Paul R. Lynd, Esq., Nixon Peabody, LLP

1
Times Not Standing Still Update on Wage Hour
Issues

• Paul R. Lynd, Esq., Nixon Peabody, LLP
• September 11, 2014
• California Payroll Conference

2
Class Action Update

• Wage and hour class actions are still going!
• Different claims in cases, but same ones, too
• Class action waivers in arbitration agreements
  are OK in California, but not with Labor Code
  Private Attorney General Act claims (Iskanian v.
  CLS Transportation, 59 Cal.4th 348 (2014))
• California courts still wrestling with
  certification
• California Supreme Court tried again to clarify
  whats important for whether common issues allow
  class certification (Ayala v. Antelope Valley
  Newspapers, 59 Cal.4th 522 (2014))

3
Minimum Wage Issues Continue on Many Levels

• Federal proposal to raise federal minimum wage to
  10.10 from current 7.25. Its gone nowhere.
• Executive order raised to 10.10 for federal
  contractors on new contracts or replacement
  contracts. Did not change much.
• Local cities enacting own minimum wages
• San Franciscos minimum wage now 10.74 an hour
  as of January 1, 2014 up from 10.55
• San Joses minimum wage now 10.15 after annual
  hike

4
California Minimum Wage Issues

• California minimum wage increased to 9.00 per
  hour on July 1, 2014
• By law, state minimum wages increases again to
  10.00 per hour on January 1, 2016
• What is not happening Another increase is off
  for now! SB 935 failed, which would have imposed
  more increases and automatic annual increases.
• Dont be surprised if the Legislature revisits
  the issue again next session.

5
What Else Changes with California Minimum Wage
Increase?

• Increase in California minimum wage changes the
  minimum salary for administrative, executive, and
  exempt employees
• Now is 3,120 per month, or 37,440 per year
• In 2016, minimum salary will increase to
  3,466.67 per month or 41,600 per year
• These minimums must be met through salary only,
  not total compensation
• Minimum for commission pay exemption employees is
  now 13.50 per hour and will be 15.00 per hour
  in 2016

6
End of Minimum Wage and Overtime Exemptions for
Some Employees

• California ended minimum wage exemption for
  personal attendants effective January 1, 2014
• Contrary to reports, did not end for all domestic
  employees
• Issue to be studied further in California
• Federal minimum wage and overtime exemptions
  ending January 1, 2015 for caregivers

7
Federal Overtime Exemption Review

• In March 2014, President issued Presidential
  Memorandum directing the U.S. Department of Labor
  to review federal overtime rules under the Fair
  Labor Standards Act
• Stated goal is updating and modernizing the
  rules
• DOL last did so in 2004
• Told to revisit federal minimum salary rule of
  455 per week
• Review of duties for exemptions likely
• No proposals emerged yet, probably nothing until
  2015

8
San Franciscos New Family Friendly Workplace
Ordinance

• Amended effective February 14, 2014 to clarify
  law applies to any employee with 20 or more
  employees regardless of location
• Covers employees who have worked at least six
  months and regularly work at least 8 hours a
  week
• Employee may request flexible working
  arrangement to assist with caregiver
  responsibilities, including changes in times
  worked, number of hours, and location
• Further such proposals likely on different levels

9
Other New 2014 California Laws of Note

• SB 390 Misdemeanor (year in jail and 1,000
  fine) for employer not remitting wage
  withholdings
• SB 462 Prevailing employer no longer entitled to
  automatic fee award on wage lawsuit. Now, award
  only if employee brought suit in bad faith.
• SB 435 Heat recovery period rest breaks of at
  least five minutes for outdoor employees, or pay
  hours wages
• New leave rights for victims of stalking,
  domestic violence, sexual assault, and crime
  victims
• Oral or written complaints to employer about
  wages now protected from retaliation

10
A California Law that Wont Be Happening

• AB 1164 California Fair Paycheck Act
• Bill would have allowed a lien on employers
  property for wages, compensation, related
  penalties and damages, interest, and costs of
  lien
• Would have been permitted on all property of the
  employer, including property acquired later
• Take mechanics lien idea and expands it
  significantly
• Bill died at end of legislative session.

11
Coming Up Mandatory Paid Sick Days

• AB 1522, the Health Workplaces, Healthy Families
  Act of 2014, signed into law on Sept. 10.
• Requires employers provide paid sick leave
• Employees could use the sick leave to care for
  certain family members (parent, child, spouse,
  domestic partner, grandparent, grandchild,
  sibling)
• Paid at the same rate as regular wage rate, in
  pay for that pay period.
• Employee may use up to three days a year.
• Wage statements must give available balance.
  Poster, wage disclosure statement also required.

