Orange County Employment Lawyer Blog

I cursorily discussed Labor Code Penalties in a previous post. However, as it applies to lunch breaks and rest breaks, recent California case law has significantly impacted these issues. In this post I will discuss in greater detail the current state of lunch break penalties and rest break penalties.

Clients frequently contact my Orange County Employment Law Firm inquiring about lunch break issues. The law states that if lunch breaks or rest breaks are not provided as required by California law, claimants are entitled to more than just the unpaid wage for working through the lunch or rest break, they are also entitled to one hour or pay for each workday that a lawful meal break or rest break was not provided.

However, California Courts have recently directed its focus on the differences between ensure and provide. Previously, employers had a duty to ensure that its employees were taking a duty free lunch (duty free means just that, not working. So, sitting at your desk and eating lunch while answering the phone occasionally when it rings is not duty free). Thus, if employers did not ensure an employee was taking a duty free lunch, they were subject to the above described penalty if an employee failed to take a duty free lunch.

Recent case law has altered the definition, changing an employer's duty from ensure its employees were taking a lunch to simply that they provide the employees with the opportunity to take a duty free lunch. Thus, if an employer has a policy that all employees take a duty free lunch, and an employee does not do so, the employer is not liable for any of the above damages if the employer does not know the employee failed to take a lunch. So, recent case law has taken much of the bite of lunch break penalties away from employees.

I previously discussed California's more common wage and hour penalties and their respective remedies in a previous Labor Code Penalties post. In this post, I will discuss in greater detail what is commonly referred to as an "Itemized Wage Statement Penalty" or IWS penalty.

While working for any employer, every employee must receive wage statements that are properly itemized, which means the pay stub must contain certain specific items of information, consisting of the following nine items:

• gross wages earned,


• total hours worked by the employee,


• the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis,


• all deductions,


• net wages earned,


• the inclusive dates of the period for which the employee is paid,


• the name of the employee and the last four digits of his or her social security number,


• the name and address of the legal entity that is the employer, and


• all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee.

An employer's failure to provide pay check with stubs containing this information may be liable for an itemized wage statement penalty. Such a penalty results in a penalty of $50 for the first violation, $100 for each subsequent violation - up to $4000 per employee.

I summarily discussed Labor Code Penalties in a previous post describing several of California's more common wage and hour penalties and their respective remedies. Here, I will discuss in greater detail what is commonly referred to as a "waiting time penalty."

When potential clients contact my Orange County Employment Law Firm, they usually just want what they are owed (in the form of unpaid wages, unpaid overtime, etc.) However, most clients never knew that when an employee separates from an employer, whether by termination or resignation, he/she must be paid all wages that are owed at the time of separation. This is true both in the case of termination or resignation, but the time frame for each to be paid in full is slightly different.

If being fired, the employee is entitled to all wages owed at the time of his or her termination. If the employee is resigning, he or she must be paid all wages due within 72 hours of resigning. If all wages are not paid within these time constraints, the employee, in addition to being able to recover all wages he or she is owed, is also entitled to a waiting time penalty. California's waiting time penalty entitles the employee to receive up to 30 days of wages, which means just that - thirty days of wages, not one month's pay!

In one of the largest single employee verdicts in United States history, the Superior Court of California, County of Orange, entered judgment of approximately $8.4 million in favor of Joovy, LLC, against Baby Trend, Inc., and its founder Denny Tsai. The judgment in favor of Robert Gardner, founder and CEO of Joovy, for claims of wrongful termination, failure to reimburse, breach of contract, and fraud was in the amount of $6,909,991 jointly against Baby Trend and Denny Tsai, and for an additional $1,495,917 against just Baby Trend.

"Wrongful termination" is one of the most mis-used and mis-understood terms in California employment law. Many clients who have called my Orange County Law Firm have been terminated from employment feel they have been wrongfully terminated. However, what these people typically fail to realize is that California is an "at will" state. "At will" means that you can be terminated with or without cause, with or without any prior notice. Similarly, the employee may also resign from their employment with or without cause or without giving any prior notice. Simply put, you can be terminated for any reason, so long as it is not an unlawful reason (race, gender, or legally protected conduct, etc.).

