Wage and Hour Law

IS SECURITY SCREENING TIME COMPENSABLE?

Security screening time is not compensable under the Fair Labor Standards Act. The Supreme Court reversed the Ninth Circuit in Integrity Staffing Solutions, Inc. v. Busk. In this class action, plaintiff warehousemen sought compensation for time spent undergoing security screening at the end of their shift. The purpose of the screening was to ensure against employee theft. The Supreme Court reasoned that security clearance was not an activity “related” to the work performed by the employees. Just as “walking, riding, or traveling to and from” the place of work is not compensable, neither is an “unrelated” activity such as “postliminary” security screening. See 2014 WL 6885951 (USSC 12/9/14).

Our opinion is that this does not bode well for wage and hour claims under the Fair Labor Standards Act. The decision was unanimous, and its reasoning appears highly suspect. Security screening is required by the employer, whereas commuting to and from the place of employment is a voluntary action by the employee.

In Laffitte v. Robert Half International, Inc., the court approved class counsel’s contingency fees of one-third of a $19 million “common fund” awarded to a class of employees. A putative class member objected to the settlement, claiming that the attorneys’ fee was excessive. The court disallowed the objection and upheld the contingency fee. It noted that the percentage of common fund monies remains viable under California law. 2014 WL 5470463 (10/29/14).

Note that under federal law, this award would likely not have survived challenge. In the Ninth Circuit there is a 25% “benchmark.” Moreover, federal courts generally compare a percentage recovery specified in an attorney-class fee agreement against the attorney fee that would be recovered under the Lodestar method. (The “Lodestar” method of calculating attorney fees is arrived at by multiplying the number of hours worked by each attorney against that attorney’s reasonable hourly rate. That total – which is subject to enhancement or reduction – is expected to bear a “reasonable relationship” to the award recovered under a common fund contingency.)

In Ferrick v. Santa Clara University (6th Dis. 12/1/14) 2014 WL 6748938, the Court of Appeal reinstated a cause of action for retaliatory discharge under Labor Code § 1102.5(b). Plaintiff’s complaint made numerous allegations that a member of administration and plaintiff’s immediate supervisor had engaged in extensive wrongdoing and inappropriate behavior. During discovery, it transpired that plaintiff had made only limited disclosures of allegedly inappropriate financial dealings to Santa Clara University (“SCU”) management. The trial court reasoned that because the injury was only to the pecuniary interests of SCU, a private institution, and not to the public at large, the public could not have sustained an injury; therefore, there could be no determination of violation of public policy.

The Court of Appeal disagreed and reinstated the claim. Plaintiff modified the claim to assert that she reasonably believed the behavior of her supervisor violated Penal Code § 641.3 (commercial bribery), California Code of Regulations, Title 2, Section 926-3 (taxable value of lodging), and other laws.

The Court of Appeal held that, “On this very narrow basis, the complaint states a cause of action for wrongful termination in violation of public policy embodied in section 1102.5(b).” Id., citing Foley v. Interactive Data (1988) 47 Cal.3d 654.

Perhaps most significantly, this court (which is the Court of Appeal for Santa Clara County) discussed the split of opinion between American Computer Corp. v. Superior Court (1989) 213 Cal.App.3d 664 on the one hand, and Collier v. Superior Court (1991) 228 Cal.App.3d 1117 on the other hand. Where American Computer expressly required that there can be no claim for retaliation where an employee simply complains to a supervisor, the court found that the decision in Collier, which held that an action may be stated where the employee only complains to the employer, rather than to a government entity, does state a cause of action. The Ferrick court noted, “We concluded that Collier is better reasoned. As observed in that case, Foley concerned an employee’s disclosures that the FBI was investigating a co-worker’s suspected embezzlement from a former employer … The Legislature’s recent amendment to section 1102.5 to protect disclosures to employees buttresses Collier’s analysis. Here … , the alleged misconduct did not affect only SCU’s private interest; it also implicated the public policy embodied in section 1102.5.” Id.

REIMBURSEMENT FOR WORK-RELATED PHONE CALLS ON PERSONAL CELL PHONES

In August, a 3-judge panel of the California Court of Appeals for the Second District held that when employees are required to use their personal cell phones for work-related voice calls, the employer must reimburse the employee for those cell minutes at a reasonable rate. Cochran v. Schwan’s Home Serv., Inc., (2014) 228 Cal. App. 4th 1137, 1140.

The plaintiffs in Cochran were employed to deliver meals to customers at their homes. The plaintiffs were required to use their personal cell phones to contact customers regarding order and delivery, but the employees were not reimbursed any money for these calls. The 3-judge panel found that reimbursement of a reasonable percentage of the employee’s cell phone bill for work-related calls is required by Labor Code § 2802 (a rule requiring employers to reimburse employees for necessary expenditures of carrying the duties of the job). Employer reimbursement is required whether the employee has limited or unlimited talk minutes on her cell phone plan.

