Wage and Hour Essentials: How to Avoid Common Pitfalls and Workplace Class Action Litigation September 3, 2015
Presented by:
SPENCER. C. SKEEN, ESQ. San Diego Office
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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WAGE AND HOUR CLASS ACTIONS Startling Statistics
– Statistics released by the Administrative Office of the U.S. Courts confirm wage and hour cases represent the most significant exposure to employers under workplace laws. Far greater than discrimination cases.
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WAGE AND HOUR CLASS ACTIONS Startling Statistics – FLSA collective action litigation increased from October 1, 2013 through September 30, 2014, and far outpaced other types of employment-related class action filings. – The same is true in California. The number of wage and hour class action lawsuits increases significantly each year. They are relatively easy to prosecute because they address systemic programs or practices, like overtime, meal and rest breaks, pay stubs, equipment and uniforms.
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WAGE AND HOUR CLASS ACTIONS Startling Statistics
– In 2012, wage and hour settlement payments totaled $467 million. – On average, companies paid $4.8 million to resolve a case in 2012.
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WAGE AND HOUR CLASS ACTIONS Startling Statistics
– More than 50% of the companies with a wage and hour settlement had also been investigated by the DOL’s Wage and Hour Compliance Division. – Each year, California’s Labor Commissioner's Office, also known as the Division of Labor Standards Enforcement, increases the number wage and hour audits it performs and issues more assessments.
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WAGE AND HOUR CLASS ACTIONS Types of Cases
– – – –
Paying less than Minimum Wage Unpaid Wages for Off the Clock Time Unpaid Wages Due to Rounding Unpaid Overtime Due to Misclassification as Exempt – Overtime/Minimum Wage Due to Misclassification as Independent Contractor – Missed Meals & Breaks – Expense Reimbursement
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WAGE AND HOUR CLASS ACTIONS Importance of Knowing Wage and Hour Laws – FLSA is a federal law that regulates minimum wage, overtime, and equal pay. – The California Labor Code is a collection of civil law statutes for California. According to California’s Labor Commissioner, it “promotes and develops the welfare of the wage earners of California, to improve their working conditions and to advance their opportunities for profitable employment.” – California’s Labor Commissioner also established an Industrial Welfare Commission, which created documents called Wage Orders. The Wage Orders regulate wages, hours, and working conditions in California.
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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WAGE AND HOUR CLASS ACTIONS Importance of Knowing Wage and Hour Laws
– Wage and hour issues are critical to the operation of the organization – FLSA/CA Wage and Hour Law determinations may be difficult – The law affects employee compensation – You play an important role in compliance
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TOP 10 MISTAKES THAT LEAD TO CLASS ACTIONS TOP TEN WAGE AND HOUR MISTAKES
– The following are the top ten FLSA/CA Wage and Hour Law mistakes that companies make that lead to class action litigation. – Avoiding these mistakes will help lead to a wage-and-hour compliant workforce.
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TOP 10 MISTAKES MISTAKE #10 – Not Having Lawful Meal and Rest Period Policies – Brinker on Remand • Having no written meal/rest policy is a certifiable issue. • San Diego Superior Court, Judge Dato – Safeway, Inc. v. Esparza • The Court of Appeal affirmed class certification of a Unfair Competition Law claim based on the Safeway’s alleged failure to pay meal period premiums. • The decision spells trouble for any employer who cannot show that meal period premiums were at least occasionally paid.
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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TOP 10 MISTAKES MISTAKE #9 – Deducting from exempt employee pay
– The FLSA and CA Wage and Hour Law have very specific rules on when deductions can be made to exempt employees’ pay. – When an employer has a practice of making improper salary deductions, the employer may lose the right to classify the employee as “exempt.”
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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TOP 10 MISTAKES MISTAKE #8 – Paying incorrectly for travel time
– The FLSA and CA Wage and Hour Law have specific rules. – Regular commuting from home to work is not compensable. However, travel that is all in a day’s work is compensable. – Further, traveling from home to work on a special one-day assignment in another city is compensable (but the employer may deduct the employee’s usual commute time).
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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TOP 10 MISTAKES MISTAKE #7 – Misclassifying Independent Contractors
– The Department of Labor’s Fiscal Year 2015 budget includes $14 million to combat employee misclassification. – Misclassification of workers as “contractors” can expose employers to liability for tax obligations and employee benefits, along with minimum wage and overtime violations. – Delivery drivers? Distributors? Union Tribune. $7 Million in fees alone.
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TOP 10 MISTAKES MISTAKE #7 – Misclassifying Independent Contractors
Liability For: – – – – –
Employment taxes. Minimum wage or overtime. Expense reimbursement. Penalties under CA law. CA has significant fines of up to $25,000 per violation.
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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TOP 10 MISTAKES MISTAKE #6 – Expense Reimbursement Mistakes
• FLSA does not require expense reimbursement. • Unreimbursed expenses for benefit of employer must be deducted from the regular rate of pay which could create a minimum wage violation. • CA requires reimbursement of actual expenses incurred. Per diem or approximations do not suffice. • Per diem may need to be included in overtime rate if disproportionately large compared to actual expenses incurred. • DOL “per diem” enforcement actions on the rise.
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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TOP 10 MISTAKES MISTAKE #5 – Focusing only on the FLSA or CA Law
– Do not look only to federal wage and hour law (FLSA) or CA law when evaluating wage and hour compliance. This is a mistake. – Employers must comply with CA law as well as federal law—whichever one offers more protection to employees.
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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TOP 10 MISTAKES MISTAKE #5 – Focusing only on the FLSA or CA Law
– Overtime – CA has daily overtime. One of the nation’s largest armored guard companies. – Expense reimbursement – optional in some states, not others. World’s largest plush toy manufacturer. – State and CA overtime exemptions differ greatly. More on that later. – Minimum wage. Employers must comply with CA law as well as federal law—whichever one offers more protection to employees.
