In Clarke v. AMN Services, LLC, dba Nursechoice (February 8, 2021), the federal appeals court over California and other western states ruled AMN’s set “per diem” (per day) payments, aimed at reimbursing home health personnel for their overnight hotel and other expenses, are to be treated as wages. Accordingly, AMN also should have included those reimbursement amounts in calculating the “regular rate” for overtime pay for a broad class of workers, a not-so-little mistake that result in huge liabilities from the related Labor Code violations, interest and civil penalties that can follow.

Two AMN employee groups were involved:

• those working temporary assignments near their home base; and
• those working assignments more than 50 miles from home, requiring overnight accommodations. Each group received the same per diem. However, AMN treated the local group’s payments as incentive wages, subject to employment taxes, while it regarded the long-distance group’s payments as non-wage (and untaxed) expense reimbursement

The Ninth Circuit court saw no basis for treating the payments differently. If per diem was a wage for some, it was a wage for all. The court also pointed to:

• ANM’s reduction of the per diem for missing a shift for any reason, indicating the payment was tied to hours worked rather than expenses incurred;

• Allowing the long-distance employees to “bank” per diem received for extra work hours and to use that accumulation to cover missed time, again signaling payment by the hours worked; and

• Not requiring the long-distance group to provide expense documentation and not tying payments to actual amounts expended.

Take-Aways:

employers paying a flat rate per diem to cover expenses should review such practices against this decision, preferably with an experienced a management-side employment attorney, to ensure consistency and legal compliance. Management does not want to repeat AMN’s experience, losing a class action suit seeking collection of significant unpaid overtime, interest and penalties.

For more information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

See also:

• What’s New In 2021: Reimbursing Employee Personal Vehicle Use: IRS Mileage Rate Decreasing 1.5 Cents (December 29, 2020)
• The Basics of Overtime: Five Rules for California (April 27, 2018)

Helena Kobrin
April 29, 2021

“Piece work” pay or “piece rate” is compensation for an employee’s unit of production. Until two key 2013 California Supreme Court decisions (Gonzales v. Downtown L.A. Motors and Bluford v. Safeway), this arrangement had long-worked to benefit workers and management in many industries. Trucking companies commonly paid drivers by the mile or by the delivery, auto repair shops paid mechanics by the task accomplished, and agricultural enterprises paid field workers by the bin or other unit measure.

A production-based system enables business to set workers’ pay rates proportional to the enterprise’s overall income generated from that production while employees, where paid well above industry norms for their efforts, tend to be more invested in company success.

Production-Based Piece Pay Hits a Wall: However, the Gonzales and Bluford decisions found that pure production structures violated California’s required minimum wage payment “for every hour worked.” Piece rate alone by definition did not pay for the daily hours an employee spends on paid rest breaks or on performance of other required tasks (so-called “non-productive” compensable time, e.g., staff meeting, preparation or clean-up time).

From the many years whole industries had appropriately paid by the piece up to that time, these two decisions created the crushing prospect of retroactive wage liability going back as far as 2009. Seeking to restore balance, the California Legislature enacted Labor Code 226.2, effective January 1, 2016. This section:

• provided employers a way to protect against such claims by a specific “safe harbor” formula of back pay to December 31, 2015
• required piece rate-paying businesses from January 1, 2016 to pay at least the applicable minimum wage (state or higher local standard) for each and every hour worked, whether that time is for production, other tasks or rest breaks; and
• required such businesses to also pay a specially calculated premium for every rest or recovery period to which such employee is entitled for each day of labor.

Production, Piece Pay is Still Possible with Good Planning, Policy: The 2016 law does not outlaw piece pay. It only requires that employers structure such plan carefully to comply with the minimum wage for “every hour worked” concept. Thus, a company intent on maintaining the incentives to high production may construct “hybrid” production-based plans which:

• start with a foundation of guaranteed minimum wage for each hour worked
• provide an additional piece rate calculation on top of that foundation
• pay the specially calculated premium for every daily rest or recovery period to which an employee is entitled; and
• comply with all section 226.2 rules on additional paystub entries for piece work compensation systems.

