California’s New Piece Rate Requirements: For many industries in California, paying employees on a piece rate system has been a long-time win-win for management and workers. Truckers earning by the miles driven, mechanics paid by a percentage of amounts charged to customers, and field workers compensated by the pounds of apples picked are of course paid more the more they produce. Such piece rate systems thus tend to generate wages well in excess of minimum wage when averaged per hour.

As we have relayed in several previous articles (see below), in the last three years the California courts and Legislature have implemented standards greatly complicating piece rate pay systems, including through new Labor Code 226.2, effective January 1, 2016. While these changes have motivated some employers to drop piece pay altogether, many other businesses must continue piece systems or risk losing the vast number of employees who want to work for such production-based incentives. Continuation requires managers to understand and comply with the new complexities.

This New Law Requires Special Pay for Rest and Recovery Breaks: Perhaps the most perplexing element of new Labor Code 226.2 is the special calculation now required to pay piece workers a premium each week for their entitled paid rest and recovery periods.

California employers must provide each employee with certain numbers of ten-minute paid rest breaks depending on how many hours that employee works in a given day. See: Employee Meal Periods and Rest Breaks; California’s Basic Requirements for Daily R&R.

California employers must also provide employees paid “recovery periods” to cool down and prevent heat illness posed by working conditions. See: Labor Code 226.7; Required Heat Illness Prevention for Outdoor Worksites; and Heat Illness Prevention Amendments Likely to Take Effect.

The California Division of Labor Standards Enforcement (DLSE) directs that employers calculate such premiums for all rest periods to which an employee is entitled in a given workweek, not just those the employee actually takes during that week. See, DLSE’s Frequently Asked Questions, Piece-Rate Compensation – New Labor Code 226.2.

Special Math Formula for the Rest-Recovery Premium: When a California employer includes a piece rate in its pay system, Labor Code 226.2 requires a special per hour premium rate for rest-recovery time :

(a) all non-rest and non-recovery compensation in a week;
DIVIDED BY
(b) the total non-rest and non-recovery working time for that week.

(c) Then, the resulting gross rest-recovery rate per hour
MINUS
(d) any hourly minimum wage already payable for all working hours that week;
EQUALS
(e) the premium rest-recovery rate.

For example: Joe Driver just put in a 40 hour week for Galactic Trucking (eight hours/day for five days), paid a base of $10.00 for all hours worked ($400 in hourly wages), plus $500 piece rate pay for his miles driven that week. Under California standards, Joe was entitled to ten 10-minute rest periods (two per day for five days), or a total of 100 minutes or 1.66 hours of rest time for that week. See chart contained in Employee Meal Periods and Rest Breaks; California’s Basic Requirements for Daily R&R.

Joe’s rest-recovery time premium rate is thus calculated as:

(a) All non-rest compensation for the week. This is $900 (the $400 hourly wages and $500 piece pay); minus $16.66 [1.66 rest hours x $10.00/hour]) = $883.34
DIVIDED BY
(b) Non-rest time (total time 40 hours minus rest time 1.66 hours): 38.34 hrs.

(c) Then, the resulting gross rest rate [$883.34 ÷ 38.34/hour] $23.03
MINUS
(d) minus the $10.00/hour already paid Joe for all hours worked
EQUALS
(e) the premium rest-recovery rate: $13.03/hour

Galactic Trucking thus must pay Joe an additional $21.63 in rest-recovery premium pay, for a total of $921.63 compensation for that week ($400 hourly, $500 piece, plus $21.63 in rest-recovery premium pay).

Our lawyers Tim Bowles, Cindy Bamforth, and Helena Kobrin are assisting many businesses on the implementation of California’s piece rate standards specified in Labor Code 226.2. Our help also includes addressing the back pay calculations and statements section 226.2 requires for those businesses that have elected the “safe harbor” for pay periods from July 1, 2012 through 2015. Please contact our office should you need further information.

