When an employer classifies a group of employees as exempt under state and federal wage and hour law, that decision is subject to challenge by the employees or a government agency. The wrong decision can result in expensive litigation and huge liability. In a recent California case titled Peligrino v. Robert Half International, a California appellate court ruled that the employer had misclassified its account executives under the administrative exemption. The court also invalidated an employee agreement reducing the statute of limitations (time to sue) to six months.

California employers are awaiting the California Supreme Court’s review of a July 2008 court of appeal ruling that held California’s Labor Code required employers to “provide” a meal period for employees who worked more than five hours a day, but not ensure that the meal period be used. Brinker Restaurant Corp. v. Superior Court (Hohnbaum), Supreme Court Dkt. No. S166350. The lower court also had addressed the companion issue of California’s rest break requirements.

On November 28, 2009, the Division of Labor Standards Enforcement (DLSE) issued an opinion letter which should help shed some light on an area of the law which has long plagued California employers due to its ambiguity -- namely, under what circumstances may employers make deductions from exempt employees' salaries without running afoul of the law?

The California Division of Labor Standards Enforcement (“DLSE”) has issued an opinion letter stating that while employers cannot deduct from the salary of an exempt employee for partial day absences, employers may deduct for such absences from employee leave balances in accordance with the employer’s bona fide leave policies. The DLSE specifically repudiated its prior limitation on leave bank deductions to partial day absences of four or more hours. This opinion represents a significant break from the DLSE’s prior enforcement position and likely will give California employers and employees greater flexibility in scheduling paid time off. DLSE Op. Letter 2009.11.23 (the “DLSE Opinion Letter”).

The concept behind incentive compensation is to motivate employee behavior, such as employee retention. Employers commonly design the incentive by providing that employees who quit or are fired for misconduct before an established date forfeit the incentive.

When it comes to properly paying employees, California law presents a minefield for the unwary employer. For example, wages must be paid in cash or in a form “negotiable and payable in cash” (e.g.., by check), without discount, within a specified time period after they are earned. Employees who quit or are terminated typically must be paid their final wages on their last day of employment or significant penalties may accrue. Once earned, wages cannot be forfeited, and it is illegal for an employer to recoup or collect from employees any part of wages already paid. Private agreements circumventing these rules are strictly prohibited.

Some people leave their jobs at the end of the day and do not even think about work until the next shift begins. Then, there is the rest of us. California's wage and hour laws are tricky, even as applied to workers on a traditional 9-5 schedule. The rules that apply to commuting, working at home, on-call time, and other incidental work performed during what is otherwise "free" time, vex even the wonkiest of employment lawyers.

In Schachter v. Citigroup, Inc.,1 the California Supreme Court rejected claims that an incentive plan that conditioned the earning of restricted stock based on continued service was unlawful where the employee voluntarily elected to participate in the plan, and the employee quit before the date on which the incentive was earned. The plan was lawful even though the incentive plan was funded from wages that the employee would have otherwise received in cash. With this decision, the California Supreme Court joined the courts of six other states that had concluded the Citigroup Capital Accumulation Plan complied with each state’s respective wage payment laws.

In Schachter v. Citigroup, Inc., the California Supreme Court rejected claims that an incentive plan that conditioned the earning of restricted stock based on continued service was unlawful where the employee voluntarily elected to participate in the plan, and the employee quit before the date on which the incentive was earned. The plan was lawful even though the incentive plan was funded from wages that the employee would have otherwise received in cash. With this decision, the California Supreme Court joined the courts of six other states that had concluded the Citigroup Capital Accumulation Plan complied with each state’s respective wage payment laws.

Employers looking to gain a foothold in San Francisco should carefully survey the terrain. San Francisco businesses are subject to local employment ordinances in addition to the many federal and state requirements. Even small businesses must comply with the host of mandates that do not apply outside the county borders. Here are the principal San Francisco ordinances that generally govern private-sector employers. Employers in specific industries may be subject to additional or different requirements.

California labor commissioner approves temporary pay reduction for exempt workers.

With the economy in flux, businesses are looking for ways to reduce payroll without losing talent. Some companies have put their hourly workers on a “work furlough” by reducing the number of hours or days in a weekly schedule. But can the same be done for salaried exempt workers? Normally, salaries cannot be adjusted based on the number of hours worked in a workweek.

An employer recently found itself in the unenviable position of defending a lawsuit brought by a former sales employee, who alleged that the employer owed him a commission of 20% on a $12 million deal he brokered with AT&T. After three and a half years of litigation, an appellate court ruled in the employer's favor because the salesperson's employment agreement contained two critical provisions. Would your company's commission plan pass the same test? Nein v. HostPro, Inc.

California employers continue to learn the hard lessons resulting from the failure to adequately keep time records or monitor off-the-clock activities. Timekeeping errors that occur systematically and continue unchecked can accumulate hundreds of thousands of dollars in liability, not to mention potential penalties and attorneys' fees in defending class action complaints addressing such deficiencies. The failure to keep accurate time records almost certainly is the direct result of an employer's failure to train, retain, and monitor effective first line supervisors.

On August 19, 2009, the California Division of Labor Standards Enforcement ("DLSE") issued an important Opinion Letter for California employers (the "8/19/09 OL"), finding that an employer's temporary schedule and salary reductions for exempt employees remains consistent with the salary basis test when implemented to cut costs.

As part of California’s annual budget ordeal, rather than enacting new taxes, the legislature enacted (and the Governor signed) various income shifting and tax acceleration provisions. Under ABX4-17, as of November 1, 2009, employers will be using a new state income tax withholding table to increase by 10% the amount of income taxes withheld based on existing claimed exemptions. This law also increases the rate on withholdings for supplemental wages as well as other types of payments such as exercised stock options and bonuses. Under a companion bill, ABX4-18X, as of January 1, 2010, California imposes 7% backup withholding for certain payments to non-employees (i.e. independent contractors) where back-up withholding is otherwise generally required under the Internal Revenue Code. In combination, these laws create new obligations on both payroll and accounts payable operations.

As the old cliché goes, “better late than never.” This applies to an important new opinion letter from the California Division of Labor Standards Enforcement (“DLSE”). In the opinion, the DLSE acknowledges, contrary to its prior view, that California’s approach to furloughing salaried “white collar” exempt employees follows the federal approach. This about face substantially reduces an area of potential legal risk for California employers who follow the federal guidelines for reducing both the workweeks and salaries of exempt employees.

As the old cliché goes, "better late than never." This applies to an important new opinion letter from the California Division of Labor Standards Enforcement (DLSE). The opinion conforms California's approach to furloughing salaried "white collar" exempt employees to the federal approach. California employers may now reduce both the workweeks and salaries of exempt employees without jeopardizing their overtime-exempt status, provided the federal rules for such changes are followed.

As a general matter, employees are not compensated for regular commute time. But sometimes the line between commuting and “on the clock” driving may be hard to define. Moreover, it is not always clear whether an employee must be compensated for performing minor tasks before or after shifts. A recent case titled Rutti v. LoJack provides a good example of just how fuzzy the line can be.

Here is some good news for California employers. The California Labor Commissioner has just published an August 19, 2009 Opinion Letter which provides employers with much needed relief during these difficult economic times.

Managers generally may do their jobs without fear of personal liability for employees' claims under California law. But a recent Ninth Circuit decision is a reminder to managers that they may not be entirely immune to claims for unpaid wages.

The federal minimum wage increased to $7.25 per hour effective July 24, 2009. Amendments to federal law in 2007 increased the minimum wage to $5.85 per hour effective July 24, 2007; $6.55 per hour effective July 24, 2008; and $7.25 per hour effective July 24, 2009.

