Court May Make Reasonable Inferences about Employee’s Exempt, Non-Exempt Activities

A trier of fact can make reasonable inferences about employees’ duties to determine status for overtime pay under California labor law, the California Court of Appeal has ruled, affirming the trial court’s holding. Batze v. Safeway, Inc.,  No. B258732 (Cal. Ct. App. Apr. 4, 2017).

A group of assistant store managers claimed they should have been classified as non-exempt managers entitled to overtime pay. The assistant managers testified that they were required to engage in non-exempt duties such as stocking shelves and building product displays. At trial, the court found that because more than 50 percent of the assistant managers’ time was spent performing managerial tasks, they were exempt from overtime pay.

The assistant managers appealed the ruling, contending gaps in the evidence should have precluded the trial court from finding exempt status. They argued that they did different jobs at different times and there were differences at stores affecting the time spent on various job duties. They also argued that the trial court must determine exempt status on a workweek-by-workweek basis, without drawing inferences from the employees’ activities during other workweeks to fill in those gaps.

The Court of Appeal affirmed the trial court’s ruling. It acknowledged that the relevant period for determining employees’ exempt status was indeed the workweek, but this does not mean the trier of fact cannot make reasonable inferences from the employees’ activities in earlier and later periods, as the trial court did in this case, especially when there is no evidence to suggest the employees’ duties varied significantly between store to store or week to week.

Please contact a Jackson Lewis attorney with any questions about this decision and other workplace developments.

The City of Los Angeles Quietly Updates Its Rules and FAQs Regarding the Minimum Wage and Paid Sick Leave Ordinance

The sick leave landscape is constantly evolving, and the City of Angeles is no exception to that rule. This past month the City of Los Angeles Office of Wage Standards  revised its rules and regulations as well the FAQs regarding its Minimum Wage and Paid Sick Leave Ordinance.

Learn what that means for employers here at our Disability, Leave, & Health Management Blog.

New California Healthcare Workplace Safety Prevention Regulation Effective April 1, 2017

Healthcare employers in California must comply with a host of new workplace safety requirements, effective April 1, 2017, on preventing workplace violence. The new requirements include written workplace violence prevention plans, additional recordkeeping, and preventive training, among other things.

Click here for the full list of requirements and contact your Jackson Lewis attorney is you have any questions.

New Healthcare Workplace Safety Prevention Laws Take Effect April 1, 2017, in California

Healthcare employers in California should prepare for a host of new workplace safety requirements, starting this weekend. California’s new healthcare workplace safety prevention law takes effect April 1, 2017.

To learn more about the scope and affects of the regulation, see the full article at our OSHA blog here.

10 Strategies for Limiting FMLA/CFRA Abuse

The federal Family and Medical Leave Act (FMLA) and the California Family Rights Act (CFRA) provides for overlapping, as well as separate leaves of absences. The administration of these leaves can be confusing and time-consuming.  Employees are becoming more sophisticated in abusing the system and many companies feel it is a problem they are helpless to stop.

To minimize disruption in the workplace, employers must be proactive in preventing abuse. Don’t be afraid to hold employees accountable for their actions.  FMLA/CFRA rules and regulations provide employers with guidelines to help prevent abuse.  These tactics will help in avoiding employee abuse:

  1. Review your FMLA/CFRA policies and procedures to ensure they are up to date. Auditing your policies to ensure they are up to date ensures consistency and prevents errors on your end.
  2. Use written leave request forms. Even if an employee gives you verbal notice, you can ask that they submit their leave request in writing. When employees realize there is a paper trail, they are less likely to request leave they do not need.
  3. Request the medical certifications be returned within 15 days. A medical certification form is your primary tool against abuse, so require employees certify their absence and seek re-certification when circumstances change. Employers who do this in writing, explaining the penalties for not doing so, may take action, including delaying the leave, toward employees who fail to follow the rules. If the certification is incomplete or insufficient, request clarification. [1]
  4. Calculate leave on a “rolling” 12 month period. This avoids the potential abuse of employees doubling their leave if leave is measured on a “calendar year” basis. [2]
  5. Require employees use their paid leave prior to taking unpaid FMLA/CFRA leave. Generally, FMLA/CFRA leave is unpaid. Employees are less likely to abuse FMLA/CFRA leave if they have to first use their vacation to do so.[3]
  6. Establish and enforce call-in procedures for all leaves. Employers can deny FMLA/CFRA leave if employees fail to follow company call-in policy. The key to avoiding abuse is consistent enforcement of leave policies designed to prevent it.
  7. Require employees provide 30 days notice for foreseeable FMLA leave. Requiring advance notice allows the employer to plan for the absence, which increases productivity and reduces abuse. [4]
  8. Request employees schedule medical treatments around business hours. The regulations allow employers to ask employees to make reasonable efforts to schedule their medical treatment either before work or in the late afternoon to minimize disruption to the employer’s operations.[5]
  9. Require employees to submit a re-certification every 30 days.[6] In some instances, an employer can require re-certification more frequently than every 30 days. [7] For instance, if the employee requests an extension; if circumstances change; or if an employer receives information that casts doubt on the employee’s stated reason for the absence.
  10. Check in periodically. Keep open the lines of communication. Checking in with the employee periodically to see how they are doing is legal – just don’t ask them to do any work while they are on leave.

