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Key Wage and Hour Issues *
California Minimum Wage.As of January 1,2008 the minimum wage is
$8.00 per hour.
Wages Premium pay required by the Labor Code and IWC Wage Orders such as overtime premium, meal
period premium, rest period premium, reporting time pay and split shift premium are “wages.”
Wages Payable on Termination - Labor 201 If an employer discharges an employee, the wages earned and unpaid at the time of discharge are
due and payable immediately.
Employee Who Quits - Labor Code 202 If an employee not having a written contract for a definite period quits his employment, his wages
shall become due and payable not later than 72 hours thereafter, unless the employee has given
72 hours previous notice of his intention to quit, in which case the employee is entitled to his
wages at the time of quitting.
Penalty for Failure to Pay Wages on Termination (Waiting Time Penalty) - Labor Code 203 If an employer willfully fails to pay any wages of an employee who is discharged or who quits,
the wages of such employee shall continue as a penalty from the due date thereof at the same rate
until paid or until an action therefor is commenced; but such wages shall not continue for more than
30 days. Daily Rate times 30 actual days.
Termination At-Will - Labor Code 2922 An employment, having no specified term, may be terminated at
the will of either party on notice to the other.
Changed Conditions Of Employment. An at-will employee who continues to work
after the employer gives notice of changed terms of employment will be deemed to
have accepted the changed terms. Digiacinto v. Ameriko-Omserv Corp. (1997) 59
Cal.App.4th 629.
Makeup Work Time - Labor Code 513 If an employer approves a written request of an employee to
make up work time that is or would be lost as a result of a personal
obligation of the employee, the hours of that makeup work time, if
performed in the same workweek in which the work time was lost, may
not be counted towards computing the total number of hours worked in
a day for purposes of the overtime requirements specified in Section
510 or 511, except for hours in excess of 11 hours of work in one day
or 40 hours in one workweek.
Release Of Claim Of Wages Illegal Unless Wages Previously Paid - Labor Code 206.5 No employer shall require the execution of any release of any claim or right on account of wages
due, or to become due, or made as an advance on wages to be earned, unless payment of such
wages has been made.
Allowable Deductions - Labor Code 224 Section 224 allows deductions when authorized by the
employee in writing but that authorization is limited to (1) insurance premiums, (2)
hospital or medical dues, or (3) other deductions not amounting to a rebate or deduction
from the wage paid to the employee. Section 224 may not, consequently, be relied upon
to allow an employer to deduct an amount from an employee’s pay which is for the use or
benefit of the employer. Caveat: Under the IWC Orders in effect prior
to January 1, 2000, Section 9 of each Order provided that the employer might “deduct
from the employee’s last check the cost of an item (uniform, tools, etc.) furnished…in the
event said item is not returned.” As the courts have stated on a number of occasions, the
Legislature enacted Labor Code §§ 400-410 to provide a method whereby the parties to
an employment contract may create a bond to insure against loss by the employer and the
IWC’s rationale in adopting the provisions of Section 9 may not pass judicial scrutiny
Employer's Duty to Defend; Employer Must Indemnify Employee for All Losses
Incurred in Direct Consequence of Discharge of Duties - Labor Code 2802 An employer shall indemnify his or her employee for all necessary expenditures of losses
incurred by the employee in direct consequence of the discharge of his or her duties, or of his or
her obedience to the directions of the employer, even though unlawful, unless the employee, at
the time of obeying the directions, believed them to be unlawful.
The test for recovery under section 2802 is whether the expense or loss was incurred
within the course and scope of employment. In determining whether, for purposes of
indemnification, an employee’s acts were performed within the course and scope of
employment, the courts have looked to the doctrine of respondeat superior. Under that
doctrine, an employer is vicariously liable fo r risks broadly incidental to the en terprise
undertaken by the employer--that is, for an employee’s conduct that, in the context of
the employer's enterprise, is “not so unus ual or startling that it w ould seem unfair to
include the loss resulting from it among other costs of the employer’s business.”
