or losses caused by an employee from the employee’s wages. That’s not the case. For example, cash shortages and other losses caused by the simple negligence of an employee may not be deducted, because the employer must bear such losses as an expense of doing business. And while California law technically allows an employer to deduct for losses suffered as a result of a “dishonest or willful act” or through the “gross negligence” of the employee, whether the employee’s actions were “willful” or “dishonest” or “grossly negligent” depends on the specific circumstances of each particular case. If the employer is wrong – i.e., the employee was not “grossly negligent,” for example, but merely “negligent” in causing a loss – then the employer will be liable to the employee for the deducted amount plus interest and penalties, which can be significant.


Uniforms

Penalties typically are awarded when the employee making the claim no longer works for the employer. Failure to timely pay a departing employee all wages due and owing – which would include any unlawful deductions – at the time of termination can result in a huge monetary penalty on top of the unpaid wages. For example, a full-time minimum-wage employee who prevails before the Labor Commissioner on a $100 unlawful deduction claim could also be awarded an additional penalty of $1,920! The penalty is calculated by multiplying the employee’s daily compensation by up to 30 days (e.g., $8.00/hr x 8 hours x 30 days). The penalty accrues on a daily basis up to 30 days after the failure to pay the wages. Most wage claims are filed more than 30 days after the failure to pay, so the maximum penalty is usually awarded. And the penalties for highly-compensated employees can be staggering.


Uniforms

Another area where employers can get stung on the prohibition against deductions from wages occurs when the employer loans an employee money or allows the employee to purchase goods on an in-house credit account, and the employee asks to pay back the loan or pay for the goods through payroll deductions. While this type of deduction is not specifically authorized by the Labor Code, the Labor Commissioner has over the years approved of this type of arrangement so long as there is a written agreement authorizing the deductions.


Uniforms

In addition, this type of arrangement must be voluntary and for the benefit of the employee, and any deductions may not reduce the employee’s pay below the minimum wage. Moreover, in the case of installment payments, the employer is not permitted to accelerate any balance due if the employee quits or is fired still owing a balance. For example, if the employee agreed to have $100 deducted from every paycheck but still owed $400 at the time of termination, the employer could not recover the $400 from the final paycheck in a “balloon payment.” Of course, an employer is free to try and recover any amounts due through the legal system – such as a small claims action – but that is usually time-consuming and may not be worth the effort.


Uniforms

The following are some tips for employers regarding deductions: Don’t be a bank! Given the strict rules regarding deductions from wages, it’s a risky business loaning money to employees. Often times the employee quits or is terminated prior to paying the balance back, and the employer is often stuck with a balance that cannot be fully deducted. At the very least, any employer that has loaned or is considering loaning money to employees and getting reimbursed through payroll deduction must have the agreement in writing.


Uniforms

In the case of losses caused by the employee, consider discipline as a substitute for a payroll deduction. As noted above, employers may not take payroll deductions from an employee’s wages to cover losses caused by the simple negligence of the employee. However, employers are free to discipline and/or discharge employees for losses caused by their negligence. Any employer considering recovering losses due to the willful, dishonest, or gross negligence of the employee should consult with counsel before doing so and should have any payroll deduction memorialized in writing by the employee. Have it in writing. Get written authorization from the employee before taking a payroll deduction. The agreement should state that the deduction is being made solely for the employee’s benefit and that the agreement is “voluntary.”


Uniforms

Be mindful of the “Penalties” issue. Remember – taking deductions not specifically authorized by the Labor Code or Wage Orders can result in huge monetary penalties if it turns out later that the deduction was unlawful. In fact, with highly compensated employees, the penalties often amount to thousands of dollars. If you ever have questions or doubts about whether a deduction is lawful, contact counsel for guidance before making the deduction.

Willful Misconduct or Gross NegligenceNot mere stupidity!!

2x Minimum Wage for Providing Own ToolsTool Certification To Solve the Problem

Uniforms

Uniforms -- Cannot charge for cost or maintenance (including Laundering)

OVERTIME

EXEMPT OR NOT EXEMPT?

THAT IS THE QUESTION

COMMON OVERTIME EXEMPTIONS

Commission Exemption

Executive/Managerial Exemption

Administrative Exemption

THE WHITE COLLAR EXEMPTIONS

Executive, Administrative and Professional Overtime ExemptionsSalary Test– at least $2773.00 per month

Problem: Commissioned Managers not involved in selling

Primary Responsibility Test: Many employers are misled by common misconceptions such as that "salaried" employees need not be paid overtime, or that "everybody" pays this or that kind of employee as being "salaried-without-overtime.”

THE WHITE COLLAR EXEMPTIONSMust spend more than 50% of time at work exercising independent judgment and discretion as to matters of importance (managing 2 or more full-time employees, administration of general business operations such as CFO, Director of HR, etc.)

OVERTIME EXEMPTIONCOMMISSION SALES

One and One-Half Times the Minimum Wage

More Than Half of Earnings from Commission

Must be involved in selling-- not performing services

When is a Sales Commission not a Sales Commission?

“Based proportionately on the amount or value thereof”

Recent Challenges:– Based on commissionable gross profits versus

gross sales receipts– Based on minimum commissions

• Low-gross deals with some, but not much profit• Negative-gross deals

OVERTIME EXEMPTIONCOMMISSION SALES

MINIMUM WAGE

OVERTIME EXEMPTION VS. FLUCTUATING WORK WEEK

PIECE RATE & NON-EXEMPT COMMISSION

FLAT RATE TECHNICIANS ARE NOT EXEMPT FROM OVERTIME

Fluctuating Work Week Overtime

Total Earnings divided by Total Hours Worked= Regular Rate

1/2 the Regular Rate for every overtime hour

Problem Area: Must Pay Overtime on Bonuses, Not just Hourly and Flat Rate Pay

The example below assumes a seven day workweek with 50 hours actually worked (sweat time). This calculation is based on a piece rate of $20.00 per piece.

1. Total Flag Hours Paid: 42 at 20.00 per piece = $840.00

2. Total Hours Actually Worked(i) 40 straight-time hours 40(ii) 10 overtime hours 10

3. Regular Rate = $840.00 (total earnings) ÷ 50 hours (total hours worked)

=$16.804. Hourly Overtime Rate = $16.80 X .50 $8.40/hour

5. Overtime Due = 10 hours @ $8.40/hour$84.00

6.Total Compensation Due (42 Flag Hours x $20.00) = $840.00 (10 overtime hours x $8.40) = $84.00

Total Compensation = $924.00

PAID VACATIONNo Use it or Lose ItMaximum Accrual is Okay

PTO treated like Vacation

PAID HOLIDAYSBe Careful On Floating Holidays

PAID SICK LEAVEA Good Thing for Salaried Managers

Alternative Work Week RulesMeetingSecret Ballot Election- 2/3 Majority VoteNotification to DLSEDon’t back into it

Make-Up Time Rule

Compensated Time Off

New Harsher Penalties


Questions and Answers

53

John P. Boggs, Esq.Fine, Boggs & Perkins LLP

(650) [email protected]

Contact Information

– KPA CONFIDENTIAL – 54

The recorded webinar and presentation slides will be emailed to you today including your local representative’s contact information.

www.kpaonline.com

[email protected]

866-356-1735