In this California case “consulting service managers” who were primarily engaged in selling recruitment services for Surrex, filed claims for overtime and missed meal periods. The court dismissed their case claiming the fit under the Sales exemption The most important language in the case is as follows:

“We conclude Labor Code section 204.1 sets up two requirements, both of which must be met before a compensation scheme is deemed to constitute ‘commission wages.’ First, the employees must be involved principally in selling a product or service, not making the product or rendering the service. Second, the amount of their compensation must be a percent of the price of the product or service.”  http://www.courtinfo.ca.gov/opinions/documents/D057955.PDF

Note in the CarMax case the court ruled a flat fee commission satisfies the requirement.

The Federal standard for sales exemptions can be found here. There are exemptions for auto sales, retail sales and outside sales. Here’s an advisor on the Outside Sales

Outside Sales Employee section
This section helps you in determining whether a particular employee who is an outside sales person meets the tests for exemption from the minimum wage and overtime pay requirements of the FLSA.
- Review the Fact Sheet
- Start Outside Sales Employee section

As further evidence of the attack on 1099 labor, the DOL issued the following press releaseon Feb. 9^th:

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?

The Case of Salas v. Sierra Chemical (2011) caused quite a stir because the appellate court dismissed a disability discrimination claim of undocumented alien based on unclean hands. Now the California Supreme Court will decide this far ranging issue. The appellate court essential took much of the teeth out of a legislative amendment to protect illegal aliens against discriminatory and other illegal workplace conduct…regardless of their status. We’ll be keeping an eye out for this one!

Docket
Court of Appeal Opinion

ELK GROVE, CA — The California Department of Fair Employment and Housing (DFEH) announced today that United Parcel Service (UPS) must pay more than $96,000 in damages after the company fired employee Eva Linda Mason because of her disability. The Fair Employment and Housing Commission (Commission) found that UPS had unlawfully terminated Ms. Mason even though she could perform the essential functions of her job.

UPS hired Ms. Mason in 1997 primarily as an Operations Management Specialist to handle customer calls and complaints on shipments. Although she occasionally located packages in a warehouse, handling packages was not part of her job. After Ms. Mason had knee surgery and took a leave of absence to recover in 2007, she continued to carry out the essential customer service functions of her job. Nonetheless, UPS perceived Ms. Mason as disabled because she had some restrictions, such as limited standing, walking, bending, and kneeling. UPS had a 12-month cap on the length of time employees with disabilities could be reasonably accommodated from their regular duties. UPS applied this cap to Ms. Mason and fired her in August 2008.

“Using a 12-month cap to fire disabled employees is unlawful under the Fair Employment and Housing Act (FEHA),” said the Department of Fair Employment and Housing Director Phyllis Cheng. “Employees with disabilities must be allowed to work if they can perform their essential job duties with or without accommodation.”

The Commission ordered UPS to pay $96,170 in damages, including $10,000 in administrative fines to the State. UPS must also post a notice about its liability and develop a policy and train management on disability discrimination.

ELK GROVE, CA — The California Department of Fair Employment and Housing (DFEH) announced today that Air Canada must pay more than $325,000 in damages after the company fired one of its customer service representatives because of her disability. The Fair Employment and Housing Commission (Commission) found that Air Canada failed to accommodate the employee’s disability and then fired her because she could not lift cargo – a job function customer service representatives rarely perform.

“Employers must attempt to find reasonable modifications that allow employees with disabilities to keep working,” said the Department of Fair Employment and Housing Director Phyllis Cheng. “Using non-essential job functions as a pretext to deny employment to persons with disabilities is unlawful in California.” 

The employee, Caroline Messih Zemaitis, worked as a customer service agent for Air Canada at Los Angeles International Airport from 1993 to 2007.  Starting in 2004, she held a clerical position in the cargo division that did not involve physical labor.  In 2005 and 2006, Ms. Zemaitis injured her back, shoulder, knee and wrist, and her doctor restricted her from performing such tasks as heavy lifting and repeated bending.  She was able to keep working in the cargo division with minor accommodations such as Air Canada’s provision of a telephone headset and heating pad, and time off for physical therapy.  

When Ms. Zemaitis became pregnant, her back condition worsened and she took a medical leave of absence for about a year.  She tried to return to work in 2007 when her doctor released her with restrictions similar to those she had before, but Air Canada refused to respond to her many communications.  Instead, Air Canada terminated Ms. Zemaitis’s because she could not lift cargo, a job function the airline’s customer service agents rarely perform.

