Transcript Slide 1

Balancing Life Shifts
and Work Shifts
CASA Annual Conference
September 4, 2014
E. George Joseph
© Copyright, 2014 Nossaman LLP. All Rights Reserved.
What We Will Cover
 Meal and Rest Breaks
 On-Call (“Standby”) Time
 Reporting Time and Split Shift Pay
 Shift Differentials
 Alternative Workweeks
 Bonuses and Incentive Compensation
 Commissions
2
Meal and Rest Breaks
Brinker Restaurant Corp. v. Superior Court
(2012) 53 Cal.4th 1004
3
Hypothetical
 Monica is a very hard working and dedicated medical
assistant at ABC Clinic. Because she wants to be sure all
her work is done promptly, she frequently skips lunch or
eats quickly at her work station while she does
paperwork.
 The Clinic’s written policy makes clear that employees
are entitled to a 30 minute meal break, and that message
is reinforced frequently at staff meetings. Nobody has
ever told Monica not to take a meal break, and the
workload is not so heavy as to prevent her from taking
one.
4
Hypothetical
 One day, Monica is advised by ABC Clinic that
they need to cut back, and her position is
being eliminated. Monica can’t believe her
loyalty has not been appreciated, and she tells
her supervisor that she has not taken a meal
break for three years, and she wants an hour
of pay for every day she has missed.
 Does Monica have a valid claim?
5
Meal Breaks
 No. Under the holding in Brinker, an
employer has a duty only to “provide”
meal breaks
 No obligation to police meal breaks
 No obligation to ensure they
are taken and no work thereafter
is performed
6
Meal and Rest Breaks
 This is a win for employers, however, Brinker is not
the death knell of wage and hour class actions.
 Bradley v. Networkers International, LLC (12/17/12)
– Class Certification Where No Break Policy
 Augustus v American Commercial Security (7/6/12)
– > $89 Mil Judgment –
Depriving employees of breaks
7
Hypothetical
 Monica is a very hard working and dedicated medical
assistant at ABC Clinic. Because she wants to be sure all
her work is done, she frequently skips lunch or eats
quickly at her work station while she does paperwork.
 The Clinic’s written policy makes clear that employees
are entitled to a 30 minute meal break, and that message
is reinforced frequently at staff meetings. Nobody has
ever told Monica not to take a meal break, but the
workload so heavy that it is difficult for employees to take
a break.
8
Hypothetical
 One day, Monica is advised by ABC Clinic that
they need to cut back, and her position is
being eliminated. She tells her supervisor that
she has not taken a meal break for three
years, and she wants to be paid the penalties.
 ABC responds that because nobody has ever
told Monica not to take a break, she has no
claim.
– Does Monica have a valid claim?
9
Meal Breaks – “Duty to Provide”
 Probably.
–If the workload effectively prevents
employees such as Monica from
taking a meal break, she has a strong
argument under Brinker that ABC has
not “provided” her with a break.
10
Hypothetical
 The manager at XYZ Surgery Center
schedules a one hour lunch for its employees
every other Friday at a pricy restaurant off
site. The Center pays for the lunch. The
stated purpose of the lunch is for employees
to socialize and get to know each other better.
There is no formal agenda and Center
business and operations are not typically
discussed.
11
Hypothetical
 The Center pays its employees for all time
spent at the restaurant, as well as traveling
there and back, which sometimes means that
employees receive some overtime pay on
Fridays if the lunch runs long. The Center
does not, however, provide a separate lunch
break to its employees on these days.
 Is the Center in compliance with California
wage and hour law?
12
Meal Breaks – “Duty to Provide”
 No.
– Unless the employees are relieved of
all duties (i.e., allowed to spend their
time as they wish), a lunch break has
not been “provided” and the Center is
required to pay each employee a one
hour penalty for each lunch break
missed.
13
What Does “Provide” Mean?
 Relieve employees of all duties
 Relinquish control over their activities
 Permit employees a reasonable
opportunity to take an uninterrupted
30-minute break
 Do not impede or discourage employees
from doing so
14
Timing – Meal Breaks
 The first 30-minute meal period
must occur no later than the end
of an employee's fifth hour of work*
 The second meal period no later than the end of an
employee's 10th hour of work
 Early lunch / no late lunch
 No rolling meal periods every five hours
* We recommend no later than four hours and fifty-nine minutes
Cal. Lab. Code Sec. 512; IWC Wage Orders 4 and 5, sec. 11.