See also:

• California Piece Rate Law: No Time to Relax on Rest-Recovery Premium Pay (September 30, 2016)
• Navigating Piece Work Pay in California – Employers Urgently Must Revise Wage Systems, Including Possible Hourly-Plus-Piece Hybrid Plan (August 12, 2016)

For more information on such matters, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Tim Bowles
April 23, 2021

“Exempt” in California workplace-speak commonly means an employee classified as exempt from overtime pay. Such workers may also be exempt from other rights and benefits accorded hourly workers, including provided meal and rest periods and "reporting time pay” (a minimum two hours of wages daily once on the job).

With criteria specified in California Industrial Welfare Commission (IWC) Wage Orders, the three most common exemptions are executive, administrative and professional. The concept is that such high-level overseers of organization and production are the most skilled and responsible for the success of the enterprise and thus can command appropriately higher pay for such expected results without regard to the time required.

All three types have the same “salary” basis requirement: a lump-sum wage equivalent to no less than two times the state minimum wage for full-time (40 hours per week) employment. For 2021, those minimums are: (a) for employers with 25 or fewer employees, salary no less than $1,040 per week, $4,507 per month, or $54,080 per year; and (b) for employers with 26 or more employees, salary no less than $1,120 per week, $4,853.33 per month, or 58,240 per year.

Each of these three exemptions have distinct so-called “exempt duties” as below. To qualify for exemption in a given seven-day workweek, the individual must be “primarily” engaged in such duties, i.e., at least 51% of his or her time during that period. However, a properly salaried individual engaged 51%-plus of a workweek’s time in exempt duties for any combination of the three (e.g., 30% time on executive, 21% administrative) will also be exempt from overtime, meal/rest periods, etc.

Executive Exempt Duties

• Has personnel managerial authority and responsibilities for the entire company or at least one of its departments or subdivisions, for example planning, recruiting, allocation of work priorities, coordination, documentation (e.g., statistics, performance evaluations) and production results;

• Customarily and regularly directs the work of two or more other employees;

• Has the authority (or provides substantial input) to hire or fire others;

• Customarily and regularly exercises discretion and independent judgment in such duties (versus merely applying one’s memory in following prescribed procedures).

Administrative Exempt Duties

• Has authority and responsibilities over performance of either office or non-manual work directly related to management policies or general business operations; or educational establishment administration or academic instruction; and

• Customarily and regularly exercises discretion and independent judgment (versus merely applying rote techniques/procedures, making decisions of little consequence or working in the production aspects of the business); and

• Carries out any one or more of the following:

1. Regularly and directly assists a proprietor or other senior executive who has delegated part of his/her discretionary powers to the employee;

2. Performs, under only general supervision, work along specialized or technical lines requiring special training, experience or knowledge (such as tax, insurance, and sales research experts, credit managers, purchasing agents, buyers, and personnel and safety directors); or

3. Executes, under only general supervision, special assignments and tasks (such as buyers, field representatives and location managers for motion picture companies). Professional Exempt Duties, Qualifications

• Engaged in the licensed practice of law, medicine, dentistry, optometry, architecture, engineering, teaching or accounting; or

• Engaged in an occupation commonly recognized as a “learned or artistic profession”;

• Customarily and regularly exercises discretion and independent judgment in his/her position.

California provides overtime exemption for workers meeting other detailed duties and compensation requirements, including certain physicians, computer programmers and truck drivers. The Department of Labor Standards Enforcement (DLSE) provides a comparison chart.

See also:

• What’s New in 2021: California Minimum Wage Increases (December 23, 2020)

For more information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Cindy Bamforth
April 22, 2021

The U.S. Equal Employment Opportunity Commission’s (EEOC) 2020 Enforcement and Litigation Report tallies its workplace discrimination charges processed between October, 2019 through September, 2020.

Retaliation charges top the list as they have in recent years, with 37,632 claims constituting 55 percent of the 67,448 charges the EEOC received, followed by disability, race, sex and age.

The EEOC recovered just over $106 million for claimants over the reporting period, resolving 165 lawsuits and filing 93 new ones.