Rodgers v. Kemper Constr. Co. (1975) 50 Cal.App.3d 608, 619
It should be noted that the IWC Orders allow an employer to require that employees
furnish “hand tools and equipment” if the hand tools and equipment are “customarily
required by the trade or craft”. The DLSE has concluded that in the phrase “hand
tools and equipment”, the word “hand” is an adjective which modifies both the word
“tools” and the word “equipment”. As the Labor Commissioner opined in 1984, an
automobile is not the type of equipment contemplated in the IWC Orders. In its Statement
as to the basis for the recently adopted wage orders, the IWC states
that the term “hand tools and equipment” is to be read narrowly and is limited to “hand
(as opposed to power) tools and personal equipment, such as tool belts or tool boxes,
that are needed by the employee to secure those hand tools. Moreover, such hand tools
and equipment must be customarily required in a recognized trade or craft.”
Duty to Defend Lawsuits - The statute requires the employer not only to pay any judgment entered
against the employee for conduct arising out of his employment but also to defend an employee
who is sued for such conduct. Unlike an insurer, the employer need not defend whenever there
is a mere potential for liability. However, if the employer elects to run a risk and refuses to
defend, the employer must indemnify the employee for his attorney fees and costs in defending the
underlying action if the employee was sued for acts within the scope of his employment. (Douglas v.
Los Angeles Herald-Examiner (1975) 50 Cal.App.3d 449 , 457-465. . . . The test for recovery under
section 2802 is whether the conduct defended against was within the course and scope of employment.
(Douglas, supra, 50 Cal.App.3d at pp. 463-465.)" Jacobus v. Krambo Corp. (2000) 78 Cal.App.4th 1096.
The California cases have consistently held that under the doctrine of respondeat superior, sexual
misconduct falls outside the course and scope of employment. (Lisa M. v. Henry Mayo Newhall
Memorial Hospital (1995) 12 Cal.4th 291, 48 Cal.Rptr.2d 510.
Costs which are incurred in training leading to licensure pursuant to a statute (real
estate, etc.) are not, usually, the responsibility of the employer. (O.L. 1994.11.17)
IRS Mileage Allowance. DLSE has opined that use of the IRS mileage allowance will
satisfy the expense s incurred in use of an employee’s car in the absence of evidence to
the contrary.
Award Of Attorney’s Fees And Interest. Both interest and attorney’s fees incurred
in claims and actions to enforce 2802 are recoverable and may be awarded by either the
courts or the Labor Commissioner to an employee (but not the DLSE or employer)
who prevails in such an enforce ment claim or a ction. (Labor Code § 28 02(c))
Note: The provisions of Labor Code § 2800 and 2802 may not be altered or waived by
private agreement. (Labor Code § 2804)
Vacations - Labor Code 227.3 Neither the statute nor the case law requires that any employer provide vacation benefits; the law only addresses the requirements
which a vacation plan, if offered, must meet. Vacation plans which establish probation periods
during which no vacation pay is vested are permitted. If the employer has not promised vacation
pay during a probation period, no pro rata portion is due the employee whether or not he or she
passes probation. Vacation plans may not have a “use it or lose it”
provision as such provision would be an illegal forfeiture. However, a variant of a “use it or lose
it” policy whereby a cap is placed on the amount of vacation which may accrue if not taken is
acceptable. Henry v. Amrol (1990) 222 Cal.App.3d Supp. 1
Gratuities - Tips - Tip Pooling - Labor Code 350, 351"Gratuity" includes any tip, gratuity, money, or part thereof, which has been paid or given to
or left for an employee by a patron of a business over and above the actual amount due such
business for services rendered or for goods, food, drink, or articles sold or served to such patron.
Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid,
given, or left for (Labor Code 351). An employer policy mandating a
tip pooling arrangement among waiter/waitresses and busboys and bartenders was legal
despite the language of Section 351 under Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.e3d 1062.