12
Paying Final Wages

• McLean v. State of California, 2014 Cal. App.
  LEXIS (Aug. 19, 2014)
• Definition of quits includes to retire for
  timing of wage payment purposes
• Under Labor Code section 202, employer has up to
  72 hours to pay when resignation without notice.
  If gave enough notice, final wages due
  immediately.
• Reminder Mailing permitted only if employee
  quits without notice and requests mailing, with
  an address
• Otherwise, hold check for pick up or instruction
  by former employee.

13
Cell Phone Expense Coverage

• Cochran v. Schwans Home Service, Inc., 228
  Cal.App.4th 1137 (2014)
• Employer must cover all work-related cell phone
  expenses
• Rule applies even if employee has an unlimited
  plan, in which case additional work calls would
  not have added to the bill
• California law ordinarily requires covering the
  actual expenses. If an unlimited plan, employer
  must pay some reasonable percentage of the
  employees cell phone bill

14
Not Reimbursing ExpensesOther Consequences?

• Vasquez v. Franklin Management Real Estate Fund,
  Inc., 222 Cal.App.4th 819 (2013)
• Labor Code section 2802 requires expense
  reimbursement
• Employer would not pay mileage, kept assigning
  driving, and employee quit
• Can sue for constructive discharge in violation
  of public policy Not a typical case, but an
  untenable position here and would have made
  less than minimum wage
• Cannot sue for intentional infliction of
  emotional distress but can file workers
  compensation claim

15
Partial-Day Absences and Exempt Employees

• Rhea v. General Atomics, 227 Cal.App.4th 1360
  (2014)
• California follows federal rule for deductions
  from paid leave for exempt employees absences
• Conley v. PGE, 131 Cal.App.4th 260 (2005) upheld
  policy of deducting from paid leave when absence
  was at least four hours
• General Atomics held that there is no minimum
  required for deduction from paid leave
• Remember Deductions from salary are different,
  and generally allowed only if for a full-day
  absence.

16
Minimum Pay Must Be Salary to Be Exempt

• Negri v. Koning Associates, 216 Cal.App.4th 392
  (2013)
• Pay was 29 per hour
• No fixed guarantee, so not a salary
• Law requires a salary, which is a fixed,
  predetermined, guaranteed amount, not subject to
  deduction
• The salary also is not based on pay or
  compensation in total
• No salary, so not exempt
• If salary requirement or minimum not met,
  duties dont matter and not exempt!

17
Simultaneous Exempt and Non-Exempt Duties
Non-Exempt

• Heyen v. Safeway Inc., 216 Cal.App.4th 795 (2013)
• Former assistant manager, claimed spent majority
  of time bagging and stocking
• Safeway claimed she was simultaneously managing
• Court found some intuitive appeal to Safeways
  argument, but California law wont recognize
• Federal law different, recognizing head and
  hands work simultaneously in Burger King cases

18
Timing Is Everything in Paying Commissions

• Peabody v. Time Warner, 59 Cal.4th 662 (2014)
• Commission pay exemption requires that half of an
  employees pay be commission, and that pay be at
  least 1.5 times state minimum wage for all hours
• California Supreme Court held that commissions
  must be paid each pay period to measure the
  exemption. Employer cannot spread commissions
  paid over a larger period
• Important holding in case Regardless of
  exemption, commissions must be paid at least
  twice a month, not monthly!!!

19
Interview Pay

• Gunawan v. Kforce Inc., 2014 U.S. Dist. LEXIS
  17873 (C.D. Cal. Jan. 30, 2014)
• A Nixon Peabody case
• Plaintiff sought to be paid minimum wage for time
  spent interviewing for initial assignment
• Court dismissed potential class action, holding
  that applicant not an employee entitled to
  pay
• Betancourt v. Advantage Human Resourcing, 2014
  U.S. Dist. LEXIS 123504 (N.D. Cal. Sept. 3, 2014)
  reach opposite conclusion.