The Commission found during this precedential decision that Air Canada had violated the Fair Employment and Housing Act. It ordered them to pay Ms. Zemaitis $102,737 in back pay, $19,720 in lost benefits, and $125,000 for emotional distress.  Air Canada must further reinstate and pay Ms. Zemaitis $54,784 in wages plus interest and pay the State a $25,000 administrative fine.  The airline will also have to post a notice about their liability and develop a policy and train management on reasonable accommodations necessary to allow disabled employees to continue working.

By January 1, 2013, whenever an employer enters into a contract of employment with an employee for services to be rendered within California and the contemplated method of payment of the employee involves commissions, the  contract shall be in writing and shall set forth the method by which the commissions shall be computed and paid.

The employer shall give a signed copy of the contract to every employee who is a party thereto and shall obtain a signed receipt for the contract from each employee. In the case of a contract that expires and where the parties nevertheless continue to work under the terms of the expired contract, the contract terms are presumed to remain in full force and effect until the contract is superseded or employment is terminated by either party.

…. “Commissions” does not include short-term productivity bonuses such as are paid to retail clerks; and it does not include 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.

The California Department of Fair Employment and Housing (DFEH) today announced its largest-ever administrative award of $846,300 against electrical supplier Acme Electric Corporation for firing an employee because he had cancer.  Headquartered in Lumberton, North Carolina, Acme Electric is a division of Actuant Corporation, a Wisconsin diversified industrial corporation that operates in more than 30 countries.

Charles Richard Wideman worked for Acme Electric as western regional sales manager overseeing sales operations in the company’s largest territory from February 2004 to March 2008.   He developed kidney cancer in 2006 and prostate cancer in 2007.  Mr.  Wideman’s cancers required two surgeries and numerous cancer-related outpatient appointments.  The company immediately granted his two requests for time off for surgery and recuperative leave.  However, Mr. Wideman requested further accommodation for the travel limitation his cancers caused from June 2006 through April 2007.  Acme Electric refused to grant or even acknowledge these accommodation requests.  Instead, in December 2007, Mr. Wideman’s supervisor gave him an unfavorable performance evaluation, criticizing him for insufficient travel.  On February 28, 2008, ignoring Mr.  Wideman’s need for accommodation the preceding year and failing to take into account his dramatically improved job performance, Acme Electric fired Mr. Wideman, relying on the insufficient travel pretext. 

After a three-day hearing, the State’s Fair Employment and Housing Commission found Acme Electric violated the FEHA by failing to accommodate Mr. Wideman’s known travel limitation due to his cancers, failing to engage in a good faith interactive process, discriminating against Mr. Wideman because of his disability, and failing to take all reasonable steps necessary to prevent discrimination from occurring.  To compensate Mr. Wideman for his losses, the Commission awarded him $748,571 for lost wages, $22,729 for out-of-pocket expenses and $50,000 for the emotional distress he suffered.  In addition, the Commission ordered Acme to pay $25,000 to the State’s General Fund as an administrative fine.  Acme must further comply with posting, policy changes, and training requirements ordered by the Commission.

Employer lesson: You can’t ignore ADA restrictions simply because it’s a pain to comply with. Any employee with a disability has to perform, with or without accommodations. In this case, had ACME attempted to accommodate Mr. Wideman…and he still could not perform to standard, then there is no liability. To learn about accommodating employees with cancer go to http://askjan.org/media/canc.htm

As stated in the preamble “The State of California has a compelling public interest in realizing the medical promise of genomics. It also has a compelling public interest in relieving the fear of discrimination and in prohibiting its actual practice….Although Congress enacted the federal Genetic Information and Nondiscrimination Act of 2008 (P.L. 110-233), its range of protections is incomplete for Californians”

While the law deals with insurance, housing and employment, we will focus on the employment law aspects.

Some notes:

• A violation of the right of any individual under the federal Americans with Disabilities Act of 1990 (P.L. 101-336) shall also constitute a violation of this section.
• The new law defines genetic information as being about an individual’s genetic tests, tests of family members, or the manifestation of a disease or disorder among an individual’s family members, and it covers information from genetics services and participation in clinical research.
• Federal GINA’s range of genetic information and nondiscrimination protections is limited to employment and health insurance coverage. SB 559 ensures that the range of protections for Californians applies to all California civil rights laws and would include genetic information as a prohibited basis for discrimination.

You can read the Act by going to http://leginfo.ca.gov/pub/11-12/bill/sen/sb_0551-0600/sb_559_bill_20110906_chaptered.pdf

Information on the bill posted by its author can be found by clicking here.