See also:

• California’s Itemized Pay Stub Requirements (March, 2016);
  
• Safe Harbor in Sight, Piece Work Compensation in California (May, 2016); and
  
• No Chance of Rescue from Safe Harbor; California’s Piece Work Employers Urgently Face Multiple Actions to Comply Fully with New Law (July, 2016)
  
• Navigating Piece Work in California (August, 2016)

Tim Bowles
September 30, 2016

Except for salaried, legitimately exempt-from-overtime workers, California employers must provide each employee with certain numbers of unpaid meal periods and paid rest breaks depending on how many hours that employee works in a given day.

Unpaid Meal Periods

First Meal Period: Generally, employers may not employ a worker for a work period of more than five (5) hours a day without providing the person a meal period of not less than 30 minutes. However, if the total work period in a day is no more than six (6) hours, that meal period may be waived by mutual consent of the employer and the worker. See, Industrial Welfare Commission (IWC) Wage Orders  and Labor Code Section 512.

For example, if an employee begins work at 8:00 a.m. and works an eight-hour day, he/she must start his/her single meal break on or before 1:00 p.m., the close of the fifth hour of work.

Second Meal Period: Generally, employers also may not employ a worker for more than ten (10) hours a day without providing a second meal period of not less than 30 minutes. However, if the total hours worked are no more than 12, employer and employee may waive this second meal by mutual consent as long as the first meal period was not waived.

For example, if an employee begins a 12-hour work day at 8:00 a.m., and takes his or her first 30 minute meal period between 12:30 p.m. and 1:00 p.m., then he/she must start his/her second 30 minute meal break on or before 6:30 p.m., the close of the tenth hour of work.  Returning to the job at 7:00, that person could then work the remaining two work hours of that day, through to 9:00 that evening.

Employees must be relieved of all duty, must relinquish control of all work activities, must be given the reasonable opportunity to be uninterrupted during any such provided 30-minute meal period and must not be impeded or discouraged from taking that period. Otherwise, that meal period shall be considered “on duty” and counted as time worked. An “on duty” meal period shall be permitted only where 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 California Division of Labor Standards Enforcement (DLSE) recognizes that employers may require that workers stay on premises for their meals.  However, the DLSE holds that in this instance, the worker is denied his/her time for his/her purposes and remains in effect under the employer’s control.  With minor exceptions for child care, foster care and residential health care workers under IWC Wage Order 5, that employer must pay such workers for their required-on premises meal periods as above.

Paid Rest Breaks

Except for those workers validly classified as salaried, exempt from overtime, California employers must also provide (“authorize and permit”) each employee paid rest breaks. The amount of rest 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 (i.e., more than two hours).  However, an employer need not provide any such paid rest time for an employee whose total daily work time is less than 3.5 hours.  See, IWC Wage Orders.

Thus:

The DLSE has interpreted “ten minutes net rest time” as a consecutive ten minutes that begins once a worker has arrived at his/her appropriate rest area away from the workstation, e.g., a break room or perhaps an outside smoking area.

The DLSE recognizes that employers may require employees to stay on premises during their rest breaks. The Wage Orders generally direct that employers are required to provide suitable resting facilities for employees during working hours in an area separate from the toilet rooms. (5th paragraph)

IWC Wage Order 5 permits a limited exception to the “fully off-duty” requirement for rest breaks.  An employee responsible for child care, foster care and residential health care may take his or her rest period while retaining general supervision of the applicable resident(s) if that employee is in sole charge of that person or those persons. However, an employer in these contexts must also authorize and permit another rest period for such a worker who had to interrupt a break to respond to the needs of residents. Wage Order 5, section 12(C).

Rest breaks are to be available in the middle of each four-hour work period insofar as practicable. Rest periods should not be combined with meal periods or other rest periods. Employees should not use rest breaks to start work ten minutes late or to end work ten minutes early.

If an employer fails to provide an employee a required meal period, rest break, or recovery period, that employer must pay that worker one additional hour of pay for each such period or break.  The employer must include this additional pay in that employee’s next paycheck.  See IWC Orders and Labor Code Section 226.7(c).