15
Meal Break Chart
Hours Worked
# of 30-Minute Meal Breaks
(Meal Breaks are unpaid)
5 hours or less
0
5 hours 1 minute through 10
hours
1
10 hours 1 minute through 15
hours
2
16
16
Meal Break Scheduling
# of 30-Minute Meal Breaks
(Meal Breaks are unpaid)
Meal Break must start by:
1
No later than 4 hours 59 minutes
after the work shift begins
2
No later than 9 hours 59 minutes
after the work shift begins
3
No later than 14 hours 59 minutes
after the work shift begins
17
17
Hypothetical
 Acme Clinic has been chronically understaffed
for a long time. As a result, its employees, all
of whom work 12 hour shifts, have been
unable to take any meal or rest breaks for
many months. Each day, they miss two meal
breaks and three rest breaks.
 The employees hire an attorney who demands
that the Clinic pay each employee a total of
five one hour penalties for each day - one for
each break missed. Are the employees
entitled to this?
18
Penalty for Multiple
Missed Breaks
 No.
 Employees are entitled to only one penalty per
day for each type of break missed. (United
Parcel Service, Inc. v. Sup. Ct. (Allen) (2011)
196 Cal4th 57, 68-69; Labor Code §226.7.)
19
Hypothetical
 XYZ Center has such a heavy patient load
that it is not possible for all of the patients to
be properly treated and cared for unless its
employees remain available to work at all
times at a moment’s notice. It is therefore not
possible for employees to be relieved of all
duties during a lunch break.
20
Hypothetical
 At a regular staff meeting, the manager of the Center
asks all employees if they will agree to work through
their lunch breaks in this manner, assuring them that
they will be paid for the that time. The employees all
state their agreement. From that date forward, the
employees all eat at their workstations every day, with
the understanding that they may be called upon to
attend to patients at any time. They do not otherwise
take a lunch break.
 Is this a lawful practice?
21
On Duty Meal Periods
 No.
 An on-duty meal period is lawful only if:
– The nature of the work prevents the employee
from being relieved of all duty;
– The employee and employer agree, in writing, to
an on-duty meal period;
– The agreement states that the employee may
revoke it at any time; and
– The employee is paid for the on-duty meal period.
Division of Labor Standards Enforcement Manual sec.
45.2.3.1
22
Meal Break Waivers
 If the shift is no longer than six hours, the meal
break may be waived by mutual consent.
 If the shift is no longer than twelve hours, the
second meal break may be waived by mutual
consent (only if the first break was not waived).
 Waivers should be in writing.
 Employee must be paid for all hours worked.
Cal. Lab. Code Sec. 512; IWC Wage Orders 4 and 5, sec. 11.
23
Meal Break Waivers –
Healthcare Employees
 If the shift is in excess of eight hours and an
employee is entitled to two meal breaks, one of
them may be waived (12-hour limit does not
apply).
 Agreement must be in writing.
 Employee must be able to revoke at any time
on one-day’s notice.
 Employee must be paid for all hours worked.
IWC Wage Order 5, sec. 11(D).
24
Overtime
 Brinker does not change current overtime
requirements
 If employees are provided with meal breaks
but choose to work through the meal break,
overtime may be owed
25
Rest Breaks
 Rest Breaks must be “provided” by the employer, but
an employee may choose not to take one, as long as
the employee is not discouraged from doing so.
 Rest Breaks cannot be combined or added to meal
periods.
 Rest Breaks need to be provided as close as possible
to the middle of the 4 hour shift.
 Working through a rest period does not entitle an
employee to leave work early or arrive late.
 Employees may be required to stay on the premises
during their rest break.
26
26
Timing – Rest Breaks
 The rest break time is based on the total hours worked daily at the
rate of 10 minutes (net) per four hours or major fraction thereof.
 “Major fraction” is any time in excess of two hours.*
– 0 minutes of rest for shifts less than 3.5 hours
– 10 minutes of rest for shifts from three and one-half to six
hours in length
– 20 minutes of rest for shifts more than six hours up to 10
hours (two 10 minute breaks)
– 30 minutes of rest for shifts more than 10 hours up to 14
hours (three 10 minute breaks)
*Brinker’s policy did not refer to “or major fraction thereof.”
IWC Wage Orders 4- 5, sec. 12.
