Category: Wage and Hour
We were recently asked about the propriety in California of deducting wages from an employee’s paycheck for damage they were caught on video causing. The bill was over $1,500! Here was my response:
First of all please remember to look at the BNA state law summaries on HR That Works.
Here’s what it says:
Employers cannot deduct from employee wages for any cash shortages, breakages, or loss of equipment, unless the shortages, breakages, or losses are caused by employees’ dishonest or willful acts or gross negligence.
[Note: In enforcing this prohibition, the Department of Labor Standards Enforcement takes so narrow a view of the definition of “gross negligence” that an act must be criminal to qualify. Employers are advised to get a ruling from the DLSE before making deductions from wages on the basis of employee negligence, because a misjudgment can result in an employee's recovery of wages due and penalties. (Dept. of Labor Standards Enforcement Letter No. 2003.02.24 (2003)]
So I dug even further. The DIR website says the same thing but in more detail and throws in a big time caution:
Q. If I break or damage company property or lose company money while performing my job, can my employer deduct the cost/loss from my wages?
A. No, your employer cannot legally make such a deduction from your wages if, by reason of mistake or accident a cash shortage, breakage, or loss of company property/equipment occurs. The California courts have held that losses occurring without any fault on the part of the employee or that are merely the result of simple negligence are inevitable in almost any business operation and thus, the employer must bear such losses as a cost of doing business. For example, if you accidentally drop a tray of dishes, take a bad check, or have a customer walkout without paying a check, your employer cannot deduct the loss from your paycheck.
There is an exception to the foregoing contained in the Industrial Welfare Commission Wage Orders that purports to provide the employer the right to deduct from an employee’s wages for any cash shortage, breakage or loss of equipment if the employer can show that the shortage, breakage or loss is caused by a dishonest or willful act, or by the employee’s gross negligence. What this means is that a deduction may be legal if the employer proves that the loss resulted from the employee’s dishonesty, willfulness, or grossly negligent act. Under this regulation, a simple accusation does not give the employer the right to make the deduction. The DLSE has cautioned that use of this deduction contained in the IWC regulations may, in fact, not comply with the provisions of the California Labor Code and various California Court decisions. Furthermore, DLSE does not automatically assume that an employee was dishonest, acted willfully or was grossly negligent when an employer asserts such as a justification for making a deduction from an employee’s wages to cover a shortage, breakage, or loss to property or equipment.
Labor Code Section 224 clearly prohibits any deduction from an employee’s wages which is not either authorized by the employee in writing or permitted by law, and any employer who resorts to self-help does so at its own risk as an objective test is applied to determine whether the loss was due to dishonesty, willfulness, or a grossly negligent act. If your employer makes such a deduction and it is later determined that you were not guilty of a dishonest or willful act, or grossly negligent, you would be entitled to recover the amount of the wages withheld. Additionally, if you no longer work for the employer who made the deduction and it’s decided that the deduction was wrongful, you may also be able to recover the waiting time penalty pursuant to Labor Code Section 203.
Bottom line: I’m not sure you want to invite the DIR to your company to make sure your deduction is proper. But since it was recorded it would be hard to say it is not willful. Problem is even the DIR says the regulations may not comply with the law! So while you may be able to make the deduction without permission, the safest thing to do is to ask them to voluntarily agree to a paycheck deduction, get a ruling from the DLSE first, or sue them in small claims!
Any time we are met with a disaster like Sandy one of the most common questions that are surface are around show up pay and payment of exempt salaries. Here’s what the law says about it:
Paying Employees Who Show Up and Have No Work to Do
While the FLSA does not address this directly, many states do. It is known as call-in or reporting pay. For example, under Mass. Law:
455 CMR 2.03– (1) Reporting Pay. When an employee who is scheduled to work three or more hours
reports for duty at the time set by the employer, and that employee is not provided with the expected
hours of work, the employee shall be paid for at least three hours on such day at no less than the basic
Here is an excellent summary created by SHRM so you can see the law in your state. http://www.shrm.org/LegalIssues/StateandLocalResources/StateandLocalStatutesandRegulations/Documents/Callbackcallinreportingpay.pdf HR That Works Members should all look at the BNA state law summaries under the Compensation folder.
Paying Exempt Employees Who Cannot Work
Bottom line is that if an employee is ready, willing and able to work, deductions may not be made for time when work is not available (29 C.F.R. 541.602(a)). You can have them use vacation or sick pay under appropriate conditions. Please see this FLSA memo for further instruction http://www.dol.gov/whd/opinion/FLSA/2005/2005_10_24_41_FLSA.htm#.UJFW1IawUYw
The BLS has released its findings on leave use by American workers. Here are just some of the findings:
- In 2011, 90 percent of wage and salary workers had access to paid or unpaid leave at their main jobs. Twenty-one percent of wage and salary workers took paid or unpaid leave during an average week.
