California’s workplace overtime rules do not apply to those workers who qualify for exemption under one or more categories, including:

● Executive Exemption: Executive employees are exempt from overtime if paid on a salary (current minimum is $640 per week; $2,773.33 monthly) and if primarily (over 50%) engaged office or non-manual management of at least two personnel below them in the chain of command and with authority to exercise discretion and independent judgment on the post. “Management” means having and exercising the authority for full responsibility over the planning, recruiting, work priorities and allocation, coordination, documentation (e.g., statistics, evaluations of personnel performance) and production results of a company or a distinct area of a company. See also, “The California Executive Exemption”;

● Administrative Exemption: Administrators are exempt if paid on salary as above for executives and if primarily (over 50%) engaged office or non-manual work on planning, organizing, or enabling production concerning, for example, creation or execution of the management policies or general business operations of his/her employer or his/her employer’s customers. An exempt administrator must regularly and customarily exercise independent judgment and discretion in his/her position. See also, “Administrators and Overtime Pay in California”; “The California Administrative Exemption”;

● Professional Exemption: An individual is an exempt professional if paid on salary as above and primarily (over 50%) engaged in one of several specified licensed occupations (including law, medicine, dentistry, optometry, architecture, engineering, teaching, or accounting) or in an “occupation commonly recognized as a learned or artistic profession.” As above, an exempt professional must regularly and customarily exercise independent judgment and discretion in his/her position.

A worker is exempt from California’s overtime rules if he meets the detailed duties and compensation requirements for an inside salesperson; an outside salespersons; or an computer employees. There are a host of other avocations (for example, interstate truck drivers) that may be exempt from California overtime rules because of the preemption of federal or other laws.

Classification of a worker as exempt from overtime is a detailed, sometimes complex process, best accomplished with the aid of a skilled employment law attorney.

Clearly Written Agreements are the “Ounce” of Prevention

Commissions payable to former employees present a special set of issues for California business. The importance of actions to prevent disputes increases over 2012 as the state will require all employee commission agreements to be in writing by December 31. See, “Employee Commissions”

California requires that all earned compensation must be paid at least twice per month. An employer also must usually pay a worker all earned compensation immediately upon termination or be subject to penalty for each day of delay up to a 30 day maximum. However, an employee may not have earned a sales commission at termination if, for instance, the company requires the customer’s actual payment of funds before commission on those funds is owing. The employer must pay such a commission earned after termination immediately upon the receipt of the funds.

Determination of just when a commission is “earned” can become quite contentious at or following termination unless there is a clear written guideline. What of the commission for a particular account a salesperson was instrumental in securing but which did not actually close until shortly after that employee has departed the company? Is a commission earned when the customer agrees to do business, makes an order, pays for an order, or receives and is satisfied with the order?

The answer can legitimately be any of these, depending on the scope of the salesperson’s responsibilities to ensure completion of the transaction. However, that proper “earning point” could be anyone’s guess if there is no written standard. It also could be a litigation nightmare if a salesperson leaves employment before the employer considers one or more commissions have been earned and the stakes are high enough.

Actions that can reduce the potential for such post-termination disputes include:

● Unambiguous contract terms with each salesperson establishing the worker’s responsibilities for a successful complete transaction and a corresponding point in that transaction when the commission is earned and payable; and

● Where possible, forthright and constructive communication between management and the salesperson at termination to confirm or reach specific written resolution on the latter’s rights to commissions on pending transactions.

Skilled legal counsel can almost certainly help anticipate and deal with the grey areas on commission rules before any problems actually arise.

For more information, see the DLSE’s FAQ on Paydays, Pay Periods and the Final Wages.

Termination for Absence or Lateness

As “at-will” status permits either the employer or the employee to freely end the relationship even with no advance notice and for no reason at all, obviously a business can legitimately terminate an “at-will” worker for not showing up or for being late. However, there are some practical considerations.

Normally, management should not be moved to make such a significant move on a single instance or a few isolated occurrences. Termination is rarely the first solution since a company has usually gone through some expense and time to train an individual worker. The majority of absent or tardy employees are willing and able to improve their reliability by a discussion alone.

It also matters why the worker has been absent or late. If the employer is aware the employee was injured on the job but must fill the person’s position to maintain operations, that company should take care to document the business necessity of having to lay off that injured worker. An individual may have a discrimination claim if he can show that management terminated him or her because he/she has filed or who intends to file for workers’ compensation insurance recovery.

Similarly, certain workers unable to work due to any illness, injury or temporary disability may be entitled to unpaid leave and reinstatement to their old or a comparable position. Such rights depend on the size of the company among other factors. For instance, in California, any business with five or more persons on its payroll must provide up to four months unpaid leave for an employee unable to work due to medical complications of pregnancy, childbirth or newborn care.