Retaliation and disability also top the California Department of Fair Employment and Housing’s (DFEH) latest list of complaints filed for 2019. The DFEH received 22,584 complaints that year, settling 710 cases for a total $14,834,753.

An educated workforce is management’s best frontline defense to prevent unlawful practices, including regular “zero-tolerance” sexual harassment training. California law requires two hours of such training for managers, supervisors and executives and one hour for non-supervisory employees every two years. See, Deadline Nigh: January 1, 2021 - Workplace Harassment Prevention Training Webinar (November 2021).

Thorough training should cover all forms of discrimination, harassment and retaliation, including for example race, gender, religion, age, sexual preference, national origin, and disability.

Another essential is up-to-date anti-discrimination, harassment and retaliation policies to promote and maintain a professional and productive work environment.

For more information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

See also:

• Workplace Discrimination Prevention-California’s Fair Employment and Housing Act, A History (March 26,2021)
• Live and Let Live - Preventing Political Backlash in the Workplace (October 23, 2020)
• Cautionary Tale Episode 37: Workplace Culture Clash – California Challenges Cisco Systems for Color (“Caste-Based”) Discrimination (September 4, 2020)

Helena Kobrin
April 16, 2021

Employers must verify identity and work authorization for U.S.-based citizens and noncitizens using “Form I-9 Employment Eligibility Verification” (I-9 Form). Potential consequences for noncompliance can include civil fines of up to $ 23,331 per occurrence as well as criminal prosecution and imprisonment.

Last year, Department of Homeland Security (DHS) announced that employers and workplaces operating remotely due to COVID-19 could perform I-9 document inspections remotely over video link, fax or email so long as they obtained, inspected and retained copies of the documents within three business days of hire and entered “COVID-19” as the reason for the physical inspection delay in the Form’s additional information field.

The DHS recently announced extension of this flexibility from April 1 to May 31, 2021.

Thus, employees hired on or after April 1 and who work exclusively in a remote setting due to COVID-19 are temporarily exempt from Form I-9’s physical document inspection requirements until they undertake non-remote employment “on a regular, consistent, or predictable basis,” or until DHS terminates this policy.

Employers who avail themselves of this option “must provide written documentation of their remote onboarding and telework policy for each employee.”

Once normal operations resume, all employees using remote verification must report to their employer within three business days for an in-person document verification, at which time the employer should add “documents physically examined” with the date of in-person inspection to the Form’s additional information field.

Affected employers must monitor the DHS and U.S. Immigration and Customs Enforcement (ICE) websites for further updates.

See also:

• Oy Vey, Now What? Employers Must Use New I-9 Form Starting May 1, 2020 (April 25, 2020)

For more information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Cindy Bamforth
April 15, 2021

Effective March 29, 2021, California Labor Code 248.2’s “COVID-19 Supplemental Paid Sick Leave” law (SPSL) requires employers with 26 or more total employees, i.e., nationwide, to provide up to 80 hours of supplemental paid sick leave benefits to eligible/covered California workers through September 30, 2021. The new law also covers providers of in-home supportive services (see California Labor Code 248.3).

SPSL revives and significantly expands last year’s COVID-19 supplemental paid sick leave law (Assembly Bill [AB]1867), which applied mostly to food sector workers and employers with over 500 employees.

As explained in the Labor Commissioner’s FAQs, the new SPSL includes:

Eligibility

A covered employee must be unable to work or telework for any of the following reasons:

• Caring for yourself: The employee is subject to a government-directed COVID-19 quarantine or isolation period, has been advised by a healthcare provider to quarantine, or is experiencing COVID-19 symptoms and seeking a medical diagnosis; or

• Caring for a family member: The employee is caring for a family member subject to COVID-19 quarantine or isolation or has been medically advised to do so, or is caring for a child whose school or place of care is closed or unavailable due to COVID-19; or

• Vaccine-related: The covered employee is attending a vaccine appointment or is experiencing vaccine-related symptoms.

Employers may not request confirming medical certification for any of these grounds.

Pay Amounts, Rates and Timing

• Covered, eligible employees may take up to 80 hours of COVID-related paid sick leave (not to exceed $511 per day and $5,110 in total) immediately upon an oral or written request to their employer.