TIMELY PAYMENT OF EARNED COMMISSIONS

In the realm of commissions on sales, when is payday? Does the law have anything to say about how quickly an employer must pay a salesperson the commission he or she has earned? It does.

The General Rule: Earned Commissions Must Be Paid Semi-Monthly

In July of 2014 the California State Supreme Court confirmed that in fact Labor Code § 204 (which provides the general rule on timely payment of earned wages) commands, “all earned wages, including commissions, must be paid no less frequently than semimonthly.” Peabody v. Time Warner Cable, Inc., (2014) 59 Cal. 4th 662, 668. [emphasis original]. “Semi-monthly” means every two (2) weeks after the commission has been “earned.”

Some exceptions apply. Where a more specific code section exists, it trumps a more general code section. Rose v. State, (1942) 19 Cal. 2d 713, 724. The Labor Code provides a special rule for “executive, administrative and professional” employees. For such employees, California law and Federal law (the Fair Labor Standards Act primarily) may grant slightly longer periods in which the employer can make payment of earned wages (Labor Code § 204c). A special rule of timely payment of earned commission wages applies just to salespersons at vehicle dealerships (Lab. Code § 204.1.).

Additionally, the Labor Code sections following 204 (§§ 204a – 220.2) address a number of specific topics, including payment of regular wages (wages based on time worked) for enumerated industries and to public employees; timely payment of wages when an employee is terminated or resigns; notice; place of payment; releases of wage claims; time off in lieu of cash compensation, etc.

But, What About My Contract? 

Whether you are an employer or a salesperson employee, your reaction to this news that earned commission must be paid semi-monthly will likely be, “Wait a minute, our sales commission contract says commissions will be paid quarterly. So, what about the contract?”

While the Peabody decision is so new that cases applying it have yet to wind their way through the court system, Labor Code § 219 (a) makes timely payment of earned wages a protection that an employee cannot waive by contract:

(a) Nothing in this article shall in any way limit or prohibit the payment of wages at more frequent intervals, or in greater amounts, or in full when or before due, but no provision of this article can in any way be contravened or set aside by a private agreement, whether written, oral, or implied. Consequently, the likely outcome is that a contract term that says an employer may pay an earned at a date later than semi-monthly is void, unless an exception applies.

WAGE DEDUCTION FOR BREAKAGE OR LOSS

It happens to everybody, you’re working away and you break something, or you come up short on your register, or, most commonly, you lose a tool or something of value that belongs to your employer.  The boss then tells you that he’s sorry but the cost of that damage or loss is going to come out of your paycheck. Can he do that?

In most cases the answer is “NO”.  Case law and orders of the Industrial Welfare Commission (IWC) make it clear that : Absent a showing of dishonesty, willful acts or gross negligence, an employer may not deduct for ordinary losses caused by an employee (e.g., for cash shortages, breakage or loss of equipment Kerr’s Catering Service v. Department of Industrial Relations (1962) 57 C2d 319. 326–330, Truck driver’s sales commissions not subject to reduction for cash shortages; see also Prachasaisoradej v. Ralphs Grocery Co., Inc.,(2007) 42 Cal. 4th 217. 229 “The law precludes the employer from using wages to shift business losses to employees, or to make employees the insurers of such losses … ” Prachasaisoradej . supra, 42 C4th at 238,  So if you lose that nice new power saw, crash the company truck, or drop a rack of dishes its on the employer’s dime, not yours.

The rationale for this principle is that losses due to an employee’s simple negligence, such as cash shortages and breakage or loss of equipment, “are inevitable in almost any business operation” and must be borne “as expenses of management.” The employer is better able to absorb the loss and can recoup the loss by passing the cost on to the customer or by lowering the wages of all employees. Kerr’s Catering Service, supra,, 57 C2d at 329.  Moreover, employees rely on the wage rate paid by the employer and “To subject that compensation to unanticipated or undetermined deductions is to impose a special hardship on the employee.” Id.

The term “deduction” means any action that deprives you of the full compensation promised: “The employer takes a ‘deduction’ … when it subtracts, withholds, sets off, or requires the employee to return, a portion of the compensation offered, promised, or paid … so that the employee, having performed the labor, actually receives or retains less than the paid, offered, or promised compensation, and effectively makes a forced ‘contribution’ of the difference.” [Prachasaisoradej, supra, at 227]

 If the employer does engage in self help and deduct wages for the loss, you are entitled to reimbursement and waiting time penalties as well as other damages depending on the circumstance.