While an employee exercising a right to any such unpaid leave is entitled to have his or her former job back or a comparable position as long as he/she returns to work within the legally specified time limit, such worker is entitled to no greater protection against a business-related termination than if he or she was not out on a leave. For example, if a company must for business reasons lay off a significant number of workers, those out on leave are entitled to no greater protection than if they were still working at the time.

Thus, again, management must take particular care when laying off a worker currently out on a protected leave. This is a situation where a company should almost certainly seek the guidance of skilled legal counsel. Among the many precautions, an employer should document the business reasons for the decision to the greatest extent reasonably possible. Even then, management should communicate forthrightly with the person on leave and seriously consider offering that worker severance pay in exchange for a signed release document.

See also, “Written Employee Attendance Policy,” “Pregnancy Disability Leave, Employers’ Obligations,’ “Disability and Leave of Absence Policies, Keeping Up with Changing Employment Laws,” and “Termination Of Employees, How To Fire A Troublesome Worker Without Getting Burned.’

Proceed with Good Judgment

The best handling for workplace theft is to prevent it in the first place. Suspected or alleged employee thievery – and an employer’s twin obligations to protect the group against an actual thief and to protect the accused from false charges — is a delicate challenge. A company’s much more straightforward task is to implement policies and security measures designed to deter the criminally tempted.

Yet, stealing can occur regardless. A clearly written and regularly updated employee handbook should thus include standards and rules for conduct, reporting, investigation, fair hearing and discipline that discourage as well as address such alleged bad behavior. Company executives as well as policy must promote the purpose of reporting and investigation: to maintain a safe, just and trusting work environment. It is leadership’s responsibility to ensure that staff are not altogether intimidated out of raising a theft or other crime problem to management. Leadership must also assure that employees are not reduced to apathy from unfair procedures that prevent the full airing of accusations and discourage justice.

California and many other states maintain “employment-at-will” as the presumed working relationship between employer and workers. “At will” means that either side may end the relationship at any time, with or without advance notice and with or without any reason for the termination.

However, “at will” employment is not any manager’s or worker’s license to treat fellow employees harshly or unfairly. While an employer may fire someone for no reason, that company may not terminate for an unlawful reason. Thus, if management lets someone go for an unsubstantiated accusation of theft, the incident could lead to an action for defamation by the accused against the company as well as the individual accuser. If management summarily fires an employee for having mistakenly reported an innocent co-worker’s embezzlement, that now-former employee might well have a claim for unlawful retaliation over the incident.

In the face of alleged workplace theft, it is thus a good idea for management to consult with a skilled employment lawyer for guidance on the conduct of an impartial investigation and on any ensuing steps for discipline or termination.

Clear, Written Workplace Policies are Essential

There is no California law requiring a business to pay its employees for time off work, whether for vacation, holidays, sick time, or any other reason. However, employers do commonly have policies and plans that provide such compensation. Once a company opts to provide any such benefits, California does have applicable law depending on just what sort of “time off” is involved.

California defines “vacation pay” as a form of wages that an employee earns (“accrues) as the working year progresses. For example, if an employer has a policy granting a worker two weeks of paid vacation per year, that employer will have earned half of that benefit (one week of paid vacation) after having worked six months of that year. This means that a business must on termination pay an employee all of his or her accrued but unused vacation pay (no “use-it-or-lose-it”).

On the other hand, California defines “sick leave” as a non-accruing benefit. For example, a company policy that specifies four paid sick days per calendar year obligates the business to pay that benefit only to the extent that an employee actually uses it in that year. Come the next calendar year, the potential benefit renews but it does not accrue (mount-up) over time. Thus, sick pay in California is “use-it-or-lose-it.

Some employers opt to combine sick leave and vacation benefits into a single time block commonly referred to as “paid time off” or “PTO.” Such policy permits the employee to choose when and for what purpose he/she will utilize the allotted paid time away. However, California requires that all such PTO time is an accruing, earned throughout the year” wage-benefit. Thus, as with a straight vacation policy, an employer must pay pay an employee on termination all of his or her accrued but unused PTO (again, no “use-it-or-lose-it”).

There is much more to a sound vacation pay or PTO policy on which a knowledgeable employment lawyer can help. For instance, a company’s written rules can (and should) define a maximum limit for such accrued benefit, after which the employee must actually take such paid time off before he/she can resume earning such vacation pay or PTO. Otherwise, a company could face an employee leaving after, say, 20 years of service with a legitimate claim for immediate payment of an equivalent duration of accrued vacation that the person never bothered to take in all those years. See, “Vacation Pay in California, No Picnic for Employers Who Don’t Know the Rules.”

It would seem too obvious to have a policy that workers must show up in order to keep their jobs and to be paid. Perhaps it is, but it’s still not a bad idea to issue clear written directives expecting attendance, specifying work days and working hours, and setting procedures for employees to notify the business when they are unable to keep the schedule.

The policy should provide examples of reasonable, legitimate circumstances for absences, including illness or family emergency. Some companies also specify bonuses for wellness, i.e, consistent attendance and productivity.