• Part-time employees with a regular weekly schedule must be paid the number of hours normally scheduled to work over two weeks.

• Part-time employees with a variable schedule must be paid 14 times the average number of hours worked per day over the past six months.

• Non-exempt employees must be paid the highest of: employee’s pay rate for the workweek in which leave is taken; state minimum wage; local minimum wage: or average hourly pay for the preceding 90 days (excluding overtime pay).

• Exempt employees must receive the same rate of pay as wages calculated for other paid leave time.

• Paid leave taken in 2020 under AB 1867 or the federal Families First Coronavirus Response Act (FFCRA) does not count towards the new SPSL leave bank.

Retroactivity: Employers must make retroactive payments for prior leave taken under any of the above eligible reasons from January 1, 2021 upon the covered employee’s oral or written request. Retroactive payments must be made “on or before the payday for the next full pay period” after receiving the request.

Model Notice/ Wage Statement:

• Employers must provide written notice to all covered employees. The Labor Commissioner’s model notice in English and Spanish may be used for this purpose.

• Itemized wage statements must list the amount of available SPSL separately from regular paid sick leave. See FAQ No.20 for more information.

Leave Interactions:

• Employers may not require a covered employee to use other paid or unpaid leave before using SPSL.

• However, employers may require employees to first exhaust their SPSL bank before paying COVID-19 related exclusion pay under Cal/OSHA’s COVID-19 Emergency Temporary Standard (ETS). See, Stay-Away “Exclusion” Pay Required Pandemic Wages for Positive Test or Workplace Exposure (March 18, 2021).

• Employers may also credit any paid leave (except for regular non-COVID-related California paid sick leave) taken by a covered employee between January 1, 2021 and March 28, 2021 for any of the above eligibility reasons.

Prohibited Retaliation/Discrimination: Retaliation or discrimination against a covered employee requesting or using SPSL is strictly prohibited.

California employers should review new section 248.2 and the accompanying FAQs to confirm compliance steps, including closely coordinating with payroll companies, downloading and distributing the model notices, and training managers on the new law.

See also:

• Pandemic Leave 2.0 - Feds Promote Expanded Paid Leave with Tax Credits, Through September 30, 2021 (March 25, 2021)
• One Certain Constant: Change - New Retroactive Paid Pandemic Leave Requirement (March 19, 2021)
• What’s New in 2021: Paid Pandemic Leave in the New Year - Some Benefits Optional, Some Mandatory (January 15, 2021)

For more information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Cindy Bamforth
April 9, 2021

The California Labor Commissioner has assessed Irvine’s Perfect Point Corp. dba South Coast Gymnastics and its owner, Xiaoping Li, $1.3 million for wage and hour violations affecting 28 coaches and administrative staff after a COVID-19 compliance inspection turned into a payroll audit of the preceding three years.

Labor Commissioner Lilia García-Brower stated: “California law requires that workers be paid for all hours worked. Anything less is wage theft. My office is committed to ending wage theft and recovering stolen wages.”

Finding some workers earned less than $5/hour, the commissioner issued citations of $590,689 for minimum wages, contract wages, meal and rest periods, and waiting time penalties, and $342,765 in interest for employees. The assessments also include $386,996 in civil penalties for minimum wage, pay period, paystub, and meal and rest break violations as well as so-called liquidated damages, a doubling of the minimum wage underpayment.

Notably, under California Labor Code 558.1 business owners, directors, officers, or managers can be held personally liable for such wage and hour violations. If the company cannot pay a full assessment, the Labor Commissioner can thus go after the personal assets of such individuals.

Take-Aways:

Employers should take regular care to confirm and ensure wage and hour compliance before the government comes knocking. That knock may well require a company to open many doors for inspection. South Coast Gymnastics’ wide-ranging and potentially “business-busting” audit arose out of a seemingly limited check on COVID precautions measures.

