The Labor and Employment Law Blog : Labor & Employment Lawyer & Attorney : Weintraub Genshlea Chediak Law Firm : Sacramento California : Labor & Employment Law Blog

On August 19, 2009, in response to the current economic downturn, the California Labor Commissioner published an Opinion Letter which provides employers with an option to laying off their exempt employees; furloughs.

Under the Labor Commissioner’s Opinion Letter, it is now lawful for California employers to reduce the work hours of their exempt staff, with a commensurate reduction in salary. California law now permits employers to temporarily reduce an exempt employee's salary, with a commensurate reduction in hours, without jeopardizing the employee's overtime exempt status, so long as employee still meets the minimum requirements for exempt status, such as wage ($2,773.33 per month) and duty requirements.

Previously, a 2002 Opinion Letter provided that a reduction of an exempt employee's salary pursuant to a corresponding reduction in hours was a violation of California law. The August 19, 2009 Opinion Letter reverses this interpretation of California law. It is now permissible for employers to temporarily reduce exempt employees’ salaries when their hours are reduced without affecting the employees’ exemption status.
 

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In Nein v. HostPro, Inc., a Court of Appeal held that the language of the employee’s employment agreement precluded him from recovering commissions following his termination of employment. Plaintiff worked as a sales representative for HostPro for a period of 2 years. He signed an employment agreement that expressly provided that Plaintiff would be eligible for commission pay “so long as [he] remains employed with the Company as a Sales Representative.”

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On January 6, 2009 the Department of Labor (DOL) issued Opinion Letter FMLA2009-1-A to respond to a request for clarification regarding employee notification procedures under the Family and Medical Leave Act (FMLA) as discussed in the DOL’s previous Wage and Hour Opinion Letter FMLA-101 (January 15, 1999).  The DOL indicated that it was brought to its attention that some employers had interpreted Opinion Letter FMLA-101 to stand for the proposition that under the FMLA, employers were not permitted to apply their internal call-in policies or discipline employees under their no call/no show policies, provided the employees provide notice within two (2) business days that the leave was FMLA-qualifying, regardless of whether the employee could have practicably provided notice sooner.

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On February 17, 2009 President Obama signed the American Recovery and Reinvestment Act of 2009 (“ARRA” or “Recovery Act”) which contains a number of entitlements and obligations affecting the workplace. In order to comply with their new obligations and understand the benefits available to employees or former employees, employers should familiarize themselves with the ARRA promptly. Below is a summary of some of the various employment-related provisions from the ARRA

1.      COBRA Subsidy.

 a.     What is it?

The ARRA provides for a 65% COBRA premium subsidy for certain “assistance eligible individuals.” An “assistance eligible individual” is a COBRA “qualified beneficiary” who meets all of the following requirements:

a.      Is eligible for COBRA continuation coverage at any time during the period between September 1, 2008 and December 31, 2009;

b.      Elects COBRA coverage (when first offered or during the additional election period provided for under the ARRA); and

c.      Has a qualifying event for COBRA coverage that is the employee’s involuntary termination during the period of September 1, 2008 and December 31, 2009.

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In his first significant act as President in the labor and employment arena, President Obama effectively overturned the United States Supreme Court’s decision in Ledbetter v. Goodyear Tire & Rubber Co. by signing the Lilly Ledbetter Fair Pay Act ("Ledbetter Act") into law this Thursday. The main thrust of the Ledbetter Act is that it “resets” the statute of limitations for wage claims based on discrimination each time an employee receives a paycheck affected by the alleged discriminatory practice.

Background
 

Lilly Ledbetter worked for her employer, Goodyear, for 19 years. She accused Goodyear of gender discrimination under Title VII on the grounds that, throughout her almost 20 career, she was consistently paid less than male employees who were similarly situated. The Supreme Court found that Ledbetter’s Title VII action was time-barred; holding that the statute of limitations starts running under Title VII when the employer makes the original discriminatory pay decision. The Court rejected Ledbetter’s argument that her claim was “refreshed” each time she received a paycheck affected by Goodyear’s discrimination.

The Ledbetter Act

The Ledbetter Act “resets” the statute of limitations for wage claims based on discrimination (in any form recognized by federal law) each time an employee receives a paycheck affected by the alleged discriminatory practice. Moreover, the Act defines “unlawful employment practices” broadly to encompass any practice that affects an employee’s compensation.

Bottom Line

Given the speed of which this new administration was able to push through this fairly substantial legislation, employers should anticipate continued robust efforts from Washington to further bolster employee protections in the coming months.

What Steps Should Employers Take?

While it will likely take some time for the courts to interpret the new law and provide guidance for employers to take steps to avoid litigation, there are a few initial steps employers should consider taking now:
 

• Examine compensation policies to ensure they do not discriminate on the basis of a protected class or protected activity.
• Work with employment counsel to structure and conduct a self-audit of compensation practices and discuss best practices for retention and destruction of compensation records.
• Train supervisors and managers regarding proper and improper considerations when making discretionary compensation decisions.