These protections apply to rank and file workers.  Technically, they do not apply to management level employees.  At the management level, an employee may indirectly be responsible for loss.  For example, a manager who is paid partly on a commission based on store profits may have his commission effectively lowered when loss and breakage are offset against profits.  In such a circumstance the courts have found the wage reduction to be lawful. Ralphs Grocery Co. v. Sup.Ct. (Swanson) (2003) 112 CA4th 1090, 1106, 

Victory for Plaintiffs in Wage and Hour Class Action

The recent decision of the Second District Court of Appeal in Harris v. Superior Court (2012) 207 Cal.App.4th 1225 ends a long battle over the classification of thousands of claims adjusters employed by Liberty Mutual Insurance Company. Plenty of money was at stake. In Bell v. Farmers Insurance Exchange (2001) 87 Cal.App.4th 805, plaintiff insurance adjusters recovered in excess of $170 million in unpaid overtime. Accordingly, the parties in Harris had a great deal at stake, which fueled an epic battle. The specific issue at stake was whether insurance adjusters may be classified as exempt from the overtime laws under the so-called “administrative” exemption. This exemption has been the subject of a number of cases in recent years, largely because of what is known as the “administrative/production” dichotomy. In short, that legal theory attempts to distinguish between those employees who are engaged in producing the goods and services of the employer as opposed to those who are employed to run the business. Federal regulation 29 C.F.R. section 541.201 puts it this way:

“To meet the [administrative exemption] requirement, an employee must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment.” Id.

Employees engaged in an activity that constitutes the company’s primary purpose are production workers. Martin v. Cooper Elec. Supply Co. (3rd Cir. 1991) 940 F.2d 896, 903. However, there has been a recent trend, in cases where the plaintiffs are white collar workers, to limit or reject out of hand the administrative/production dichotomy. These new cases conclude that the purpose of this analysis is to distinguish between those who work on a factory floor and those who effectively run the business from an office. In today’s service-dominated economy, the theory goes, it is an artificial distinction to differentiate between those who run the business and those who provide the service or product of the business.

In Harris, as in Bell, plaintiffs argued that claims adjusters, by definition, perform duties and provide services which are the essential product of the insurance company. The employers argued that claims adjusters do not produce the employers’ product because employers’ product is the “transference of risk,” not claims adjusting. Round one went to the employers, with the Court of Appeal siding with Liberty Mutual in 2007. On petition to the Supreme Court, plaintiffs emerged victorious. In Harris v. Superior Court (2011) 53 Cal.4th 170, the court held that the Court of Appeal had misapplied the administrative/production dichotomy and remanded the case back to the Court of Appeal for further proceedings consistent with its direction. Grudgingly, the Court of Appeal applied the criteria specified by the Supreme Court and found in favor of plaintiffs.

This case is significant (as is the Supreme Court’s reversal) not only because it reaffirms the viability of wage and hour class actions, but also because it clearly establishes that the administrative/production dichotomy is alive and well in the field of white collar employment: a conclusion that a number of courts have in recent years urged is not the case. Although the plaintiffs here were claims adjusters, the reasoning applies to any office or “white collar” employment.

Kirby v. Imoos Fire Protection case

In the wake of the seminal Brinker Restaurant Corp.v. Superior Court (2012) 53 Cal. 4th 1004, the Kirby case, a true jewel for the defense bar, has slipped by virtually unnoticed. This case, another gift from our local Supreme Court to the defense bar and to industry, has the potential to be just as deadly to actions for wage and hour violations as its more celebrated sibling. In short, the ruling in Kirby is that a Plaintiff who sues for meal and rest break violations under Labor Code Section 226.7 is not entitled to attorneys fees under any statute. The legislative purpose in awarding attorneys fees to a victorious Plaintiff suing for overtime is to make it economically viable to punish small violations that would uneconomical without the incentive of attorneys fees.

Labor Code Section 1194 expressly provides that a prevailing Plaintiff in an action for unpaid overtime is entitled to reasonable attorneys fees. Thus, a worker who has been ripped off for $2,000 in unpaid overtime may be able to persuade a lawyer to take his or her case, knowing that the fee award if Plaintiff wins will compensate him or her for the time expended, thereby deterring illegal behavior. One would logically think that the same statute would apply to unpaid meal and rest periods; violations that go hand in hand with overtime violations. The legislative principle is identical, the problem widespread, and the damages usually smaller than in an overtime case. The court labored hard in Kirby to find a reason why Section 1194 should not apply to meal and rest period violations. The reasoning is unsound and unpersuasive. The fact is, as Brinker illustrates very clearly, the California courts are legislating away compensation for meal and rest period violations.

