"meal and rest periods" Archives

Employee – Exempt or Non-Exempt?

Preface

As Will Rogers stated, “Be thankful we’re not getting all the government we’re paying for.” Unfortunately, we seem to be getting more and more as the present administration winds down. The Department of Labor, Wage and Hour Division (DOL) is now proposing new rules as to who are “white collar” exempt employees not subject to timekeeping and overtime rules.

Presently, there is a three prong test to determine who may be classified as an exempt employee not generally subject to wage and hour rules. The first is the “duties test,” where the employee is paid a fixed salary based on job duties and that salary is not subject to reduction because of variations in the quality or quantity of work performed. The second prong is the amount of salary paid, which must meet a certain minimum specified amount. And the third prong is, does the employee’s job duties primarily involve executive, administrative, or professional decisions? The Fed’s are proposing to change the second prong or the “floor” on the salary requirement.

The Proposed New Rules

The proposed new rules are pretty straightforward. In order to be classified as an exempt employee, your full-time employee must make at least $921.00 per week or $47,892.00 annually. If the employee is part-time, the same criteria applies, but is just broken down by a daily rate. For example, $921.00 divided by 5 equals $184.20 per day. The employee, be he/she full-time or part-time, must also meet the other two prongs of the test. The present threshold is $455.00 per week or $23,660.00 per year. The increase is almost 100%—quite a jump. The rules have also changed for “highly compensated exempt employees,” but that subject is not discussed in this bulletin as it is doubtful that my readers would have many employees in that rarefied atmosphere.

Method In The Department’s Madness

In my opinion, as a matter of misguided social engineering, DOL wants heretofore salaried exempt employees reclassified as non-exempt employees to be subject to all of the wage and hour statutes, including, but not necessarily limited to, all timekeeping requirements, overtime payments, and breaks and meal period rules. As an employer, your choice will now be to either raise the employee’s “floor” salary or change his/her employment status. The administration’s hope is that these employees will ultimately see pay and benefit increases, whichever classification is used. The idea that you or your employees may be fully satisfied with the present arrangement is of no concern to the “command and control” philosophy of many of our politicians or bureaucrats. Good luck with that.

Prepare Now – Proposed Rules – The New Normal

Somehow, in the ever expanding morass of government regulations, proposed rules are always the final rules with, perhaps, some minor tweaks. You must evaluate all of your presently exempt employees and make a determination if they will meet the new salary “floor” or should they be reclassified as non-exempt. In some cases, raising their salary may be an option. In others, “time carding” them may be preferable. In other cases, elimination of the position may make even more economic sense. Amazingly, our betters rarely consider the last option as a consequence of their actions. Unintended consequences are often the result of their altruistic efforts to better our lives.

The Misclassification Trap

Misclassification of employees is now, and has been, a major employment litigation issue. If an employee or group of employees has been found wrongfully classified as exempt, the “aggrieved” employees could bring either class or individual civil actions claiming Labor Code violations because they should have been non-exempt hourly employees. The resulting violations “stack” and will result in multiple damages awarded, including costs and attorney’s fees—big money not usually insured.

If the employer is found to have misclassified non-exempt employees, it would be liable for the following Labor Code Violations:

• Failure to Pay All Wages (Labor Code §§ 201-203)
• Failure to Keep Accurate Payroll Records (Labor Code §§ 226 and 1174)
• Unfair Competition (Business & Professions § 17200 et seq.)
• Violation of Private Attorney General Act (Labor Code §§ 2698-2699)

The employer could also be liable for violations of the Fair Employment Housing Act (“FEHA”) (Govt. Code § 12900 et seq.), and tort claims for discrimination and/or wrongful termination. Such tort claims raise the specter of punitive damages, which will ruin any employer’s day.

Because of multiple penalties, possible FEHA, tort, and class or representative actions, it behooves all employers to fully understand these new proposed “white collar” employment rules and prepare to take prophylactic action to insure compliance when, not if, they are finalized. We will try and notify you when that occurs.

Remember, your income depends on running a profitable business and those profits depend, in part, on following the requirements of all federal and state Labor Code mandates. Being an employer in California is not for the faint of heart. Be always aware of and understand your legal duties. At least the weather is great.

This article should not be construed as legal advice and is for informational purposes only.

Meal/Rest Periods/Overtime & Retaliation Issues

California wage and hour statutes are somewhat unique in that a failure to follow their mandates exposes the employer to express statutory penalties as well as the potential for a civil lawsuit that could ultimately impose additional money damages far and above any amounts that may be due the employee under the specific wage and hour law. It is important that the employer understands the statutory scheme and meticulously complies with its requirements. Most of those requirements are found in the various Industrial Wage Commission (“IWC”) Orders which spells out some of the do’s and don’ts for employers in specific industries. The IWC Orders may be found on the State of California’s Department of Industrial Relations Web site. We have tried to simplify some of the major common requirements as explained below.

1. Posting – The IWC Order poster for your industry must be posted in a conspicuous location easily accessible to the employees, such as a break room, office, or anywhere employees congregate. It does not have to be posted where it can be viewed by your customers. It should be posted in conjunction with California Minimum Wage Order MW-2014 poster and the new Mandatory Sick Leave poster. All must be displayed.