27
Rest Break Chart
Hours Worked
# of 10-Minute Rest Breaks
(Rest Breaks are paid )
Up to 3 hours 29 minutes
0
3 hours 30 minutes to 6 hours
1
6 hours 1 minute to 10 hours
2
10 hours 1 minute to 14 hours
3
28
28
Best Practices



Given the Supreme Court’s reliance on Brinker’s
meal and rest period policies in deciding the class
certification issues, Brinker is a reminder that it is
incumbent upon employers to both draft clear, concise
policies and to ensure that these policies are uniformly
implemented and applied.
If you are managing meal periods under an “ensure”
standard, you may consider converting to a “make
available” standard.
It is also important for employers to
internally audit the workplace to ensure
compliance with policies.
29
Best Practices

Policy should include all 4 components of the “provide”
standard for meal breaks as set forth in Brinker.

Policy should include the “major fraction thereof”
language for rest breaks.

Timing of meal breaks needs to be properly described;
e.g., first meal period no later than 5th hour of work,
second meal period no later than the end
of an employee’s 10th hour of work.
(There is NO “rolling 5 hour” rule.)

Adopt and promulgate a clear policy that
strongly prohibits off-the-clock work.
30
On-Call
(“Standby”) Time
31
Hypothetical
 Robert works as a nurse for a 24-hour walk-in clinic. In
addition to his regular 40-hour workweek, one day per
week Robert is on call for a shift that begins at 8:00 p.m.
and ends at 5:00 a.m. the next morning.
 While on call, Robert carries a beeper that must be on at
all times, and if he is beeped, he is occasionally required
to report to the clinic within 30 minutes (he lives 15
minutes away). Otherwise, Robert is free to do what he
wishes during his on call time. Robert is paid $5 per
hour while on call.
32
On Call Time
1) Is Robert being paid enough for his on call
time?
2) Is the time spent by Robert while waiting on
call counted as “hours worked” for overtime
purposes?
3) Are the wages paid to Robert considered in
calculating his “regular rate” for overtime
purposes? If so, how?
33
On Call Time
1) Is Robert being paid enough for his on call
time?
Yes.
Because Robert is on “uncontrolled standby,”
he need not be paid at all, so any amount
the clinic decides to pay Robert is at the
clinic’s discretion. If Robert were on
“controlled standby” the clinic would
generally have to pay him the same rate as
for other hours worked.
34
When Is Standby “Controlled?”
 Consider the following factors:
– Are there excessive geographic restrictions on the employee?
– Is the frequency of calls unduly restrictive?
– Is the time limit for response unduly restrictive?
– Can the employee readily trade his/her on call responsibilities with
another employee?
– Can the employee engage in personal activities while on call?
 The mere fact that the employee is required to carry a
pager or cell phone does not mean that standby is
“controlled.”
Division of Labor Standards Enforcement (“DLSE”) Manual sec. 47;
Madera Police Officers Assoc. v. City of Madera (1984) 36 Cal.3d.
403.
35
On Call Time
2) Is the time spent by Robert while waiting on
call counted as “hours worked” for overtime
purposes?
No.
Because Robert is not actually performing work
while he is waiting for a call, his time spent
on call is not considered “hours worked,”
and therefore does not count when
determining whether Robert has worked
overtime.
DLSE Manual sec. 47.5.3
36
On Call Time
3) Are the wages paid to Robert considered in
calculating his “regular rate” for overtime
purposes? If so, how?
Yes.
The Labor Commissioner takes the position that this is
payment for performance of a duty, and therefore is
considered in calculating the “regular rate” All
amounts paid for uncontrolled standby are added to
other (non-excluded) payments for work, the sum of
which is divided by hours worked during the week to
yield the regular rate. DLSE Manual sec. 47.5.3
37
Hypothetical
 One night while Robert is on call, he decides to spend
time at his girlfriend’s house which is 30 minutes away
from the clinic. Robert receives a page while at his
girlfriend’s house, drives to the clinic, cares for patients
for one hour, and then returns to his own home 15
minutes from the clinic.
1) Is Robert entitled to be paid for his travel time? If
so, for how much?
2) Is Robert entitled to a minimum of two hours
reporting time pay for his call?
38
Call-Back Pay
1) Is Robert entitled to be paid for his travel time? If so,
for how much?
Unclear.
While it is clear that an employee must be paid for
traveling to a call back at an off site location, the Labor
Commissioner has not taken a position as to whether
time spent traveling to the workplace on a call back
must be paid. One court has implied that perhaps it
should. There is risk in not paying, but it is probably
low.