This court though not only held fees unavailable under Labor Code Section 1194, it went further to deny fees to Plaintiff under any statute, including Labor Code Section 218.5. That section provides that in an action for unpaid wages except overtime, the prevailing party, be it Defendant or Plaintiff, may recover reasonable attorneys fees. Determined to shut off oxygen to suits for meal and break violations, the court held that each side bears their own fees, win, lose ,or draw. This is very bad news for the Plaintiff bar: attorneys will, we predict, only rarely take on a meal or break violation case. For now, such cases are effectively dead unless they are an adjunct to a case whose main focus is another legal theory.

The judiciary seems to have taken on the role of protector of business. The economy may be playing a role, along with political pressure to make California a “business friendly” state…….like Texas. The fact is that at the end of the day it is the little guy who pays. We are determined to fight even harder for your rights through the legal and political process. If we at Ainley Law can help you, we will. You can count on it.

Vacation Pay. It belongs to you

One issue that repeatedly comes up is whether an employer may adopt a “use it or lose it” vacation day policy.  This usually takes the form of a policy by which the employer states that for each year worked, employees a certain number of days of paid vacation.  Sometimes, the employer builds into that policy a statement that vacation days which have accrued, but which have not been used by the end of the calendar year, will be forfeited.  This is against the law:  Vacation days that you have accrued are days that have been earned and are part of your compensation.  They are, therefore, wages, as defined by Labor Code section 200.  To compel a worker to give up a vacation day is the same, in the eyes of the law, as forcing a worker to repay wages to his or her employer.  Apart from being unfair, this is effectively a garnishment of wages without judicial process which is in violation not only of the spirit of the entire Labor Code, but also specifically violates Code of Civil Procedure section 487.020(c).  See also Phillips v. Gemini Moving Specialists (1998) 63 Cal.App.4th 563, 572. :  Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774, 779 (vacation pay is simply a form of deferred compensation). In sum, “use it or lose it” policies are  illegal.

That being said, an employer is not obligated to provide vacation days as part of a compensation agreement.  When an employee and employer enter into an employment relationship, an agreement arises:  the employee will perform services in the future in exchange for compensation.  If vacation days are offered as part of that compensation package, they may not be withheld.  However, some employers do not offer vacation pay as part of their package of benefits.  This is not unlawful, but is rare, as it almost guarantees a very high turnover of personnel.  Vacation includes “floating vacation days,” as well as personal time off (PTO).  Also, an employer may “cap” the amount of accrued vacation days so long as the extra days accrued are “bought out” by the employer in lieu of providing a day off

Duran v. U.S. Bank National Association case

The Duran decision, preceding the Brinker case by 2 months is yet another milestone in the judicial effort to curtail or eliminate the right to recovery of unpaid overtime wages.  Duran was a class action case; the class plaintiffs followed the mechanism by which most class actions have been tried in this State for the past 50 years.  In brief, the Duran Plaintiffs were 260 employees of the Defendant bank who claimed that they were misclassified as exempt from the right to overtime.  At the trial court level, the judge selected 21 Plaintiffs as representative of the class of 260 plaintiffs and certified the class.  (By certifying the class the court in essence said that common issues of fact outweigh individual issues and that the most expeditious way to proceed was to “certify” a class of people who would be represented by the 21 chosen plaintiffs.  Liability would then be determined by the 21 witnesses as representative of the whole class.  In that fashion, the parties would avoid 260 separate trials).  USB challenged the Court’s certification on two grounds. First, USB argued that taking a statistical sampling to represent all of the people in the class was unfair because USB believed that at least a third of the people in the class were not misclassified; and, even if this were legitimate, the statistical methodology was unsound.  Second, USB argued that on the issue of liability, it had the right to present a defense to each and every claimant on hours worked and whether they were exempt.  In short, USB argued that determining liability in a class action could not be determined by use of a sample group.

The appellate court bought USB’s arguments with every bell and whistle attached.  While it did not have the nerve to say that there could be no wage and hour class action claims, it did hold that a defendant has the right to defend against every single claim in a class action.  In a decision stretching to 38 pages and 80 footnotes (a sure sign that a court thinks it is making new law) the court attacked the concept of trial by representative parties; i.e. the class action as it has been known for half a century.  To illustrate its point, the court noted that even if the trial were to take 520 days, as plaintiffs claimed, that was acceptable to protect the defendant.  Further, according to the court a class of 260 is really too small to worry about things like efficiency (“We also note that the class here is comprised of 260 members…it would not have been implausible …to conduct some type of individualized inquiries as to each plaintiff’s entitlement to damages.”).  This is a flat out re-writing of the law.  The whole point of class actions is judicial economy and protection of the class.  To eliminate the class action process with as many as 260 plaintiffs is unprecedented.