- Workers who took leave during an average week took an average of 15.6 hours of leave.
- Fifty-six percent of wage and salary workers were able to adjust their work schedules or location instead of taking leave or because they did not have access to leave in 2011. Seven percent of workers made such an adjustment in an average week.
- Among wage and salary workers age 25 and over, 72 percent of workers with a bachelor’s degree or higher had access to paid leave, compared with 35 percent of workers with less than a high school diploma.
- Twenty-one percent of wage and salary workers took paid or unpaid leave during an average week. Workers who took leave during an average week took an average of 15.6 hours of leave.
- Women were slightly more likely than men to take leave from their jobs during an average week–23 percent compared with 20 percent.
- In an average week, 6 percent of wage and salary workers reported their main reason for taking leave was a vacation, 5 percent took leave because they were ill or needed medical care, and 4 percent took leave mainly to
run errands or for personal reasons.
- Of those wage and salary workers who took leave from their main jobs during an average week, 57 percent used only paid leave and 40 percent used only unpaid leave. Three percent of these workers used a combination of paid and unpaid leave.
- Fifty-six percent of wage and salary workers were able to adjust their work schedules or location of their main jobs instead of taking time off from work in 2011. This includes wage and salary workers who adjusted their work schedules or location instead of taking leave as well as those who did so because they did not have access to leave but needed time off from work.
- Among wage and salary workers age 25 and over, 61 percent of those with a bachelor’s degree or higher were able to adjust their work schedules or location instead of taking time off from work, compared with only 38 percent of workers with less than a high school diploma.
- In an average week in 2011, 7 percent of wage and salary workers adjusted their work schedules or location of their main jobs instead of taking time off from work.
- Parents of a household child under the age of 13 were more likely to adjust their work schedules or location instead of taking time off from work in an average week than workers who were not a parent of a household child under 18–10 percent compared with 6 percent.
On June 18, 2012 in a 5-4 ruling, the U.S. Supreme Court decided pharmaceutical representatives are “outside salesmen,” exempting them from the overtime requirements of the FLSA. Click here to read the article posted by Bill Pokorny of the Worklaw® Network firm Franczek Radelet. This ruling has implications for all employers that have exempt sales executives.
In yet another effort to tap into the wage and hour jackpot, in the case of Muldrow v. Surrex, the plaintiffs brought a claim for overtime and a failure to provide meal periods, among other claims, arguing that the senior consulting managers at the recruiter, Surrex, were not covered by the sales exemption, as they were not in “sales” positions. The court distinguished these recruiters from mechanics and drivers and ruled, “they are salespeople.” Fact was, the plaintiffs were involved principally in selling the product or service of recruiting.
A few points were made by the court:
- An employer is not precluded from calculating commissions based on anything other than a straight percentage profit.
- The employer may offset costs to determine profits as part of a commission scheme.
- The commissions must be sufficiently related to the price of services sold to constitute commissions for purposes of the exemption.
By now you may have heard that the California Supreme Court finally decided the Brinker case, ruling in favor of employers. It concluded that an employer’s obligation is to relieve its employees of all duty, with the employee thereafter at liberty to use their rest or meal period for whatever purpose he or she desires. The employer need not ensure that no work is done. Thankfully for California employers the court ruled that you can treat employees like the adults they are supposed to be! Here’s the bottom line to a decision that took much too long to come to such a commonsense conclusion:
- You have to offer rest and meal breaks.
- It’s up to employees to take them.
- Your managers can’t dissuade employees from taking their breaks.
- If they can’t take the break, you pay a one-hour penalty.
Much of the case had to do with the class action certification process, which is only of interest to the lawyers. Of course, if it’s to be a class action, the issue is whether common or individual questions predominate and that question often depends on a resolution of issues closely tied to the merits. Here are some quotes from the Brinker decision that apply to rest and meal period:
- “To earn the first ten-minute break, one must be scheduled for a work shift of at least three and one-half hours, while to earn the next ten minutes, one must be scheduled to work four hours plus a major fraction to earn the next ten, eight hours plus a major fraction, and so on.” So, employees are entitled to ten-minute rests for shifts from 3.5-6 hours in length, 20 minutes for shifts of 6 hours up to 10 hours, and 30 minutes for shifts of 10 hours up to 14 hours, and so on.
- “As a general matter, one rest break should fall on either side of the meal break.”
