Don't Wait for the $15 Minimum Wage - San Francisco's Goes Up to $13 Today!

If you know someone doing business in San Francisco, remember to let that special person know that the minimum wage goes up to $13.00 per hour effective today.  The SF minimum wage web page with access to the poster etc. is here.

As of today, you can hire someone in LA for just $10.50 per hour. (here).  But LA is going to increase that wage to $15.00 within the next few years.  And LA just doubled the statewide paid sick leave entitlement!

Happy July 4 everyone.

Reminder: California Minimum Wage Going Up 1/1/2016

There are so many new laws and rules going into effect that one obvious one may slip through the cracks.  The minimum wage in California is going up on January 1, 2016 to $10.00 per hour.   It says so right here on the old Minimum Wage Notice that has been around for a couple of years now. (HERE).

Because of the minimum wage increase, the California minimum salary for exempt "white collar" employees will increase to $3,466.6667 per month or $41,600 annually.  Also, those of you relying on the inside sales exemption (requiring minimum compensation of 1.5X minimum wage, take note that your employees will have to make at least $15.00 / hour).  

There are other wages pegged to minimum wage as well, but my boundless generosity is limited by time this morning. So, please consult with your attorneys, read your wage orders and labor code, and enjoy time with family and friends this holiday season. 

Best wishes for a safe and enjoyable holiday, and Merry Christmas.

Greg

 

CA Governor Signs Two Wage-Hour Bills

Governor Jerry Brown signed a couple of wage-hour laws, which will take effect 1/1/15.  Neither is earth-shattering, but affected employers take note:

AB 2074, text here, clarifies California law regarding the statute of limitations for "liquidated damages," available for unpaid minimum wage claims.  The statute amends Labor Code section 1194.2 (here) to say that the statute of limitations for liquidated damages will be the same as the statute of limitations applicable to the underlying wage claim.  I'm not sure, but it may be that employers argued the statute of limitations is only 1 year because liquidated damages are a form of penalty.

AB 2743, text here, expands the availability of "waiting time penalties."  Per Labor Code section 203 (here), employers face a penalty of up to 30 days' pay when they do not pay employees correctly and timely at termination of employment.  Section 201.9 of the Labor Code allowed employers in the "live theatrical or concert" industry to pay final wages in accordance with a collective bargaining agreement. AB 2743 expands the availability of waiting time penalties to situations when the employer does not pay on time under that CBA.  So, employers not in the "live theatrical or concert" business:  Nothing to see here.

California Supreme Court Narrows the Inside Sales Exemption in California

The California Supreme Court unanimously decided the following:  "an employer may not attribute commission wages paid in one pay period to other pay periods in order to satisfy California‟s compensation requirements."

This decision will affect employers and employees trying to qualify for the inside sales exemption for sure, which was the issue before the court.  Will it affect other areas of wage-hour law?  What other areas?  Gee, you ask a lot of questions.   Read on.

Here are the relevant facts per the Court:

From July 2008 to May 15, 2009, Susan Peabody was a Time Warner account executive selling advertising on the company's cable television channels. Every other week, Time Warner paid $769.23 in hourly wages, the equivalent of $9.61 per hour, assuming a 40-hour workweek. About every other pay period, Time Warner paid commission wages under its account executive compensation plan.

Peabody claimed she worked more than 40 hours per week.  In some weeks, she worked 48 hours.  In those weeks, she would earn less than minimum wage per hour if there was no commission payment that week.

Hold the phone - Time Warner claimed Peabody was an exempt, inside sales person.  To qualify under the inside sales exemption, she must, among other things, satisfy two compensation criteria.  The one that matters here is "'that an employee's 'earnings exceed one and one-half (1 1/2) times the minimum wage” (ibid.), i.e., $12 per hour. '"

Peabody of course did not earn $12.00 per hour in base pay.  As shown above, she earned less than $10.00 per hour. So, for the exemption to apply, commissions would have to make up the difference.