If Robert is paid, he should be paid for all travel time.
Pilkenton v. Appalachian Regional Hospitals, Inc. (W.D. Va. 1971) 336 F.Supp. 334.
39
Call-Back Pay
2) Is Robert entitled to a minimum of two hours reporting
time pay for his call?
No.
Although reporting time pay would ordinarily be required if
an employee is summoned back to the clinic and given
less than two hours’ work, there is an exception to that
requirement where, as in Robert’s case, the employee
in on paid standby and is called to work at a time that is
not his usual shift.
IWC Wage Orders 4-5, sec. 5(D)
40
Reporting Time and
Split Shift Pay
41
Reporting Time Pay
 If an employee reports to work when required but is given less
than half the hours for which he/she is scheduled to work, the
employee will be paid for half of his/her scheduled work time;
however, the employee must be paid for at least two hours but
not more than four hours at the employee’s regular rate of pay.
 If an employee reports to work a second time during the same
work day and is given less than two hours' work, the employee
will be paid for half of his/her scheduled work time, at least two
hours but not more than four hours at the employee’s regular
rate of pay.
IWC Wage Orders 4-5, sec. 5.
42
42
Reporting Time Pay Exceptions
 Reporting time pay requirements do not apply when:
– The reduction in work is caused by the employee's own
decision to leave work early;
– Operations cannot commence or continue due to threats to
employees or property or recommendations by civil
authorities;
– Public utilities fail to provide electricity, water, or other
necessities needed to commence or continue operations;
or
– Events not within the employer's control interrupt work.
IWC Wage Orders 4-5, sec. 5(D).
43
43
Split Shifts
 California law requires that employees receive “split shift”
pay. A split shift is when an employee is scheduled to
work two separate shifts during a workday with more than
one hour between the two shifts.
 Generally, the employee must receive at least one hour’s
pay at not less than minimum wage for the time between
shifts.
 The total pay for the workday need only be the equivalent
of minimum wage for the hours actually worked plus the
extra hour. If the employee’s regular rate is high enough,
paying the employee for only the hours actually worked
may be sufficient to cover the requirement.
IWC Wage Orders 4-5, sec. 4(C).
44
44
Hypothetical - Reporting Time Pay
 Philip works in a coffee shop. On a day on
which he is not scheduled to work, Philip’s
employer asks him to come in for a meeting.
When Philip arrives, he is told immediately
that his employment is terminated, and he is
sent home with a paycheck that includes two
hours of pay for the termination meeting.
Philip claims he is entitled to be paid for 3
hours, which is half the length of his usual
shift, and sues his employer for the difference.
– Does Philip have a valid claim?
45
Reporting Time Pay
Answer: No.
In Price v. Starbucks Corporation (2011) 192
Cal.App.4th 1136, the court held that because Philip was
not scheduled to work on the day of the meeting, he
was not entitled to be paid for half of his usual shift, but
only the minimum of 2 hours. The court also held that
“usual” shift is not the average hours of employee’s
previously worked shifts, but the expectation of hours
for the customary shift.
46
Hypothetical - Reporting Time
and Split Shift Pay
 Employees of a cell phone company are required to report
to work to attend meetings that are regularly scheduled to
last two hours. On one occasion, the meeting lasts just
over an hour, and the employees are paid only for the
actual duration of the meeting. The employees sue,
claiming they should be paid 2 hours reporting time pay.
 Some of the employees had to report back to work several
hours after the meeting concluded. They were paid a total
amount for the day that exceeded the minimum wage that
would have been earned for all hours worked, plus one
additional hour. They sued, claiming that they were entitled
to “split shift pay” equal to their regular rate for hours
actually worked, plus 1 hour at minimum wage.
47
Reporting Time and Split Shift Pay
 The Wage Orders provide that when an employee
reports to work but is furnished less than half his usual
day’s work, he must be paid for half the usual shift, but
in no event less than 2 nor more than 4 hours. Do the
employees prevail on their reporting time claim?
 A split shift is any 2 distinct work periods separated by
more than 1 hour. Employees must receive at least 1
hour’s minimum wage for the time between shifts, plus
minimum wage for the hours worked. Do the
employees prevail on their split shift claim?
48
Reporting Time and Split Shift Pay
Answer: Employees lose on both claims.
In Aleman v. AirTouch Cellular, 209 Cal. App. 4th 556
(2012), the court held that because the meetings were
regularly scheduled, and because they lasted more than
half the 2 hours, the employees were not entitled to
reporting time pay.
