California HR

From the Experts: Reporting Time Pay, Part 1; Time for Employers to Pay Attention




This month’s experts are Marjorie S.
Fochtman, partner, and Paul R. Lynd, senior associate, with the law firm of
Nixon Peabody, LLP, in San Francisco.

 

The Industrial Welfare Commission (IWC) Wage Orders require that
California employers pay employees “reporting time pay”—a certain minimum
number of hours simply for reporting—if an employee reports to work and is
either not put to work or is given less than half of his or her regularly
scheduled day’s work. Although the reporting time pay provision has existed for
decades, its requirements have been obscure and little understood. However,
recent litigation treating reporting time pay as wages demonstrates that the
time has come to pay attention.

 

What Is Reporting Time Pay?

The reporting time pay requirements are set out in Section 5 of
each of the Wage Orders (except Wage Order 17 (Miscellaneous Employees)). In a
nutshell, an employer must pay an employee for half of the employee’s regular
day’s work just for reporting for work as the employer required. The provision
establishes a minimum of two hours of pay and a maximum of four hours. As examples,
an employee who regularly works eight hours would be due four hours of
reporting time pay. An employee who works a regular 10-hour shift would be due
the maximum four hours of reporting time pay. An employee regularly scheduled
to work four hours would be owed the minimum two hours.

 

The above rules apply to an employee’s first reporting in a
workday. If an employer requires an employee to report a second time, the Wage
Orders establish a two-hour minimum pay requirement. In particular, when an
employer requires an employee to report for a second time in any workday and
the employee “is furnished less than two hours of work on the second reporting,”
the employee “shall be paid for two hours at the employee’s regular rate of
pay.”

 

Why Is It Required?

Reporting time pay seeks to protect certain employee interests.
The IWC’s stated intent was to encourage employers to schedule employees only
when work is available and to provide proper notice when employees are not
needed to report to work. Reporting time pay also compensates an employee for
the expense if reporting when there is no work available. Plus, it compensates
an employee for committing to work for a day or a period for one employer, and
thus potentially foregoing the opportunity to work elsewhere during that time.

 

Why Should Employers Pay Attention?

Reporting time pay may seem like a minor potential liability of
only a few hours of pay, especially if only isolated incidents are involved.
The California Supreme Court, however, has given reporting time pay greater significance.
In
Murphy v. Kenneth Cole
Productions, Inc.,
the court last year recognized
reporting time pay as wages rather than a penalty.
1 It pointed to reporting time
pay as, like overtime, having a “dual-purpose remedy that is primarily intended
to compensate employees, but also has a corollary purpose of shaping employer conduct.”
The court further noted: “As with overtime, reporting-time . . . pay provisions
do not become penalties for statute of limitations purposes simply because they
seek to shape employer conduct in addition to compensating employees.” After
Murphy, the state labor commissioner now treats reporting time pay as
wages. A federal court also recently reached the same conclusion.
2

 

The treatment of reporting time pay as wages rather than as a
penalty is significant. The statute of limitations for filing a lawsuit for
wages is three years (four years for an Unfair Competition Law lawsuit) as
opposed to  one year with a penalty. The
potential liability also isnot limited only to the amount unpaid. Rather,
regardless of the amount owing, an employee could recover up to 30 days’ wages
as waiting time penalties under Labor Code Section 203 if reporting time pay
due remains unpaid at termination. The labor commissioner now will consider
awarding waiting-time penalties on reporting time pay claims when an employee
has been terminated. An employee can also recover interest at an annual rate of
10 percent, plus attorney’s fees, in a successful lawsuit for wages.

 

What to Do Now?

Not only has wage and hour litigation increased in California, its focus
has begun to shift to technical compliance with things like reporting time pay,
including in class action suits. Paying attention to the particulars and
nuances of reporting time pay can help an employer avoid potentially costly
mistakes. Although the reporting time mandates may appear simple, their
application to specific circumstances is not always obvious. Paying for
reporting time correctly also is not always simple. These issues will be explored
further in next month’s issue of
CWHA.

 

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1 Murphy v. Kenneth Cole Productions., Inc., Calif. Supreme Court No. S140308, 2007

2 Kamar v. Radioshack Corp., U.S. District Court (C.D. Cal.) No.
CV-07-2252 AHM, 2008