In 2008, San Francisco enacted an ordinance (Ordinance) requiring private employers with 20 or more employees, as defined more completely below, to offer employees "subsidized" commuting benefits.1 The Ordinance became "effective" for implementation on January 19, 2009. It requires employers to provide employees at least one of the following three options: (1) allow employees to elect to deduct commuting costs from pre-tax wages to purchase transit passes or vanpool rides (but not parking); (2) the employer may pay no less than $45 per month (raised to $55 on July 1, 2009) for transit passes or reimburse employees for a portion of carpool or vanpool expenses; and/or (3) the employer may operate a vanpool, bus, or similar multi-passenger shuttle-type service at no cost to employees.

With summer in full swing, many employees are taking vacations with their families. Meanwhile, Human Resources managers are checking leave balances. As the Court of Appeal recently reiterated in the case of Owen v. Macy’s, the law does not require that an employer provide its employees with any paid vacation. Any right to vacation benefits must come from the employer’s policies, an employment contract, or a collective bargaining agreement.

In a case titled Chau v. Starbucks, a California appellate court has added a new dimension to rules regarding tip pooling in California. Tip pooling is the practice of sharing customer tips among staff. It is a common practice in restaurants. California’s Labor Code has a specific rule that precludes managers or supervisors from taking part in the tip pool distribution.

Most employers doing business in California are familiar with wage claims brought by current or former employees before the Division of Labor Standards Enforcement (DLSE), which is the state agency charged with enforcing the California Labor Code and the state's wage-hour laws and regulations. This article highlights the rules and procedures in defending a wage claim in California.

In connection with its review of a federal district court decision in D'Este v. Bayer Pharmaceuticals, the Ninth Circuit Court of Appeals certified two important questions to the Supreme Court of California, the answers to which could resolve several pending putative wage-hour class actions against pharmaceutical companies involving the exempt classification of their sales representatives. However, on June 10, 2009, the Supreme Court of California summarily denied the Ninth Circuit's request:

Earlier this year, a San Diego trial court issued a $100 million verdict against Starbucks Corporation in a controversial class action involving how Starbucks distributes tip jar monies. About 10 days ago, a California Court of Appeal reversed that ruling. In doing so, the court clarified one of the important rules that hospitality industry employers must follow when devising any tip sharing arrangements.

Affirming summary judgment in favor of an employer, the California Court of Appeal has held that the plain language of an employment agreement barred a salesperson’s recovery of commissions following his termination of employment. Nein v. HostPro, Inc., No. B199497 (Cal. Ct. App. June 4, 2009). The Court also held that the agreement precluded the plaintiff’s claim for breach of the implied covenant of good faith and fair dealing, for state Labor Code violations for failing to pay wages, and for violations of the state Unfair Competition Law.

A recent California appellate court opinion has substantially expanded the group of restaurant personnel who may participate in a mandatory tip pooling arrangement. Tip pooling is a practice where some of the tips received by tipped employees are shared with other restaurant employees. Under existing law and longstanding industry practice, restaurant servers pool their tips and distribute a portion of that money to bus persons, food runners and others who directly assist in serving the customer. Kitchen personnel and others are typically left out of such an arrangement.

Holding that an employer had failed to prove its employees were covered by the motor carrier exemption to the overtime compensation requirements of the California wage and hour laws, the California Court of Appeal has reversed summary adjudication for the employer. Gomez v. Lincare, Inc., No. G040338 (Cal. Ct. App. Apr. 28, 2009). The Court concluded the employer had not shown that its employees qualified for the exemption, because it was unable to demonstrate they drove a vehicle carrying hazardous materials each workday. The Court remanded the case for further proceedings.

When an employer pays money to an employee asserting a legal claim, it expects to receive a release of liability in exchange. A valid release for wage claims can be tricky in California because the Labor Code places limits on the right to release such claims. A recent case titled Watkins v. Wachovia Corporation illustrates that a valid release is possible only in the context of a “bona fide dispute.”

A recent California federal district court ruling in a case titled Cervantes v. Celestica Corporation addresses two wage and hour issues: (1) Must employees be compensated for pre- and post-shift time spent waiting in line at a security checkpoint? (2) Under California and federal wage and hour law, may temporary workers sue their temp agency as well as the company to whom they are assigned?

San Francisco’s Health Care Security Ordinance (“Ordinance”), which became effective in 2008, requires covered employers operating in San Francisco to spend a minimum amount on health care for covered employees and to file an annual report form (“ARF”). Employers must file the first report (for 2008 expenditures) by April 30, 2009.

Maybe like your morning, the controversy over tip pooling perked up over a cup of coffee. A little over a year ago, a court awarded over $85 million dollars to Starbucks “baristas,” finding a Starbucks tip pooling policy allowed shift supervisors to unlawfully share in the pooled tips. While many employers may be familiar with other wage and hour issues, such as overtime and meal and rest breaks, tip pooling is one of those issues that has gone undisturbed for many years. Now that the sleeping giant is awake, employers in applicable industries should become fully aware of the current rules in California governing tip pooling.

The California Division of Labor Standards Enforcement has issued an opinion letter to Jackson Lewis LLP in which it approved a proposed alternative workweek schedule for summer months. Specifically, the DLSE permitted an employer, a pharmaceutical manufacturer, to adopt a schedule of four nine-hour days (Monday through Thursday) and one four-hour day (Friday) from June to September, while maintaining a schedule of five eight-hour days (Monday through Friday) during the balance of the year. The DLSE also stated that, if the proposed schedule would recur in subsequent years, the employer would need to conduct a secret ballot election among affected employees to approve the alternative summer workweek schedule, but only once.

Whether the economy is still declining or on the rebound, one thing is clear: the storm of wage & hour litigation continues to buffet employers, an increasing trend that began long before the current recession and plague of unemployment in California. Two key historical facts have contributed significantly to the rise of such litigation in California beginning this decade.

As we reported in our last issue (California Wage/Hour Update, No. 1, January 2009), the U.S. Court of Appeals for the 9th Circuit recently ruled that the overtime provisions of California's Labor Code apply to work performed in California by non-resident employees. Sullivan v. Oracle Corporation.

Affirming dismissal of the plaintiff’s complaint, the California Court of Appeal has held that a restaurant’s mandatory “tip pool,” in which servers shared their tips with bussers, bartenders, kitchen staff, and dishwashers, did not violate the Labor Code.

Something good for employers is buried in the text of the recently concluded California budget. The Legislature has given California employers greater flexibility in implementing and administering so-called "alternative workweek schedules." The new law, which goes into effect on May 21, 2009, amends the California Labor Code to add more flexible options to employers and employees alike. Here's a rundown of the key changes.

In a decision making waves throughout the trucking industry, the U.S. Court of Appeals for the Ninth Circuit, in American Trucking Association v. Los Angeles, enjoined implementation of mandatory Concession Agreements for drayage trucking services at the Port of Los Angeles and the Port of Long Beach because it found that the Concession Agreements were preempted by the Federal Aviation Administration Authorization Act ("FAAA Act"). The decision not only presents a hurdle to union organizing efforts at the Ports, but it may also be used to challenge state meal and rest break regulations as they apply to the trucking industry.

Affirming summary judgment in favor of the employer in a class action involving unpaid overtime claims, the California Court of Appeal has held that the Labor Code did not prohibit the release of a claim for unpaid wages where there was a bona fide dispute over whether wages were owed. Chindarah v. Pick Up Stix, Inc., No. G037190 (Cal. Ct. App. Feb. 27, 2009). After the employer had settled claims with as many class members as possible, several employees challenged the settlement agreements, claiming that they violated the Labor Code because wages owed could not be consideration for entering into a release. The court rejected the plaintiffs’ claims and found that the settlement agreements were valid as a matter of law because the wage amounts at issue were disputed.