- “The meal period requirement is satisfied if the employee: 1) has at least 30 minutes uninterrupted, 2) is free to leave the premises, and 3) is relieved of all duty for the entire period. Again, the employee must be relieved of any duty or employer control and are free to come and go as they please. It is not the employer’s obligation to ensure that no work is being done.
- “When someone is employed for 5 hours, an employer is put to a choice: 1) it must afford an off-duty meal period; 2) consent to a mutually-agreed upon waiver if one-hour or less will end the shift; or 3) obtain written agreement to an on-duty meal period if circumstances permit. Failure to do one of these will render the employer liable for premium pay. If work does continue, the employer will not be liable for premium paid. At most, it will be liable for straight pay, and then only when it ‘knew or reasonably should have known’ that the worker was working through the authorized meal period.”
- “Proof of an employee’s working through a meal period will not alone subject the employer to liability of premium pay. Employees cannot manipulate the flexibility granted them by employers to use their breaks as they see fit to generate such liability. On the other hand, an employer may not undermine a formal policy providing meal breaks by pressuring employees to perform their duties in ways that omit breaks. For example, common scheduling policies that make taking breaks extremely difficult or creating incentives to forgo or otherwise skipping breaks. “
- “The first meal period must start after no more than five hours. A second meal period is only required after ten hours of work.”
In the case, the plaintiff also contended that Brinker required employees to perform work while clocked out and that meal break records were altered to conceal time working during those periods.
Additional notes: Remember that all meal periods are required to be recorded. Rest periods are not so required. Think about this twist: It can be argued that those employees who worked through their meal breaks and thereby out-produced their peers, are doing so voluntarily with a desire to be promoted. If in fact they are promoted ahead of their peers, their peers can then argue that you basically discouraged them from taking meal breaks and violated the law.
US Labor Department, California sign agreement to reduce misclassification of employees as independent contractors
As further evidence of the attack on 1099 labor, the DOL issued the following press releaseon Feb. 9th:
WASHINGTON — Nancy J. Leppink, deputy administrator of the U.S. Department of Labor’s Wage and Hour Division, and California Secretary of Labor Marty Morgenstern have entered into a memorandum of understanding regarding the improper classification of employees as independent contractors. Leppink and California Labor Commissioner Julie A. Su hosted a press teleconference Feb. 9 during which they discussed how the U.S. Department of Labor and the state of California will embark on new efforts, guided by this memorandum, to protect the rights of employees and level the playing field for responsible employers by reducing the practice conducted by some businesses of misclassifying employees. This partnership is the 12th of its kind for the U.S. Department of Labor.
“This memorandum of understanding helps us send a message: We are standing together with the state of California to end the practice of misclassifying employees,” said Leppink. “This is an important step toward making sure that the American dream is still available for workers and responsible employers alike.”
“California is proud to enter into this partnership with the U.S. Department of Labor to work together to attack the problems of the underground economy,” said Su. “Gov. Brown just signed an important law that went into effect on Jan. 1, increasing penalties for willful misclassification. With the Labor Department, we are poised to use all the tools in our arsenal to lift the floor for hardworking employers and employees throughout the state.”
Employee misclassification is a growing problem. In 2011, the Wage and Hour Division collected more than $5 million in back wages for minimum wage and overtime violations under the Fair Labor Standards Act that resulted from employees being misclassified as independent contractors or otherwise not treated as employees.
Business models that attempt to change, obscure or eliminate the employment relationship are not inherently illegal, unless they are used to evade compliance with the law. The misclassification of employees as something else, such as independent contractors, presents a serious problem, as these employees often are denied access to critical benefits and protections — such as family and medical leave, overtime compensation, minimum wage pay and Unemployment Insurance — to which they are entitled. In addition, misclassification can create economic pressure for law-abiding business owners, who often struggle to compete with those who are skirting the law. Employee misclassification also generates substantial losses for state Unemployment Insurance and workers’ compensation funds.
Memorandums of understanding with state government agencies arose as part of the U.S. Department of Labor’s Misclassification Initiative, which was launched under the auspices of Vice President Biden’s Middle Class Task Force with the goal of preventing, detecting and remedying employee misclassification. Colorado, Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington have signed similar agreements. More information is available on the U.S. Department of Labor’s misclassification Web page at http://www.dol.gov/misclassification/.