Time Warner paid its commissions about once a month.  And therein lies the issue the Court decided.  Could Time Warner allocate the monthly commission payments over the course of the month in which they were paid?   Could Time Warner allocate the commissions across the time period during which the commissions were "earned"?

No, no, and.....no, said the California Supreme Court, unanimously.  Yes that was three "nos."

It was clear in this case that Peabody did not receive 1.5 times minimum wage for the hours worked on many of her paychecks.  Time Warner argued that the commissions it paid Peabody "counted" towards the period during which the commissions were "earned."  So, if the commission check was paid on March 23 for commissions earned in February, then the minimum wage calculation had to take into consideration those commission wages.

Agreeing with Peabody, the Court rejected that argument.  The Court held that commissions may be earned over time. It may be that a sale occurs in January, but is not earned until payment is received in April.  That's fine with respect to wage-hour law governing commissions.

But if the commission check is paid in April because the commissions are finally earned, then those commissions are counted towards minimum wage only during the (bi-weekly or semi monthly) pay period  for which the pay check is paid.

Whether the minimum earnings prong is satisfied depends on the amount of wages actually paid in a pay period. An employer may not attribute wages paid in one pay period to a prior pay period to cure a shortfall.

The Court then explained why it was making satisfying the exemption difficult:

Making employers actually pay the required minimum amount of wages in each pay period mitigates the burden imposed by exempting employees from receiving overtime. This purpose would be defeated if an employer could simply pay the minimum wage for all work performed, including excess labor, and then reassign commission wages paid weeks or months later in order to satisfy the exemption‟s minimum earnings prong. 

Finally, the court refused to rely on Fair Labor Standards Act cases interpreting the federal inside sales exemption, aka "7(i)."  Under federal law, the employer may pay commissions at greater intervals than per pay period and still comply with the exemption.

So, bottom line re inside sales exemption in California:

- to satisfy the exemption, the employee must receive in each pay check at least 1.5 times the minimum wage, for the hours worked during the applicable workweeks covered by that pay check. That means $13.50 per hour worked, starting July 1 of this year.  An employer who pays commissions less frequently than semi-monthly or bi-weekly must pay a sufficient hourly rate to ensure the 1.5 times minimum wage threshold is met.

-  This requirement will increase the non-commission earnings, by increasing the hourly pay required to maintain the exemption. That will have two consequences. First, payroll expense will increase absent a reduction in the commission rate.  Second, the inside sales exemption depends on a second criterion:  the employee must make more than 50% of wages from commission.  Paying a higher hourly rate will make it harder for employers to meet that 50% threshold.

Moving on... on the bright side the Court unanimously endorsed the view that commissions are earned when conditions are met, even if there is a delay between when a sale occurs and when commissions are earned:

an employment agreement may require receipt of a client's payment before any commissions on sold advertising are earned. If a client routinely pays its bills on the 15th of each month, commissions will be earned and owed once a month. Yet this does not create a monthly pay period in contravention of section 204(a). To summarize, section 204 establishes semimonthly pay periods, but there is no obligation to pay unearned commission wages in any pay period. Commissions are owed only when they have been earned, even if it is on a monthly, quarterly, or less frequent basis.

(emphasis is mine).

Finally, some thoughts:

-   If commissions are only counted towards minimum wage in the pay period during which they are actually received, will that holding also affect the "regular rate of pay" calculation in California?  Overtime pay is based on the "regular rate of pay."  The "regular rate of pay" can include hourly wages and commissions.  The calculation of the "regular rate" may include allocating periodic payments like bonuses or commissions over the periods during which they are earned. So, if  commissions are only counted towards wages earned in the pay period in which payment is made, then should those commissions be counted for overtime earnings purposes only during that same pay period?

If this Peabody rule applies outside the inside sales exemption context, then during the pay period when the commission check is received, there will be a high regular rate of pay, and during non-payment weeks, the regular rate of pay will be low.   That could drastically affect employees' overtime pay calculations.  What about quarterly bonuses?  If Peabody is extended to overtime calculations, will "retroactive" overtime still be due for pay periods during which the bonuses were not paid?