Reversing an order compelling arbitration in a class action over alleged meal and rest period violations, the California Court of Appeal has held that an arbitration agreement was unconscionable because it barred class arbitration and prevented the plaintiff from acting as a private attorney general under the Labor Code Private Attorney General Act (“PAGA”). Franco v. Athens Disposal Co., No. B203317 (Cal. Ct. App. Mar. 10, 2009). The court applied the California Supreme Court’s analysis in Gentry v. Superior Court, 42 Cal. 4th 443 (2007), which addressed the enforceability of class action waivers to claims for unpaid overtime. The court remanded the case and ordered a trial.

Affirming summary judgment in favor of the employer, the California Court of Appeal has held that a restaurant’s distributions from a “tip pool” to employees who did not provide direct table service did not violate the state’s Labor Code. Budrow v. Dave & Busters of Calif., Inc., No. B205026 (Cal. Ct. App. Mar. 2, 2009). The plaintiff alleged that the employer’s tipping policy, requiring servers to contribute one percent of their gross sales to bartenders and other non-management employees, violated Section 351 of the Labor Code, which relates to tip sharing. The Court rejected the employee’s claim, ruling that Section 351 did not limit tip pools to staff providing direct table service, and affirmed the trial court’s judgment.

Tip pooling is the practice of taking customer gratuities and dividing the money among employees. In California, the practice is allowed, but particular rules apply, including the prohibition against supervisor participation.

The U.S. Court of Appeals for the Ninth Circuit (San Francisco) has withdrawn its opinion holding that nonresidents of California were entitled to overtime pay under the California Labor Code for work performed in California and could pursue derivative claims under the California Unfair Competition Law (Cal. Bus. & Prof. Code § 17200) for alleged state and federal overtime violations. Sullivan et al. v. Oracle Corp., No. 06-56649 (9th Cir. Feb. 17, 2008). Instead, the Court has certified three state law questions to the California Supreme Court regarding the application of the Labor Code and UCL to nonresident workers:

A new law went into effect as of the first of this year requiring the issuance of weekly paychecks for most workers on temporary assignment with a client or customer. Although initially intended to apply only to the temporary services industry, as enacted, the law extends outside traditional notions of that industry.

Affirming judgment in favor of the employer in an action for late payment penalties under Section 203 of the California Labor Code, a state Court of Appeal has held that such penalties may not be recovered as restitution under the California Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17203. Pineda v. Bank of Am., N.A., No. A122022 (Cal. Ct. App. Jan. 21, 2009). The court further held that the plaintiff’s claim for late payment penalties was barred by a one-year statute of limitations. Accordingly, the plaintiff’s complaint was dismissed.

Violations of California’s wage and hour laws are costly. Aside from liability for unpaid wages, the Labor Code imposes cumulative penalties, interest and attorney fees. But what about punitive damages? Can a jury award Labor Code penalties plus punitive damages on top?

Reversing a jury verdict awarding punitive damages to a former golf course employee, the California Court of Appeal has held that such damages cannot be recovered for claims under the California Labor Code for unpaid wages, minimum wage violations, meal and rest breaks violations, and pay stub violations under the “new right-exclusive remedy doctrine.”

Reversing a judgment in favor of a class of employees, the California Court of Appeal has ruled that an employer’s formula for calculating overtime compensation on bonuses paid to hourly employees did not violate the California Labor Code or the federal Fair Labor Standards Act.

Our economic recession has wrought hiring freezes, lay offs, business closures, etc. Both employers and employees are suffering. To keep afloat and perhaps avoid layoffs, employers are seeking creative ways to save money and conduct business more efficiently. One option is to reduce employer liability for payment of overtime. The adoption of an “alternative workweek” may be a means to accomplish this goal.

A new San Francisco Ordinance went into effect January 20. It requires employers with 20 or more employees (regardless of where they are located) to provide incentives for their San Francisco employees to use public transportation. The San Francisco based employees must work at least 10 hours per week to qualify.

California's labor laws require employers to reimburse all employees for any personal expenses they may incur while rendering services for their employer. This includes automobile expenses if the employee is required to use their personal automobile while rendering services for the employer.

A federal appeals court recently handed down a significant decision addressing the application of the overtime provisions of California's Labor Code to work performed in California by non-resident employees. The case has important consequences for employers who hire non-residents to perform work in California Sullivan v. Oracle Corporation.

In our last issue we looked at some of the most important timekeeping problems that employers should be aware of, in order to keep from being engulfed in the virtual tsunami of overtime claims being filed in recent years.

On December 3, 2008, in a long-awaited decision, the California Court of Appeals for the Fourth Appellate District addressed the issue of punitive damages in the context of a wage-and-hour lawsuit. This case represents a victory for employers in an area where the laws and penalties in California tend to be draconian.

In what may become a trend statewide, or even nationwide, the San Francisco City Council passed what is called the Health Care Security Ordinance (HCSO). The purpose of the ordinance is to require employers to pay certain monetary amounts for health care, based on the number of persons employed.

A new law slated to take effect on January 1, 2009, clarifies the wage payment obligations of temporary staffing firms that do business in California by requiring employers to pay temporary employees on assignment at least once a week, regardless of when their temporary assignment ends, rather than the day each assignment ends. Under the new law (California Labor Code Section 201.3), employers also must pay the wages for work performed during any calendar week no later than on the regular company payday during the following calendar week.

San Francisco recently passed an ordinance (Ordinance) requiring San Francisco non-governmental employers to offer employees "subsidized" commuting benefits.1 The Ordinance, scheduled for full implementation on January 19, 2009, requires employers to provide employees at least one of the following three options: (1) allow employees to elect to deduct commuting costs from pre-tax wages to purchase transit passes or vanpool rides (but not parking); (2) the employer may pay (no less than $45 per month) for transit passes or reimburse employees for a portion of carpool or vanpool expenses; and/or (3) the employer may operate a vanpool, bus, or similar multi-passenger shuttle-type service at no cost to employees. The Ordinance's stated purpose is to reduce air pollution and carbon dioxide emissions in San Francisco to 20 percent below the city's 1990 levels by the year 2012, by encouraging the use of public transportation or vanpooling. Whether or not the environmental goals can be met, the Ordinance complicates doing business in San Francisco. The Ordinance adds yet another (and sometimes conflicting) layer to subsidized employee commuting benefits that are already provided for under federal tax law as Qualified Transportation Fringe Benefits (QTFB).2 This article discusses the new Ordinance as well as its interplay with QTFBs and California laws allowing employees to cash out employers' subsidized parking for additional wages under the California Air Resources Board's "Parking Cash-Out Program."

If a company sends its out-of-state employees to work on an assignment in California, does the California Labor Code apply during the assignment? The answer, according to the federal Ninth Circuit in a case captioned Sullivan v. Oracle Corp., is “yes.”

Nonresidents of California are entitled to overtime pay under state law for work performed in California, the U.S. Court of Appeals for the Ninth Circuit held as it reversed summary judgment in favor of the employer on claims for unpaid overtime under the California Labor Code. Sullivan et al. v. Oracle Corp., No. 06-56649 (9th Cir. Nov. 6, 2008). The Court also reversed summary judgment in favor of the employer on the plaintiffs’ claim under the California Unfair Competition Law, which was predicated on the Labor Code violations, ruling that the UCL applied to the plaintiffs’ work in California. However, the Court held that the UCL did not apply to violations of the Fair Labor Standards Act outside of California and affirmed summary judgment in favor of the employer on this claim.

Businesses must comply with California labor laws when their employees perform work in California even if the employees live or mostly work out of state.