The DLSE interpreted Labor Code section 351 to allow for a tip pool policy requiring the
employee receiving the tip to contribute 15% of the actual tips to the tip pool and all money
from the tip pool then to be distributed to the other employees in the “chain of service” based
on the number of hours they worked, as is consistent with industry custom, provided:
1) Tip pool participants are limited to those employees who contribute in the chain of the
service bargained for by the patron, and
2) No employer or agent with the authority to hire or discharge any employee or supervise,
direct, or control the acts of employees may collect, take or receive any part of the
gratuities intended for the employee(s) as his or her own.
Credit Card Charges As Tips. An employer cannot offset the cost of credit card charges
which may be incurred by an
employer against tips paid by the patron on the credit card. This addition is in keeping
with a decision of the 1st District Court of Appeal which held that any cost of doing
business must be borne by the employer and not the employee. (Hudgins v. Neiman
Marcus (1995) 34 Cal.App.4th 1109) Inasmuch as credit card purchases are common,
the cost of credit card charges are a cost of doing business.
Solicitation of Employees by Misrepresentation - Labor Code 970 Labor Code § 970 prevents employers from inducing employees to move to, from, or
within California by misrepresentating the nature, length or physical conditions of
employment. Double damages are the remedy for violation of section 970. Thus, double
any cost incurred by the employee in changing employment (and residence) is
recoverable.
Construction and Industry Contractors' Requirements - Labor Code 1021 Labor Code § 1021. Any person who does not hold a valid state contractor's license
issued pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the
Business and Professions Code, and who employs any worker to perform services for
which such a license is required, shall be subject to a civil penalty in the amount of one
hundred dollars ($100) per employee for each day of such employment. The civil
penalties provided for by this section are in addition to any other penalty provided by
law.
Independent Contractor vs Employee Burden Of Proof. The party seeking to avoid liability has the burden of proving that
persons whose services he has retained are independent contractors rather than
employees. In other words, there is a presumption of employment. (Labor Code
§ 3357; S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations (1989) 48 Cal. 3d 341 at pp.
349, 354.)
Multi-Factor Borello Test. In determining whether an individual providing service
to another is an independent contractor or an employee, there is no single determinative
factor. Rather, it is necessary to closely examine the facts of each service relationship
and to then apply the “multi-factor” or “economic realities” test adopted by the
California Supreme Court in Borello, supra, 48 Cal.3d 341.
The Test Prior To Borello came from Tieberg v. Unemployment Insurance Appeals Bd. (1970) 2 Cal.3d 94 3,
which held that “the principle
test of an employment relationship is whether the person to whom service is rendered
has the right to control the manner and means of accomplishing the result desired.”
Under this test, “if the employer has the authority to exercise complete control, whether
or not that right is exercised with respect to all details, an employer-employee
relationship exists.” Empire Star Mines Co. v. Cal. Emp. Com. (1946) 28 Cal.2d 33, 43.
Borello brought about a sharp departure from this overriding
focus on control over work details. The growers who were found to be employers by
the Borello court did not have the contractual authority to exercise supervision over
work details, yet the court ruled that they retained “all necessary control” over their
operations. The simplicity of the work, or the existence of a piece-rate based payment
system, may make it unnecessary for an employer to assert direct control over work
details and the employer may retain “all necessary control” by indirect means.
“The ‘control’ test, applied rigid ly and in isolation, is often of little use in evaluating the
infinite variety of service arrangements.” (Borello, 48 Cal.3d at p. 350) While the right
to control the work remains a significant factor, the Borello court identified the following
additional factors that must be considered:
1. Whether the person performing services is engaged in an occupation or business distinct from that
of the principal;
2. Whether or not the work is a part of the regular business of the principal;
3. Whether the principal or the worker supplies the instrumentalities, tools, and the place for the
person doing the work;
4. The alleged employee’s investment in the equipment or materials required by his task;
5. The skill required in the particular occupation;
6. The kind of occupation, with reference to whether, in the locality, the work is usually done under
the direction of the principal or by a specialist without supervision;
