California businesses do not have to offer workers paid vacations. However, the Labor Code dictates that if implemented, such pay is an accrued or accruing benefit, prohibiting a “use it or lose it” plan.

Since an employee continually earns the benefit as she/he works, a policy that simply provides a few weeks of paid vacation each year without limit could become a problem. For instance, a worker who hadn’t bothered taking his/her two-three weeks of paid vacation/year over a couple of decades could suddenly have over a year of pay coming upon termination or retirement.

A written paid vacation policy should thus specify a ceiling accrual amount (for example, 18 months of benefits) after which the employee cannot earn more until he/she utilizes at least some of the benefit already earned.

As a vacation benefit “accrues” or “vests” over a work year, the employer must pay an employee that proportion earned up to her/his departure date during that benefit year (in addition to any vacation benefit accrued but unused from prior years). A company that overlooks paying this pro-rated amount on a midyear termination or resignation could be subject to a “waiting time” penalty up to one month’s wages.

Labor Commissioner FAQs offer more detailed information including permitted earning limitations for new hires, employer rights to regulate vacation times, and much more.

Take-Aways:

If a business opts to offer it, management should take care to issue clearly stated paid vacation benefit rules and procedures. With its distinct characteristics, the policy should be separate from paid holiday, sick pay and other leave provisions.

See also,

• For the Record – Sound Management Practices for Personnel Documentation (August 14, 2020)
• Give Me a Break! – Time Off for Fire Fighting, Crime Victims, Drug Rehab, School Visits, and More (June 22, 2018)
• When a Door Shuts …. Make Sure It’s Fully Closed – Figuring Out the Final Paycheck (May 25, 2018)
• Prepare for Summer – Effectively Manage Paid Vacations (May 10, 2018)

Tim Bowles
May 21, 2021

Wisely, the federal and California workplace anti-discrimination protections do not include ineffectiveness, ineptness, uselessness, or incompetence.

However, across the spectrum of personnel decisions – including recruitment, testing, hiring, pay scale, benefits, promotions, discipline and termination – management may not discriminate on any “protected classification.” In no particular order, the vast majority of California workers (including employees, interns, volunteers, and independent contractors) are shielded from such unequal treatment due to:

• the person’s (or his/her associate’s) age (40 and over)
• ancestry
• national origin (including language use restrictions and use and possession of a driver’s license issued to persons unable to prove their legal presence in the U.S.)
• color
• race and traits historically associated with race (including hair texture and “protective hairstyles” such as braids, locks and twists)
• religion or religious creed (including religious beliefs and observances and religious dress and grooming practices)
• gender (including gender expression and gender identity such as transgender or transitioning)
• pregnancy, childbirth, breastfeeding, and/or any related medical conditions
• sexual orientation (heterosexuality, homosexuality and bisexuality)
• disability (mental or physical, including HIV and AIDS)
• requests for disability or religious accommodation
• medical condition (including cancer or a related medical condition or genetic characteristics not presently associated with symptoms of disease)
• family care or medical leave
• genetic information (including genetic tests, participation in clinical research or manifestation of disease)
• marital status (including registered domestic partner status)
• military or veteran status, and
• engagement in protected activity (whistleblowing).

The discrimination does not have to be direct or overt. Violations may be circumstantial, e.g., a discriminatory policy against older or disabled people by recruitment campaigns and ads for “active,” “dynamic,” or “energetic” candidates.

Management’s frontline protections against such claims should start – and will hopefully end – with sound policy, regular training and prudent practice.

See also,

• Discrimination: Old Definition New Meaning - The Supreme Court’s “Unexpected” Expansion of Equal Rights for Gay and Transgender Employees (June 24, 2020)
• Abolishing Workplace Bigotry: A Work in Progress (March 5, 2020)
• Boss Sauced – Senior Manager – Must Prevent Supervisor Harassment, Discrimination (September 23, 2019)
• Be Kind to Mommies – Pregnancy Discrimination Is a Really Bad Idea (June 21, 2019)

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

Tim Bowles
Helena Kobrin
May 21, 2021

Employees’ attorneys are increasingly relying on the California Private Attorney General Act (PAGA) to pursue businesses for Labor Code violations.