The Supreme Court of California’s Brinker decision (2012) clarified the meaning of “employer provided” meal periods and rest breaks. In essence, employers are not responsible for policing workplaces to make sure employees take their meals and rest breaks. Rather, employers are responsible for clear policies setting out the above standards and for consistently encouraging and supporting employee prerogatives to take their entitled times away from their labors during the workday.

See also,

Brinker decision and rest periods. California employers get a break(May, 2012).

brinker: California’s meal break breakthrough. employers are no longer the lunch police(May, 2012).

brinker: Employees may skip breaks. yet greater flexibility requires greater documentation(May, 2012).

brinker: Clocking in on employee timekeeping. Dos and don’ts for California employers(May,2012).

brinker’s new rules for meal and rest breaks. the necessity of management training(May,2012).

Brinker case Settles for $56 million California restaurant workers settle high profile wage and hour class action lawsuit(August, 2014).

Tim Bowles
September 23, 2016

Mary, an African-American employee, complained to her co-workers that her pay was lower than that of Caucasian employees doing similar work. Upon overhearing these conversations, Mary’s supervisor reprimanded her for “distracting” her co-workers with discussions about perceived pay discrimination. The supervisor may be surprised to learn such discipline may very well constitute unlawful retaliation.

Knowing when and how to discipline employees is a vital part of any HR manager or supervisor’s job. See, for example, Discrimination and Retaliation Claims; An Employer’s Lesson In Thorough Documentation (May, 2014) and Barbosa v. IMPCO – Terminating an Employee for Mistakenly Falsifying Time Card Violates Public Policy (December, 2009).

Under federal law, retaliation occurs when an employer takes disciplinary steps because an applicant or employee has engaged in “protected activity” which means asserting rights protected by law or opposing a perceived unlawful practice.

On August 29, 2016 the federal Equal Employment Opportunity Commission (EEOC) published an Enforcement Guidance on Retaliation and Related Issues (Guidance), a Small Business Fact Sheet: Retaliation and Related Issues, and a Question and Answer Publication (FAQs) to help employers better understand and prevent workplace retaliation.

In the press release announcing the Guidance’s issuance, EEOC Chair Jenny R. Yang stated, “Retaliation is asserted in nearly 45 percent of all charges we receive and is the most frequently alleged basis of discrimination. The examples and promising practices included in the guidance are aimed at assisting all employers reduce the likelihood of retaliation.”

The Guidance defines retaliation under federal law, explains what actions are protected from retaliation, and describes the limited circumstances under which employers may discipline someone who has engaged in “protected activity.”

The Guidance and FAQs advise employers to take the following steps to prevent unlawful retaliatory conduct:

• Maintain a written, plain language anti-retaliation policy.
• Train all managers, supervisors and employees on the company’s anti-retaliation policy.
• Caution anyone accused of discriminatory actions not to seek revenge.
• Proactively meet with employees, managers, and witnesses during ongoing investigations to inquire if there are concerns about potential or perceived retaliation.
• Confirm actions and documentation in response to workplace grievances are legitimate, non-discriminatory and non-retaliatory.
• Ensure performance evaluations are consistent, objective and free from unlawful motivations.

Cindy Bamforth
September 21, 2016

While cell phones can speed work-related communications when employees are out of the office, workers’ personal use of their mobile devices while on-the-clock has become the top “productivity killer” for business.

According to a June 9, 2016 Career Builder survey, eight out of ten workers have smartphones and most keep them within eye contact while on the job. Employee personal use of their phones for calls, texts, email, social media, and online entertainment during work hours is thus a legitimate and significant concern for employers.

Although California and many other states regulate cell phone usage while driving (see California Cell Phone Law: Keep Your Eyes on the Road, Your Hands Upon the Wheel), there are currently no regulations governing an employee’s access and/or personal use of cell phones during company time. However, employers can and should implement policy to address this problem.

For example, some employers have gone so far as to entirely ban cell phones from company premises. Others simply restrict use of cell phones during working hours, but allow access for emergencies and during meal and rest breaks. Some employers may choose to address the situation only when a particular employee’s productivity is clearly suffering or that employee is acting as a distraction to others. Another solution is to limit Wi-Fi access on company premises to deter employees from using their smartphones due to concerns about exceeding personal data limits.

Employers should decide what restrictions on cell phone usage would be best for their workplace environment and culture, and then create a consistent and comprehensive written policy to reflect this.

For further information, please contact one of our attorneys: Tim Bowles, Cindy Bamforth or Helena Kobrin.

Cindy Bamforth
September 14, 2016

Beginning July 1, 2016, the City of Los Angeles’s Minimum Wage Ordinance (MWO) imposes higher hourly minimums than the statewide level. The City will enforce the MWO through the Office of Wage Standards (OWS) via Rules and Regulations published July 22, 2016. The Rules and Regulations contain many key points, including:

Who is an employee. The OWS has the power to determine whether a worker fits the definition of “Employee” subject to the MWO. As stated in Regulation No. 1 (p. 3), an Employee is “any individual who in any particular week performs at least two (2) hours or work within the geographic boundaries of the City for an Employer.” The Rules and Regulations also instruct employers how to track and document each Employee’s “hours worked” within the City’s boundaries, not necessarily an easy task for some workers.

Small business deferral. Employers with 25 or fewer employees may defer providing the MWO’s minimum wage by one year, i.e., until July 1, 2017. However, OWS requires all such employers interested in the deferral to complete and retain Form MW-2. See City’s FAQs Nos. 39-45 and Rules and Regulations (pp. 16-18) for more information.

Large non-profit corporation deferral. Non-profits with 26 or more employees may defer complying with the City’s minimum wage rate until July 1, 2017 so long as the non-profit submits mandatory Form MW-1 for OWS approval. See City’s FAQs Nos. 34-38 and Rules and Regulations (pp. 13-15) for more information.

Non-profit transitional employer exemption. Any non-profit organization providing transitional jobs for long-term unemployed workers as further defined in MWO Section 187.02(F) may obtain an exemption from the City’s minimum wage rate for each transitional worker’s first 18 months of employment. The non-profit organization must submit mandatory Form MW-3 to OWS for approval. For more information, see Rules and Regulations (p. 12).

See also:

• City of Los Angeles Minimum Wage Increasing Annually from 2016 to 2020 (May, 2015).
• City of Los Angeles Casts Light on its New Minimum Wage and Paid Sick Leave Ordinance (July, 2016).

If you would like further, more detailed information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Cindy Bamforth
September 12, 2016

Promotion and advertising are important parts of the budget of any business, whether for-profit or non-profit. In order to bring in customers, clients, and donors, it is imperative to create and hone your promotional efforts for your target public.

Most large companies with important promotional materials have in-house or outside counsel who advise them to register copyrights for important company properties, including promotional material. It is likely, however, that many small and medium-size businesses are missing out on this legal protection.

As we explained in The Annals of Copyright Number 6, Should You Register Your Copyright?, when you create any work, it is copyrighted from that moment. However, an owner must register that work with the U.S. Copyright Office before it can enforce that copyright in federal court. 17 U.S. Code 411(a).

Two major benefits that may be available to a copyright owner that registered its work either before it was infringed or within three months after it was first published are attorney fees and statutory damages – i.e., damages that the owner does not have to prove, but are set in a range provided by the statute. 17 U.S. Code 412 A copyright owner whose registration does not meet those requirements can still file suit but would only be able to obtain damages that it can prove, as well as an injunction. It also could not recoup its attorney fees.

Legal fees for copyright cases can be high. If you win your infringement suit and you qualify under section 412, you can ask that the court order the losing infringer to reimburse your attorney fees. While an award is discretionary, many copyright holders have persuaded judges to direct such attorney fee payments, sometimes even in excess of the damages awarded for the infringement.

It can also be difficult to prove damages in a copyright case. You may not be able to show what actual damages there were. But if your registration meets the registration requirements, in addition to attorney fees, you also can seek statutory damages. These range from $200 per work for innocent infringement up to $150,000 per work if the infringement was willful.

To determine whether you should register your promotional materials, you need to ask yourself what will happen if someone rips off your successful promo. You should consider how much staff effort and budget went into its creation and how much you have paid independent contractors, whether marketing experts, digital designers, printers or others. If the budget that you invested into developing your promotional material is extensive, and if that material brings considerable business or donations into your company, you should preserve your ability to prevent others from profiting off your investment. In contrast to the large amount you could lose because of infringers, the cost of applying for a standard copyright registration is $35.00.

For further information, please contact one of our attorneys: Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin
September 2, 2016

California Labor Code Section 226 requires employers to provide workers with strictly defined statements (i.e. pay stubs) either semimonthly or with each paycheck. See, California’s Itemized Pay Stub Requirements, Ignoring the Needed Details Poses Trap for Unwary Employers (March, 2016).

While section 226 generally requires each pay stub to include the employee’s total hours worked during that pay period, employers have been permitted to omit this information for certain salaried exempt-from-overtime workers under various statutes and Industrial Welfare Commission Wage Orders.

However, employers have long understood this ability to omit “total hours worked” from the pay stubs of any type of lawfully exempt-from-overtime employee whether or not paid by salary. In a rare development in favor of employers, the California Legislature has now ratified this widespread practice through new Labor Code 226(j). Effective July 22, 2016, this subsection comprehensively lists specific categories of overtime exemption which do not require listing total hours worked on the pay stubs.

They include:

• Salaried persons employed in an executive, administrative, or professional capacity;
• Outside salespersons;
• Computer software professionals paid on a salaried basis under Labor Code section 515.5; and
• Individuals who are the parent, spouse, child, or legally adopted child of the employer.

Although amended Labor Code 226 removes any uncertainty on the pay stub requirements for such workers, California employers are of course responsible for accurately classifying as exempt only those employees who are eligible. See, for example:

• California’s Exemptions from Overtime Pay (January 2012)
• The California Administrative Exemption (November, 2009)
• The California Executive Exemption (November, 2009)
• Commissioned Sales Personnel and Overtime Pay. Must Employers Pay Premiums for Extra Hours Worked? (October, 2012)
• Wake-Up Call on Inside Salespersons.California Supreme Court Narrows Eligibility for the Commissioned Sales Person (July, 2014)
• California Labor Laws 2015: New Requirement for Computer Professional Overtime Exemption. (January, 2015)

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

Cindy Bamforth
August 31, 2016

Employers sometimes wish to make deductions from an employee’s wages for a variety of reasons. Doing so without knowing what the law permits can be a mistake, as California has stringent laws on what deductions are allowed.

As a general principle, employers may make deductions from wages if: (1) state or federal law requires or permits the deduction; (2) an employee authorizes the deduction in writing for such things as hospital or medical dues, insurance premiums, or other deductions that do not reduce a standard wage resulting from collective bargaining, a wage agreement, or a statute; or (3) a collective bargaining agreement expressly authorizes health, welfare, or pension plan contributions. CA Labor Code 224.

Unlawful Deductions

An employer may not:

• Collect back any part of a wage that it has previously paid to an employee. For example, if you advance commissions to employees, you may not take them back if the customer never pays unless you have a policy that correctly and legally characterizes the commissions and advances and provides when and how you may recoup them. See, Drafting Sound Commissions Agreements; and Defining Employee Commissions.

• Collect a debt the employee owes the company against wages without written agreement from the employee.Labor Code 224. A company also may never offset the balance of a debt owed against final wages. Barnhill v. Robert Saunders & Co. So if you loan money to an employee who later quits, you cannot subtract the remaining debt from the person’s last wages. You could work out an agreement with the person on how (s)he will pay off the debt and you can use normal collection and litigation remedies if needed.

• Make payroll deductions or require an employee to pay for any “necessary expenditures or 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.” Labor Code 2802. These expenditures include such things as uniforms, required medical examinations, travel, meals, and purchases of equipment.

• Subtract from wages the amount of tips an employee has earned. Labor Code 351.

• Deduct the amount of a bond that the employer paid for an employee or a photograph the employer required.Labor Code 401

• Subtract from wages expenses resulting from the employee’s negligence, such as cash shortages, loss of equipment, or breakage. See, Industrial Welfare Commission (IWC) Wage Orders, including, for example, section 8 of Wage Order 4. This rule does permit an employer to make deductions for gross negligence or dishonest or willful acts. See below.

Lawful Deductions

An employer may:

• Deduct legally required amounts for such things as federal and state income tax, unemployment, state disability insurance and paid family leave tax, Medicare, and Social Security.

• Subtract amounts under court orders for garnishment or child support up to certain statutory maximum amounts.

• In industries where an employer may need to furnish meals or lodging, deduct up to the value of those items specified in applicable IWC Wage Orders. See, for example, section 10 of Wage Order 15.

• Make deductions authorized by an employee in writing for such things as a 401(k) account, life insurance, health insurance, or union dues.Labor Code 224.

• Deduct other amounts that the employee agrees to in writing, such as payments on a loan the employer gave to the employee so long as it is not the last pay check, does not reduce the wages to below the amount required by a wage agreement, collective bargaining agreement, or statute, and is not more than agreed upon by the employee.

• Subtract amounts attributable to an employee’s gross negligence or dishonest or willful acts. See, for example, section 8 of Wage Order 4.

Before you make deductions from wages other than required withholding, it is advisable to verify that the intended deduction is legally permissible.

For further information, please contact one of our attorneys: Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin
August 26, 2016

The City of Santa Monica (City) has enacted a city-wide paid sick leave and minimum wage ordinance (Ordinance No. 2515). See, our blog “City of Santa Monica Increasing Minimum Wage Annually from 2016 to 2020” (May, 2016)

Effective January 1, 2017, Ordinance No. 2515 requires all employers, no matter where located, to provide paid sick time to every employee who works for at least two hours “in a particular week” within the geographic boundaries of the City and who is legally “entitled to a payment of a minimum wage” (Employees). Click here to find out if a particular address is located within those city limits.

Employers with 26 or more Employees shall provide:

• On January 1, 2017 at least 40 hours of accrued paid sick leave.
• On January 1, 2018 at least 72 hours of accrued paid sick leave.

Employers with 25 or fewer Employees shall provide:

• On January 1, 2017 at least 32 hours of accrued paid sick leave.
• On January 1, 2018 at least 40 hours of accrued paid sick leave.

Employers must provide either:

• One hour paid sick leave for every 30 hours worked (“accrual method”). Under this method, any unused sick leave will carry over from year to year (fiscal year, calendar year, or anniversary date) up to the accrual limit shown above; or
• The full amount of required paid sick leave at the start of each calendar year, fiscal year or anniversary date (“front load method”), in which case unused sick leave need not carry over from year to year.

Although paid sick leave will begin to accrue at the commencement of employment, an employee may not use accrued paid sick leave until after the first 90 days of employment or consistent with the employer’s policies, whichever is sooner.

Employees may use some or all of their accrued paid sick leave benefit amount at any time (following the first 90 days of employment).

Employers must conspicuously post the City’s current official Notice in English, Spanish or any other language spoken by at least five percent of the workforce. Employers must also provide new hires the employer’s name, address, and telephone number in writing.

As always, if there is a conflict between California state and city paid sick leave laws, the employer must abide by the more employee-favorable provision(s).

Affected employers should ensure their sick leave policies and practices comply with these new standards. Santa Monica’s online frequently asked questions page provides more information.

For further assistance, please contact one of our attorneys: Tim Bowles, Cindy Bamforth or Helena Kobrin.

Cindy Bamforth
August 25, 2016