My guess is that the courts will continue to allocate periodic payments over longer periods of time for overtime purposes.  For one thing the allocation of commissions or bonuses over more than one pay period for overtime purposes is settled federal law, and California appears to have followed that rule.

-  I still want to know if the inside sales exemption is valid in California under Wage Order 4, which applies to businesses that do not involve a "retail concept."  Under federal law, there is no inside sales exemption outside of retail, e.g., you can't have an  exempt, inside salesperson at a hospital.   Under state law, there appears to be a broader exemption because non-retail employees can qualify for the state exemptoin. If federal law requires overtime, but a state law exemption applies, isn't that an issue?  Can you be exempt under state law, but non-exempt under federal law?  (I also ask a lot of questions.)

The case is Peabody v. Time Warner Cable and the opinion is here.

Be careful out there!

Greg

Quick Reminder: California Employers Must Update Minimum Wage Posters

The California minimum wage goes up on 7/1/14 to $9.00 per hour.
Get your new poster here.

Remember, the exempt minimum salary for executives, administrative and professional workers will go up to $37,440, or $3120 per month.  So, make sure any exempt employee earning less than those minimums gets a raise!

Have a good holiday weekend!

President Calls on DOL to Revise Exemption Regulations

He doesn't expressly say how:

I hereby direct you to propose revisions to modernize and streamline the existing overtime regulations. In doing so, you shall consider how the regulations could be revised to update existing protections consistent with the intent of the Act; address the changing nature of the workplace; and simplify the regulations to make them easier for both workers and businesses to understand and apply.

The memorandum is here.

So, what will this mean to employers?  The White House's  "Fact Sheet" about the memorandum, which is longer and more detailed than the memo itself, provides some clues:

Workers who are paid hourly wages or who earn below a certain salary are generally protected by overtime regulations, while those above the threshold who perform executive, professional or administrative duties are not. That threshold has failed to keep up with inflation, only being updated twice in the last 40 years and leaving millions of low-paid, salaried workers without these basic protections. Specifically: 

In 1975 the Department of Labor set the threshold below which white collar workers were entitled to overtime pay at $250 per week.
In 2004 that threshold was set at $455 per week (the equivalent of $561 in today's dollars). 

This is below today’s poverty line for a worker supporting a family of four, and well below 1975 levels in inflation adjusted terms. 

Today, only 12 percent of salaried workers fall below the threshold that would guarantee them overtime and minimum wage protections (compared with 18 percent in 2004 and 65 percent in 1975). Many of the remaining 88 percent of salaried workers are ineligible for these protections because they fall within the white collar exemptions. Many recognize that these regulations are outdated, which is why states like New York and California have set higher salary thresholds.

If you haven't heard, the administration is pushing hard to raise the minimum wage to $10.10 per hour, which is equivalent to a full time salary of $21,008 or so.  (They have not invented a pajama boy for the minimum wage - yet- but they're still pretty committed.)  Under the current regulations, the salary basis minimum is just over $23,000.  So, raising the salary basis threshold is another way of raising the "minimum wage," at least for those workers who qualify as "exempt" under federal law.

As for the duties tests, the DOL revised them in 2004, which addressed some outdated regulations and terms.  The DOL also simplified certain exempt tests, particularly when workers earned more tha $100,000 per year.  So "simplification" must mean "tougher exemptions." For example, the executive exemption might be changed to require supervision of more than the current two employees.  The administrative exemption could be reserved to senior administrative employees with greater discretion.  The professional exemption might be revised to include the salary test (hi, contract lawyers).  The duties test could be turned into a quantitative measure of time spent on exempt work (a la California) rather than a qualitative test.  Etc.

So, by now, some of you may be concerned that these regulations are going to happen and soon. The press and seminar sellers write articles etc. as though this is just around the corner.   I don't think any changes are nigh, or imminent, even.