[1] 29 CFR §825.305(b).

[2] 29 CFR §825.200

[3] 29 CFR §825.207(b)

[4] 29 CFR 825.302(a).

[5] 29 CFR 825.302(e).

[6] 29 CFR 825.308(a).

[7] 29 CFR 825.308(c)(1), (2), and (3).

California’s Free Mining & Tunneling Training Schedule

California enforces its own mining and tunneling regulations through Cal/OSHA’s Mining and Tunneling Unit.  The main function of this specialized unit is to investigate complaints and accidents in mines and tunnels and to issue citations to employers that violate regulations.

Click here for the full article and the training schedule from our MSHA Law Advisor Blog.

California Court of Appeal Clarifies Wage Statement Requirements for Use of Unique Employee Numbers, Hourly Rates for PTO or Vacation

The California Court of Appeal has held that: (1) the use of payroll service provider generated unique employee file numbers on employee wage statements, in lieu of the employer’s internal employee identification number or last four digits of employee social security numbers, is legally permissible under California law; and (2) employers are not required to state applicable hourly rates for payments of accrued paid time off or vacation on exempt employee wage statements. Blaire v. Dole Food Co., No. B263695, 2017 Wage & Hour Cas.2d (BNA) 46,633 (Cal. Ct. App. Feb. 15, 2017) (unpublished).

Pursuant to California Labor Code section 226(a)(7), employee wage statements must state either “only the last four digits of [the employee’s] social security number or an employee identification number other than a social security number.” In Blaire, the employer utilized a payroll servicing company to issue employee wage statements. The payroll servicing company generated its own unique employee “file” number for payroll purposes, and placed these “file” numbers on employee wage statements, in lieu of the last four digits of employees’ social security numbers or the employer’s internal employee ID numbers.

The court found the unique employee “file” numbers generated and placed on employee wage statements by the payroll servicing company qualified as a unique “employee identification number” required by Labor Code section 226(a)(7). The court held Labor Code section 226 does not require that employers use employer-generated internal employee identification numbers assigned upon hire rather than an “equally unique personal ID number simultaneously created for tax and payroll purposes.” The court explained, “Nothing in section 226, subdivision (a)(7) prohibits an employer’s use of a unique personal ID or file number, so long as the number chosen consistently appears on the employee’s wage statement. The label attached to the number is not material.”

Additionally, the court found that Labor Code section 226(a)(9), which requires employee wages statements state “all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee,” does not apply to payments of accrued paid time off to exempt employees. The court first noted that vacation or paid time off does not constitute “hours worked.” Then it reiterated that Labor Code section 226(a)(2) does not require employers to list the hours worked and the applicable hourly rate for exempt salaried employees. Section 226(a)(2) provides that employers must state employees’ “total hours worked…, except for any employee whose compensation is based on a salary and who is exempt from paying overtime.” The court found that if “the number of hours worked need not be itemized on an exempt employee’s wage statement, there is no ‘applicable hourly rate’ for an employer to furnish.” Accordingly, the court held that employers are not required to provide an hourly rate for payment of paid time off or vacation to salaried exempt employees.

While this decision is favorable to employers, it is another reminder that employers need to ensure that their paystubs comply with all requirements of the Labor Code, as these types of paystub lawsuits appear to be on the rise.

Separate Compensation for Rest Breaks and Non-Productive Time Required for Non-Exempt Commissioned Employees

Non-exempt commissioned employees must be paid separately and specifically for rest breaks and non-productive time, a California appellate court has ruled.  The court found that a compensation plan that does not pay employees directly for rest periods undermines the public policy of encouraging employees to take their rest breaks. 

In Vaquero, et al. v. Stoneledge Furniture LLC, the California Court of Appeal, Second Appellate District ruled that Wage Order 7-2001 (mercantile industry) requires employers to separately compensate non-exempt commissioned employees for rest breaks.  It further held that the same analysis applies to “any other compensation system that does not separately account for rest breaks and other nonproductive time.”  A link to the opinion filed February 28, 2017, can be found here.

The plaintiffs in this case were sales associates at a retail furniture company. They filed a wage and hour class action alleging, in part, that under their former compensation agreement, their employer failed to provide rest periods in violation of Labor Code section 226.7 and Wage Order No. 7-2001.