The Ninth Circuit in Sullivan v. Oracle Corporation, (08 Cal. Daily Op. Serv. 13,881) (Nov. 6, 2008), came to three important conclusions regarding the reach of certain California laws:First, California's overtime laws may apply to nonresident employees (in the case itself, individuals from Arizona and Colorado were involved) for those periods of time that the employees temporarily work in California; Second, the court found that a company that has a sufficient presence in the state, such as Oracle, can be required to comply with California law without violating that employer's due process rights; and Third, the court found that California's unfair competition law does not apply to acts based on alleged federal wage law violations that occur outside of the state.

Following on the heels of the California Supreme Court's decision to grant review in Brinker Restaurant Corporation v. Superior Court, which interpreted California's meal and rest period requirements, a California Court of Appeal has re-addressed California's break requirements. In Brinkley v. Public Storage, Inc. (10/28/08), the Court of Appeal determined: (1) employers must provide, but not ensure, meal periods for employees; (2) meal periods need not be provided within the first five hours of the shift (only that they be provided at some point during a shift of 6 hours or more); and (3) employers must provide, but not ensure, rest periods for employees.

Last July we reported on Brinker Restaurant Corp. v. Superior Court, an employer-friendly decision by a California Appeals court which addressed the legal standards under California's laws on meals and rest periods for employees.

The California Supreme Court has granted review of a pro-employer meal and rest period case, Brinker Restaurant v. Superior Court. The Court may take a year or more to mull over the matter; in the meantime, California employers are left guessing about this baffling aspect of labor law.

In a previous ASAP, "A Ray of Hope: California Court of Appeal Decides Compliance with Meal Period Obligation Requires an Opportunity, Not a Guarantee," July 2008, employers were cautioned that the court of appeal's decision was not likely to be the last word on the subject. As anticipated, on October 22, 2008, the California Supreme Court granted review in Brinker Restaurants v. Superior Court (Hohnbaum).1 As a result, the Court of Appeal decision is now "depublished" and cannot be cited or relied upon as precedent.

The California Supreme Court has granted review of the California Court of Appeal's decision in Brinker Restaurant Corporation v. Superior Court, which interpreted California's meal and rest break requirements. As reported in our July 24, 2008 Legal Alert, the California Court of Appeal previously held that: (1) employers need only provide, not ensure, that rest periods are taken; (2) employers need only authorize and permit rest periods to be taken for every four hours or major fraction thereof worked (and that the rest periods are not required to be taken in the middle of the four hour period); (3) employers are not required to provide a meal period for every five consecutive hours worked; (4) employers need only provide, not ensure, that meal periods are taken; and (5) employers can only be held liable for employees working off-the-clock if the employer knew or should have known employees were doing so.

Employers anywhere in the United States are required to spend specified minimums on health care benefits for any of their employees working in San Francisco under a local ordinance recently upheld by the Ninth Circuit Court of Appeals (see San Francisco Health Care Law Survives ERISA Preemption). Employers may face significant penalties for failing to comply with the San Francisco Health Care Security Ordinance, which went into effect this year.

California’s Department of Labor Standards Enforcement (DLSE) has released two opinion letters (OpLtrs) that should please employers by sanctioning their use of alternate, electronic wage payment methods. The OpLtrs approve the use of payroll debit cards and “Money Network checks” for the payment of wages under the California Labor Code, provided that:

Finally, employers battling wage-and-hour class actions have caught a break. California’s Fourth District Court of Appeal has ruled that employers need only provide workers meal and rest breaks; they do not need to ensure that the breaks are taken. The court also ruled that employers cannot be held liable for off-the-clock work unless they knew or should have known employees were working off the clock, and vacated class certification as the issues in the case involved individualized inquiries that could “only be decided on a case-by-case basis.”

Last week Gov. Arnold Schwarzenegger approved an amendment substantially changing the law concerning overtime pay for certain computer software professionals. The law amends the California Labor Code and restores the overtime exemption for qualifying computer programmers, analysts and engineers who are paid a monthly salary equivalent to at least $75,000 per year, or who continue to be paid at least $36 per hour for all hours worked. The bill was passed as urgency legislation and took effect on September 30, 2008.

California Governor Arnold Schwarzenegger recently signed into law an amendment of California's Labor Code, which provides that employees in the computer software field are not entitled to overtime pay if they meet certain requirements. Under AB 10, employees in the computer software field are not entitled to overtime pay if they earn at least $36.00 per hour or have an annual salary of not less than $75,000 for full-time employment, which is paid at least once a month and in a monthly amount of not less than $6,250.

California, which nurtured Silicon Valley into a global phenomenon, has finally acted to stem the off-shoring of computer jobs by simplifying and reducing the compensation requirement for overtime-exempt computer professionals. The new legislation, contained in Assembly Bill (AB) 10, which took effect on September 30, 2008, as urgency legislation, may also stem the outpouring of computer jobs from California to other states by substantially harmonizing the duties requirements of the overtime exemption with those under federal law and under the laws of most other states.

On September 30, 2008, Governor Schwarzenegger signed into law a bill clarifying that salaried computer software professional employees who earn at least $75,000 a year are exempt from overtime compensation requirements.

Employers in California are still being pummeled with claims by current and former employees seeking compensation for allegedly unpaid overtime. Employers should tackle this problem by conducting self-audits and improving internal procedures for eliminating overtime complaints. The fact is, many overtime claims have identifiable causes and are completely avoidable.

There is a California law which costs employers millions of dollars each year, all of which could be avoided with almost no effort on the employer's part – no lengthy training, no notices to post, and no changes to employee handbooks.

Amid state budget delays and deals, the Labor Code has been amended to exempt from overtime pay eligibility only those computer software professionals who earn at least $75,000 annually. The previous exemption did not contain an annual income restriction. By some estimates, the amendment may affect 250,000 professionals.

Employers with 20 or more employees on average will be required as of December 20, 2008, to establish a mass transit commuter program for their employees who work 10 or more hours per week in San Francisco.

Two recent cases from the California federal district courts signify a continuing trend of cases that are favorable towards employers who are required to provide non-exempt employees with meal and rest breaks. On August 19, 2008, in Kimoto v. McDonald's Corps, the Central District denied class certification to a putative class of McDonald's crew members who alleged they were improperly denied meal and rest breaks. On July 28, 2008, in Perez v. Safety-Kleen Systems, Inc., the Northern District held that absent satisfactory evidence that a company was discouraging its employees from taking breaks, a class could not be certified due to the lack of commonality between each individual class member's claims. Both cases come on the heels of the decision in Brinker Restaurant Corp. v. Superior Court, a July 22, 2008, case from the California Court of Appeal for the Fourth Appellate District, which overturned a class action against the parent company of Chili's Grill & Bar and held that although corporations are required to provide rest breaks to employees, they are not obligated to ensure that its employees take them.

California law requires that all wages be paid twice during each calendar month, that wages be paid immediately upon discharge, and that wages be paid within 72 hours if an employee quits, with certain exceptions.

The California Court of Appeal recently overturned a class certification order in a lawsuit brought by a group of hourly, non-exempt employees who claimed that they were denied rest and meal periods and were forced to work off the clock. In a key ruling, the court held that employers “need not ensure meal breaks are actually taken, but need only make them available.” The court also held that the employer’s practice of providing an “early lunch” within the first hour of an employee’s shift did not violate California law, even where the employee might then have to work in excess of five consecutive hours without an additional meal period. The court found such “rolling five-hour” meal periods to be inconsistent with the plain meaning of the Labor Code. In addition, the court found that employers are liable for off-the-clock work only if they “knew or should have known” employees were working.

On July 22, Governor Arnold Schwarzenegger signed into law Senate Bill 940 which will change payroll practices applicable to "temporary service" workers. Under the new law, which will go into effect in January of next year, temporary service agencies must pay temps every week instead of every other week. The law also requires agencies to pay temps daily when they work for a client on a “day-to-day basis.” The new legislation creates another exception for workers on an assignment “for over 90 consecutive calendar days.” The weekly payment requirement does not apply to these employees unless their employers pay them weekly.