Under PAGA procedures, an employee may file a private “representative” lawsuit – on behalf of her or himself and other “aggrieved” workers – to collect civil penalties where the state chooses not to pursue such claims. The bulk of any penalties assessed – 75 percent – goes to the state with the remainder distributed among the affected employees and a modest representative award to the plaintiff. PAGA also directs payment of the plaintiff attorney’s fees.

The law can produce staggering results. In Magadia v. Wal-Mart Associates, Inc. (May, 2019), three PAGA violations affecting a portion of Walmart’s California employees yielded an award of $53,901,700.

The plaintiff asserted penalties for two pay stub violations under Labor Code 226(a).

First, while Walmart included hourly rates and hours worked as required on its bi-weekly pay stubs, it omitted this information on quarterly stubs for certain bonus and overtime compensation.

Though the plaintiff sought $131,427,750 in PAGA penalties on this violation alone, the court awarded “only” $48,046,000, finding that Walmart had operated on a reasonable belief it was complying with the law until the court ruled otherwise.

Second, the court directed Walmart to pay $5,785,700 for failing to list the inclusive work dates on final pay statements, even though Walmart included this information on later stubs.

The plaintiff did not personally experience a third alleged violation – for inadequately compensating non-compliant meal breaks – but still secured $70,000 in PAGA penalties for other employees who did. California courts allow a PAGA plaintiff to bring multiple claims even if he or she has not experienced all of them.

Walmart will survive these results even if it loses its pending appeal . No doubt there are many thousands of employers who would be unable to endure such PAGA challenges to workplace practices non-compliant with Labor Code standards.

PAGA has been criticized as law primarily benefiting the attorneys seeking its remedies. A recent report shows:

• PAGA plaintiffs receive an award average of $12,828
• employees such plaintiffs represent receive an average $2,078 payout; while
• the average PAGA case attorney fee award is $405,724.

The attorney fee component of this Walmart case has yet to be resolved. It will likely be well in excess of that average, considering the number of that company’s California employees and the scope of the case. Walmart will have to pay those plaintiff’s attorney fees in addition to the undoubtedly enormous fees it is paying its own attorneys.

Take-Aways:

The specter of PAGA claims requires that California employers take extraordinary care to maintain all of their wage and hour practices in full compliance with the Labor Code. However, once the PAGA process starts, the non-complaint business, plaintiff employee and his/her co-workers are all losers in the game, with plaintiff lawyers standing to be the only real winners. Sacramento should question whether such results support any legitimate goal of government.

See also,

• The Peril of Ignorance – Know and Comply: California’s Itemized Paystub Requirements (May 4, 2021)
• Cautionary Tale Episode 41- Gymnastics School Takes a Tumble (April 8, 2021)
• Cautionary Tales Episode 16 - Spa Nailed for $1.2 Million, “Wage Theft” (August 1, 2018)
• Paperless Paystubs – Do They Comply with California Wage Statement Laws? (February 28, 2018)

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

Helena Kobrin
May 14, 2021

No state is likely more protective of employees than California nor more likely to have more employment-based claims in its courts. In our last 20-plus years of defending business in such lawsuits, nearly all have included worker allegations of meal and/or rest break deprivation.

This meal-and-rest suit “pandemic” is a combination of our state’s highly technical break rules, the lash-back anger of former workers out of a job (whether or not justified), and, in too many cases, an employer’s lack of thorough documentation of its provision of such breaks.

California employers must provide every not-exempt-from-overtime worker off-duty unpaid meal and paid rest breaks based on the number of hours that employee works in a given day. As we have detailed in the linked blogs below, the rules vary for such workers as specified in the 17 Industrial Welfare Commission (IWC) Wage Orders covering different industries and occupations.

For an employer’s failure to provide an employee a required meal period or rest break, that business must pay that worker one additional hour of pay/day for any missed meal periods and one hour/day for any missed rest breaks. The employer must include this additional pay in that employee’s next paycheck. See IWC Orders and Labor Code section 226.7.