2. Timekeeping – It is very important that detailed time records are kept on each non-exempt employee. You absolutely must maintain accurate time records documenting the employee’s “time in” and “time out,” and this record should not be created by the employee. A time clock produces the best evidence of the employee’s actual work time.

3. Payroll Stubs – Payroll stubs must reflect the gross wages of the employee less any mandatory or employee authorized deductions. Any employee authorized deductions must be in writing and signed by the employee. The stub should include the employee’s full name and current address as well as the last four digits of his/her Social Security number. It should also list the employee’s paid medical leave status. Note: it is very important that the gross wages are accurate, based on time card records, including all authorized or unauthorized overtime claims. Be sure the employee signs his/her time card as accurate.

4. Meal Periods – The California Meal Period requirement is a 30-minute meal period that must be provided for every five (5) hours worked. The meal period should be as close to the middle of the shift as possible and may be taken “off premises” at the sole discretion of the employee. The “off premises” meal period need not be compensated and is on the employee’s own time. Alternatively, the employee may take an “on duty” meal period (at the place of employment) as long as he/she is paid for the time at the regular rate of pay and the employee signs an “on duty” meal period waiver. Both “on duty” or “off premises” meal periods should be noted on the employee’s time card. For example, if the employee takes an “off premises” meal break, he/she would clock out and back in and be paid for eight (8) hours of an eight and one-half (8 ½) hour shift. “On duty” meal periods also need to be shown and the employee would be paid for a full eight hours, including the thirty minute paid meal period. Don’t forget the waiver.

5. Rest Periods – The California Rest Period requirement is a 10-minute rest period for every four (4) hours of work. However, while offering rest periods is mandatory, the employee may knowingly waive rest periods as long as it is done in writing. Note that both meal period and rest period waivers can be revoked at any time by the employee. If the employee refuses to waive his/her rest period, accommodation must be made. This could include adding coverage, shift change, and/or shift shortening to under four (4) hours. Rest periods need not be shown on time cards.

6. Overtime – For most California employers, the overtime requirements are relatively straightforward—one and one-half (1½) times the employee’s regular rate of pay for anything over eight (8) hours per day or any time over forty (40) hours per week. All overtime should be documented on the employee’s time card or sheet. All overtime, whether authorized or not, must be paid. The employee may be disciplined if continued, unauthorized overtime is a problem, but all employee time spent on the job must be paid. The best policy is not to allow any overtime unless authorized, in writing, by a manager.

7. Breakage & Shortage – “No employer shall make any deduction from the wage or require any reimbursement from an employee for any cash shortage, breakage, or loss of equipment, unless it can be shown that the shortage, breakage, or loss is caused by a dishonest or willful act, or by the gross negligence of the employee.” [IWC Order No. 5-2001, Section 8.] Overages and shortages are always a problem for small retail and hospitality businesses such as restaurants and bars. While many have policies concerning shortage reimbursement, it is easy to run afoul of this particular wage order and the employer must be careful. Under no circumstances is the employer to take any deduction from an employee’s paycheck for shortages or breakage. If it is appropriate, the employee should pay the shortage or breakage as a separate transaction unrelated to his/her paycheck and the transaction should be thoroughly documented. Responsibility for shortages or breakage requires a “willful act” or “gross negligence” on the part of the employee, and these concepts are hard to define. As a general rule, unless shortages or breakage are large and continuous, the operator is probably better off not requiring any employee reimbursements. Advising the employee that continuing shift shortages or breakage of a serious nature could lead to termination is the preferred policy for handling the problem, but be very careful.

8. Retaliation – You, as an employer, may not retaliate against any employee because that employee exercises any of his/her statutory rights under the wage and hour statutes or other employee protection statutes. Retaliation can include demotion, changing conditions of employment [except to accommodate the employee or as a business necessity], or termination. If any employee makes a Labor Commission claim or any claim that suggests possible wrongful conduct on the part of the employer, do not, under any circumstances, change the status of that employee. Do not change shifts, bad-mouth, harass, or in any manner do anything to intimidate that employee. Immediately consult your attorney concerning a strategy to handle that particular situation. The price for the attorney advice will be small when compared to the cost of a lawsuit defense. The quicker wage and hour disputes are resolved, the cheaper they will be.

9. Conclusion – This memo is a brief summary on dealing with the main points in IWC Orders as they pertain to your business. It is not intended to be a comprehensive discussion of all of the provisions contained in the various work orders, nor is it a complete exposition of all meal, rest, overtime, paid sick leave and reimbursement issues, but instead a short guide covering some of the more important wage and hour issues. It is your duty, as the employer, to understand and follow your particular IWC Order mandates to the letter. Seek professional help if you do not completely understand your employer responsibilities.

Remember, your income depends on running a profitable business and those profits depend, in part, on following the requirements as stated in your IWC Order and other Labor Code mandates. Being an employer in California is not for the faint of heart. Be always aware of your legal duties. At least the weather is great.

This article should not be construed as legal advice and is for informational purposes only. Good luck.