Plaintiffs in this case correctly stated that USB’s position, if upheld, would effectively kill off class actions, in wage and hour cases at least, in California.  That is most certainly true and the court does not really try to deny it.  The most it can say is that the “situation is not quite that dire.”  Ah, but it is that dire.  This decision must either be overturned or legislatively annulled; if not, there is a very small chance of any class action case surviving.  At a minimum, every plaintiff may look forward to an appeal.  It worked for UBS, precedent is now out there, and any like minded conservative judge can simply follow the lead.

This case is a true milestone; a de jure throw over of the legislature’s injunction in Code of Civil Procedure section 382 that cases with common issues may be tried as one if common issues prevail.  This decision is nothing more than an attempt to kill off what the big business lobby considers nuisance number 1.  While we are all in favor of job creation and a friendly business environment, we do not believe that extends to a carte blanche to deprive workers of their statutory rights.  Simply put, an individual case for overtime is, to the employer, not something to lose sleep over.  A class action is altogether different and encourages employers to respect the law because the damages can be very high indeed.  When, as here, the judiciary becomes a cheerleader for big business (banks, no less) the incentive to follow the law drops dramatically.  As a weatherman might say: “we are looking at unpaid overtime increasing in the near future.”

Labor code and your paycheck stub

LABOR CODE SECTION 226: THE INFORMATION THAT MUST BE INCLUDED ON YOUR PAYCHECK OR PAYSTUB

California law requires nine (9) specific pieces of information to be included on the paycheck or paystub of every employee. Failure to comply with each and every requirement of this code section (Labor code section 226) is a misdemeanor.  The employer is liable for $50 for the first violation, and $100 per pay period for each violation thereafter up to a total per employee of $4,000. Individually, the claim may not be large but collectively it can be very large indeed. (Note that if you have a claim for unpaid overtime or break time, you likely also have a claim for pay stub violations. For hourly employees, the overtime hours you worked but were not paid for almost always are missing from your pay record -i.e. you worked 55 hours but were told to put down 40 hours because the company doesn’t pay overtime, your overtime wasn’t approved etc.-  That is an inaccurate record and therefore a pay stub violation.)  Frequently, employers put the wrong address or no address.  Small businesses sometimes provide no information on the pay stub or pay out of a personal account with no record at all.  If you sue and win you get your damages plus attorneys fees and costs. If you lose your case, the employer does not get attorneys fees but can recover costs (filing fees etc.).  The following is the text of the statute(with minor changes)

Every employer shall, semimonthly or at the time of each payment of wages, furnish each of his or her employees, either as a detachable part of the check, draft, or voucher paying the employee’s wages, or separately when wages are paid by personal check or cash, an accurate itemized statement in writing showing

“(1) gross wages earned;

(2) total hours worked by the employee, except for any employee whose compensation is solely based on a salary and who is exempt from payment of overtime; [this is a critical requirement; if you worked 50 hours you deserve to be paid for 50 hours. False documentation of hours worked provides penalties in addition to the overtime monies owed].

(3) the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis;

(4) all deductions, provided that all deductions made on written orders of the employee may be combined and shown as one item;

(5) net wages earned;

(6) the inclusive dates of the period for which the employee is paid;

(7) the name of the employee and his or her social security number, except that by January 1, 2008, only the last four digits of his or her social security number or an employee identification number other than a social security number may be shown on the itemized statement;

(8) the name and address of the legal entity that is the employer, [this is very important] and

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

The deductions made from payments of wages shall be recorded in ink or other indelible form, properly dated, showing the month, day, and year, and a copy of the statement or a record of the deductions shall be kept on file by the employer for at least three years at the place of employment or at a central location within the State of California.”

Be sure to check your paystub for compliance with California law.  Aside from the statutory damages it’s a good idea to know who your employer actually is and what type of business they are (corporation, partnership, and so forth). In addition, violations are potent tools to gain leverage in other disputes you may have with your employer.

Your employer MUST show you your payroll records within 21 days of your request. (Labor Code section 226 (c),(f),and (g). If the employer does not show you the records within that time you may sue to compel the employer to produce them to you.  Again, if you win, you get attorneys fees and costs.  If you lose the employer does not get attorneys’ fees. (Note: if your request is in writing and is dated, whether by certified mail or by an email, losing this claim if records are not produced would be almost impossible.) Cross refer: Right to inspection of personnel file.

HOW TO CALCULATE YOUR OVERTIME WAGES

Overtime is paid either for any hours worked over 8 on any given day during a week, or for all hours worked over 40 in one workweek which is defined as any consecutive 7 day period. You can receive overtime which is calculated per week for work in excess of 8 hours in any or all of the 7 days in a week, or the total number of hours worked over 40 in any 7 day period. It is usually to your advantage to calculate on a per day rather than a per week basis but not always. The following is how to calculate your overtime.