Some forms of "legally protected conduct" include reporting sexual harassment, reporting or complaining about not receiving overtime, meal breaks, or proper wages. If you are terminated for reporting or complaining about any of these legally protected issues, you then have a claim for wrongful termination in violation of public policy.

Case information for Gardner vs. Baby Trend, Case No. 05CC11681

Surprisingly, California does not have an actual definition establishing what an independent contractor is. As a result, when clients inquire of my Orange County employment law firm whether they are independent contractors or employees, an analysis of their specific job duties as they relate to past court cases must be performed.

However, before doing that, it is important to understand why the determination is so important. Only employees are protected by the strict California wage and hour laws which include issues of overtime, meal periods, break periods and minimum wage, etc. Independent contractors are not subject to these laws. I have seen many scenarios where employers classify their employees as independent contractors to avoid paying overtime wages, among other things. These employers usually make their employees sign a document stating that the employee "acknowledges" that he is an independent contractor. In addition, the employee receives a Form 1099 instead of a W-2. However, just as I mentioned in a prior blog post about misclassifying employees, an employer's classification (or misclassification) of an employee as an independent contractor is not determinative as to what that employee's proper employment status truly is. Instead, the duties actually performed by the employee dictate his/her employment status.

The California Supreme Court case of S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations (1989) 48 Cal.3d 341 is the definitive case in interpreting whether an individual is an employee or independent contractor. Borello set forth several critical factors that are considered, some of which are:

• Whether the person performing the services is engaged in an occupation or business distinct from that of the principal;
• Whether the principal or the worker supplies the instrumentalities, tools and the place for the person doing the work;
• The length of time for which the services are to be performed;
• The degree of permanence of the working relationship; and
• The method of payment, whether by time or by the job.

All Borello factors aside, an individual will likely be classified as an independent contractor only when:

1. the individual has the right to control and discretion as to the manner of performance of the contract for services in that the result of the work and not the means by which it is accomplished is the primary factor bargained for;


2. the individual is customarily engaged in an independently established business; and


3. the individual's independent contractor status is bona fide and not a subterfuge to avoid employee status.

RELATED RESOURCES

Division of Labor Standards Enforcement (DLSE)

Most wage and hour matters in California provide remedies in addition to the actual unpaid wage or damage in the form of Labor Code penalties. I will describe some of the more common penalties below.

WAITING TIME PENALTY

When an employee separates from an employer, whether by termination or resignation, he/she must be paid all wages that are owed at the time of separation. If fired, the employee is entitled to all wages owed at the time of his or her termination. If resigning, he or she must be paid all wages due within 72 hours of resigning. If all wages are not paid within these time constraints, the employee, in addition to being able to recover all wages he or she is owed, is also entitled to a waiting time penalty. California's waiting time penalty entitles the employee to receive up to 30 days of wages, which means just that - thirty days of wages, not just one month's pay.

ITEMIZED WAGE STATEMENT PENALTY

While working for any employer, every employee must receive wage statements that are properly itemized, which means the pay stub must contain certain specific items of information, most commonly the employee's gross wages, net wages, total hours worked, commission rate, piece-rate, pay periods covered by the check, and all deductions withheld, among other items. An employer's failure to provide pay checks with stubs containing this information may be liable for an itemized wage statement penalty. Such a penalty results in a penalty of $50 for the first violation, $100 for each subsequent violation - up to $4000 per employee.

MEAL AND REST BREAKS

If lunch breaks or rest breaks are not provided as required by California law, claimants are entitled to more than just the unpaid wage for working through the lunch or rest break, they are also entitled to one hour of pay for each workday that a lawful meal break or rest break was not provided.

