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California Payroll
Association
Wage and Hour
Developments
Thursday, September 11, 2014
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Presented by:
Brian Dixon
Co-Chair, Wage and Hour Practice Group
Littler Mendelson, P.C.
[email protected]
415.677.3194
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Wage and Hour
Developments
• White-Collar Exemptions
• Commission-Sales
Exemption
• Commission Pay Timing
• Meal and Rest Periods
• Heat Recovery Periods
• Piece-Rate and
Commission Pay Plans
• Independent contractors
• Arbitration and PAGA
claims
White Collar Employees
Overtime exemptions
• Does employer qualify for the
exemption
• Does employee do work of exempt
quality
• Does employee do sufficient
quantity of exempt work
• Does employee received the
required compensation
White Collar Employees
Heyen v. Safeway Inc., California Court of Appeal
• Fact finder must determine objective
purpose of employee’s actions
• Concurrent duties test rejected, employee’s
actions can only be exempt or non-exempt
• Realistic expectations test confirmed
• Fact finder is to
– Look at what employee did
– Whether what employee did was consistent with
realistic expectations
– Whether employer communicated about failure to
meet expectations
• Primary duty is determined week by week
Expense Reimbursements
Cochran v. Schwan’s Home Service, Inc.,
California Court of Appeal
• Employer must reimburse employees for reasonable
percentage of cost of cellular phone service –
even if employee already had
unlimited phone service
and incurred no
additional cost
in answering
phone
Expense Reimbursements
Cochran v. Schwan’s Home Service, Inc.,
California Court of Appeal
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Must employer pay reasonable percentage for use of
Employee’s home internet service?
Employee’s home land line?
Employee’s reading glasses?
Employee’s watch?
Inside Sales Exemption
• Employer must be traditional
retail or service establishment
• Employer must be covered by
Wage Order 4 or 7
• Employee must spend more
than one half his or her time in
sales
• Employee must earn more at
least time and one half the
minimum wage for each hour
worked
• More than one half of
employee’s compensation must
be commissions
Inside Sales Exemption
Peabody v. Time Warner, Inc.
California Supreme Court
• Commissions paid
monthly cannot be
credited toward the
minimum compensation
requirements for an
earlier bi-weekly pay
period.
Commission Pay Timing
Peabody v. Time Warner, Inc.
California Supreme Court
• “In other words, all
earned wages,
including commissions,
must be paid no less
frequently than
semimonthly.”
Meal and Rest Periods Post-Brinker
• The Brinker standard
– Employer must “provide” meal breaks, proof problems
compel strict compliance
– Clarified the timing and duration
– Reinforces the importance of lawful policies
• Premium pay for missed meals
and rest periods
– Must be timely
– Must be correctly identified
on pay stub
Meal and Rest Period Problems
• Auto-deduction for meals without effective
exception reporting policy
• Granting employees too much latitude
to waive meal periods
• Production pay schemes
• Interrupted meals
• Leaving the premises
Practical Solutions
• Time card certifications
• Monitoring missed meals and rest periods
through timekeeping system
• Regular audits of records and practices
• Training managers
and employees
• Forced scheduling
• Hotline for reporting
non-compliance
California Expands Break and Premium Pay
Requirements to Heat Recovery Periods
What’s HOT in California • Required written guidelines and training to
avoid heat illness in outside employees
• Always provide water
• Make shade available
when over 850
• Provide 5-minute, paid
heat recovery periods
whenever needed
• Pay one-hour of premium
each day any heat recovery
period is not provided
Piece-Rate Pay Plans Under Attack
Employer must pay the
minimum wage for:
• Each separate hour worked,
even where an employee is
earning above the minimum
wage when averaged over all
hours worked
• Any small amount of work that
does not directly result in piece
rate or commission
compensation
• Rest periods
Who Is … And Is Not,
An Employer
Ayala v. Antelope Valley Newspapers,
California Supreme Court
• The alleged employer’s right to control, not
the exercise of control, is most important
FedEx Ground Cases,
Ninth Circuit Court of Appeals
• Scrutinize the entire relationship even where
contractor has some control
Patterson v. Domino’s Pizza, LLC,
California Supreme Court
• Franchisor is not joint employer of franchisee’s
employees even though every franchise relationship
entails some control by franchisor
Independent Contractors –
Risks of Failed Relationship
• Overtime and minimum wages
• Civil and statutory penalties for misclassification,
failure to pay wages, pay timely, check stubs
• Employment taxes
• Denial of other employee rights
• Wrongful termination
• I-9 compliance
Independent Contractors –
Risks of Failed Relationship
Less commonly perceived risks of failed
independent contractor relationships:
• Arbitration of disputes
• Intellectual property
• Claims for benefits and discrimination issues in
plans
Un-Civil Procedure
Iskanian v. CLS Transportation of Los
Angeles, California Supreme Court
• Class action waivers in arbitration
agreements are enforceable
• PAGA waivers in arbitration agreements
are not enforceable
Fardig v. Hobby Lobby Stores, Inc.,
Quevedo v. Macy’s, Inc.,
Parvataneni v. E*Trade Financial
Corporation, United States District Courts
• PAGA waivers in arbitration agreements
are enforceable
Un-Civil Procedure
Private Attorney’s General Act
• No class action certification
required for Plaintiff to proceed
• Plaintiff can pursue claims on
behalf of any aggrieved
employee
• One-year(?) statute of limitations
• Potential penalties cannot be
summed to remove PAGA case
to federal court
PAGA PENALTIES
AND SOME OTHER BAD THINGS
Employee’s time card is missing one
hour of time, employee’s paycheck is
short, employee quits –
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Penalty for inaccurate time card – LC 1199
Penalty for untimely payment – LC 210
Penalty for late payment of final wages – LC 201
Penalty for inaccurate
pay stub – LC 226
MORE BAD THINGS
• Penalty for failure to comply with the Wage
Order – LC 558
• Unpaid wages as part of penalty – LC 558
• Waiting time penalty – LC 203
• Penalty for not paying minimum wage –
LC 1197.1
• Liquidated damages for not paying
the minimum wage – LC 1197.1
• Attorney’s fees,
interest, costs
QUESTIONS?
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THANK YOU!
R. Brian Dixon
Littler Mendelson, P.C.
[email protected], 415.677.3194
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