The court also held that because the employees had
been paid an amount that exceeded minimum wage for
all hours worked plus 1 additional hour, they had been
properly paid for the split shift.
49
Reporting Time Rules for Meetings
 If a meeting is not regularly scheduled, and the
employee is not put to work, the employee is entitled
to 2 hours reporting time pay (the Price case).
 If the meeting is regularly scheduled and lasts at least
half the scheduled time, the employee need only be
paid for actual time in attendance (the Aleman case).
 If the meeting is regularly scheduled and lasts less
than half the scheduled time, the employee must be
paid “reporting time pay” equal to half the scheduled
time, but in no event less than 2 nor more than 4
hours.
50
Hypothetical
 Amy works in the morning from 6a-10a
(4 hours), and then returns later in the
day and works 4p-10p (6 hours), for a
total of 10 hours in one workday. She is
paid $20/hour.
Should Amy be paid a split shift premium?
51
Hypothetical
 No.
– Amy is not entitled to a split shift premium because
her regular compensation for 10 hours of work will
be greater than 10+1 or 11 hours at the minimum
wage. (Note that Amy should be paid overtime on
the 10 hours as per any other shift but not on the
time between shifts.)
– When an employee splits a work shift, the
employee is entitled to 1 hour’s pay at the
minimum wage in addition to the minimum wage
for the workday; it is due only to employees who
are paid at or near the minimum wage. (Aleman)
52
Split Shift Pay and Overtime
 Because the compensation for time between shifts is
not for “hours worked,” and is not included in the
“regular rate of pay,” it need not be considered when
calculating overtime compensation.
See IWC Wage Orders 405, sec. 2(R); Securitas Security Services
USA, Inc. v. Superior Court, 197 Cal. App. 4th 115 (2011).
53
Overtime Pay
 Overtime is calculated on a “workday” and
“workweek” basis:.
– “Workday”: A 24-hour period beginning at the
same time each day (e.g., 12:01am-midnight); may
begin at any hour.
– “Workweek”: any 7 consecutive 24-hour periods,
starting with the same calendar day each week,
beginning at any hour of any day, so long as it is
fixed and regularly occurring.
– Once defined by employer, workday and
workweek are intended to be fixed/permanent.
IWC Wage Orders, Cal. Lab. Code 500.
54
Hypothetical: When Shift
Straddles Workdays
How should OT be calculated for the work schedule
below, assuming a “regular” workday/week (no
alternative workweek arrangement)?
– “Workday” is 12:01am-midnight
– “Workweek” is Sunday 12:01am – Saturday midnight.
M
T
W
Th
Fri
Employee works
11p-7a
11p-7a
11p-8a
3p-11p
3p-11p
Hours per shift
8
8
9
8
8
Hours per workday 1
7+1
8+1
8+8
8
OT DUE
0
0
8 (4 DT) 0
0
55
When Shift Straddles
Workdays
For a “regular” workday/week (no alternative
workweek arrangement), OT should be paid for
time over 8 hrs in any one “workday” and time
over 40 hours in any one “workweek,” as those
terms have been defined.
See Labor Commissioner’s Opinion Letter 1993.12.09.
*Note: 14-day/80-hr workweek permitted in HealthCare Industry, if agreed
to by employer/employee. (IWC Wage Orders 4-5, sec. 3(B)(8).)
56
Shift Differentials
57
Shift Differentials
 A shift differential is an entirely voluntary agreement
by an employer to pay an employee a higher rate for
work that is considered more difficult, hazardous or
otherwise less desirable.
 The extra compensation paid for such work must be
considered when calculating the employee’s “regular
rate” for overtime purposes.
 Where different rates are paid to the same employee
for different types of work, employers must use the
“weighted average” method of determining the regular
rate.
DLSE Manual sec. 49.2.5; 29 CFR 778.115.
58
58
The “Weighted Average” Method
Example:
In a workweek, an employee works 40 hours at $10
per hour and 10 hours at $20 per hour
Weighted average equals total wages of $600 ($400
plus $200) divided by 50 total hours worked: $12/hr.
 For each hour of overtime compensable at time and a
half, $6 would be paid as a premium.
59
59
Alternative
Workweeks
60
Alternative Workweeks - Overview
 “Alternative Workweek Schedule” means any regularly
scheduled workweek requiring an employee to work
more than 8 hours in a 24-hour period.