7. The alleged employee’s opportunity for profit or loss depending on his managerial skill;
8. The length of time for which the services are to be performed;
9. The degree of permanence of the working relationship;
10. The method of payment, whether by time or by the job;
11. Whether or not the parties believe they are creating an employer-employee relationship.
Blacklisting - Labor Code 1050 It is illegal for an employer (or any person, agent or officer thereof) to prevent the reemployment
of an employee, through misrepresentation in a reference letter or other means, who has left the
employer’s service either by discharge or voluntary quit. An employee who is damaged by an employer’s
untruthful statements may recover treble damages. (Labor Code § 1054).
It is not illegal, however, for an employer to furnish, upon special
request (i.e., a specific request for information regarding that employee), a truthful
statement concerning the reasons for termination. (Labor Code § 1053)
In the past, it was not unheard of for employers to put a special mark or signal on
letters of recommendation or answers to requests for information which, to the
initiated, conveyed a meaning different from that conveyed by the plain words of the
letter or message. The Legislature made any such mark or sign or the fact that the
information was furnished without there being a “special” request, prima facie evidence
of a violation of the statute. (Labor Code § 1053).
Illegal Contracts - Labor Code 219 Private Parties May Not Agree To Alter Statutory Duties. (De Haviland v. Warner
Bros. Pictures (1944) 67 Cal.App.2d 225, 235-236. This principle of law is particularly important in
dealing with employment contracts, for instance, to payment of less than the
minimum wage; or payment of less than a premium for overtime; or payment of less
than the established prevailing wage on public works jobs; or employment of any employee
for longer hours than those fixed by the IWC order; Timely payment of wages. Section 219
prohibits private parties from contravening any portion of the Labor Code which regulates the
payment of wages. Such contracts are void.
Illegal to take Employees' Wages - Labor Code 221
In Hudgins v. Neiman Marcus Group, Inc., (1995) 34 Cal.App.4th 1109, the court held that
Labor Code § 221 has been interpreted by the California
courts to prohibit deductions from an employee’s wages for cash shortages, breakage,
loss of equipment, and other business losses that may result from the employee’s simple
negligence. The court also cited Barnhill v. Saunders (1981) 125 Cal.App.3d 1; 177
Cal.Rptr. 803, which held that deductions of this nature would, as the DLSE has long
held, “unjustifiably provide em ployers with self-help remedies that are not available to
other creditors.” Such deductions, the court further noted, contravene the public policy
expressed in sections 400 through 410 of the Labor Code.Bonus Plans
A bonus is money promised to an employee in addition to the salary,
commission or hourly rate usually due as compensation. Bonuses may be in the form of
a gratuity where there is no promise for their payment; or they may be required payment
where a promise is made that a bonus will be paid in return for a specific result.
Courts have held that shortages or other ingredients not within the control
of the employee and which are usually considered a cost of doing business may not be
deducted when calculating a bonus. (Quillian v. Lion Oil (1979) 96 Cal.App.3d 156
An employee who voluntarily leaves his employment
before the bonus calculation date is not entitled to receive it if the employer has
expressly qualified its promise of a bonus on a requirement of continued employment.
Lucien v. All States Trucking (1981) 116 Cal.App.3d 972, 975. Where the promise of a
bonus is not expressly conditioned on continued
employment an employee who voluntarily leaves employment may be entitled to the
bonus if other applicable conditions have been satisfied. Thus, in Hill v. Kaiser Aetna
(1982) 130 Cal.App.3d 188, an employee who resigned on January 3, 1978, was held to
be vested in his right to a bonus for calendar year 1977 where: (1) the bonus plan did
not expressly require continued employment, and (2) the bonus was an inducement for
continued employment. Id., at 196.
Termination Of The Employment By The Employer.
Common law contract
theories will not allow one party to the contract to prevent the other party from
completing the contract. If the employee is discharged before completion of all of the
terms of the bonus agreement, and there is not valid cause, based on conduct of the
employee, for the discharge, the employee may be entitled to recover at least a pro-rata
share of the promised bonus.