1. First, determine your hourly rate. If you are an hourly employee, that is obviously your hourly wage. If you are a salaried employee or are paid a combination of salary, commission, or piecework, Labor Code Section 515 provides a simple formula. Take your total pre-tax annual wages, divide that by 52 and divide again by 40. Because a workweek is by law 40 hours, the product of that equation is the hourly rate.

Example 1. Jack made a straight salary of $52,647.00 a year as an internet technician. Dividing by 52 gives a weekly salary of $1012.44. Divide again by 40 to get an hourly rate of $ 25.41. This is the baseline to use when multiplying for overtime.

Example 2. Jack is now working at inside sales. His total compensation is $59,563, $40,000 of this is his base draw, and $19,563 is the commission he earned selling internet services. Again, this figure is divided by 52 producing a weekly rate of $1145.44. Divided by 40, Jack’s hourly rate is now $28.63.

2. Next, calculate the total hours worked over the course of one work week which is defined by statute as 40 hours over any period of seven consecutive days regardless of the starting day. (Labor Code Section 515(d)). Subtract 40 from this amount and you have the overtime worked. Labor Code Section 510 requires that any hour worked over 40 in a week be compensated at a rate of not less than 1.5 times the ordinary hourly rate.

Example 1: Bob works 5 days in one week, putting in three 8 hour days and two 10 hour days. Bob has worked 44 hours and so is entitled to 4 hours of overtime at 1.5 times his hourly rate.

Example 2: Bob works 6 days in one week, putting in 7 hours each day. His total hours worked are 42. Although he did not work more than 8 hours in one day, Bob is still entitled to 2 hours of overtime.

If the number of hours left after subtracting 40 is greater than 0 then the only step left is to ensure that you have the proper hourly overtime multiplier. The first 4 hours of overtime per day (8-12 hours) must be paid at 1.5 times the hourly rate. After 12 hours, they are computed at 2 times the hourly rate.

Example 1: Jack puts in a 60 hour week. Subtract 40 hours to find Jack’s overtime of 20 hours. Jack’s hourly rate is $25.00 an hour. If Jack worked three 14 hour days and three 9 hour days he would be entitled to 6 hours at $50 an hour (double time) and 14 hours at $37.50 (time and a half). Jack’s base pay is $1,000. His overtime is $825. However, if Jack’s overtime were calculated on a weekly rather than a daily basis he would only have 20 hours of overtime for a total of $750.

3. If the number of hours worked in a workweek is less than 40 (> 0) you are still entitled to overtime on a daily basis.

Example 1: Work is slow for Sheila with the recession and she is only able to work one day during the week. Business is good that day and Sheila works 14 hours at $30.00 an hour. She has no work for the rest of the week. Sheila is entitled to 4 hours at $45 and 2 hours at $60 for a weekly total of $300.

Example 2 : Jeff earns $10 an hour and works 16 hours a day for 5 days for 80 hours total during the week. Jeff is entitled to 20 hours at 1.5 times his hourly rate and 20 hours at 2 times his hourly rate, $700. If Jeff’s overtime were computed on a weekly basis he would earn only $600.
If you have not been paid overtime you can demand payment according to either method. You cannot however add the two (this is called pyramiding and is effectively double counting). It is usually, but not always more profitable to add your time on a daily basis. Because the unit of calculation is the week you can choose the most profitable method for each week that you are owed overtime.

Choppy Seas: California Supremes sink Bell II while NLRB tacks left

To call wage and hour law in California unsettled is like saying Mike Tyson was a pretty good boxer.  Two recent decisions, one by the National Labor Relations Board (NLRB) and one by the California Supreme Court  illustrate the lack of any consistency in decisions and the political tensions between left and right.  Perhaps more than any other field of employment law, wage and hour litigation is overtly political.  Conservatives and evangelicals view meal and break time claims as “Extortion cases” while other more moderate views consider the right to overtime as a fundamental legislative barrier to barrier to worker exploitation.  The two views took new twist and turns in the NLRB decision D.R. Horton, Inc. Case No. 12-CA-25764( January 3, 2012) and the California Supreme Court Decision in Harris v. Liberty Mutual, SI56555 (December 29, 2011).  In Horton, the NLRB ruled that workers could not be forced to waive their right to bring class actions by means of compulsory arbitration agreements which explicitly require arbitration and forbid class actions either before a court or in arbitration.  Conversely, the California Supreme Court essentially reversed its landmark ruling in Bell v. Farmers Ins. Exchange (2001) 87 Cal. App. 4th 805 in finding that insurance adjusters working for Liberty Mutual were exempt employees.  In so doing, our local Supremes effectively subordinated California law to Federal regulation; an act of judicial capitulation that will likely have profound consequences.  An analysis of the se two decisions and links to them follow.