Controversial proposed legislation that would have required all California employers to provide paid sick days to all employees will not be adopted this legislative session. Citing the cost of implementing and maintaining the program, the California Senate Appropriations Committee decided to hold up consideration of Assembly Bill 2716. The California Labor Federation AFL-CIO has promised to work to reintroduce the bill in the 2009 legislative session.

The California Court of Appeal recently rendered an opinion in Brinker Restaurant Corp. v. Superior Court (Hohnbaum) which addresses several heavily litigated meal/rest period issues. While employers obviously welcomed the clarification provided by the ruling, lively celebration may be a bit premature. First, the case may find its way to the California Supreme Court. If the Supreme Court grants review as many anticipate, the law pre-Brinker will apply until the high Court rules. Additionally, the Legislature could decide to take a stand on Brinker as part of the continued budget stalemate. In that case, we may end up with compromise legislation and an unanticipated new law.

All California employers may be required to provide paid sick days to all employees if Assembly Bill 2716 is enacted. Under the bill, modeled after San Francisco’s sick leave ordinance, paid sick days would be provided, upon oral or written request, to employees for the employee’s personal illness, to care for a sick family member, or to recover from domestic violence or sexual assault. Assembly Bill 2716 does not require employees to provide documentation supporting the need for leave.

In California, what is the employer’s obligation with respect to employee meal and rest periods? Must an employer force its employees to take these breaks, or is it enough to make them available for employees who are interested in taking them?

California’s labor enforcement agency, the DLSE, has approved the use of debit cards and money checks for payment of wages. The two methods work as follows....

A California appellate court has handed down a long-awaited decision addressing legal standards for employee claims including meal and rest period violations. The court also overturned legal rulings regarding the employees' "off-the-clock" claims.

In a victory for California employers battling wage-and-hour class action claims over meal and rest breaks, a California Court of Appeal has ruled that employers need only provide workers meal and rest breaks, not ensure that the breaks are taken.

The eagerly-awaited Brinker Restaurant Corporation v. Superior Court, No. D049331 (July 22, 2008) decision on California meal and rest periods is out and the news is encouraging for employers.

The Court of Appeal's opinion in Brinker Restaurant Corp. v. Superior Court (Hohnbaum), ___ DJAR ____ (Jul. 22, 2008), addresses several heavily litigated issues regarding meal and rest period claims. If the decision withstands an anticipated petition for review to the Supreme Court, the court's opinion will sharply curtail class action litigation over alleged meal and rest period violations.

In a “win-win” decision for employers, a California Court of Appeal has dramatically clarified the meal and rest period requirements for California employees, while simultaneously narrowing a plaintiff’s ability to certify a putative class action based upon alleged meal and rest period violations.

The California Department of Labor Standards Enforcement recently approved the use of payroll debit cards and “Money Network checks” for the payment of wages under the California Labor Code as long as they meet certain conditions. In the DLSE’s opinion, employers may use these alternate payment methods if they make the full amount of wages available to employees on their regularly scheduled payday, without penalty or reduction, and employees’ participation in the programs is voluntary. The programs also must provide a sufficiently extensive network of ATMs and other locations at which employees may access their accounts.

On July 22, 2008, a California Court of Appeal reversed an order certifying a class of employees that claimed numerous violations of the California Labor Code. As an initial matter, the court clarified that an employer's responsibility to "provide" meal breaks "does not suggest any obligation to ensure that employees take advantage of what is made available to them."

When you are oo-ing and ah-ing at fireworks this weekend, remember that some people have to miss the show because of a work shift.

In March a California court awarded more than $105 million to Starbucks baristas due to the company's practice of permitting supervisors to share the tips. The case is significant to all California employers that have tip-sharing arrangements.

California law sets out basic overtime requirements for non-exempt employees in California. Among other things, the law requires an employer to pay an employee time and one-half of the employee's regular rate of pay for both 1) more than 8 hours of work in one workday, and2) more than 40 hours of work in any workweek. A double time premium is required for hours in excess of 12 in a work day, or in excess of 8 hours on the seventh consecutive day of work in a work week.

Employers sued in California wage and hour class actions are all too familiar with the State’s “multiplier effect.” What is the California “multiplier effect,” you ask? Simply put, it is a small wage payment violation (e.g., for non-payment of overtime hours or off-the-clock work), that can trigger a range of penalties under the California Labor Code far exceeding the value of the original unpaid wage amount. In wage and hour class actions, minor wage violations can cost employers millions.

It is hardly news that class actions over missed or untimely meal breaks are pandemic in California. Employers are anxiously awaiting a conclusive judicial determination of the meaning of Labor Code section 512's mandate that California employers "provide" a 30-minute meal period to employees who work more than five hours in a day. Does it mean that the employer need only provide the employee with the opportunity to take a meal break, or must an employer ensure that the meal break is actually taken. In an unpublished October 2007 opinion in Brinker Restaurant Corp. v. Superior Court (Hohnbaum), a California Court of Appeal reversed a trial court class certification order, stating the class certification order was erroneous and had to be vacated because, among other reasons, "the class certification order rest[ed] on an incorrect assumption with respect to the meal period claims to the extent those claims are based on the theory that [the employer] had a duty to ensure that its hourly employees took the meal periods it provided to them, and thus the court abused its discretion in finding that these claims are amenable to class treatment."

Summer is here (almost) and many teenagers will be hitting the workforce to earn a few extra dollars. California companies who hire teenagers should be aware that California and federal law restricts the use of minors or “child labor.”

Where an employer agrees to pay employees premium pay for holiday work, the employer is not required to pay overtime based on the premium rate if the employees work more than 8 hours in a day or 40 hours in a week, the California Court of Appeal ruled. Advanced-Tech Security Svcs., Inc. v. Superior Court (Roman), No. B205186 (Cal. Ct. App. June 3, 2008). Rather, the employer is entitled to credit the time and one-half premium pay on holidays against otherwise earned overtime. Accordingly, the appellate court directed the trial court to vacate its order denying the employer's motion for summary adjudication on an employee's claim for unpaid overtime and to enter an order granting the employer's motion.

Individual owners, officers, and managers of several closely-held garment manufacturing companies are not personally liable for Labor Code violations arising from the failure to pay employees wages and accrued vacation, a California appeals court has ruled. Bradstreet v. Wong, No. A113760 (Cal. Ct. App. Apr. 16, 2008).The court also held that the defendants could not be held personally liable for restitution under section 17200 of the Business and Professions Code, also known as the California Unfair Competition Law (the "UCL"), because they did not personally benefit from the employees' labor or misappropriated funds that otherwise would have been used to pay the employees.

Effective Jan. 1, 2000, Assembly Bill 60 implemented a number of changes to California's wage and hour laws. Many employers and their lawyers focused on the statutory restoration of daily overtime pay, which the Industrial Welfare Commission previously had abolished in several of its Wage Orders. As it turned out, though, AB 60's sleeper issue was the relatively small section of the law devoted to meal periods. AB 60 codified existing regulations mandating meal periods. However, the Legislature determined that employers were not following the rules because there were no financial consequences. So, AB 60 included a requirement that employers pay one hour's wages to employees who were not given a timely meal period in accordance with the law.

A violation of the California Labor Code can be costly to a corporate employer. The risk of personal liability for owners, officers and managers of a corporation further raises the stakes.

Employers in California are not obligated to offer sick pay to employees. The benefit is entirely optional—for now. Some politicians in Sacramento aim to make sick pay benefits mandatory.

