Articles

Dancing in a Minefield: The California Wage and Hour Law Tango

April 02, 2006

The adage “Everything old becomes new again” has particular meaning both for employers and for the lawyers who sue or represent them.

California’s wage and hour laws were promulgated during the 1930s to implement such New Deal concepts as minimum wage, overtime and “one day’s rest in seven.” Over the ensuing decades, the California legislature expanded the scope of wage and hour laws to cover payroll practices, vacation pay, and meal and rest breaks. No detail—from what must be listed on a paycheck stub to whether an employee may be paid final wages by direct deposit—was too small to escape legislative attention.

In the twenty-first century, wage and hour laws underlie a legal industry. For example, in December 2005, an Oakland jury awarded a $172 million verdict in a class action against Wal-Mart for violating meal and rest break laws. In January 2006, a class action was filed against IBM for alleged failure to pay overtime to tens of thousands of computer installers and maintenance workers who were wrongly characterized as “exempt.”

While lawsuits against business giants such as Wal-Mart and IBM capture headlines, every California employer must recognize that the wage and hour laws are a minefield, through which the employer dances daily. Even the smallest misstep can result in an administrative claim, a Labor Commissioner audit, civil litigation, or criminal charges. In 2004, the legislature passed the Labor Code Private Attorneys General Act, which permits any aggrieved employee to sue for violation of almost any provision of the Labor Code, increases the amount of civil penalties, and provides for a right to recover attorneys’ fees, thereby encouraging litigation.

Some of the hazards in the minefield are created by simple, fundamental decisions such as:

1.  Is the employee exempt or non-exempt from minimum wage and overtime law? The employer’s burden to prove exempt status rests on the amount of the monthly salary as well as the predominant nature of the work performed. Non-exempt employees are entitled to earn minimum wage and overtime for all time worked in excess of eight hours in a workday or forty hours in the workweek. An employee may be entitled to claim unpaid overtime going back over four years. The employer could also be liable for interest, penalties and attorneys’ fees.

2.  Is the employee paid appropriately? California law requires that employees be paid all amounts earned, without reduction, within certain defined time spans. Legal disputes frequently explode over whether bonuses or commissions were earned and timely paid.

3.  Is the employer providing non-exempt employees with a meal-break of not less than half an hour after five hours worked?  The employer has the burden of maintaining records which show that a meal break was provided. The failure to provide meal breaks results in a one hour penalty for each missed meal break.

4.  Is the employer properly accruing and paying out vacation time? Paid vacation is not required by law, but an employer who chooses to offer this benefit must comply with a host of rules, ranging from prohibition of “use it or lose it” policies to formulae for calculating permissible caps on accrual.

5.  Are improper deductions being taken from the employee’s paycheck?  Other than required taxes, any deduction must be authorized by the employee in writing. Deductions from salary for absences of less than a full week caused by the employer, jury duty, witness duty, or absences of less than one full day, may jeopardize the status of an exempt employee.

6.  Was a terminated employee paid all amounts owed for services, including accrued but unused vacation, immediately upon an involuntary termination or within 72 hours of a resignation?  Failure to properly calculate and pay final wages can result in “waiting time” penalties of up to thirty days of wages.

This is a sampling of the wage and hour landmines that litter the employment relationship from hiring to termination. The prudent employer will have policies and practices to avoid a misstep.

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Roberta S. Hayashi, Berliner Cohen partner, has over twenty-five years experience representing Silicon Valley employers in employment and business litigation. She has trial experience in wrongful termination, discrimination, and misappropriation of trade secrets and proprietary information actions in both state and federal court. Ms. Hayashi has been named one of the “Top 50 Women Litigators” in California by The Daily Journal.  For more information, please contact Ms. Hayashi at roberta.hayashi@berliner.com.

©2008 Berliner Cohen.  This article is not intended to and does not constitute legal advice or a solicitation for the formation of an attorney-client relationship and no attorney-client relationship is created through your use of the Berliner Site or your receipt of the materials.  Attorneys in the Berliner Cohen Employment Group will be pleased to provide further information regarding the matters discussed in this article.