The California Court of Appeals has held that a California employer did not owe overtime to an employee because it had entered into an explicit mutual wage agreement that provided for base compensation and overtime in one lump sum.  Arechiga v. Dolores Press, Inc., No. B218171 (Cal. Ct. App. Feb. 7, 2011).  Carlos Arechiga (“Arechiga”) and Dolores Press, Inc. (“DPI”) agreed that Arechiga would work 11 hours a day, six days a week, for a total of 66 hours per week, consisting of 40 straight-time hours and 26 overtime hours.  DPI paid Arechiga a lump sum of $880.00 a week. Arechiga and DPI later entered into a written employment agreement stating that Arechiga would be paid a “salary/wage of $880.00.”

Arechiga argued that Labor Code Section 515(d) prohibited explicit mutual wage agreements for nonexempt employees based on the California’s Division of Labor Standards Enforcement’s Enforcement Policies and Interpretations Manual.  The Court rejected Arechiga’s argument, noting that the DLSE’s Manual was “non-binding” on the courts because it was not properly adopted under the Administrative Procedures Act.  Further, California case law recognized such agreements for non-exempt employees.  The Court concluded that explicit mutual wage agreements remained valid under California law and that the trial court properly upheld the parties’ agreement.

 The use of explicit mutual wage agreements for non-exempt employees should be entered into carefully and employers should work with counsel to ensure that they comply with applicable law.  For additional information click on California Court Rules Employer Not Required to Pay Overtime under Explicit Mutual Wage Agreement

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Photo of Jonathan A. Siegel Jonathan A. Siegel

Jonathan A. Siegel is one of the founding Principals of the Orange County, California, office of Jackson Lewis P.C. He practices before the Equal Employment Opportunity Commission, National Labor Relations Board, state and federal agencies and courts.

Mr. Siegel also provides advice and…

Jonathan A. Siegel is one of the founding Principals of the Orange County, California, office of Jackson Lewis P.C. He practices before the Equal Employment Opportunity Commission, National Labor Relations Board, state and federal agencies and courts.

Mr. Siegel also provides advice and counsel regarding labor and employment law with respect to various issues ranging from wage and hour law, reduction in force, WARN Act, discipline, leave management and harassment and discrimination issues. Mr. Siegel defends employers regarding different varieties of wrongful termination and discrimination claims.

Mr. Siegel has represented management in union organizing drives and regularly defends employers in unfair labor practice proceedings as well as in collective bargaining and arbitrations. He also has extensive experience conducting wage and hour preventive audits. He conducts single location and multi-location audits for employers. The scope of such audits can range from examining specific issues, i.e., exempt status under federal law and California, to comprehensive FLSA and California Labor Code audits. Mr. Siegel has conducted audits for a wide range of industries including, but not limited to manufacturing, retail, transportation, various service industries, defense contractors and healthcare.

Mr. Siegel regularly speaks on a variety of topics including wage and hour, harassment/discrimination, national and California employment trends, Workers’ Compensation, EEO, managing leaves of absence under FMLA and state leave laws and union avoidance. He has moderated numerous programs and is featured as a keynote speaker for several different organizations.