When major customers failed to pay for goods, Wins Corporations, a group of three garment manufacturing companies that had successfully operated for over a decade in the highly competitive sewing business, went into financial crisis. Attempting to push through the crisis, the company urged its employees to continue working without pay until it collected slow-paying accounts receivable and stabilized its finances. As a result, employees were either paid late, underpaid, or not paid at all. When the employees complained, the Division of Labor Standards Enforcement (DLSE) and Department of Labor (DOL) filed suit against Wins and its individual owners and bookkeeper.

How would you like your class action lawsuit served—tall, grande, or vente? An employee class action lawsuit that recently concluded in San Diego against Starbucks serves as a reminder to all restaurants, hotels, and other hospitality businesses: be careful who shares in the tip pool.

In the year since the California Supreme Court decided Murphy v. Kenneth Cole Productions, employers have been hit with a surge of class actions for violations of California’s meal and rest period laws. The California Supreme Court had ruled that payments for violations of the state’s meal and rest period laws were wages, not penalties, and subject to a three-year statute of limitations. Seeking to provide some relief to employers from this wave of litigation, California legislators have introduced various bills intended to change the Court’s decision. The bills are intended to limit the remedies for violations, define what it means to “provide” a meal or rest period, and clarify when meal periods must be given.

Ruling that Starbucks Corporation unlawfully allowed shift supervisors to share in a portion of tips left in tip jars, a California Superior Court judge recently entered judgment in a class action against the company in the amount of $86.7 million, plus interest, for a class made up of baristas, or counter workers, employed in California stores since 2000.

Here is something to ponder as you enjoy your next beverage from Starbucks: How many venti, half-caf-half-soy-no-foam-latte-whips does it take to generate $87 million in tips over a seven-year period? It might take more than one refill for you to do that math. But wait, there's more. Consider that the recent and widely reported $100 million-plus award to about 100,000 Starbucks "baristas" compensates them only for a portion of the total tips customers paid (plus interest). That is, just a fraction of what must have been hundreds of millions in total tips wrongfully distributed to shift supervisors. The award, one of the largest reported employment law verdicts, is striking not only because of its sheer size, but also because it is based on optional "gratuities" that are paid by customers rather than the employer.

In California, unless specifically exempted, an employee is presumed to be non-exempt and subject to the provisions of the applicable Wage Order. Perhaps the most frequently mentioned exemptions are the "white collar" exemptions involving executive, professional, and administrative occupations. A white-collar exemption exempts an employee from entitlements under many sections of the Wage Order, including meal & rest periods, recordkeeping, and the minimum wage and overtime provisions.

In a case for alleged unpaid wages, the California Court of Appeal has held that on-call resident managers of an elderly housing complex are entitled to compensation only for time spent actually performing assigned duties and not for all time spent on call. Isner v. Falkenberg/Gilliam Associates, B195860 (Cal. Ct. App. Mar. 18, 2008). Although the plaintiffs were required to remain on the premises while on call, they were otherwise free to use on-call time as they chose. Following their retirement, the plaintiffs filed a class action on behalf of resident managers to recover wages for all time spent on call. The employer moved for summary judgment, which the trial court granted. The appellate court affirmed.

A San Diego, California Judge just ordered Starbucks to pay $100 million in back tips and interest to coffee baristas who were forced to share their tips with their shift supervisors. While Starbucks vows to appeal the ruling, it brings to light certain lessons that California employers of tipped employees should learn.

Commissions and bonuses are forms of "wages" in California. The Labor Code imposes on employers a number of obligations regarding payment of wages. For example, wages must be paid within a specified time period after they are earned. Employees who quit or are terminated typically must be paid their final wages on their last day of employment or penalties may accrue. Wages must be included in the "regular rate" of pay, which is used to calculate overtime. They also must be detailed on the "wage statement" that is furnished employees with every paycheck.

Following the lead taken by San Francisco just a year ago, the California Legislature has proposed AB 2716, the “Healthy Families, Healthy Workplace Act of 2008.” If passed, this Act would mandate that all employers, regardless of size, provide some form of paid sick leave benefits to all employees who work in California for seven or more days in a calendar year.

On February 20, 2008, the California Assembly introduced legislation aimed at allowing more flexibility in work scheduling. Assembly Bill 2127 would amend California Labor Code Section 511 to permit what is being called the “Small Business Family Scheduling Option.” If passed, this section would permit employers with 25 or fewer employees to approve the written request of an employee to work an alternative work schedule for no longer than 10 hours per day within a 40 hour workweek, without overtime compensation being incurred.

In a victory for California employers, a California Court of Appeal recently rejected the traditional administrative/production dichotomy test for an administrative exempt employee for certain business models. In Combs v. Skyriver Communications, Inc. (2/7/08), the Court of Appeal affirmed the trial court’s decision dismissing the employee’s claims for overtime, unpaid meal period penalties and unpaid rest period penalties because the employee was properly classified as an administrative exempt employee. Importantly, the Court of Appeal relied heavily upon the recent changes to the Industrial Welfare Commission’s Wage Order No. 4-2001 in determining that the employee was an administrative exempt employee and, therefore, not entitled to overtime, meal periods or rest periods.

California's wage and hour laws are more detailed than any other state's. To facilitate education about the myriad requirements, the Legislature has included at least one substantial penalty for each failure to abide. So, employers must be cautious before deviating from the letter of the law.

In the last several weeks, investigators from the California Labor Commissioner’s office have conducted sting operations at retail establishments throughout the state to ensure compliance with California’s payroll record retention requirements. Pursuant to Californian Labor Code Section 226, employers are required to keep payroll records reflecting all applicable deductions for each of its employees “on file . . . for at least three years at the place of employment or at a central location within the State of California.”

California employers are increasingly being challenged on whether they properly compensate and reimburse employees for usage of the employee's money or property in the course and scope of the employee's employment. Courts continuously acknowledge the California Legislature's intent that employers should not pass the cost of doing business onto employees such that the employees bear losses or incur expenses in conjunction with their employment.

San Francisco's Health Care Security Ordinance has been reactivated by a federal appeals court order issued January 9, 2008, and the City of San Francisco may begin enforcement. The Ordinance is a local measure that requires certain San Francisco employers to spend a specified minimum amount to provide health care coverage, from $1.17 to $1.76 per hour paid to each employee working within the City.

In a widely anticipated ruling, a United States District Court Judge sitting in San Francisco granted summary judgment on December 26, 2007, in favor of a local restaurant association that had challenged the employer funding provisions of the San Francisco Health Care Security Ordinance. While recognizing that providing health care coverage to the citizens of San Francisco is a laudable goal, the court nonetheless found the employer funding provisions of the Ordinance to be preempted by ERISA (Employee Retirement Income Security Act) since the Ordinance's provisions have an impermissible connection with employee benefit plans and make unlawful reference to employee benefit plans.

Employers with California employees may unwittingly expose themselves to significant penalties under an obscure California Labor Code statute by paying employees with out-of-state checks.

When a former employee seeks only waiting time penalties under Section 203 of the Labor Code, and not back wages as well, the statute of limitations is one year under Section 340(a) of the California Code of Civil Procedure, a state Court of Appeal has ruled. McCoy v. Superior Court of Orange County (Kimco Staffing Services, Inc.), No. G038589 (Cal. Ct. App. Nov. 27, 2007). The court affirmed the trial court's order striking portions of the plaintiff's complaint which claimed that waiting time penalties were due for a four-year period.

Hard on the heels of San Francisco's paid sick leave law (Proposition F), which became effective February 5, 2007, employers will face another challenge in 2008, when employer health care spending mandates found in the San Francisco Health Care Security Ordinance ("HCSO") go into effect - unless the courts intervene. A decision in a year-old lawsuit by a restaurant employers' association to block the ordinance on ERISA preemption grounds is expected before the end of 2007.