First, it will take years to draft, vet, re-draft, re-vet, and finally promulgate these regulations.  Because that's how the DOL issues regulations.  Second, although it is true that this administration has issued gobs of regulations, it also has failed to issue others (Hi, NLRB poster, NLRB quickie election rules, etc.).   Third, I hear there's an election in 2016.  The outcome could affect whether and to what extent any proposed changes are implemented.  Even the 2014 election could shift the winds.  Who knows?

Finally, as the White House memo points out, California employers already must apply exemptions that are much stricter than federal law.  So, don't expect much impact on California employers' practices unless the DOL regulations are incredibly onerous.

Feel better?  Go look at pajama boy again.

California State Minimum Wage Going Up...and Then Up Some More

The Governor will sign AB 10 on 9/25.  The new bill will raise the California minimum wage from its current $8.00 per hour to $9.00 on July 1, 2014.  Then it will go up to $10.00 on January 1, 2016.
This change will affect overtime calculations, the retail inside sales exemption (measured based on whether employees earn more than 1.5 X minimum wage), and the salaried exemptions (based on salary of at least 2 X minimum wage).  It will also affect the "split shift" threshold which imposes a split shift premium for those workers who earn less than minimum wage + 1 hour at minimum.
There will be a new poster!
Read the new law here.

Court of Appeal: Meal/Rest/Wage Statement Class Action Should Be Certified

Safeway compensated truck drivers based on a compensation formula rather than a straight hourly rate: 

The collective bargaining agreements also obligated Safeway to utilize what it calls an activity based compensation system to determine the drivers‟ wages. Pay was calculated based on (1) mileage rates applied according to the number of miles driven, the time of day the trips were taken, and the locations where the trips began and ended; (2) fixed rates for certain tasks (e.g., rates for number of pallets delivered and picked up); (3) an hourly rate for a predetermined amount of minutes for certain tasks (e.g., paid for 10 minutes at hourly rate for set-up time at each store); and (4) an hourly rate for delays (e.g., breakdowns, impassable highways, time spent at scales, or other causes beyond the driver‟s control).

Drivers logged their mileage and activities for each trip manually on trip sheets. They also logged their activities into an onboard computer system known as the XATA system. Through XATA, Safeway tracked the drivers' moves, including their stops. The drivers input codes into XATA to record specific reasons for delays. Neither the trip sheets nor the XATA system, however, provided a place or means to record meal or rest periods.

 
So, the compensation system did not include separate payment for contractually and legally required rest periods.  Safeway argued that the paid rest periods were included in its compensation formula, presumably because the payment for miles and tasks assumed the rest periods would be taken during these activities.  Safeway also had drivers sign time cards to acknolwedge they were authorized and permitted to take rest periods. 
The trial court refused to certify a sub-class of rest period claims.  But the court of appeal reversed.  The court held Safeway's system of compensation was akin to a piece rate method of compensation.  And, the court decided, California law does not allow paid rest periods to be included in piece rates because it was an improper averaging of compensation: 

under the rule of Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314, 323 (Armenta), rest periods must be separately compensated in a piece-rate system. Rest periods are considered hours worked and must be compensated. (Cal. Code Regs., tit. 8, §§ 11070, subd. 12; 11090, subd. 12.) Under the California minimum wage law, employees must be compensated for each hour worked at either the legal minimum wage or the contractual hourly rate, and compliance cannot be determined by averaging hourly compensation.

The court expressly held that there was a common issue for determining liability - that the compensation system did not compensate employees for paid rest periods separately. The court did so by holding that piece rates may not include payment for rest periods. That is another way of saying that there was no payment for rest periods as a matter of law.

With all respect to the court of appeal, this decision seems to over-analyze the merits of the case.  The court seems to be saying the common proof is that all rest periods were paid incorrectly as a matter of law.  Without saying so, therefore, the court essentially granted summary judgment for the plaintiff rather than just class certification. 

