HR Management & Compliance

How To Avoid the Worst California Wage and Hour Tripwires

While the landscape of employment law is always changing, certain wage and hour hazards remain constant. Many of these pitfalls include issues that seem insignificant at the individual employee level but if left unchecked can easily become massive liability risks that snowball into class actions and Private Attorney General Act (PAGA) claims.

Today and tomorrow, Julia Melnicoe explores some of the most common myths and dangerous assumptions about wage and hour law that California employers can fall prey to. Melnicoe is an attorney at the San Francisco office of Sedgwick LLP.

1. Not paying overtime for unauthorized work. Many employers have written policies prohibiting employees from working overtime without express permission. Such policies are fine so long as you realize that employees must be paid for all time worked even if they have violated your policy by working extra time.

Options for dealing with an employee in this situation are limited to ordinary disciplinary procedures. You may warn, suspend, or even terminate an employee who works unauthorized overtime, but you still must pay for all time worked, including unauthorized overtime pay.

2. Excluding nondiscretionary bonuses and commissions from the regular rate of pay. For purposes of calculating overtime pay, state and federal law requires almost all types of wages to be included in the regular rate, including piece rates, commissions, and nondiscretionary bonuses.

Nondiscretionary bonuses are bonuses that are designed to encourage employees to work more steadily, rapidly, or efficiently and bonuses designed to encourage retention or attendance. Depending on how often commissions and bonuses are paid, you may be required to go back and recalculate the regular rate of pay over the entire period the commission or bonus covers to reach the proper overtime rate for that period.

3. Designating anyone with no more than a college degree as an exempt “professional.” It’s becoming increasingly common for employers to require a college degree or certification as a prerequisite for white-collar positions. The fact that a degree is desirable, however, doesn’t mean the work meets the standard for a “professional” exemption.

Under California law, an employee qualifies as an exempt professional if she is licensed in a specific field or is primarily engaged in an occupation commonly recognized as a “learned” or “creative” profession. “Learned” means requiring advanced and prolonged specialized study, as distinguished from general academic education.

While that doesn’t mean the professional exemption requires a Ph.D., you shouldn’t designate a position as professionally exempt if the realities of the job don’t actually require such advanced learning.

For instance, a design company may prefer to hire employees with college degrees in drafting for AutoCAD positions; however, such positions aren’t properly exempt if an employee could obtain sufficient understanding of AutoCAD through on-the-job training or experience.

Likewise, employers are tempted to designate employees with simple certifications as professionals. Many certifications offered through private organizations, trade schools, or community colleges don’t meet the standards for a “prolonged” course of instruction.

Therefore, you should be wary of designating employees as exempt professionals without thoughtful consideration of the education and training actually required to perform the duties of the position.

Employee Expense Reimbursements in California: Your Compliance Obligations Explained—webinar next week!

4. Ignoring out-of-state employees working in California. The California Supreme Court has recently concluded that employees who reside outside of California but perform work in California for a California-based employer are subject to California overtime requirements while in the state.

Multistate employers should be careful when sending employees on temporary assignments in California to ensure that timekeeping practices and payroll are adjusted to comply with California law.

5. Relaxing meal period policies after Brinker. The California Supreme Court clarified certain obligations for employers this past April when it concluded in Brinker Restaurant Corp. v. Superior Court that employers need not “ensure” that employees take their meal and rest breaks. The ruling doesn’t, however, relieve you of the burden of providing employees the opportunity to take an uninterrupted 30-minute meal period.

An employee who is required to work through a meal period is still entitled to one hour of premium pay under Labor Code Section 226.7. Moreover, all the old rules for what constitutes an off-duty meal period still apply—for instance, the employee must be free to leave the premises and use the meal period for his own purposes.

You should be cautious in this post-Brinker period to make sure supervisors and managers understand their obligation not to impede or discourage employees from taking meal breaks. While it remains unclear how plaintiffs’ attorneys will react to this decision, meal period claims, PAGA claims, and waiting-time penalties will continue to be costly for employers that ignore these obligations.

6. Ignoring nonexempt employees’ use of company smartphones and remote access. It is becoming more common for employers to offer employees 24-hour access to work email via smartphones or from home.

Although you need not compensate employees for “de minimis” work—i.e., a few minutes here or there—a nonexempt employee who routinely spends 10 to 15 minutes a night checking and responding to emails may have a claim for unpaid wages and overtime.

Add in waiting-time penalties and a possible PAGA claim, and the amount may be significant. You should consider restricting remote access to exempt employees to avoid this potential headache.

Tune in tomorrow for numbers 7-11 on our list.

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Paying Overtime on Bonuses: A Calculation Guide