In Horton, the NLRB considered whether the defendant employer violated the National Labor Relations Act (NLRA)by requiring all workers, as a condition of employment,  to waive the right to file class actions for wages and other benefits whether at arbitration or in court. The Board found that such coerced agreements violate section 7 of the NLRA, which gives employees the right to act together for mutual aid or protection.  The Court rejected the claim by the Defendant that the agreement –in the context of employees subject to the NLRA – did not violate the Federal Arbitration Act (FAA) which tends to make all employment-related arbitration provisions, no matter how onerous or one-sided–  enforceable.  The Board clearly found that the employees had the right to bring “employment-related claims on a classwide or collective basis in court or before an arbitrator.” Slip. op at 3.

In Horton, Plaintiffs sought relief under the Fair Labor Standards Act (FLSA) for unpaid overtime.  The key to the decision is that the prohibition against class actions violated the right to “collective action” under the NLRA.  Plaintiffs’ counsel wisely chose to challenge the anti class action clause under the NLRB rather than argue a right under the FLSA to collective action or to try to persuade a court that the agreement was unconscionable.  The reason for this round about route is the United States Supreme Court (SCOTUS).  This court, in its majority conservative makeup embraces vigorously any limitation on collective action and virtually rubber stamps restrictive arbitration agreements.  In particular, SCOTUS is a huge fan of the Federal Arbitration Act (FAA) and routinely strikes down States’s efforts (usually by California) to moderate the use and misuse of arbitration agreements.  Recently, in a much criticized case, AT&T Mobility v. Concepcion, 131 S.Ct. 1740 (2011), the Court struck down a decision of the California Supremos in Discover Bank v. Superior Court (2005) 30 Cal.Rptr.3d 76 which has applied California’s judge made unconscionability test to arbitration clauses.  According to SCOTUS, the FAA is the supreme law of the land and no consumer contract (including employment) is ever likely to be unconscionable by barring class actions and by mandating arbitration.  Plaintiffs in Horton recognized the roadblock and made a very neat end-run around it through the NLRA.  However, the battle is not over: next stop is either the 11th Circuit or the D.C. Circuit and then most likely the supremes once again.  If Scalia and Thomas still hold the whip hand then all the work may have been in vain.

But while the Feds moved to the center, a chastened California Supreme Court headed right. Harris v. Liberty Mutual (supra) is a major disappointment to the Plaintiff’s bar.  In 2001 the Bell decision allowed white collar functionaries –people with no real power and very limited independence – to receive overtime benefits.  The industry in question –insurance – re-tooled and went back for a do-over.  This time they won.  This case is troubling for two reasons.  First, it follows the lead of Federal courts which have limited the principles of the “Administrative Exemption” to the traditional factory setting and have rejected overtime claims unless the employee(s) have been engaged in some form of manual labor (c.f. United Parcel Service v. Superior Court (2011) Cal. App.4th 57. ).  Second, it follows Federal regulation where that regulation is more restrictive than state regulation or case law.  It has long been the most basic principle of construction that Federal regulation, in the overtime context, is followed or is persuasive, only where it is more beneficial to the employee than the State variant.  While California looks to federal regulation for guidance, it does so only where the regulation is consistent with, or is more protective of, the worker than California law.  The courts are bound to follow whichever law or regulation  provides the greatest protection.  Aguilar v. Association for Retarded Citizens (1991) 234 Cal. App. 3d 21, 34-5.  Where a federal regulation limits or reduces the protections offered under California’s statutes and wage orders, the federal rule or regulation is disregarded.  E.g.  Department of Labor Standards Enforcement (DLSE) rule 51.1.5.1 (“DLSE will disregard the language of 29 CFR §541.107 and rely upon the language of 29 CFR §541.207 to define the term ‘discretion and independent judgment’ in each of the exempt classifications.”)  In short, while federal regulations can provide guidance to California courts, that guidance is no longer persuasive (or even relevant) where California statutes, regulations, or public policy differ from the federal by providing greater protections: “Federal regulations are of little if any assistance in construing state regulations which provide greater protections to workers.” Morillion v. Royal Packing Co. (2002) 22 Cal. 4th 575, 593-94.

Unfortunately, Harris seems to ignore this well settled precedent and rely exclusively on restrictive Federal interpretations.  The clear implication of this case is that the California Supreme Court will be looking east for direction rather than leading the way as it has done in years past.  Harris has to be chalked up as a major victory for those who feel that the right to overtime is “extortion”. Choppy seas indeed.

Board finds that certain mandatory arbitration agreements violate federal labor law

See the case document: Frances Harris v. The Superior Court of Los Angeles County

IS SECURITY SCREENING TIME COMPENSABLE?