The Supreme Court of California’s Brinker Restaurant Corp. v. Superior Court decision (2012) clarified the meaning of “employer provided” meal periods and rest breaks. Employers are not responsible for policing workplaces to make sure employees take their meals and rest breaks. However, employers must set out and back-up clear policies consistently encouraging and supporting employee prerogatives to take their entitled times away from their labors during the workday.

Yet, even against a conscientious employer careful to observe these rules, meal and rest break claims commonly find their way into employment cases because they are relatively easy to assert and difficult to defend if management has failed to anticipate the need to methodically document its compliant practices.

One common employer error is neglecting to ensure workers clock out for their minimum 30-minute off-duty meals and back in at meal conclusion. The remedy is obvious: impose the clock out-and-in requirement and regularly confirm compliance.

Documenting a company’s provision of the minimum ten-minute off-duty rest periods is not so easy since these are on the clock. However, management can and should implement a forms system for its workers to acknowledge in writing that they have taken – and were not deprived of -- such breaks (as well as meals) over some period of weeks just passed, with space provided to specify any exception. There are timekeeping software programs that include such features.

Such procedures are not just good practice, enabling management and employees to do their parts in the provision of meal and rest periods. They are also workable preventative measures against the risk and expense of the way-too-frequent litigation on these issues.
See also,

• Square Meal is the Deal – California Supreme Court Prohibits Meal Break Time Rounding (April 1, 2021)
• Cautionary Tales Episode 27 - Walmart Hit with Six Million Dollar Verdict for “Discouraging” Off-Site Meal Breaks (May 23, 2019)
• Required Meal Periods and Rest Breaks Revisited – Off-Duty Time During a California Work Day (April 12, 2018)
• Brinker’s New Rules for Meal and Rest Breaks – Employers are No Longer the Lunch Police The Necessity of Management Training (May 18, 2012)
• Brinker: California’s Meal Break Breakthrough – Employers are No Longer the Lunch Police (May 1, 2012)

Tim Bowles
May 13, 2021

A federal appeals court has ruled that trucking companies must classify owner-operators as employees unless the relationship meets California’s highly restrictive “ABC” criteria for independent contractor status. Thus, haulers not in a position to change their independent relations with owner-operators must swiftly determine if they can meet the detailed “business-to-business” exception to the ABC test.

“Assembly Bill (AB) 5,” effective January 1, 2020, imposed a three-part “ABC test” for classifying independent contractors, with prong B almost certainly fatal to the traditional relationship between trucking companies and small owner-operators: “a person [i.e., the owner-operator] performs work that is outside the usual course of the hiring entity’s business.”

The California Trucking Association quickly took action, winning a January 16, 2020 injunction for interstate drivers, a San Diego judge ruling that the Federal Aviation Administration Authorization Act of 1994 (F4A) overrode AB-5.

However, in California Trucking Ass’n (CTA) v. Bonta (Bonta) (April 28, 2021), a Ninth Circuit panel overturned that injunction, agreeing with the state that California’s ABC criteria did not improperly interfere with the federal government’s exclusive powers over the prices, routes, or services of the interstate transportation of property.

Unless overturned in turn by the U.S. Supreme Court, the decision requires trucking companies to hire owner-operators as employees unless the parties can meet the ABC test (again, a virtual impossibility for the traditional relationships) or can meet an exception the California law provides to that test.

While not yet confirmed by any court decision, Labor Code 2776 (effective September, 2020) may provide such an exception for hauling companies and their independent operators provided the relationship can meet the strict, detailed “business-to-business” criteria of that section.

To qualify for the exemption, the service provider [owner-operator] must:

• be free from the contracting business’s control and direction both under the contract and in fact;
• be customarily engaged in an independently established business of the same nature as the work performed;
• advertise and hold itself out to the public as available to provide the same or similar services;
• negotiate its own rates and set its own hours and location of work;
• obtain any required business license and/or tax registration; and
• refrain from performing construction-type work that requires a license from the Contractor State Licensing Board.