MINIMUM WAGE PENALTIES

If an employer fails to pay an employee the California mandated minimum wage rate (currently $8 per hour), the penalty is $100 to each underpaid employee for the first violation, $250 to each employee for each pay period thereafter when there is a violation or underpayment.

UNLAWFUL DEDUCTIONS

When an employer unlawfully collects or deducts monies from an employee's wages, either in the form of a penalty or other such deduction, the unlawful deduction penalty is $100 to each underpaid employee for the first violation and $200 to each employee for each pay period thereafter where this is such a deduction, plus 25% of the amount underpaid.

There are of course other Labor Code penalties, but I have found these to be among the most common.

A recent Orange County case on appeal in the Fourth District (Scotch v. Art Institute of California-Orange County, Inc.) affirmed summary judgment (a motion to have the entire case dismissed before trial) for the Defendant was proper because the Plaintiff did not identify a reasonable accommodation that was available at the time the interactive process (meeting between the employer and the employee) occurred.

FEHA protects individuals with "disabilities." "Physical disability" has been defined to include cosmetic disfigurement and physiological and anatomical conditions that affect one or more of the body systems, such as the musculoskeletal and neurological systems, and that limit an individual's ability to participate in a major life activity. Employers may not bar or discharge from employment an employee based upon his/her's disability, or otherwise discriminate against the person in compensation or in terms, conditions or privileges of employment.

REASONABLE ACCOMMODATION / INTERACTIVE PROCESS

The law imposes an affirmative obligation on both parties to engage in the "interactive process" to determine whether reasonable accommodations are possible. A lot of litigation concerns whether an employer engaged in good faith discussions with the employee concerning the availability of reasonable accommodations, including alternative positions. Failure to engage in the good faith "interactive process" by either an employer or employee can be determinative on the validity of certain disability discrimination claims. The accommodation process is a dynamic one with many considerations to be evaluated. The FEHA requires employers to make reasonable accommodation for the known disabilities (mental or physical) of employees to enable them to perform a position's essential functions, unless doing so would produce undue hardship on the employer's operations or would create a danger or threat of safety to the disabled employee or others. Some possible reasonable accommodations that may be considered include, but are not limited to:

• Making existing facilities used by employees readily accessible to, and usable by, individuals with disabilities;
• Job restructuring, part-time or modified work schedules, reassignment to a vacant position, acquisition or modification of equipment or devices, adjustment or modifications of examinations, training materials or policies, the provision of qualified readers or interpreters, and other similar accommodations for individuals with disabilities; or
• Providing a finite leave of absence for a disabled employee to recuperate or care for his or her disability.

However, as Scotch v. Art Institute of California-Orange County, Inc., demonstrates, claims by an employee against an employer for failing to engage in the interactive process must identify a reasonable accommodation that was available at the time the interactive process should have occurred. The court recognized that during the interactive process itself, an employee may not have the same access to information about possible accommodations as the employer. However, the court states that through litigation, particularly discovery, the employee must be able to identify a reasonable accommodation that would have been available during the interactive process.

RELATED RESOURCES

California Employment Lawyers Assocation (CELA)
Department of Fair Employment and Housing (DFEH)

An Irvine based business, doing business primarily in Orange County, but covering parts of all Southern California, called my Orange County employment law firm with a question. He has a dozen or so employees, and is unsure how to properly classify them so as to not get into any legal troubles.

His two choices are either exempt or non-exempt. Exempt essentially means you are salaried and meet one of several exceptions making you ineligible for overtime. Non-exempt, as you may guess, means you do not qualify for any of the exceptions and are thus entitled to overtime compensation.

As I have written in previous blog posts about overtime, California has by far the strictest and most complex labor laws in the country. California wage and hour laws are extremely "pro" employee, which often gets the uniformed small business owner (as well as corporate giants) into significant legal trouble.