Security screening time is not compensable under the Fair Labor Standards Act. The Supreme Court reversed the Ninth Circuit in Integrity Staffing Solutions, Inc. v. Busk. In this class action, plaintiff warehousemen sought compensation for time spent undergoing security screening at the end of their shift. The purpose of the screening was to ensure against employee theft. The Supreme Court reasoned that security clearance was not an activity “related” to the work performed by the employees. Just as “walking, riding, or traveling to and from” the place of work is not compensable, neither is an “unrelated” activity such as “postliminary” security screening. See 2014 WL 6885951 (USSC 12/9/14).

Our opinion is that this does not bode well for wage and hour claims under the Fair Labor Standards Act. The decision was unanimous, and its reasoning appears highly suspect. Security screening is required by the employer, whereas commuting to and from the place of employment is a voluntary action by the employee.

In Laffitte v. Robert Half International, Inc., the court approved class counsel’s contingency fees of one-third of a $19 million “common fund” awarded to a class of employees. A putative class member objected to the settlement, claiming that the attorneys’ fee was excessive. The court disallowed the objection and upheld the contingency fee. It noted that the percentage of common fund monies remains viable under California law. 2014 WL 5470463 (10/29/14).

Note that under federal law, this award would likely not have survived challenge. In the Ninth Circuit there is a 25% “benchmark.” Moreover, federal courts generally compare a percentage recovery specified in an attorney-class fee agreement against the attorney fee that would be recovered under the Lodestar method. (The “Lodestar” method of calculating attorney fees is arrived at by multiplying the number of hours worked by each attorney against that attorney’s reasonable hourly rate. That total – which is subject to enhancement or reduction – is expected to bear a “reasonable relationship” to the award recovered under a common fund contingency.)

In Ferrick v. Santa Clara University (6th Dis. 12/1/14) 2014 WL 6748938, the Court of Appeal reinstated a cause of action for retaliatory discharge under Labor Code § 1102.5(b). Plaintiff’s complaint made numerous allegations that a member of administration and plaintiff’s immediate supervisor had engaged in extensive wrongdoing and inappropriate behavior. During discovery, it transpired that plaintiff had made only limited disclosures of allegedly inappropriate financial dealings to Santa Clara University (“SCU”) management. The trial court reasoned that because the injury was only to the pecuniary interests of SCU, a private institution, and not to the public at large, the public could not have sustained an injury; therefore, there could be no determination of violation of public policy.

The Court of Appeal disagreed and reinstated the claim. Plaintiff modified the claim to assert that she reasonably believed the behavior of her supervisor violated Penal Code § 641.3 (commercial bribery), California Code of Regulations, Title 2, Section 926-3 (taxable value of lodging), and other laws.

The Court of Appeal held that, “On this very narrow basis, the complaint states a cause of action for wrongful termination in violation of public policy embodied in section 1102.5(b).” Id., citing Foley v. Interactive Data (1988) 47 Cal.3d 654.

Perhaps most significantly, this court (which is the Court of Appeal for Santa Clara County) discussed the split of opinion between American Computer Corp. v. Superior Court (1989) 213 Cal.App.3d 664 on the one hand, and Collier v. Superior Court (1991) 228 Cal.App.3d 1117 on the other hand. Where American Computer expressly required that there can be no claim for retaliation where an employee simply complains to a supervisor, the court found that the decision in Collier, which held that an action may be stated where the employee only complains to the employer, rather than to a government entity, does state a cause of action. The Ferrick court noted, “We concluded that Collier is better reasoned. As observed in that case, Foley concerned an employee’s disclosures that the FBI was investigating a co-worker’s suspected embezzlement from a former employer … The Legislature’s recent amendment to section 1102.5 to protect disclosures to employees buttresses Collier’s analysis. Here … , the alleged misconduct did not affect only SCU’s private interest; it also implicated the public policy embodied in section 1102.5.” Id.

REIMBURSEMENT FOR WORK-RELATED PHONE CALLS ON PERSONAL CELL PHONES

A 3-judge panel of the California Court of Appeals for the Second District held that when employees are required to use their personal cell phones for work-related voice calls, the employer must reimburse the employee for those cell minutes at a reasonable rateCochran v. Schwan’s Home Serv., Inc., (2014) 228 Cal. App. 4th 1137, 1140.

The plaintiffs in Cochran were employed to deliver meals to customers at their homes. The plaintiffs were required to use their personal cell phones to contact customers regarding order and delivery, but the employees were not reimbursed any money for these calls. The 3-judge panel found that reimbursement of a reasonable percentage of the employee’s cell phone bill for work-related calls is required by Labor Code § 2802 (a rule requiring employers to reimburse employees for necessary expenditures of carrying the duties of the job). Employer reimbursement is required whether the employee has limited or unlimited talk minutes on her cell phone plan.