In addition:

• the service provider’s [owner-operator’s] employees may deliver such contracted services directly to the contracting business’ [hauling company’s] customers so long as they do so under the service provider’s name and the service provider regularly contracts with other businesses;
• The service provider’s written contract with the contracting business must specify the payment amount, including any applicable rate of pay, for services to be performed, as well as the due date of payment for such services;
• The service provider must maintain its own separate business location (can be a personal residence);
• The service provider must be allowed to contract with other businesses without restrictions. Thus, a service provider working exclusively on a large job for a single contracting business does not have to literally perform work for other businesses simultaneously to qualify for the exemption; and
• Consistent with the nature of the work, the business service provider provides its own tools, vehicles, and equipment to perform the services.

Even if a trucking company – owner/operator relationship can meet all the criteria of this exception, the parties must still satisfy the requirements of the traditional “Borello” factors to properly classify that owner-operator as independent.

Take-Aways:

if they are to maintain the independence of owner-operator relationships in California, trucking companies must be sure to meet all the criteria of an exception of this state’s ABC test. Otherwise, best practice is to reclassify such owner-operators as a hiring company’s employees.

See also,

• What’s New in 2021: California’s Newest Independent Contractor Law Part I - Revamped Business-To-Business Exceptions (September 17, 2020)
• Dodging the Bullet: The Industries and Professions Not Subject to California’s New Independent Contractor Restrictions (October 9, 2019)

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

Helena Kobrin
Tim Bowles
May 7, 2021

New California Labor Code 2810.8 requires all hospitality and business services employers -- e.g. hotels; private clubs; event centers; airport-related hospitality operations or service providers; and janitorial, building maintenance or security services provided to office, retail or other commercial buildings -- to offer new positions to qualified former employees laid off due to COVID-19, through 2024.

Governor Newsom announced: “As we progress toward fully reopening our economy, it is important we maintain our focus on equity…by assuring hospitality and other workers displaced by the pandemic are prioritized to return to their workplace.”

Employees qualify if:

• employed in the hospitality or business services field by the employer for at least six months in the 12 months preceding January 1, 2020
• worked “at least two hours in a particular week”; and
• were laid off due to the pandemic (including a public health directive, government shutdown order, lack of business, or a reduction in force). Former union employees fitting these criteria are eligible unless explicitly waived in a valid collective bargaining agreement

Covered employers must:

• Within five business days of establishing an open job position, offer covered employees in writing, either by hand or to their last known physical address, and by email and text, all available positions for which they qualify (i.e., they held the same or similar position at the time of most recent layoff); and

• Give recipients at least five business days from date of receipt to accept or decline.

Employers may make simultaneous, conditional employment offers to multiple covered employees, but the position must be ultimately offered to whoever has seniority (based on hire date).

If the employer “declines to recall a laid-off employee” due to “lack of qualifications” and instead hires someone else, the employer must provide a written notice to the laid-off employee within 30 days describing “the length of service with the employer of those hired in lieu of that recall, along with all reasons for the decision.”

Recordkeeping: Employers must maintain all relevant records for at least three years for each laid off employee including name, job classification, hire date, last known address and other contact information, and copies of the written notices and all records of communications concerning this job recall procedure; and comply with the law’s anti-retaliation provisions.

Enforcement: California’s Division of Labor Standards Enforcement will directly field employee complaints and award damages, which can include hiring and reinstatement rights, recouping lost pay and benefits, civil penalties of $100 per affected employee, and ongoing damages of $500 per day per employee.

Employers should promptly familiarize their hiring managers with the new law and any similar local government ordinance(s); document the reason(s) for every employee’s separation, such as voluntary quit, retirement, layoff (specify if COVID-related or not) and termination for cause; and implement a compliant rehire process, prepare sample notices, and confirm accurate record-keeping before filling any job vacancy.

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

See also:

• What’s Even Newer in 2021 California Expands COVID-19 Paid Sick Leave – Detailed, Retroactive Requirements for Employers with 26 or More on Payroll (April 9, 2021)
• Stay – Away “Exclusion” Pay – Required Pandemic Wages for Positive Test or Workplace Exposure (March 18, 2021)
• One Certain Constant: Change – New Retroactive Paid Pandemic Leave Requirement – Revisions Coming 2021 Handbook & Forms (January 21, 2021)

Cindy Bamforth
April 30, 2021

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