A California Appellate Court shut down a class action effort which, in a sense, would have provided employees for a minimum of two hours show up pay for attending weekly team meetings which were not concurrently conducted with their work schedules. For example, when employees show up for an all team meeting on a Saturday morning at 10:00. The court ruled that as long the meeting was a) scheduled, and b) the meeting lasted for at least half the time scheduled, and c) the employees were paid for the time they did attend, the law has been satisfied. However, if it’s not a scheduled meeting and say somebody is pulled into the office for only 15 minutes, then you may be required to pay between two and four hours of show up pay depending on their “normal work schedule.” Reporting time pay is defined in the following manner:
“Each workday an employee is required to report to work and does report, but is not put to work or is furnished less than said employee’s usual or scheduled day’s work, the employee shall be paid for half the scheduled or usual day’s work, but in no event for less than two hours no more than four hours, the employee’s regular rate of pay which shall not be than less than minimum wage.”
So, for example, if they normally work an 8-hour day, and they’re sent home, they have to be paid for four hours. If they normally work a 3-hour day and are sent home, they must be paid for at least 2 hours. In this case, the battle was over employees showing up for weekly meetings when they did not go to work immediately thereafter.
Bottom line: Identify how long the meeting will be, spend at least 50% of the scheduled time, and make sure they record their time.
As a farewell to 2011, the California Supreme Court went to great lengths to spell out the parameters of the administrative overtime exemption. This is the exemption from overtime laws that seems to get employers into trouble more than any other. If you are a human resource executive in California you must read this case. Yes, there is a lot of legal mumbo jumbo…but it’s something you must understand or you will unnecessarily expose your company to overtime claims. Perhaps as here on a class action basis.
In Harris v. Liberty Mutual Insurance, the court provided much guidance. Here is some of the instructive language:
[W]ork qualifies as administrative when it is directly related to management policies or general business operations. Work qualifies as directly related if it satisfies two components. First, it must be qualitatively administrative. Second, quantitatively, it must be of substantial importance to the management or operations of the business. Both components must be satisfied before work can be considered directly related‖ to management policies or general business operations in order to meet the test of the exemption. (Fed. Regs. § 541.205(a) (2000).)….
[T]he administrative/production worker dichotomy distinguishes between administrative employees who are primarily engaged in administering the business affairs of the enterprise and production-level employees whose primary duty is producing the commodity or commodities, whether goods or services, that the enterprise exists to produce and market.
The Court understands that:
[B]ecause the dichotomy suggests a distinction between the administration of a business on the one hand, and the production end on the other, courts often strain to fit the operations of modern-day post-industrial service-oriented businesses into the analytical framework formulated in the industrial climate of the late 1940‘s.
Bottom line: The administrative exemption causes the vast majority of mis-classification headaches. According to this decision even the judges and the DIR have a hard time getting it right. Read this case. Make sure your workers are not mis-classified. If they are, take a look at the report on HR That Works So You Have a Wage Claim Exposure–What Do You Do About It?
We’ve been getting a lot of Hotline queries regarding holiday pay. Here’s the basic Federal law on it:
The Fair Labor Standards Act (FLSA) does not require payment for time not worked, such as vacations or holidays (federal or otherwise). These benefits are generally a matter of agreement between an employer and an employee (or the employee’s representative).
On a government contract to which the labor standards of the McNamara O’Hara Service Contract Act (SCA) apply, holiday and/or vacation fringe benefit requirements are stated in the SCA wage determinations in contracts that exceed $2,500.
On a government contract to which the labor standards of the Davis-Bacon and Related Acts apply, holiday pay and/or vacation pay is required for specific classifications of workers only if the Davis-Bacon wage determination in the covered contract specifies such requirements for workers employed in those classifications.
There is no requirement that employers have to pay overtime to eligible employees for holiday work, unless the employees work more than 40 hours in the same workweek, or 8 hours that day in California. Also paid holidays don’t count towards the 40-hour overtime rule.
Remember, exempt employees always get paid for holidays if they worked any portion of the week.
Here’s California FAQ on it: www.dir.ca.gov/dlse/FAQ_Holidays.htm. The theme is the same in the other states as well. Many state regulations don’t mention it at all.
Colorado wage law does not require nor prohibit any paid holidays, and does not require nor prohibit any extra pay for working on holidays. When an employee is paid for a non-work holiday, the holiday hours do not count towards overtime unless actual work was performed on the holiday.
Q: Am I entitled to holiday pay in Illinois?
A: No, unless by employment contract or agreement.
Q: Must an employer pay workers for holidays, sick time and/or vacations?
A: Under the New York State Labor Law, payment for time not actually worked is not required unless the employer has established a policy to grant such pay. Holidays, sick time and/or vacations fall under ‘time not worked.’ When an employer does decide to create a benefit policy, that employer is free to impose any conditions they choose.
Hope that helps!