As the New Year approaches, California employers should be mindful of an important change that will take effect on January 1, 2008, relating to information that can be listed on employee pay statements. Under California Labor Code section 226, employers must include certain itemized information on each employee’s pay statement. (This information must be provided separately for each pay period when the wages are paid by personal check or cash.)

California employers are beset with a confusing array of very technical wage hour obligations which must be followed to the letter. The stakes for non-compliance got even higher in 2007 as the California Supreme Court weighed in on a host of wage hour matters. This article discusses how four of these key rulings affect your business. Alternate Link To Article

On November 14, 2007, San Francisco City Mayor Gavin Newsom announced that, on January 1, 2008, the minimum wage for employees within San Francisco will increase from $9.14 per hour to $9.36 per hour. This was done in accordance with the San Francisco Minimum Wage Ordinance, which was passed by the voters in November 2003, and calls for annual rate adjustments based on the previous year’s Consumer Price Index for urban wage earners.

Effective January 1, 2008, California employers are required to provide all employees with written notice of their possible right to an Earned Income Tax Credit on their federal income tax returns. Legislative sponsors felt the measure, Assembly Bill 650, was necessary because "hundreds of millions of federal dollars go unclaimed by the working poor in California" since few eligible employees participate in the federal earned income tax credit program.

In Gattuso v. Harte-Hanks Shoppers, Inc., Case No. S139555 (Nov. 5, 2007), the Supreme Court of California held that employers may reimburse employees for business-related expenses pursuant to Labor Code section 2802 by paying them increased compensation, but cautioned that employers must apportion between compensation for work performed and reimbursement for business-related expenses.

Employers can satisfy their statutory obligation to reimburse employees for business expenses by paying employees a lump sum added to their base compensation to reflect those expenses, the California Supreme Court has ruled.

The California Supreme Court recently held that an employer can meet its obligations to indemnify its employees for expenses by paying employees an enhanced compensation that takes the expenses into account. See Gattuso v. Harte-Hanks Shoppers, Inc. (11/5/07).

Effective January 1, 2008, the California Minimum Wage will increase from $7.50 to $8.00 per hour, a 6.7% increase. This increase will trigger several automatic changes in your minimum-compensation requirements.

Since the dot.com bust, the market for and wage rates of Information Technology (IT) professionals have declined significantly. Many contend that California employers have sought IT help outside of California to avoid overtime costs.

In a well-drafted, yet currently unpublished decision, the California Court of Appeal for the Fourth Appellate District (San Diego County) issued an order that, if published or followed in published decisions, will ease the tremendous burden currently placed on California employers related to meal and rest break claims. In Brinker Restaurant Corporation v. Superior Court of San Diego County (Adam Hohnbaum Real Party in Interest) (October 12, 2007), the appellate court reversed the trial court’s order certifying the class action based on the trial court’s erroneous interpretation of the law.

The California Supreme Court decided earlier this year, in Murphy v. Kenneth Cole Productions, that the one-hour premium employees receive for violation of meal break or rest period laws is a wage and not a penalty. Because the statute of limitations for unpaid wages is three years (or four years under an unfair competition theory), and the statute of limitations for penalties is only one year, Murphy means that multi-million class actions against state-wide employers are potentially three times more lucrative for plaintiffs and their lawyers. As a result, the plaintiffs’ bar continues enthusiastically to file class actions alleging violations of the meal and break laws.

The wildfires in Southern California have taken a significant toll and continue to affect both employers and employees. As many employees remain absent due to evacuations and to care for their displaced loved ones and many employers are forced to remain closed as a result of evacuation orders, employers question their obligation, if any, to pay employees when no work is being performed. The answer depends on the circumstances involved and whether the employee is classified as exempt or non-exempt under California's wage and hour laws.

In Prachasaisoradej v. Ralphs Grocery Co., the California Supreme Court ruled by a 4-3 vote that a profit sharing incentive plan based on a net profit calculation, which included deductions for workers compensation costs, cash and merchandise shortages and the costs of third party tort claims, did not violate Labor Code prohibitions against deducting such costs from employee wages.

In Prachasaisoradej v. Ralphs,1 No. S128576 (Cal. Aug. 23, 2007), a narrow majority of the California Supreme Court ruled that employers may lawfully use net-profit based incentive plans to compensate employees. The Ralphs decision presents a balancing point to a line of cases that had concluded that some types of deductions from other, albeit sometimes similar, forms of incentive compensation were invalid. The lawfulness of compensation plans that fall on the continuum at points between these earlier cases and the Ralphs decision is not clear.

One thing is clear about California wage and hour laws: The rules governing law firms (and all businesses) in California are too numerous to be summarized in just one column. The first installment on this topic ran on July 27, 2007 and is available online at www.dailyjournal.com. In that piece, I discussed potential pitfalls, such as mis-classification of employees as independent contractors or "exempt" employees, minimum wage and overtime laws, independent contractor status, exemptions from overtime, payroll practices and deductions from paychecks. If those topics are not complex and confusing enough, there are many others applicable to California employees.

In Harris v. Superior Court, a divided California Court of Appeal panel held that insurance adjusters are not exempt from employees under the administrative exemption to California’s wage orders because their work does not “rise to the level of management policy or general operations” – despite the majority’s acknowledgment of no less than eight contrary rulings by federal courts applying identical regulatory language to insurance claims adjusters and contrary determinations by the U.S. Department of Labor in interpreting its own regulations.

When Shakespeare wrote in Henry IV, "Uneasy lies the head that wears a crown," he could have been describing law firm managing partners. Client development and satisfaction, billable hours, expense control, office leases, hiring and retaining associates and staff, fierce competition, oh, and the practice of law, are just a few of the challenges facing the lawyer who accepts the responsibility of running a law firm or office.

California employers must furnish employees with both rest periods, which are paid, and meal periods, which are not paid. These requirements first appeared in the Industrial Welfare Commission's Wage Orders in 1916. But in 2000, the Legislature imposed on employers significant financial consequences for failure to comply with rest and meal period laws.

California’s mandate of an extra hour of pay for missed meal or rest periods provides additional wages, not statutory penalties, the state’s Supreme Court has ruled.

The California Supreme Court has sent a shockwave through the California business community by ruling that premium pay issued to employees under California Labor Code section 226.7, to compensate them for missed meal and rest periods carries a three-year statute of limitations as opposed to a one-year statute of limitations.

Everything you need to know about how the Kenneth Cole decision will cost you.

The California Supreme Court has held that missed-meal pay is wages and claims for failure to provide meal periods are subject to the three-year statute of limitations.

California employers will now have to open their wallets for missed meal claims -- up to three years of back pay liability.

California has a narrow exception to the general rules on overtime pay with regard to alternative workweeks.

It's been difficult for California employers to determine who is and who isn't exempt from overtime and minimum wage requirements; this article helps you sort it all out.

The California Labor Code requires employers to indemnify employees for all expenses incurred in connection with their employment. To clarify this indemnification obligation under section 2802, the California Division of Labor Standards Enforcement has proposed new travel and expense regulations. A public hearing on the proposed regulations was held on February 7, 2007 in San Francisco. Here are some of the highlights of the proposed regulations.

Resulting from a ballot measure passed by voters in November, San Francisco, California has just become the first city in the country requiring all employers to provide paid sick leave to employees. This is the second of a “one-two” punch that impacts San Francisco employers this year. The “one” was when the minimum wage for employees in San Francisco rose to $9.14 per hour starting January 1, 2007.

Workers in San Francisco will begin accruing paid sick leave on February 5, 2007 despite numerous uncertainties raised by the San Francisco Sick Leave Ordinance. Donna Levitt, Division Manager of the Office of Labor Standards Enforcement (OLSE), the administrative agency in charge of enforcing the Ordinance, took time last week to meet with concerned business owners at two public hearings and addressed some of the outstanding issues.