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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TOP 10 MISTAKES MISTAKE #5 – Focusing only on the FLSA or CA Law
– Downtown LA Motors. California Court of Appeal held employers must pay separate hourly wage for non-piece rate work and waiting time. FLSA allows averaging. CA does not. – Federal District Court reached similar conclusion for commission-based pay. Nordstrom’s commission plan was lawful under FLSA, but the plan violated California law because averaging is illegal in California.
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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TOP 10 MISTAKES MISTAKE #4 – Not Paying Overtime on Incentive Pay – All commissions must be included in the employee’s regular rate of pay for purposes of calculating overtime. – Only discretionary bonuses can be excluded from calculations pertaining to the employee’s regular rate of pay. – To be exempt from the overtime calculation, both the fact that the bonus is to be made and the amount of the payment must be discretionary.
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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TOP 10 MISTAKES MISTAKE #4 – Not Paying Overtime on Incentive Pay
– Drivers paid by piece rate are still entitled to overtime pay. – The regular rate is obtained by dividing the total weekly earnings by the total number of hours worked in that week. The employee is entitled to an additional one-half times this regular rate for each hour over 40. – Another way, is to pay one and one-half times the piece rate for each piece produced during OT hours.
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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TOP 10 MISTAKES MISTAKE #3 – Not tracking hours actually worked
– Do non-exempt employee timesheets consistently reflect time worked as “9 am – 5 pm”? – Time records must reflect actual hours worked, not just the employee’s work schedule. – Does company policy prohibit clocking in “too early” for a shift?
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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TOP 10 MISTAKES MISTAKE #3 – Not tracking hours actually worked
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Bag check time. Travel time. Training time. On call time. Set up and clean up time. Time where work was “suffered” or “permitted” regardless of schedule or whether work was voluntary. – Non-productive time (Downtown LA Motors). EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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TOP 10 MISTAKES MISTAKE #2 – Rounding
• Is time rounded? • What type of rounding rule do you have? • Is rounding permitted in your state? • If so, is it performed properly? • See’s Candy • Time Warner Cable
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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TOP 10 MISTAKES MISTAKE #1 – Misclassifying employees as exempt
– This is arguably the biggest, most common, and potentially expensive FLSA/CA law mistake. – FLSA/CA law exemptions are difficult to understand and not intuitive. – They may be changing! DOL just issued proposed revisions. Proposing to raise the minimum salary.
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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TOP 10 MISTAKES MISTAKE #1 – Misclassifying employees as exempt
– Like the FLSA, California law recognizes three basic “white collar” exemptions: • Executive • Administrative • Professional
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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TOP 10 MISTAKES MISTAKE #1 –Executive (Managerial) Exemption Federal
California
Primary duty is managing the enterprise or department or subdivision thereof
Customarily and regularly directs the work of two or more employees
Customarily and regularly directs the work of two or more employees
Authority to hire/fire
Authority to hire/fire
Primarily engaged in exempt executive duties
Customarily and regularly exercises discretion and independent judgment
Duties include management of the enterprise or a department or subdivision thereof
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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TOP 10 MISTAKES MISTAKE #1 – Administrative Exemption Federal
California
Non-manual work related to management policies or general business operations
Regularly assists the proprietor or exempt employees
Performs work under general supervision along specialized or technical lines requiring special training or experience
Primarily engaged in exempt administrative duties
Customarily exercises independent judgment
Primary duty is performance of office or non-manual work directly related to the management or general business operations Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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TOP 10 MISTAKES MISTAKE #1 – Misclassifying employees as exempt
– Proving exemption requires math and proof of decision-making. – Job titles and job descriptions not enough. – Performance reviews not enough. – Consider: • Process of elimination • Payroll verifications • Write-ups. • How to manage the managers.
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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Wage and Hour Essentials: How to Avoid Common Pitfalls and Workplace Class Action Litigation RECOMMENDATIONS 1. 2.
3. 4. 5.
WAGE AND HOUR AUDITS TRAIN MANAGERS ON COMMON PITFALLS EVALUATE ROUNDING 50 STATE SURVEYS ARBITRATION AGREEMENTS WITH CLASS ACTION WAIVERS?
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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ADR-RELATED LEGISLATION Assembly Bill 465
Assembly Bill (“AB”) 465 passed the Senate and is pending before
the Assembly. It prohibits employers from: – “[R]equir[ing] another person to waive any legal right, penalty, remedy, forum, or procedure for a violation of any provision of [the California Labor Code], as a condition of employment, including the right to file and pursue a civil action or complaint with, or otherwise notify, the Labor Commissioner, state agency, other public prosecutor, law enforcement agency, or any court or other governmental entity.” The bill does not speak to voluntary waivers/arbitration agreements. It seems to make class action waivers unlawful even though such waivers were expressly sanctioned by the United States Supreme Court.
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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ADR-RELATED LEGISLATION Assembly Bill 465
Potential Good News – Because the Federal Arbitration Act (“FAA”) has been interpreted to reflect “a liberal federal policy favoring arbitration agreements” and to preempt “state-law rules that stand as an obstacle to the accomplishment of the FAA’s objectives” or are “applied in a fashion that disfavors arbitration,” it is likely AB 465 would be struck down by a federal court.
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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Wage and Hour Essentials: How to Avoid Common Pitfalls and Workplace Class Action Litigation September 2, 2015
Presented by:
SPENCER. C. SKEEN, ESQ. San Diego Office
EMPLOYMENT LAW BRIEFING ▪ NOVEMBER 6, 2014 ▪ COLUMBIA
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