See also,

• Cautionary Tales Episode 36: Is Gig up for Car Wash Company? – First AB 5 Suit Challenging Independent Contractor Classification (July 31, 2020)
• Cautionary Tales Episode 31: Residential Care Facility Not Feeling the Love – 708,521 Reasons to Pay Workers Legally (July 12, 2019)
• Cautionary Tales Episode 27: Walmart Hit with Six Million Dollar Verdict for “Discouraging” Off-Site Meal Breaks (May 23, 2019)

For further information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin
April 8, 2021

With two exceptions (New Zealand, 1894; Australia, 1896), no country had a minimum wage law until the 20^th Century. Instead, employers paid what they contended were “just (or fair) wages” on the purported mutual consent of their workers. If employees agreed to labor at the take-it-or-leave-it rates business offered, U.S. courts ruled they were powerless to challenge the sanctity of that private contract.

With the Progressive Era (1896 to the 1920s), religious and political groups attacked such “just wages” arguing that the vast majority of employees lacked the bargaining power to negotiate a livable wage. In the United States and throughout the industrialized world, factory conditions were also notoriously harsh and workdays long. Not uncommonly at the time, American businesses hired woman and children for lower wages than men. By 1910, two million children worked up to 20 hours a day in this country. Exhausted, many were killed or injured on the job.

In the 1920s, American lawmakers sought to improve working conditions in their states. By 1925, fifteen states had passed minimum wage laws, including California at 16 cents an hour.

President Roosevelt’s New Deal fundamentally changed the nationwide employment landscape. The 1938 Fair Labor Standards Act (FLSA) – overcoming an earlier Supreme Court invalidation of federal labor conditions legislation -- established the first federal minimum wage at 25 cents an hour. The law also imposed overtime pay (“time and a half”) after a mandated 40-hour regular workweek. The Act also introduced the classification of “exempt (from overtime)” and “non-exempt” employees as well as outlawed many forms of child labor.

By 1943, the Labor Department had raised the federal minimum wage to 40 cents an hour. It hit $1.00/hour in 1955. Federal minimum wage has been $7.25 an hour since 2009. Although each U.S. state has the power to set a higher minimum wage than the federal rate, none can set a lower one.

The FLSA, American wage regulations, and state enactments have evolved into a complex body of state and federal employment law requiring that employers take careful measures to ensure compliance.

At least ten nations still lack minimum wage standards for private business employment, including Ethiopia, Qatar, Singapore, Somalia, United Arab Emirates and Yemen.

See also:

• Workplace Rhythm & Cues - Our Employee Policy Handbook & Forms for 2021 (January 21, 2021)
• What’s New In 2021: California Minimum Wage Rate Increases (December 23, 2020)

For more information on such matters, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Tim Bowles
April 2, 2021

The California Supreme Court has ruled that employers may not round worker time entries for meal breaks, in contrast to rules permitting rounding for start and end of workday time entries. Kennedy Donohue v. AMN Services, Inc. (Donohue) (February, 2021).

The Donohue Court observed that California and federal law permit employers to round an employee’s time entries at the beginning and end of a day if done by a fair and neutral method that will result in the employee being paid for all hours worked over a period of time. Such rounding is permissible because “for purposes of calculating wages, counting slightly fewer minutes one day can be made up by counting a few more minutes another day.”

In contrast, the Court found that such rounding practices cannot apply to the 30-minute meal break required by Labor Code 512 and the Industrial Wage Orders before the end of five hours and the second meal break required before the end of 10 hours in a workday.

The Donohue Court concluded “the health and safety concerns underlying ‘meal period’ provisions distinguish the meal period context from the wage calculation context, in which the practice of rounding time punches was developed.” Rounding meal time entries thwarts that health and safety purpose since “a shorter or delayed meal period one day cannot be offset by a longer or earlier meal period another day.”

In addition, rounding may deprive an employee from receiving the one-hour premium pay required under Labor Code 226.7 and the Wage Orders for missed, short or late meal periods.

Employers should eliminate rounding meal break times and consult with an employment attorney on any advisable remedial measures to address mistaken past practices.

See also,

• What are a California employer’s duties on meal and rest breaks? (January 21, 2021)
• Required Meal Periods and Rest Breaks Revisited – Off-Duty Time During a California Work Day (April 12, 2018)
• Brinker: California’s Meal Break Breakthrough – Employers are No Longer the Lunch Police (May 1, 2012)

For further information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin
April 1, 2021