 Apply to employees in Wage Orders 1-13 and 15-17,
including employees in the Health Care Industry.
(Lab. Code 511, IWC Orders.)
 Applies only to nonexempt employees.
 Scheduling flexibility is limited by requirement that
employer implement a regular alternative work schedule,
and, in general, pay all hours worked outside the
regularly scheduled workweek at an overtime rate.
61
Employees in the “Health Care Industry”
 “Health Care Industry” is defined as:
– Hospitals
– Skilled nursing facilities
– Intermediate care and residential care facilities
– Convalescent care institutions
– Home health agencies
– Clinics operating 24 hours/day
– Clinics performing surgery, urgent care, radiology,
anesthesiology, pathology, neurology, or dialysis
Alternative schedule only available for employees
providing patient care
IWC Wage Orders 4-5, sec. 2(G, J).
62
Alternative Workweeks versus
Flexible Schedule
 Flexible schedule: workweek schedule of 8 hours per day
where some employees begin shift early in the day and
others begin later in the day. Employer can institute a
flexible schedule at any time. Employer approval is
required for flexible schedule.
 Alternative Workweek: workweek schedule requiring
employee to work more than 8 hours in a 24-hour period.
Eliminates the legal requirement of paying daily overtime
for all work in excess of 8 hours in each workday. With
limited exceptions, everyone in the “work unit” must work
the alternative workweek schedule.
63
Examples of Alternative
Workweeks
 Four 10-hour shifts
 “9/80” Schedule: workweek begins at noon on Friday
and ends at noon the following Friday. Employees work
four 9-hour shifts and one 4-hour shift each workweek.
 Three 12-hour shifts and one 4-hour shift (overtime is
avoided only for health care employees)
64
Creating an Alternative
Workweek Schedule
 Correct procedure must be followed to implement an
alternative workweek schedule:
– Written proposal to employees in the affected unit, including
either a single work schedule or a menu of options that would
suit the employer’s business needs.
– Hold at least one meeting 14 days before vote to discuss effects.
– Hold a secret ballot election. 2/3 of all affected employees must
vote in favor for schedule to become effective. File results with
Dept. of Industrial Relations.
 If not properly adopted, employer can be liable for 3-4
years of back overtime. CCP 338(a); Cal. Lab. Code Sec.
1194; Cal. Bus. & Prof. Code 12900.
See IWC Wage Orders 4-5, sec. 3(C).
65
Changing the Alternative
Workweek Schedule
 Employer can change alternative schedule occasionally if
employees are provided with reasonable notice (defined by
DLSE as one week). Schedule must be predictable and
cannot be “on call,” in which days/weeks subject to continual
changes.
 Only the employee may request to substitute one “day of
work” for another. If employer requires employee to work
on any non-scheduled day of an Alternative Workweek,
hours worked on the unscheduled day would have to be
paid at the premium rate.
66
Accommodating Employees Who
Cannot Work Alternative Schedule
 Generally, an employer has an obligation to
accommodate:
– An employee’s religion
– Employees who were eligible to vote in the
election and who are unable to work the alternative
schedule
– Employees hired after the election who are unable
to work the alternative schedule
IWC Wage Orders 4-5, sec. 3(B)(4)-(6).
67
Hypothetical
 An employee in the health care industry
works a valid 3/12 alternative workweek.
1) To how many meal breaks is the
employee entitled?
2) Can the meal break(s) be waived?
68
Hypothetical
Answer: The employee is entitled to two 30minute meal breaks, and can voluntarily waive
her right to one of the two meal breaks.
Employees on alternative workweek schedules are
generally entitled to the same meal and rest breaks as
employees on traditional schedules.
Employees in the health care industry who work shifts
of over 8 hours can voluntarily waive right to one of their
two meal breaks. IWC Wage Orders 4-5 sec. 11(D).
69
Overtime During Alternative
Workweek (Generally)
 Overtime at 1.5 times the regular rate for
– Work beyond regularly scheduled hours, up to 12 hours/day;
– Work beyond 40 hours per week.
– Work on days other than those regularly scheduled, unless
occasional change by employer with notice, or substitute day
of work per employee’s request
 Double-time for:
– Work beyond 12 hours per day;
– Work beyond 8 hours per day on days other than those
regularly scheduled.
70
Overtime During Alternative
Workweek (Health Care Industry)
 12-Hour shifts are permissible in the Health
Care Industry with no overtime worked.