It has been my experience that an employer's most common mistake is misclassifying an employee as exempt (i.e. a manager). Employers typically do this because managers (and other qualifying employees) are not entitled to overtime pay at the overtime premium rate of one and one half times the employee's regular rate of pay.

The problem is, just because you call someone a manager, does not make them one. Managers, for instance, must manage either an enterprise, a customarily recognized department or a subdivision thereof. Additionally, managers must also customarily and regularly direct the work of 2 or more employees and must have authority to hire/fire OR must have the ability to suggest/recommend the hiring/firing/advancement/promotion or other similar change of status of an employee. Lastly, a manager must customarily and regularly exercise discretion and independent judgement and must spend at least 51% of the time performing "exempt" work (i.e. managerial type work as described above)

I have seen it time and time again - an employer classifies an employee as a "manager" so he/she is exempt from receiving overtime pay. However, after analyzing the "managers" actual job duties, it often turns out that he/she is not in fact performing managerial tasks or given managerial authority. As a result, such an employee is then determined to be misclassified and as a result, is entitled to overtime compensation for all overtime hours previously worked for which he/she did not receive overtime compensation. What's more, if it turns out an entire group of employees were misclassified, then the case could be a class action.

RELATED RESOURCES

Code of Federal Regulations (CFR)

San Francisco Superior Court Judge John K. Stewart approved the $17.25 million final settlement of a class action complaint against energy giant PG&E. The class of employees filed suit against PG&E seeking compensation for unpaid overtime hours worked. The workers alleged, among other things, that they were misclassified as salary exempt meaning that they were not subject to California's strict overtime laws. As such, they worked many overtime hours without receiving any additional compensation other than their base salary.

The case, Conley v. Pacific Gas & Electric Co., was originally filed in March, 2000. Yes, 2000, which means it took 9 years for the case to resolve, an excruciating amount of time for the Plaintiffs and their attorneys to have an ongoing case. I have handled several wage and hour class actions during the last three years, so I am fully aware of the complexities of class actions and the amount of time it takes to litigate them. The biggest impediment to settling a class action is that once a class action is filed, the court must approve the settlement. As a result, the Defendant must offer enough money to satisfy the court that the settlement is fair and reasonable. Additionally, the Defendant is unable to settle with just the named Plaintiff and then dismiss the remainder of the complaint. Consequently, Defendant companies typically aggressively defend class actions.

PG&E spokeswoman Jennifer Zerwer, in typical "big company settles big lawsuit" fashion, said in regards to the settlement "PG&E truly appreciates the 20,000 men and women who work every day to provide safe and reliable energy to our customers. They are our most important asset. We believe these employees were properly classified, according to California law. We are pleased we were able to come to a compromise that is fair to both our employees and our customers." Loosely translated, we fought like mad for as long as we could to defend this case, but in the end came to grips with the fact we misclassified our employees and settled before we got into any more trouble.

PG&E workers get $17.25 million in OT case, The Mercury News, July 31, 2009

California has by far the strictest labor laws in the country. I receive many calls from clients asking what exactly constitutes overtime wages and if they are entitled to receive them. What overtime wages are, by definition, is pretty straight forward. However, whether employees are entitled to them is usually a much more complex issue dealing with whether the employee is classified as exempt or non-exempt.

In California, overtime wages are all hours worked over 8 hours in any workday AND are also all hours worked over 40 hours worked in a workweek. California Labor Code §510 states that eight hours of labor constitutes a day's work, and employment beyond eight hours in any workday or more that six days in any workweek is permissible provided the employee is compensated for the overtime at the following rates:

1. One and one-half times the employee's regular rate of pay for all hours worked in excess of eight hours up to and including 12 hours in any workday, and for the first eight hours worked on the seventh consecutive day of work in a workweek;
2. and Double the employee's regular rate of pay for all hours worked in excess of 12 hours in any workday and for all hours worked in excess of eight on the seventh consecutive day or work in a workweek.

RELATED RESOURCES

California Labor Code
Division of Labor Standards Enforcement (DLSE)