Some basic elements are:

• Employee work hours – Define a work day, including the times for start, meals, and ending work. Define the schedules for each shift if the company has more than one. The policy should also inform workers of their rights to take paid breaks;

• Define lateness – Be clear about what constitutes lateness (including any few “buffer zone” minutes) and the procedure for notifying a manager if one is going to be late;

• Family Medical Leave Act (FMLA) (federal), California Family Rights Act (CFRA) – A business with 50 or more employee must comply with these laws and should have written policy covering qualifications for such leaves and the applicable procedures.

• Pregnancy Leave: A California business with five or more employees must provide unpaid leave benefits for pregnant women and new moms. Written policy should describe the requirements and procedures compatible with the law;

• Leave of absence – A company that chooses to provide unpaid leaves of absence should of course issue policy on the criteria and other rules;

• Discipline and consequences – The policy should also specify the company’s ability to decide the consequences for attendance policy violations. The standard should not be set out in stone, i.e., a business should not specify some set discipline for an infraction since circumstances are almost always going to vary. It is of course a given that an employer’s disciplinary actions cannot discriminate on the basis of gender, older age, and the host of other protected classifications.

For assistance in creating a workable, legally sound attendance policy, contact an employment law attorney.

Sitting Down on the Job

As raised in several recent class action suits against retail giants Wal-Mart, Home Depot and others, California requires “suitable seating” for certain employees.

California Industrial Welfare Commission Wage Order 7-2001, section 14, covering retail businesses, states:

(A) All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of such seats.

(B) When employers are not engaged in the active duties of their employment and the nature of their work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.

While this retail business wage order does not require that all employees must be able to sit at any time, it does require that employees be allowed to sit down if the nature of their work reasonably permits the use of seats.

Eligible workers do not need to first request seating from their employers in order to bring a claim under Wage Order 7. Thus, California retail employers should be proactive on providing reasonable seating, supported by adequate policy consistent with the above requirements, (A) and (B).

California Requires Employers to Pay

A company’s required uniforms for its workforce can provide a more professional image and an espirit de corps and comradery among employees. While the federal law permits employers to require workers to finance their own mandatory uniforms under certain circumstances, California requires businesses to foot the bill.

The U.S. Fair Labor Standards Act allows employers to make wage deductions for mandatory uniforms as long as those deductions don’t reduce employees’ regular pay below the federal minimum wage of $7.25 per hour.

On the other hand, the California Labor Code section 2802 specifies that if an employer requires that an employee wear a uniform, the employer must pay the cost of that uniform.

An experienced employment law attorney can help guide business owners and human resources managers through further fine points on this issue.

State Supreme Court Issues an Employer-Favorable Decision in a “Mixed Motive” Case

In February, 2013, the California Supreme Court decided that even where illegal discrimination (e.g., racial, gender, age, religion) was one of a number of motivating factors in terminating a worker, the employer will not be liable for damages if it can show the business would have fired that person in any event for non-discriminatory reasons.

Wynona Harris v. City of Santa Monica was the Supreme Court’s long-anticipated decision in a “mixed motive” case, where a defendant employer is found to have terminated someone for improper, discriminatory reasons as well as legitimate business purposes.

Ms. Harris was a newly hired bus driver for the city. She had a rocky start, including two accidents and two unexcused latenesses or no-shows. Under the city’s point system, termination was warranted.

While her supervisors were deciding whether to fire Ms. Harris over these offenses, she announced she was pregnant, a circumstance protected against discrimination by California’s Fair Employment and Housing Act (FEHA). See, e.g., Bowles Law Office blogs “Pregnancy Disability Leave, California Employers’ Obligations” and “Expanded Pregnancy Health Benefits Law for Most California Employees.” The city nevertheless terminated Ms. Harris a few days later, citing the above performance problems. She sued Santa Monica for pregnancy and sex discrimination under FEHA.

At trial, the judge directed the jury that the city was liable for discrimination if the employee-plaintiff was able to prove that her pregnancy was a “motivating factor/reason for the discharge.” The jury then found that Harris’s pregnancy had in part motivated the city to terminate her, awarding her $177,905 in damages and $401,187 in attorneys’ fees.

However, the Supreme Court found the trial judge’s jury instruction had been mistaken. The court resolved that if the city can prove it would have terminated Ms. Harris even if she had not been pregnant at the time, then she will not be able to collect damages nor be reinstated. While this poses a significant new barrier for plaintiffs to receive compensation for emotional distress or lost wages resulting from a “partly discriminatory” termination, the decision still permits injunctions and attorney fee awards against employers in such a “mixed motive” case. Obviously, no employer is immune from complying fully with prohibitions against unlawful discrimination.

For help on how this decision might impact your business, please contact our firm’s attorneys Tim Bowles or Cindy Bamforth.

(Photo by Paul Sakuma, Associated Press)