 A Health Care Industry employer pays
overtime at the following rates:
– 1.5 times the regular rate for work beyond 40
hours per week.
– Double-time for work beyond 12 hours per day.
IWC Wage Orders 4-5, sec. 3(B)(8).
71
Hypothetical
 Jan is an RN with a Community Hospital. She
works a valid 3/12 alternative workweek
schedule. One week, she works a four-hour
shift, in addition to regular 3 12-hour shifts.
 Jan claims she is entitled to overtime at timeand-a-half for the four additional hours.
– Is Jan correct?
72
Hypothetical
Answer: NO. Jan is not entitled to overtime for
the 37th through the 40th hour worked.
Health care employees on a 3/12 alternative workweek
schedule are entitled to time-and-a-half pay only after
performing 40 hours of work.
Singh v. Superior Court, 140 Cal.App.4th 387 (June
12, 2006) (IWC Wage Order 5, sec. 3(B)(8)).
73
Health Care Industry: Hours
 An alternative workweek schedule cannot provide
fewer than 4 hours of work in any shift. IWC Wage
Orders 4-5 sec. 3(B)(1).
 An employee assigned to 12-hr shift:
– Can work more hours only for “healthcare emergency,” as
declared by Chief Nursing Officer or authorized executive.
– Even in the case of emergency, employee can work no more
than 16 hours unless voluntary mutual agreement.
– Can work up to 13 hours if employee scheduled for next shift
does not report to duty and employer does not receive at
least 2 hours’ advance notice.
IWC Wage Orders 4-5 sec. 3(B)(9).
74
Health Care Industry: Workweek
 Employers who operate a hospital or
establishment which is primarily engaged in
care of the sick, aged, or mentally ill who
reside on the premises can agree with
employee that workweek will constitute period
of 14 consecutive days in lieu of 7 days for
purposes of overtime computation.
 Overtime at time-and-a-half would apply for
hours worked over 80 in 14 day period.
IWC Wage Order 5, sec. 3(D).
75
Bonus and Incentive
Compensation
76
Bonus and the Regular Rate
 The general rule is that the regular rate
includes all remuneration for work.
DLSE Manual sec. 49.1.1.
 To qualify for the exclusion from the regular
rate, a bonus must be discretionary.
 Bonuses to induce employees to work more
steadily or efficiently, or to remain with the
company, are not discretionary and are
included in the regular rate of pay.
DLSE Manual sec. 49.1.1-49.1.3.
77
Bonus and the Regular Rate
 Bonus payments can be excluded from the
regular rate if either
– (a) both the fact that payment is to be made and
the amount of the payment are determined at the
sole discretion of the employer at or near the
end of the period and not pursuant to any prior
contract, agreement or promise ... ; or
– (b) the payments are made pursuant to a bona fide
profit-sharing plan or bona fide thrift or savings
plan . . . .
DLSE Manual sec. 49.1.2.4.
78
Hypothetical
 Store managers at Office can award “Bravo
Cards” to employees for performance above
and beyond expectations. Managers decide
when to award the Bravo Cards.
 The awarded cards are placed in a container,
and at the end of the month there is a drawing
for a cash prize of $50, which is a “Bravo
Award” paid in the winning employee’s next
paycheck.
79
Hypothetical
 Howard received a Bravo Card. His Card was
drawn from the pot, and he and won the $50
Bravo Award. Howard received the $50 Bravo
Award in his next paycheck.
 Office did not factor the $50 Bravo Award into
the calculation of Howard’s regular rate of pay
for purposes of computing overtime.
 Howard claims the Bravo Award should have
been calculated into the regular rate.
– Is Howard correct?
80
Hypothetical
 Yes.
Office was required to include the Bravo Award
in the regular rate. The award was not
“discretionary” because the amount of
payment was known to all employees in
advance. Provine v. Office Depot, 2012 U.S.
Dist. LEXIS 92811.
**Recall: both the fact of receiving the bonus
and the amount must be discretionary for the
payment to be excluded from the regular rate.
81
Hypothetical
Result:
 Factoring the $50 into the regular rate may result in a
very small amount of back pay actually due to Howard,
BUT
The difference can add up to hundreds of thousands of
dollars in back pay, depending on the size of the
workforce and the number of employees whose pay
was miscalculated; and
The unpaid overtime can trigger attendant violations
and severe and costly penalties; e.g., failure to provide
accurate wage statements, wages not timely paid,
PAGA penalties, waiting time penalties.