While we're talking about the merits, I am not sure I understand why the piece rate payment cannot include implied payment for rest periods, as Safeway testified it did. An hourly pay rate does not expressly include payment for rest periods either.  During the hour that an employee takes a rest period, he is paid the same hourly rate, but simply works less.  During the hour that an employee does not take a rest period, she receives the same rate as if she did take one. Employers likely set their hourly rates under the assumption that the employee will take a rest period during one of every four hours worked.  The hourly rate therefore "averages" compensation, which the cout said could not be done.   Anyway, I don't get a vote.  So, I descend from my soap box, dejected.

The court also certified a meal period sub-class class on the basis that there was a common issue regarding whether Safeway adequately provided second meal periods before 2006, which is when the case was filed.  The court did not reach the plaintiff's argument that Safeway did not do enough to ensure drivers were relieved of duty, because the one common issue was enough for class certification.  This part of the decision may not be all that significant to employers who adequately provide for both meal periods per Brinker.  Safeway changed practices in 2006.

Finally, the court of appeal decided the wage statement sub-class should be certified.  The court agreed that the wage statement did not adequately spell out wage rates applicable to miles driven, such that the employees would have to refer to their own trip sheets to verify whether they received adequate compensation and engage in mathematical calculations:

Plaintiff‟s argument goes to the structure of the wage statements. As a result, his and the other drivers‟ claims of injury on account of the wage statements will be resolved by means of common proof. The structural omissions in the wage statements, and their alleged violation of Labor Code section 226, are, like employer policies, the types of matters best resolved by class adjudication.

There have been other decisions regarding  piece rates lately. See, e.g., here.  Employers should review their compensation plans to ensure compliance with minimum wage, overtime, meal and rest period laws.

This case is Bluford v. Safeway Stores, Inc. and the opinion is here.

Court of Appeal: CA Employer Violates Minimum Wage By Averaging Total Compensation Over Hours Worked

An auto dealership compensated its mechanics based on a "piece rate" system. For repairs, the company would pay the employees based on a standard period of time allowed for a repair (flag hours).  The pay rate was significantly higher than minimum wage.  So, if the job took longer than standard hours, there was enough wages to ensure the mechanic earned more than minimum wage.

But the mechanics spent significant time at work NOT performing repairs, such as in training, cleaning, etc.  The dealership would calculate the total hours worked vs. the compensation it would pay for flag hours.  If the pay rate fell below minimum wage, the dealership would make up the difference.  The dealership did not pay a separate hourly rate for non-repair time that would not have been covered under the piece rate.

Illegal, said the court of appeal. The main issue is whether the applicable Wage Order (Wage Order 4-2001), requires payment of at least minimum wage for each hour worked, or an average of minimum wage for all hours worked in the work week.  The trial court and Court of Appeal, relying on an earlier case, Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314 agreed with the plaintiffs that the former interpretation was correct.

The bottom line is that piece-rate employees must be paid separately for work that does not fall within the scope of the work that is the subject of the piece rate.  The non-related hours must be paid at least at minimum wage.  Employers concerned about increased payroll costs may choose to reduce piece rates prospectively, and upon reasonable notice.  They should check with their lawyers first regarding how to do this.

While you have your lawyer on the phone, another wrinkle may be determining where the piece rate work ends and the non-related work begins.  What, exactly, goes into the calculation of the piece rate repair time?  If the employer over-includes non-related work into the piece rate, it risks liability if the work should have been classified as non-related.

This case is Gonzalez v. Downtown LA Motors and the opinion is here.

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Do You Know Minimum Pay in San Jose?

"LA is a great big freeway. Put a hundr"...oh, is this on?  Oops.

San Jose's voters approved a $10.00 minimum wage, indexed to inflation beginning in 2014. (The California state minimum wage is $8.00.)  San Jose joins San Francisco as the second city to pass its own city wide minimum wage.