Under the agreement at issue, sales associates were paid on a draw of $12.01 per hour that was advanced against future commissions. The agreement did not provide separate compensation for any non-selling time, such as time spent attending meetings or taking rest breaks.  Sales associates recorded the time electronically for meals, but they did not clock out for rest breaks.

The court found that a compensation plan that does not compensate employees directly for rest periods would undermine the public policy of encouraging employees to take their rest breaks.

Under the agreement, sales associates who earned commissions above the guaranteed minimum, received the same amount of compensation regardless of whether they took rest breaks. The commission did not separately account for rest breaks, and there was no way to determine the rate of pay, all of which violated California law and the Wage Order.

For those associates who did not exceed the weekly minimum rate, the company advanced monies to compensate employees for hours worked, including rest breaks. However, these advances were eventually clawed back when the associate earned commissions above the guaranteed minimum. Thus, the court found that the advances or draws against future commissions were not compensation for rest periods because they were eventually returned to the employer.

Thus, regardless of whether the associates met the weekly minimum or not, the court found that the agreement violated Labor Code section 226.7 and Wage Order 7-2001.

Commission-based compensation agreements are still valid in California. However, employers should ensure that employees paid by commissions are separately compensated for rest breaks and other non-productive time.

The Opinion is silent as to how to calculate the rate at which rest breaks must be paid to employees paid on a draw plus commissions plan. Yet, Labor Code section 226.2 may provide some guidance.  Although this section applies only to employees compensated by piece-rate, it requires employers to separately compensate piece-rate employees for rest, recovery and other nonproductive time at a regular hourly rate “no less than the higher of”: (1) the “average hourly rate”; or (2) the applicable minimum wage.  An article regarding Labor Code section 226.2 can be found here.

If you are an employer with non-exempt commissioned employees, you should talk to your Jackson Lewis attorney to ensure compliance with this new ruling.

Don’t Assume PAGA Claims Are Not Arbitrable: Ninth Circuit Reverses District Court Order Denying Motion To Compel Arbitration of PAGA Claim

On March 3, 2017, in an unpublished decision in Valdez v. Terminix International Company Limited Partnership, Case No.15-56236, the U.S. Court of Appeals for the Ninth Circuit reversed a District Court order denying defendant Terminix International Company Limited Partnership’s (Terminix) motion to compel arbitration of plaintiff Palcido Valdez’s (Valdez) claim for penalties for violation of the California Private Attorneys General Act of 2004, Labor Code section 2698 et seq. (PAGA).

As readers may recall, in 2014, the California Supreme Court held in Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014), that PAGA representation actions cannot be waived in arbitration agreements. For more information on the Iskanian decision, click here.

In 2015, in Sakkab v. Luxottica Retail North America, Inc., 803 F.3d 425 (9th Cir. 2015), the Ninth Circuit previously held that the Federal Arbitration Act (FAA) does not preempt the California “Iskanian rule” prohibiting PAGA waivers.  For more information on the Sakkab case, click here.

Nevertheless, the Ninth Circuit has now held that “Iskanian and Sakkab clearly contemplate that an individual employee can pursue a PAGA claim in arbitration, and thus that individual employees can bind the state to an arbitral forum. The Ninth Circuit explained, “Iskanian does not require that a PAGA claim be pursued in the judicial forum; it holds only that a complete waiver of the right to bring a PAGA claim is invalid,” and that Sakkab “recognized that employees may pursue PAGA claims in arbitration.”

In doing so, the Ninth Circuit also affirmed that the Iskanian rule is not preempted by the FAA as it “does not stand as an obstacle to the accomplishment of the FAA’s objectives,” citing Sakkab, and that the U.S. Supreme Court’s recent decision in DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 (2015), which, according to the Ninth Circuit, “evinces a garden-variety application of the FAA preemption test” to strike down “arbitration-specific contract defenses,” does not cast doubt on Sakkab’s holding that the Iskanian rule is a valid, “generally applicable” contract defense.

After holding that PAGA claims are arbitral, the Ninth Circuit determined that Valdez’s PAGA claim fell within the scope of the arbitration clause at-issue. As such, the Ninth Circuit reversed the District Court’s order denying Terminix’s motion to compel arbitration and remanded the case back to the District Court to determine whether to dismiss or stay the action pending arbitration.

Accordingly, following Valdez, although prior thought was that PAGA claims could not be compelled to arbitration and should be stayed pending arbitration of the underlying claims (see prior discussion here), employers should consider attempting to compel PAGA claims to arbitration claims through valid arbitration agreements.

Employers who operate in California and have arbitration agreements should seek legal guidance to ensure the arbitration agreements are valid and enforceable. Please contact Jackson Lewis if you have any questions.

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