82
Bonus Payments & The
Regular Rate – Federal Law
For bonuses included in regular rate:
If bonus payment covers one weekly pay
period, it should be included with other earnings
when calculating weekly regular rate.
If bonus payment is deferred over a period of
time, when amount can be ascertained, it
should be apportioned over the workweeks of
the period during which it was earned.
29 CFR 778.209.
83
Bonus Payments & The Regular
Rate – California Law
For bonuses included in regular rate:
“Variable” bonus: California follows
federal law. Regular bonus rate is:
Bonus ÷ Total # of hrs worked during bonus period (incl.
OT hrs)
 “Flat rate” bonus: California uses
different method. Regular bonus rate is:
Bonus ÷ “Maximum legal regular hrs worked” during
bonus period (OT hrs not included)
DLSE Manual sec. 49.2.4 et seq.
84
Hypothetical
 Mary receives a predetermined $300
bonus for meeting a 90% collections
target. During the bonus period, Mary
worked 640 regular hours and 116
overtime hours.
 Question 1:
– Should the bonus be included when
calculating the regular rate?
85
Bonus and Overtime
 YES, the $300 bonus should be factored into
the regular rate.
– Neither the fact that a payment was to be made,
nor the amount, was at the employer’s sole
discretion. The bonus amount was predetermined
to reward employee’s production.
 Question 2:
– What additional overtime is due as a result of the
bonus, under California law?
86
Bonus and the Regular Rate
 Recall, under California law, the regular rate for a
“fixed sum” bonus is calculated as:
Bonus ÷ “Maximum legal regular hrs worked” during bonus period (OT hrs
not included)
 Here, Mary worked 640 hrs and 116 overtime hrs. The
bonus regular rate is thus:
Equation
Total
Reg. Bonus Rate
$300 ÷640*
$.469
1.5 x Bonus Rate
$.469 x 1.5
$.703
OT due on bonus for time/half hrs $.703 x 116
$81.65
AMOUNT DUE:
Bonus
$300
OT due on Bonus
$81.65
(Bonus + OT)
$381.65
TOTAL:
See DLSE Manual sec. 49.2.4.3.
*under federal law, the $300 would be divided by the total hours, incl. OT, or 756.
87
Commissions
88
Commissions
 State and Federal law allow employers to
compensate employees, in whole or in part,
on a commission basis.
 Commissions are generally for employees
engaged in selling goods or services.
 Commissions are considered “wages,” and
employees who receive commissions are
entitled to minimum wage and overtime unless
they qualify for an exemption.
Cal. Lab. Code Secs. 204.1, 2751
89
Commissions & The
Regular Rate
 Commission should be included in the regular rate,
which should be calculated weekly. 29 CFR 778.104.
 The regular rate for an employee paid on a
commission basis is calculated as follows:
Total commissions + earnings for the workweek
# of hours worked
29 CFR 778.118.
 Employee is entitled to .5 x regular rate for each
overtime hour worked, where commission has already
paid for the straight time.
90
Deferred Commission Payments
 If commission payments are deferred, and it is
not possible to calculate payment until after
the regular pay day for the workweek,
employer may disregard commission in
computing regular rate until commission can
be ascertained.
 When paid, commission should be
apportioned back over the workweeks of the
period during which it was earned.
29 CFR 778.119.
91
Deferred Commission Payments
 If it is not possible or practicable to allocate
the commission among the workweeks of the
period in proportion to the amount of
commission actually earned or reasonably
presumed to be earned each week, another
reasonable and equitable method can be
adopted; e.g.,
– Allocation of equal amounts to each week; or
– Allocation of equal amounts to each hour worked.
DLSE Manual sec. 5.2.5; 29 CFR 778.119, 778.120.
92
Commission Agreements
Assembly Bill 2675 (Effective 1/1/13)
Amends Labor Code section 2751 to clarify
that the following types of payments are not
considered “commissions” for purposes of a
required written agreement:
– Short-term productivity bonuses paid to retail clerks.
– Temporary, variable incentive payments that increase, but do
not decrease, payment under the written contract.
– Bonus and profit sharing plans, unless there has been an
offer by the employer to pay a fixed percentage of sales or
profits as compensation for work to be performed.
93
Commission Agreements
Assembly Bill 2675 (Effective 1/1/13)
AB 2675 will not change much for most
employers.
Employees paid commissions still need to
have a signed written commission agreement
on file.
94
Questions
95