The new, 6-page ordinance has a bunch of additional provisions in it.  Payroll records must be kept for four years.  There is a new poster required.  Every employer must provide new employees with the employer's name and address in writing.  The anti-retaliation provision says that any adverse action taken within 90 days of an employee's protected activity related to the minimum wage is presumed to be retaliation.  Oh, and there is a penalty of $50 per employee per pay period for non-compliance.  The ordinance allows for government enforcement, and also creates a private right of action for violations as well.

The new wage is effective 90 days from when its November election is certified.  Our friends at the Cal Chamber say that the new wage will take effect in March 2013 or so.

Here is the ordinance.

Thanks for the tip, Cal Chamber. Happy Thanksgiving everyone.  If you know the owner of a small business in San Jose, you may wish to let him or her know about the new ordinance before he or she is litigated, fined, etc. out of business.

DGV

San Francisco Minimum Wage to $10.55 effective January 1, 2013

The San Francisco Office of Labor Standards Enforcement announced that the San Francisco minimum wage will increase to $10.55 per hour, effective January 1, 2013.  The statewide minimum is $8.00 per hour.

This hourly rate, up from $10.24 in 2012, is indexed to inflation.  There will be a new minimum wage poster too, natch.  Find it, along with other information about the SF Minimum Wage Ordinance, here.

San Francisco Update

Employers operating in SF - couple of things to note.

First, a new poster!  This one must be posted by employers with more than 20 employees who are covered by San Francisco's health care program.   Under that program, employers must spend a certain amount per hour on health care coverage for San Francisco based employees. That amount starts at $1.46 per hour for employers of 20-100 employees.  Read the poster and download it here.

Second, the San Francisco minimum wage, is going up!  San Francisco employers must start paying $10.24 minimum starting 1/1/12. That's a big jump from this year's minimum of $9.92, because the minimum wage is indexed to inflation.  Prices have been going up too, except for home prices of course!  And employers have to post the updated poster, which is here.

San Francisco employers- here's wishing you an enjoyable winter celebration of pointy sustainably grown trees, except for those of you who are enjoyment-challenged or hypofuniacs.

DGV

San Francisco Minimum Wage Going Up 1/1/2011

San Francisco has its own minimum wage law.   It is indexed to inflation. It did not rise in 2010. However, it's rising as of 1/1/2011.  The new rate will be $9.92 per hour.  There of course is a new poster!  Get information here. 

Nevada Minimum Wage Going Up 7/1/2010

Our neighbor to the east will raise its minimum wage on July 1. In Nevada, there are different minimum wage levels for employees who receive qualifying health benefits and those who do not.

The Nevada minimum wage will increase to the federal level of $7.25 per hour for employees who receive qualifying health benefits. The rate goes up to $8.26 per hour for those workers who do not receive health benefits. The increase is covered in this article. It is not yet posted on the Nevada Labor Commissioner's website, but likely will show up here. Qualifying health benefits are defined here.

FLSA - Federal Minimum Wage Going Up 7/24/09

Happy July 4!
The California state minimum wage is $8.00 (even higher for some employers subject to "living wage" ordinances, and in some localities like San Francisco). So, you may not care that the federal minimum wage is going up to $7.25 per hour on July 24, 2009. U.S. DOL's minimum wage page is here. Multi-state employers, heads up!

San Francisco Minimum Wage Going UP

1/1/09 - the SF Minimum Wage increases to $9.79. And let's not forget that poster! Here's a free one. The $9.79 minimum applies to all private sector employers. But city government contractors have a higher minimum wage $11.54. And here is your poster, government contractor! Happy new year anyway.

Federal Minimum Wage Going Up to $6.55 per hour 7/24/08

Most of us who practice or work in California don't think much about the federal minimum wage. That's because California's minimum wage is far higher than the federal standard. Those of you not subject to California's $8.00 minimum may be interested in the upcoming increase to the federal minimum. The FLSA minimum wage will rise $5.85 to $6.55 per hour on July 24, 2008. It will increase again to $7.25 on 7/24/09, too. Here's a U.S. DOL fact sheet on the federal minimum wage.

DGV