20
Paying Wages with Paycards

• Gunawan v. Kforce Inc. also addressed a paycard
  claim
• Paycards usually challenged under Labor Code
  section 212 and 213
• Gunawan court held that employee has no private
  right of action to sue under Labor Code sections
  212, 213, 221, and 223
• Civil penalties claim under Labor Code Private
  Attorney General Act (PAGA) still possible
• Holak v. Kmart Corp., 2012 U.S. Dist. LEXIS
  176331 (E.D. Cal. Dec. 12, 2012)
• Paycards need to be voluntary, among other things

21
Inadequately Funded Contract Liability

• Hawkins v. TACA Intern. Airlines, S.A., 223
  Cal.App.4th 466 (2014)
• Labor Code section 2810 imposes liability for a
  contract where entity knows or should know
  contract does not have sufficient funds to comply
  with law
• Applies with construction, farm labor, garment,
  janitorial, security guard, and warehouse
  contractor
• Cannot simply use a pair of scissors and a paste
  pot to draft a lawsuit, but must see and allege
  contracts
• Important Admission security company has the
  ability to pay, means contract was not
  underfunded

22
Arbitration Agreement Can Bar Labor Commissioner
Claim

• Sonic Calabasas A, Inc. v. Moreno, 57 Cal.4th
  1109 (2013)
• 2011 decision prohibited waiving Labor
  Commissioner hearing, allowed arbitration in lieu
  of trial de novo
• U.S. Supreme Court told court to reconsider
• Now If covered by Federal Arbitration Act,
  agreement can require arbitration instead of a
  Labor Commissioner hearing

23
Careful on Appealing Labor Commissioner Award
into Court

• Palagin v. Paniagua Construction, Inc., 222
  Cal.App.4th 124 (2013)
• Timely bond or undertaking is a condition to
  filing appeal
• Court lacks jurisdiction otherwise it cannot
  extend deadline
• Amendment to Labor Code section 98.2 overturned
  2006 Progressive Concrete decision
• Court ruled in favor of employer, who likely
  would have avoided 80,000 award if it had been
  timely

24
The Labor Commissioner Took Too Long, But Wait.
. .

• American Corporate Security, Inc. v. Su, 220
  Cal.App.4th 38 (2013)
• Labor Commissioner found violation of Labor Code
  section 98.6 . . . 3 years later!
• Demand letter insisted employer offer
  reinstatement, plus pay 86,000 in backpay and
  13,000 in interest
• Employer filed writ petition. Court said must
  wait to raise defense in enforcement lawsuit
  filed by Labor Commissioner.

25
Tip Pooling Held OK

• Avidor v. Sutters Place, 212 Cal.App.4th1439
  (2013)
• Earlier case held no private right of action
  under Labor Code section 351, which declares tips
  the property of employee
• Mandatory tip pool of a drop per hour
• Court rejected unfair competition and conversion
  claims
• Mandatory tip pooling ok under California law, as
  long as employers agent not included
• Customer intent not relevant
• Be careful of federal law

26
Californias Piece Rate Problem

• Labor Code section 200(a) defines wages as
  including all amounts for labor performed by
  employees of every description, whether the
  amount is fixed or ascertained by the standard of
  time, task, piece, commission basis, or other
  method of calculation.
• Wage orders have the same definition

27
Californias Minimum Wage Complication

• Section 4(A) of the wage orders requires pay at
  the minimum wage for all hours worked
• What does all hours worked mean?
• As long as the total pay exceeds the minimum wage
  for all hours worked, is it legal?
• Yes, but not in California

28
The Federal Rule

• Federal law requires minimum wage in any work
  week
• Federal law permits averaging
• Medrano v. DArrigo Bros. Co. of California, 336
  F.Supp.2d 1053 (N.D. Cal. 2004) held California
  follows federal rule
• Settled issue?

29
What Time Must Be Paid as Hours Worked

• Two parts to definition in wage orders, either
  (1) the time during which an employee is subject
  to the control of an employer, or (2) all the
  time the employee is suffered or permitted to
  work, whether or not required to do so
• Control interpreted by courts to mean whether
  the employee can use the time effectively for
  his or her own purposes, Morillion v. Royal
  Packing Co., 22 Cal.4th 575 (2000)

30
What Other Time Could Have to Be Paid?

• Meeting time
• Training
• Controlled waiting time
• Preparation time at the start
• Cleaning up time at the end of day
• Travel during the day
• Items taken home for work
• Exercise time

31
What About Paid Rest Periods?

• Wage Orders require paid rest periods of at least
  10 minutes
• Authorized rest period time shall be counted as
  hours worked for which there shall be no
  deduction from wages
• New heat recovery period breaks for cool down?