Calculation Of “Regular Rate Of Pay” Where Bonus Is Involved.
When calculating
the regular rate of pay for purposes of overtime calculation under the IWC Orders,
non-discretionary bonuses must be calculated into the formula.
Reporting Time Pay. Section 5 of each of the Industrial Wage Orders
(A) Each workday an employee is required to report for work and does report, but is not put to work or is
furnished less than half said employee’s usual or scheduled day’s work, the employee shall be paid for half
the usual or scheduled day’s work, but in no event for less than two (2) hours nor more than four (4) hours, at
the employee’s regular rate of pay, which shall not be less than the minimum wage.
(B) If an employee is required to report for work a second time on any one workday and is furnished less than
two (2) hours of work on the second reporting, said employee shall be paid for two (2) hours at the
employee’s regular rate of pay, which shall not be less than the minimum wage.
(C) The foregoing reporting time pay provisions are not applicable when:
(1) Operations cannot commence or continue due to threats to employees or property; or when
recommended by civil authorities; or
(2) Public utilities fail to supply electricity, water, or gas, or there is a failure in the public utilities, or
sewer system; or
(3) The interruption of work is caused by an Act of God or other cause not within the employer’s
control
(D) This section shall not apply to an employee on paid standby who is called to perform assigned work at a time
other than the employee’s scheduled reporting time.
Reporting time pay constitutes wages. (Murphy v. Kenneth Cole (2007) 2007 WL 1111223).
Thus, failure to pay all reporting time pay due at the time of employment termination may be the
basis for waiting time penalties pursuant to Labor Code § 203.
“Employee’s Usual Or Scheduled Day’s Work.” If an employee has no regularly
scheduled shift, then the usual shift worked by the employee (but in no event less than
two or more than four hours) must be paid. However, if an employee has a regularly
contracted “scheduled” relief shift of less than two (2) hours the reporting time penalty
is not applicable. However, in such a situation the employee must be paid for the
regularly scheduled contracted amount.
Time Spent under Employer's control is Compensable Time. Travel Time on Employer buses.
Employees must be paid for all time they are restricted to the employer’s
premises, or worksite, while “waiting out” a delay caused by rain or other inclement
weather, if they are not free to leave the premises or worksite during that time, even if
the employees are relieved of all other duty during the period of time they are waiting
for weather conditions to improve. The reason for this is that under the IWC orders,
employees must be paid for all “hours worked,” and the term “hours worked” includes
both “all time the employee is suffered or permitted to work, whether or not required
to do so,” and all “time during which an employee is subject to the control of an
employer.”
Restricting employees to the employer’s premises, or worksite, means that
the employee is subject to the employer’s control so as to constitute “hours worked.”
See Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575 (time spent by employees traveling
to job site on employer buses is compensable), and Bono Enterprises v. Labor
Commissioner (1995) 32 Cal.App.4th 968 (meal periods in which employees are required to remain
on company premises is compensable time). Under such circumstances, the employees
must be paid their regular rate of compensation (which cannot be less than the
minimum wage), or any overtime rate, if applicable.
Meal Periods. Section 11 of each of the Industrial Wage Orders (except Order 16).
(A) No employer shall employ any person for a work period of more than five (5) hours without
a meal period of not less than 30 minutes, except that when a work period of not more than six
(6) hours will complete the day’s work the meal period may be waived by mutual consent of the
employer and the employee. Unless the employee is relieved of all duty during a 30 minute meal
period, the meal period shall be considered an “on duty” meal period and counted as time worked.
An “on duty” meal period shall be permitted only when the nature of the work prevents an
employee from being relieved of all duty and when by written agreement between the parties an
on-the-job paid meal period is agreed to. The written agreement shall state that the employee may,
in writing, revoke the agreement at any time.
(B) If an employer fails to provide an employee a meal period in accordance with the applicable
provisions of this order, the employer shall pay the employee one (1) hour of pay at the
employee’s regular rate of compensation for each workday that the meal period is not provided.