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California’s Department of Labor Standards Enforcement (DLSE) has released two opinion letters (OpLtrs) that should please employers by sanctioning their use of alternate, electronic wage payment methods. The OpLtrs approve the use of payroll debit cards and “Money Network checks” for the payment of wages under the California Labor Code, provided that:

• The programs make the full amount of wages available to employees on their regularly scheduled payday without penalty or reduction;
• Employees’ participation in the program is voluntary; and
• The programs provide a sufficiently extensive network of ATMs and other locations at which employees may access their accounts.
   

The DLSE addressed the use of two types of payroll services: payroll debit cards and a nationwide check cashing service. The programs are voluntary and employees may elect, at any time, to receive their wages by direct deposit into an account at their own bank or credit union.

Before implementing either type of program, employers should work with their legal counsel and make sure they meet all the requirements outlined by the DLSE.
 

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Under California Labor Code section 351, tips are the "sole property" of the employees for whom they are left. As such, "employers" may not "collect, take, or receive" employee tips.

The issue in this case was who is the "employer" for purposes of section 351? At Starbucks, "shift supervisors" shared tips with other baristas. A Superior Court Judge in San Diego decided that the shift supervisors were not entitled to the tips at issue because they are "supervisor employers" for the purposes § 351. He ordered Starbucks to pay $100 million in back tips and interest to the non-supervisor baristas who shared the tips with their shift supervisor baristas. It should be noted that the shift supervisors worked side-by-side with the non-supervisor baristas performing many of the same tasks.
 

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State Court:

In Brinker Restaurant Corp. v. Superior Court (Hohnbaum), a group of hourly non-exempt employees brought a class action against the restaurant employer claiming that the employer failed to comply with meal and rest period obligations and also required employees to work off the clock. The employees specifically claimed that: 1) the employer’s practice of having employees take “early lunches” shortly after starting their shift and then requiring them to work another five to ten hours without receiving another meal period violated Labor Code section 512(a) and the wage orders; 2) they were not provided their rest periods between their second and fourth hour of work, and were not provided the rest period before the first meal period; and 3) they were required to work off the clock when they were clocked out for their meal periods.

The employees argued that the wage and hour violations were amenable for class treatment because the employer’s non-compliance with wage and hour requirements could be determined by time card records and the employer’s policies and practices. The trial court agreed and granted class certification. The employer petitioned for a writ of mandate to the court of appeal. The court of appeal issued an unpublished decision which went up to the California Supreme Court. The Supreme Court vacated the court of appeal’s original decision and transferred the matter back to the court of appeal for reconsideration. It was on reconsideration that the court of appeal concluded that the class certification order from the trial court was erroneous and must be vacated because the trial court failed to properly consider the elements of the employees’ claims in determining whether they are susceptible to class treatment. In discussing the elements of the employees’ claims, the court of appeal handed down the following encouraging pronouncements:
 

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This case concerns the lawfulness of defendant Costco Wholesale Corporation’s formula for computing overtime compensation on semi-annual bonuses paid to hourly employees. The trial court determined that defendants’ bonus overtime formula for the class of employees who qualify for the maximum base bonus (plaintiffs) violates California law, and ordered use of a different formula. The court concluded that defendant’s formula violated neither California nor federal law, and reversed the judgment with directions to enter judgment for defendant.

a. The Base Bonus.

Costco pays a formula-based bonus, based on paid hours, to long-term hourly employees. To be eligible for the bonus, paid in April and October, these employees must: (1) have been paid a specified number of hours for continuous service -- 8,000 hours (approximately four years) for those hired before March 15, 2004, and 9,200 hours (approximately 4.6 years) for those hired after that date; (2) generally be at the top of their pay scale; and (3) have been employed by defendant on April 1 for the April bonus and October 1 for the October bonus. The maximum semi-annual base bonus amount is $2,000 for those with less than 10 years of service, $2,500 for those with 10 to 14 years of service, $3,000 for those with 15 to 19 years of service, and $3,500 for those with 20 or more years of service.

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Effective January 1, 2009, Senate Bill 940 creates new wage and hour requirements for temporary service employers. Along with adding section 210.3 to the California Labor Code, SB 940 also amends sections 203, 203.1, 204, 210, 215, 220, and 2699.5 of the Labor Code. Existing law requires that employers pay their employees twice during each calendar month. SB 940 creates a special set of requirements for temporary service employers with employees' working week-to-week or day-to-day. Employees on week-to-week assignments are now required to be paid weekly, while employees working day-to-day must be paid daily. Further, employees assigned to clients engaged in a trade dispute must be paid daily. These new requirements do not apply to employees who are assigned to a client for more than 90 consecutive calendar days.
 

Because existing law imposes civil and criminal penalties for wage violations, SB 940 also creates state-mandated local programs to enforce these existing civil and criminal penalties for violations of the new temporary employee wage requirements.
 

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AB 10 was passed and clarifies that computer professionals who meet the computer professional exemption requirements outlined in Labor Code section 515.5, are exempt if they are paid no less than $36 per hour if paid on an hourly basis, and if no less than $75,000 per year for full-time employment if paid on a salary basis. Such salary must be paid at least once a month at a monthly rate of no less than $6,250.

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