32
Ontiveros v. Zamora, 2009 U.S. Dist. LEXIS 13073
(E.D. Cal. Feb. 20, 2009)

• Auto mechanics paid a piece rate for repairs
• Not paid separately for meetings, training,
  setting up work stations, and rest breaks
• Employer claimed necessary and integral to
  piece work tasks, so paid by piece rate
• Court disagreed, holding that all activities must
  be paid separately, no averaging

33
Cardenas v. McLane Foodservices, Inc., 796
F.Supp.2d 1246 (C.D. Cal. 2011)

• Drivers paid for number of cases delivered, miles
  driven, or stops
• Not paid separately for pre- and post-shift
  activities
• Rejected averaging, and claim that activities
  integral and necessary
• Clear holding a piece-rate formula that does
  not compensate directly for all time worked does
  not comply with California Labor Codes, even if,
  averaged out, it would pay at least minimum wage
  for all hours worked
• Rejected declarations from employees saying they
  understood piece rate compensated for everything

34
Quezada v. Con-Way Freight, Inc., 2012 U.S. Dist.
LEXIS 98639 (N.D. Cal. July 11, 2012)

• Drivers paid piece rate by the mile, but also
  hourly rate for loading and unloading time
• Not paid separately for pre- and post-trip
  inspection time, or for the first hour of waiting
  time
• Court held cannot build in time for these
  activities into piece rate, must pay separately
• If performing a task that prevents someone from
  earning piece rate, must be directly compensated
  for that time.

35
Balasanyan v. Nordstrom, Inc., 913 F.Supp.2d 1001
(S.D. Cal. 2012)

• Retail employees time included 30 minutes of
  daily stocking assignments, and over 40 minutes
  of pre-opening and post-closing work
• Could not average time to cover activities when
  commissions could not be earned
• Holding employees must be directly compensated
  at least minimum wage for all time spent on
  activities that do not allow them to directly
  earn wages.
• Did not matter if employees signed agreement,
  because not lawful
• Case settled for 7.5 million.

36
Enter the California Courts Gonzalez v. Downtown
L.A. Motors, LP, 215 Cal.App.4th 36 (2013)

• Auto mechanics again
• Paid piece rate per repair, with no separate pay
  for waiting time between customers, getting
  parts, cleaning workstations, meetings, travel
  between locations, and reviewing service
  bulletins
• Held averaging not allowed, separate pay required
  for non-repair tasks
• Employers minimum wage floor did not save it

37
Bluford v. Safeway Inc., 216 Cal.App.4th 864
(2013)

• Drivers paid piece rate for trips, hourly rate
  for other things
• Rest breaks not paid separately, but Safeway
  claimed part of the overall piece-rate
  compensation
• Court held this averaging not allowed
• Conclusions a piece-rate compensation formula
  that does not compensate separately for rest
  periods does not comply with Californias minimum
  wage law
• Also an employer is precluded from building
  compensation into its mileage rates for rest
  periods

38
What Is the Potential Liability?

• Unpaid wages due at either minimum wage or
  employees usual pay rate
• Liquidated (or doubled damages) on a minimum wage
  claim
• Waiting time penalties of 30 days wages for
  former employee
• Possible civil penalties
• Attorneys fees

39
What to Do?

• Is it the end of piece rate or commissions only
  as base pay? Likely, there will be much less.
• Evaluate whether you have any uncompensated time,
  with piece rate, commissions, or not
• If keeping piece rate or commissions only, find a
  way to track and pay separately other time not
  covered by piece rate
• Is there a need to track rest periods to pay them
  correctly? Probably so.
• How to handle wage payment statements if paying
  for time separately?

40
Watch Out for These Recurring Issues that Still
Drive Claims and Lawsuits

• Regular rate Is everything included?
• Itemized wage payment statements Is everything
  there? Are the inclusive dates listed?
• Semi-monthly pay periods Are you always paying
  the same to non-exempt employees?
• Deduction authorizations and final pay
• Frequency of commission pay
• Seating issues Still in the hot seat
• Meal and rest period issues

41
Presenter

• Paul R. Lynd, Esq.
• Nixon Peabody LLP
• San Francisco, CA
• 415-984-8235
• plynd_at_nixonpeabody.com

• Partner, Labor and Employment group
• Represents a diverse group of clients in
  litigation in federal and state courts, as well
  as before administrative agencies
• General employment matters, with an emphasis on
  wage and hour issues.
• Advice and strategy, development and revisions of
  policies and plans, litigation prevention and
  defending employers in individual claims and
  class actions, leave and reasonable accommodation
  issue.
• Published California and federal decisions on
  important wage and hour issues involving bonus
  plans and class certification issues.