On November 7, San Francisco voters approved the first law in the nation mandating that employers provide paid sick leave to all employees. The law is effective February 5, 2007. Proposition F provides an important benefit to employees, but poses several vexing and unresolved questions certain to give employers headaches.

California Governor Arnold Schwarzenegger has signed into law a $1.25 increase in the state minimum wage. The increase will take place in two parts. The first increase will raise the minimum wage from the current $6.75 per hour to $7.50 on January 1, 2007. The second increase of $0.50 will raise the minimum wage to $8.00 per hour on January 1, 2008. It is estimated that these increases will directly affect approximately 1.4 million California workers. The $8.00 per hour minimum wage as of January 2008 will, along with Massachusetts, be the highest in the country.

In a policy decision driven as much by election-year politics as by labor economics, Republican California Governor Arnold Schwarzenegger is expected to sign a bill (A.B. 1835) authored by Assemblymember Sally Lieber (D-Mountain View) that will increase in two steps California's minimum wage for the first time since January 1, 2002.

The California Supreme Court has unanimously decided that the state's wage payment law—which requires that earned and unpaid wages be paid to discharged workers "immediately"—applies to employees who leave their jobs after a specific assignment or time duration, as well as to employees who are fired.

In a major decision in Smith v. Superior Court (L'Oreal USA, Inc.), No. S129476 (July 10, 2006), the California Supreme Court considered whether to apply California's statute requiring the immediate payment of final wages to employment relationships that end because of the completion of a specific assignment or period of time for which the employee was hired. The issue before the California Supreme Court was whether such an end of employment constitutes a "discharge," triggering the obligation to pay final wages immediately, or whether a "discharge" only means a firing or layoff. Giving a broad application of the term "discharge," the Supreme Court held that a "discharge" occurs in all of these circumstances.

The California Court of Appeal recently held that the time employees spend on an employer-provided shuttle that transports them from a parking lot to the work site is not compensable. According to the court, since the employer did not require employees to take the shuttle, the time was not compensable travel time.

In its recent decision in Bearden v. U.S. Borax, Inc., No. B182625 (Apr. 7, 2006) the California Court of Appeal in Los Angeles invalidated a provision of an Industrial Welfare Commission (IWC) wage order that exempted certain employees covered by collective bargaining agreements from meal period requirements. The court held that the wage order's exemption exceeded the statutory exceptions to meal period requirements authorized by the California legislature. The decision adds to the uncertainty surrounding California's meal period requirements. Its holding calls into question other provisions of the wage orders that provide relief from meal period requirements beyond the terms in Labor Code section 512.

Underscoring the increasing prominence of wage and hour issues, the California Supreme Court has agreed to decide two major questions. In one case, the Court will decide the statute of limitations applicable to claims for meal and rest period violations. The second case will determine how employers must reimburse employees for expenses.

On February 22, 2006, the California Supreme Court agreed to review one of the most hard-fought issues affecting California employers - are the monies owed to employees for missed meal and rest breaks considered "wages" and governed by a three-year statute of limitations, or are they "penalties" subject to a one-year statute of limitations? The California Supreme Court accepted review of this issue in the case of Murphy v. Kenneth Cole Productions.

On February 22, 2006, the California Supreme Court granted review in Murphy v. Kenneth Cole Productions, Inc., 134 Cal. App. 4th 728, 36 Cal. Rptr. 3d 418 (Cal. App. 1st Dist. 2005).

As many employers have learned the hard way, California Labor Code section 226.7(b) requires non-exempt employees to be paid one hour's pay at their regular rate for each workday they are not provided a meal or rest period that complies with the requirements of the applicable Industrial Welfare Commission wage order.

In National Steel and Shipbuilding Co. (NASSCO) v. Superior Court (Case No. D046692), the Fourth District of the California Court of Appeal held that the meal/rest period violation remedy is a penalty in the form of a wage, therefore subject to a three-year statute of limitations. The decision is at odds with the First District's recent decision in Murphy v. Kenneth Cole Productions, Inc., making California Supreme Court review likely.

On Friday, December 2, 2005, Christmas may have come early for some California employers with the issuance of the First District Court of Appeal's opinion in Murphy v. Kenneth Cole Productions, Inc. (Case No. A107219; A108346), holding that the one-hour-of-pay remedy for meal and rest period violations in the Wage Orders and Labor Code section 226.7 is a penalty, not wages. As such, these claims have a one year, rather than three or four year, statute of limitations.

In the California Supreme Court’s long awaited Reynolds v. Bement opinion, the court concluded that individuals who were either officers or directors of a company and who were shareholders of the company were not liable for the alleged failure to pay overtime to the company’s employees. Though the court’s decision will bring a sigh of relief to individual defendants in some pending matters, individual liability for the failure to pay wages is still a possibility under provisions of the Labor Code that were not at issue in Reynolds, under changes made to the Labor Code after the Reynolds case arose, under general corporate law principles, and under the federal Fair Labor Standards Act (FLSA).

The California Supreme Court has ruled unanimously that the state's labor laws do not impose personal liability on corporate officers and directors for unpaid wages owed by a corporate employer. This includes unpaid overtime pay based on the erroneous classification of workers as exempt employees.

After three public hearings and 4,000 comments, on April 6, 2005, the California Division of Labor Standards Enforcement released proposed modifications to the meal and rest period regulations first issued in December 2004.

The California Supreme Court has agreed to decide whether an employee bonus plan based on a profit figure reduced by the employer's expenses violates state law. At issue is whether employer expenses can include the costs for workers' compensation, as well as for cash and inventory losses.

In apparent response to a significant number of complaints from a vocal opposition, the California Division of Labor Standards Enforcement withdrew its December 10, 2004, proposed emergency regulations clarifying and revising meal-period requirements for California employees.

In January, 2005, The U.S. Supreme Court, with-out comment, declined to review a 2-1 decision of the Ninth Circuit, allowing the City of Berkeley to extend its "living wage" ordinance only to businesses in the City's marina employing at least six workers and having gross annual sales of $350,000.

In apparent response to a significant number of complaints from a vocal opposition, the California Division of Labor Standards Enforcement withdrew its December 10, 2004 proposed emergency regulations clarifying and revising meal period requirements for California employees.

The California agency responsible for enforcing the State's wage-hour laws has proposed emergency regulations seeking to clarify how employers may comply with California's stringent meal period requirements. If approved, regulations proposed on December 10, 2004 could take effect by December 20.

Recent months have seen an increase in what may be the next wave of California wage and hour class actions: claims relating to impermissible deductions from bonus calculations.

In a near unanimous opinion, the court found the trial court did not abuse its discretion in certifying a class of assistant managers and operating managers employed by Sav-On in California.

If your company's bank charges a fee for California employees to cash their paychecks, you may feel the sting of a brewing investigation into potential violations of a state statute regulating pay practices.

The California Supreme Court has ruled that an employer who unsuccessfully appeals a Labor Commissioner wage decision must pay attorneys' fees to the Labor Commissioner. Lolley v. Campbell

In a very important ruling for all California employers, a state appeals court has held that a case seeking back overtime pay for hundreds of store managers and assistant managers is not suitable for class action treatment because of the variation in the job duties of the claimants.

Discusses Lujan v. Southern California Gas Company, in which the court held that the State's more employee-friendly standards regarding how overtime pay is calculated are enforceable, and must be used, unless the federal standard under the FLSA produces even higher pay.

Discusses Morillon v. Royal Packing Co., 00 C.D.O.S. 2373 (March 27, 2000), [PDF] or [DOC] (modified at [PDF] or [DOC]) in which the court held that the time agricultural employees are required to spend traveling on their employer's buses is compensable under Wage Order No. 14-80 because they are "subject to the control of an employer" and do not also have to be "suffered or permitted to work" during this travel period.