The clear intent of the
IWC is that the burden of insuring that employees take a meal period within the
specified time is on the employer; it is the employer’s duty not to “employ any person
for a work period of more than...” It is the employer’s burden to compel the worker to
cease work during the meal period.
NOTE: The meal period requirement does not extend to exempt employees.
CAVEAT: Employers are strongly cautioned to examine their classification of employees
as exempt. If a class of employees is misclassified as exempt, severe penalties will apply in
any wage and hour class action case.
Limited Waiver Of Meal Period Requirement Allowed In Two Situations:
1. If a work period of not more than six hours will complete the day’s work, the meal period
may be waived entirely by mutual consent of the employer and employee. 1
a. Note, there is no requirement that the waiver be in writing in this situation.
b. There is no requirement in this situation that the employee be able to eat while on
duty as is the case with an “on-duty” meal period described below.
c. An employer may not employ an employee for a work period of more than 10 hours
in a workday without providing a second meal period. This second meal period
may be waived if the total hours of work are no more than 12 hours and the first
meal period has not been waived.2
2. An on-duty meal period may be provided if the employee agrees in writing, and such onduty
meal is allowed “only when the nature of the work prevents an employee from being
relieved of all duty.”
a. The test of whether the nature of the work prevents an employee from being
“relieved of all duty” is an objective one. An employer and employee may not
agree to an on-duty meal period unless, based on objective criteria, any employee
would be prevented from being relieved of all duty based on the necessary job
duties.
b. The written agreement for an on-duty meal period must contain a provision that the
employee may, in writing, revoke the agreement at any time.
Employers must keep time records of meal periods as well as when the employee begins and
ends each work period, split shift intervals, and total hours worked.
NOTE: Meal periods during which operations cease and authorized rest periods need not
be recorded. Section 7. RECORDS of Industrial Wage Orders.
Rest Periods . Section 12 of each of the Orders (except Order 16)
(A) Every employer shall authorize and permit all employees to take rest periods,
which insofar as practicable shall be in the middle of each work period. The
authorized rest period time shall be based on the total hours worked daily at the rate
of ten (10) minutes net rest time per four (4) hours or major fraction thereof.
However, a rest period need not be authorized for employees whose total daily
work time is less than three and one-half (3 ½) hours. Authorized rest period time
shall be counted as hours worked for which there shall be no deduction from
wages.
(B) In an employer fails to provide an employee a rest period in accordance with the
applicable provisions of this order, the employer shall pay the employee one (1)
hour of pay at the employee’s regular rate of compensation for each workday that
the rest period is not provided.
45.5
California Overtime Laws. Non-exempt
employees must be paid one-and-a-half times the
regular hourly rate for hours worked over 8 in
a day or over 40 in a week. Double time must be
paid for hours worked over 12 in a day.
Exemptions from Overtime Laws. Exempt vs
Non-Exempt classification.
"White collar"
exemptions.
"Executive" or managerial exemption,
"Professional" exemption, and
"Administrative" exemption. To be exempt
from overtime in California, both the "Salary
test" AND "Duties test" must be satisfied.
"Salary test". A weekly salary of at least two
times the minimum wage must be paid (that is,
$33,280. per year) for an employee to be exempt
- hourly paid employees must be paid overtime
no matter how much they are paid.
"Duties test.
Job title is irrelevant - the test looks at the
actual job duties performed. Must perform duties
of the exemption more than 50% of the time.
Managerial misclassification occurs when a
"working manager" performs the same duties as
his subordinates. Administrative
misclassification occurs when the employee spends
most of his time on work "producing" the
company's products or in the selling function.
The administrative exemption only applies when
the employee is spending most of his time on
duties supporting the company's "organization"
functions.
Meal Breaks and Rest Break Requirments.
Non-exempt employees who work a shift greater
than 5 hours must be provided a 30 minute unpaid
meal break.
* - Many sections above are taken verbatim
from the DLSE ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL