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Employees often clock in and out a few minutes early or late at beginning and end of day or for meal breaks. Is an employer required to calculate all those extra or short minutes in determining an employee’s wages.
Employees often clock in and out a few minutes early or late at beginning and end of day or for meal breaks. Is an employer required to calculate all those extra or short minutes in determining an employee’s wages? Fortunately, the answer is “No.”
The Fair Labor Standards Act of 1938 (“FLSA”) 29 U.S.C. § 785.48 and the California DLSE Manual §§ 47.1 and 47.2 permit employers to round such minutes up and down to simplify administration of wage payments if done in an appropriate fashion.
The federal regulation recognizes that certain industries that use time clocks have had a “practice for many years of recording the employees' starting time and stopping time to the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour.” The regulation accepts this practice, “provided that it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.” California adopts the federal language in the Division of Labor Standards Enforcement (DLSE) Manual.
For example, consider an employee scheduled to work from 8: 00 am to 4:00 pm and paid $20 per hour (equivalent to $0.33 per minute). If the employee leaves at 3:58 p.m., the employer could round his departure time to 4:00 p.m. and he would be paid for two minutes that he did not work. If the same employee leaves work at 4:05 p.m. on another day, his work time could be rounded to 4 p.m. He would gain $.66 on the first day and lose $1.65 on the second. As this happens over time, the employee would gain and lose minutes of pay, but these rounded amounts would tend to result in compensating the employee about the same amount as if every minute were counted in both directions.
In Corbin v. Time Warner Entertainment-Advance/Newhouse Partnership (May, 2016), the federal Ninth Circuit Court of Appeals -- over California and several other western states – rejected Mr. Corbin’s challenge to Time Warner’s time rounding policies under the FLSA and California law, observing that focusing on small resulting personal imbalances was misguided: “This case turns on $15.02 and one minute. $15.02 represents the total amount of compensation that Plaintiff . . . alleges he has lost due to his employer’s . . . compensation policy that rounds all employee time stamps to the nearest quarter-hour.”
The court confirmed the purpose of a time rounding policy is to enable employers “to calculate wages efficiently.” As a result, “in any given pay period, employees come out ahead and sometimes they come out behind, but the policy is meant to average out in the long-term.” It also ruled that a time rounding policy does not mean that every employee must be paid every cent of wages that employee would have earned without time rounding. Rather, the time rounding regulation applies to “employees” in the aggregate.
If you are engaging in time rounding or would like to do so, you should have a written, neutral rounding policy that explains how your company will evenhandedly apply rounding up and down to a specific time increment, such as five, ten, or 15 minutes. This policy should be in your employment handbook or issued separately, and your employees should acknowledge its receipt in writing. To reduce the chances of possible expensive challenges such as the Corbin case, it is good practice to have an experienced attorney draft or review such policy.
For further information, contact one of our attorneys: Tim Bowles, Cindy Bamforth or Helena Kobrin.
Helena Kobrin
August 19, 2016
As previously announced in Sick Pay Ordinance Epidemic Spreads to San Diego, New Measure Adds Yet More Uncertainty to Employer Obligations (June, 2016), San Diego voters recently enacted city-wide paid sick leave and minimum wage ordinance...
As previously announced in Sick Pay Ordinance Epidemic Spreads to San Diego, New Measure Adds Yet More Uncertainty to Employer Obligations (June, 2016), San Diego voters recently enacted city-wide paid sick leave and minimum wage ordinance (Ordinance No. 20390). See our blog Rising Minimum Wages, the California Trend Continues, San Diego Approves its first gradual Increases Effective, July 11, 2016 (August, 2016) for more information on this ordinance’s minimum wage mandate.
As of July 11, 2016, Ordinance No. 20390 requires that employers must provide paid sick time to all employees who work in San Diego for at least two hours in one or more calendar weeks of a year (Employees). Click here to find out if a particular address is located within those city limits.
Also starting July 11, employers must provide employees with one hour of earned sick leave for every 30 hours worked within the city (“accrual method”). Employers may limit actual use of earned sick leave to 40 hours per year, but unused, accrued sick leave must be carried over to the following year.
Starting September 2, 2016, San Diego’s follow-up ordinance (Implementing Ordinance No. 20706) allows employers to cap an employee’s total accrual at 80 hours. It also authorizes employers to “front load” 40 hours of sick leave at the beginning of each benefit year (“front loading method”) thus relieving the employer of any accrual and carryover requirements. Under the front loading method, the employer must reserve at least 40 new hours at the beginning of each benefit year. Ordinance No. 20390 defines benefit year as a “regular and consecutive twelve – month period, as determined by an Employer”.
New hires will be allowed to use accrued paid sick leave beginning on the 91st day of employment or after July 11, 2016, whichever is later.
In addition to the reasons specified under state law, San Diego allows employees to use paid sick leave when the employee’s place of business or child’s school/child care provider closes by order of a public official due to a public health emergency.
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. Once the Implementing Ordinance takes effect in September, the city will update this notice.
Employers must also give each current employee and new hires written notification of their rights using San Diego’s Earned Sick Leave and Minimum Wage Employee Notification Form.
Affected employers should ensure their sick leave policies and practices comply with these new standards. San Diego’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 18, 2016
The one constant feature of California employment law is change. There is perhaps no better recent example than this state’s “piece work” compensation rules.
The one constant feature of California employment law is change. There is perhaps no better recent example than this state’s “piece work” compensation rules. Starting January, 2016, employers must fundamentally re-structure such pay systems or face increasing risk of legal claims, including potential business-busting class action lawsuits.
The Core Change in the Law:
Trucking, agriculture, and many other California industries have utilized “by the piece” pay for many years. Haulers have paid drivers by the mile traveled, growers have paid field workers by the bushel or basket, and vehicle repair shops have paid mechanics by the repair job completed. At its best, a wage “by the piece” acts as a win-win for labor and management, when pay rates are fairly set proportional to the enterprise’s overall income generated and workers, now encouraged to produce more to earn more, can be fairly rewarded for their efforts well above “by the hour” norms.
However, starting with two court decisions in 2013, it has not been that simple in this state. Effective January 1, 2016, the California Legislature added more complexity. See, Piece Work Compensation is a Wreck Waiting to Happen, The Perils of New Labor Code Section 226.2 (December, 2015).
California now takes the unique view that an employer must compensate a piece work employee at least at the applicable minimum wage level for “every hour worked,” meaning, unlike the federal system, a company can no longer average all piece pay over the hours worked in a payroll period to confirm an average of minimum wage per hour. Instead, California businesses must pay its piece workers separately for state-directed rest periods and for payable “non-production” time.
A Solution for Compliance with New Standards:
This unique reading of piece work requirements is a potential formula for confusion and conflict. How does one define payable “non-production time” exactly? It is only labeled in Labor Code 226.2 as “time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis.” What “not directly related” means here is anyone’s guess at this point. Is a trucker’s time spent fueling not directly related to his or her driving? Is a mechanic’s time in a coordination meeting not directly related to the repair jobs thus assigned to him or her that day?
However, section 226.2(a)(4) and 226.2(a)(7) provide a possible simple solution. As long as the employer pays an hourly rate of at least the applicable minimum wage for every hour worked in addition to any piece work compensation, the worker will be considered fully paid for his or her payable “non-productive” time.
This solution would thus require the employer to re-define its pay system and modify accompanying practices as needed. Instead of a “pure” or “exclusive” piece work wage (for example, only paying drivers by the mile), a company could change to a hybrid plan that includes: (1) an applicable minimum wage payment for each hour worked in a day; plus (2) a “net” piece work pay calculated by subtracting whatever hourly minimum wage the employee has earned in (1) from the total piece pay he or she previously earned on the “pure” piece work system.
This would not be the only change required to comply with new Labor Code 226.2. If a company has not been doing so for its piece workers, it will now have to require each such employee to accurately record and report his or her daily and weekly hours worked. As we will explain in future articles, that employer must also separately calculate and pay “rest and recovery periods” compensation and may also be obligated to calculate and pay premiums for daily or weekly overtime depending on the industry the business is in. That employer must also accurately document the new system with a revised and expanded paystub in compliance with all California standards.
Yet, this “hourly-plus-net-piece-pay” arrangement has the advantage of complying with the new section 226.2 while retaining the production incentives created by a piece work arrangement. In essence, a piece worker will not earn any less than he or she was earning before the change. With the additional “rest and recovery periods” compensation as above, that employee will actually be earning a little more each week than previously.
The Way Forward:
The new requirements began on January 1, 2016. If a piece work-paying company has yet to implement such a system, it is not too late. However, sooner is better by far. Each week that passes without these improvements is another week where that employer is potentially in violation of California standards and thus at risk of ever-increasing liability.
Our lawyers Tim Bowles, Cindy Bamforth, and Helena Kobrin are assisting many businesses with such urgently needed transitions. Our help also includes addressing any back pay issues arising for periods between January, 2016 and the new system’s implementation. Please contact our office should you need further information.
See also:
Tim Bowles
August 12, 2016
Effective July 11, 2016, San Diego became the next California city to set a minimum wage level above the state’s standard. Under San Diego’s Ordinance No.
Effective July 11, 2016, San Diego became the next California city to set a minimum wage level above the state’s standard.
Under San Diego’s Ordinance No. 20390, all employers, regardless of size or location, must pay at least $10.50 per hour to any employee who works two or more hours in one work week within the geographic boundaries of the city. The state of California’s minimum wage is currently $10.00 per hour. Click here to find out if a particular address is located within those city limits.
Employers shall pay:
San Diego shall publish annual notices announcing the adjusted minimum wage rate for the upcoming year and its effective date. Employers must conspicuously post the city’s current Notice in English, Spanish or in any other languages spoken by at least five percent of the workforce.
Employers must also give each current employee and new hire written notification of San Diego’s special paid sick leave and minimum wage rights using the city’s Earned Sick Leave and Minimum Wage Employee Notification Form.
San Diego’s online frequently asked questions page regarding these rights provides more information.
For further assistance, please contact one of our attorneys: Tim Bowles, Cindy Bamforth or Helena Kobrin.
Cindy Bamforth
August 10, 2016
The U.S. Department of Labor (DOL) has revised the federal Fair Labor Standards Act (FLSA) Minimum Wage poster and the Employee Polygraph Protections Act (EPPA) poster . Starting August 1, 2016, U.S.
The U.S. Department of Labor (DOL) has revised the federal Fair Labor Standards Act (FLSA) Minimum Wage poster and the Employee Polygraph Protections Act (EPPA) poster.
Starting August 1, 2016, U.S. employers must post these revised versions:
1. FLSA Minimum Wage Poster (FMW): In addition to simpler language throughout, this version includes:
2. Employee Polygraph Protection Act Poster: This version deletes the $100,000 civil penalty limit for an EPPA violation and updates the DOL's contact information.
Employers may purchase these posters and other required state and federal notices from the California Chamber of Commerce or another qualified vendor.
For more information, please contact one of our attorneys, Timothy Bowles, Cindy Bamforth or Helena Kobrin.
Cindy Bamforth
August 5, 2016
The U.S. Department of Labor (DOL) issued its Final Rule in May 2016, raising minimum salary amounts for exempt-from-overtime executive, administrative, professional, computer and outside sales employees under the Fair Labor Standards Act...
The U.S. Department of Labor (DOL) issued its Final Rule in May 2016, raising minimum salary amounts for exempt-from-overtime executive, administrative, professional, computer and outside sales employees under the Fair Labor Standards Act (FLSA). See “New Stricter Federal Requirements on Exemptions from Overtime, Employers Must Comply No Later than December 1, 2016.”
The new regulations, currently set to take effect less than four months from now, pose a sudden, 100%-plus increase in minimum salary for otherwise qualified exempt employees: from $455/week, $1,972/month, or $23,660/year to $913 per week, $3,957 per month or $47,476 annually.
On July 15, 2016, Congressmember Kurt Schrader (D – OR) introduced H.R. 5813, the Overtime Reform and Enhancement Act (OREA), to slow the Final Rule’s implementation. The measure seeks a four-step phase-in of the higher minimum over three years:
The bill would also eliminate the Final Rule’s automatic three year minimum salary increases that are to start in 2019, instead requiring the DOL to comply with the standard evaluation and justification process federal rulemaking law requires.
H.R. 5813 currently does not address the Final Rule’s increase from $100,000 to $134,004 for a “highly compensated” executive to qualify for exemption. The measure is also silent on the Final Rule’s minimum increase for motion picture exempt salaries from $695/week to $1,397/week (or equivalent for a less than six-day week). The bill may of course be amended to address these points.
In an election year particularly, the bill’s prospects of becoming law before the Final Rule’s December 1 effective date is anyone’s guess. Employers who plan to meet the full increase by that date can allow themselves to be pleasantly surprised if indeed H.R. 5813 succeeds in time.
If you need assistance with working any of the issues raised by these new regulations, our attorneys, Tim Bowles, Cindy Bamforth or Helena Kobrin, can help.
Helena Kobrin
August 5, 2016
As we have reported, all businesses with employees working within the geographic boundaries of the City of Los Angeles (City) are potentially subject to its new minimum wage and paid sick leave rules: Ordinance No. 184320 and Ordinance No.
As we have reported, all businesses with employees working within the geographic boundaries of the City of Los Angeles (City) are potentially subject to its new minimum wage and paid sick leave rules: Ordinance No. 184320 and Ordinance No. 184319 (Work Ordinances). See, e.g., Latest Minimum Wage Increases for California Cities, City of Los Angeles New Paid Sick Leave Requirements Effective July 1, 2016, City of Los Angeles Minimum Wage Increasing Annually from 2016 to 2020.
In an attempt to consolidate the Work Ordinances’ passages in a single, easy-to-read document, the City published on July 25, 2016 an anticipated set of frequently-asked questions (Ordinances FAQs).
Ordinances FAQs restate Work Ordinances’ general definitions; the City’s minimum wage rate increase schedule; eligibility for paid sick leave; how qualifying “Employees” accrue and take paid sick leave; for what purposes an “Employee” can take paid sick leave; how to pay and track earned and taken sick leave; and other information Employers must provide to their Employees.
For additional assistance understanding and implementing the City’s Work Ordinances, please contact one of our attorneys Tim Bowles, Cindy Bamforth or Helena Kobrin.
Cindy Bamforth
July 28, 2016
A court order on the eve of a July 1 deadline threw into doubt whether California would be able to immediately enforce its new piece work compensation law, Labor Code 226.2 . See, Storm Brewing Over Piece Work Safe Harbor (July, 2016).
A court order on the eve of a July 1 deadline threw into doubt whether California would be able to immediately enforce its new piece work compensation law, Labor Code 226.2. See, Storm Brewing Over Piece Work Safe Harbor (July, 2016). However, that judge has now further ordered the state may proceed to administer that law in full and without delay. Nisei Farmers League v. California Labor and Workforce Development Agency, July 25, 2016 order.
Section 226.2 directed that a California piece work employer give a formal “safe harbor” notice to the state by July 1, 2016 if that business was going to opt to avoid potentially greater liability. A business then could do so by paying all affected workers by December 15, 2016 additional back pay to mid-2012 under one of two calculation methods. See, Safe Harbor in Sight, Piece Work Compensation in California (May, 2016) (Safe Harbor).
The state’s Department of Industrial Relations (DIR) currently lists at least 2,500 companies that have submitted formal safe harbor notices. The only change the above July 25 Order effected was to confirm extension on that July 1 notice filing deadline through July 28, 2016. The DIR will not accept any notices received after that date. Piece work employers may submit this notice online.
Timely filing of its safe harbor notice is only the beginning of a piece work employer’s required actions, all to be taken as soon as feasible. For such a business to meet its safe harbor requirements by paying up to 4% of gross earnings to each piece work employee between July 1, 2012 and December 31, 2015 (Safe Harbor Period) (see, Safe Harbor), these actions include:
A. Safe Harbor Period Back Pay and Documentation:
1. Calculate: Calculations of gross compensation to each piece work employee, pay period-by-pay period, and, depending on any pay during that time for “non-productive time” (as defined in section 226.2(b)), calculation of between 3% and 4% of that gross number as that employee’s total “safe harbor” back pay amount;
2. Compensate: Begin payment to each such employee of his/her safe harbor back pay “as soon as reasonably feasible,” with completion no later than December 15, 2016; and
3. Document: Accompany each such payment with an accurate safe harbor statement containing four distinct categories of information, including the detailed disclosure of how the company calculated that gross back pay amount. Actual payment should be for the ensuing net amount, following standard withholding and employment tax deductions, as further shown on a compliant paystub.
The new law allows employers to correct any good faith error on such calculations within 30 days of discovering the mistake.
There is much more at stake. Full “safe harbor” compliance will only protect a piece work employer from potential pre-2016 liability. Section 226.2 also requires such employer’s compliance with specific piece work pay standards from January 1, 2016 onward. For piece work companies that do not yet have such standards in place, further actions include:
B. Promptly Implement a Revised Piece Work Pay System:
As discussed in our Safe Harbor blog, section 226.2 now requires California employers to pay at least the applicable minimum wage to each piece work employee for every hour worked as well as a specially calculated premium for every rest or recovery period to which such employee is entitled for each day of labor. Thus, such a business can and should swiftly:
4. Develop and Issue New Pay Plan: Establish and issue company policies confirming a new hourly-plus-piece work compensation system that complies with Labor Code 226.2 payment rules and related protocols for all pay periods going forward. Properly structured, the only actual change in compensation would be a slight increase in the total, due to the now-required rest and recovery period premiums;
5. Develop and Issue New Pay Plan Documentation: Establish and issue template employment agreements, time card procedures, and time attest forms consistent with the above policy changes;
6. Develop and Issue New Pay Stub Documentation: Establish and issue custom company payroll summary form and paystub template that comply with all current rules on paystub for piece work compensation systems. See, California’s Itemized Pay Stub Requirements (March, 2016).
C. Further Back Pay Compliance, from January, 2016 to Date of New System Implementation:
With section 226.2’s standards effective January 1, 2016, an affected company should also swiftly take actions that will catch-up on such compliance for any 2016 pay periods preceding the above implementation, including:
7. Calculate: Calculations of gross compensation to each piece work employee, pay period-by-pay period, for any underpayment of minimum wage for each hour worked and for rest/recovery compensation since January 1, 2016. The calculation should also include the 10% interest rate on wages to the date of late payment. (Together, 2016 Back Pay);
8. Compensate: Begin payment of the 2016 Back Pay to each such employee as soon as possible; and
9. Document: Accompany each such payment of 2016 Back Pay with: a) an accurate summary statement detailing how the company calculated that gross back pay amount; and b) a template release and waiver statement for such workers to sign on receipt of their respective back pay amounts. Actual payment should be for the ensuing net amount, following standard withholding and employment tax deductions, as shown on a compliant paystub.
Our lawyers Tim Bowles, Cindy Bamforth, and Helena Kobrin are assisting many such employers with these essential compliance steps, including help with the proper calculations and template and custom forms for the required documentation. Please contact our office should you need further information.
Tim Bowles
July 27, 2016
Continuing the trend of escalating minimum wage laws, numerous cities and one county in California increased their minimum wage effective July 1, 2016.
Continuing the trend of escalating minimum wage laws, numerous cities and one county in California increased their minimum wage effective July 1, 2016. See, for example, our blogs on San Francisco, Santa Monica, Pasadena, Los Angeles City, and Los Angeles County. The laws vary in their application to smaller and larger employers, as described below.
The UC Berkeley Center for Labor Research and Education has published an on-line list of the local California jurisdictions with ordinances raising the minimum wage above the $10.00/hour statewide standard. All but one went into effect July 1, 2016. San Diego’s was effective July 11, 2016.
The ordinances specifically define the terms “Employer” and “Employee” for application of their standards. For example, the Los Angeles ordinance specifies an “Employee” to be a person who performs work for an employer for at least two hours in a week within city limits. That ordinance defines “Employer” as anyone who “employs or exercises control over the wages, hours or working conditions of any Employee,” whether directly or indirectly. Other municipalities have similar definitions with some variations.
Each ordinance requires that affected employers post an updated official notice where employees can read it easily. We supply links to access those notices below. Some of the ordinances require employers to post the notice in Spanish and/or other specific languages in addition to English. Others require that employers post the notice in other languages spoken by at least a certain percentage of their employees. See, for example, City of Los Angeles and El Cerrito.
Businesses must also provide a complete and accurate Wage Notice to each new employee.
If you have: (a) individual workers who perform work in more than one applicable municipality; or (b) facilities in different applicable municipalities where you have employees, you need to confirm any required implementation of the local minimum wage ordinance in each case. As compliance can be complex, we encourage you to obtain assistance from your attorneys, accountants, and payroll services. Each of the laws has its own nuances, including such things as future increases, provisions on counting tips in minimum wage or not, and exemptions. It is therefore important that you become familiar with the express provisions of any minimum wage laws that may apply to your company.
For further information, contact one of our attorneys Tim Bowles, Cindy Bamforth, or Helena Kobrin.
Helena Kobrin
July 21, 2016