700508066 2 Overview Trends in wage-hour litigation The Meal/Rest Period Litigation Explosion Section 226.7 Payments: Are they penalties or “wages”? “Donning and Doffing”: The IBP Case Bearden: Are the IWC Orders Invalid? Why many IT employees are misclassified Permissible commission “chargebacks” Vacation-docking in in less than full-day increments?
700508066 3 Current Trends in Wage-Hour Litigation Exemption litigation continues Litigation on technical violations increasing Bar for certification lower after SavOn Relatively few PAGA claims Wage-hour claims are commonplace in individual termination disputes Acting Labor Commissioner Bob Jones
700508066 4 Exemption Hotspots Executive Exemption Claims by Retail General Managers increasing Continuing claims by Assistant Managers Administrative Exemption Highly paid professionals in production-type jobs (stockbrokers, etc.) IT Employees Nationwide class claims filed against IBM Case against Siebel certified $14.9 million settlement in Electronic Arts case
700508066 5 Sav-On: 34 Cal. 4 th 319 (2004) At trial court Numerous declarations filed by Sav-On showing wide variation in duties of store managers and assistant managers Trial court granted class certification On appeal Certification reversed Individual fact questions predominated Plaintiff’s evidence “insubstantial, conclusory or incredible” Supreme Court Certification ruling upheld; no abuse of discretion Different job duties did not preclude certification Use of “aggregate proof” to establish “common issues” at certification stage
700508066 6 Sav-On Aftermath Several trial court judges have used discretion to deny certification, including: Albertsons (J. Edmon, LA Superior) United Parcel Service (J. Henderson, N.D. Cal.) Wal-Mart (J. Fischer, C.D. Cal.) Kragen Auto Parts (J. Enright, SD Superior) Others use discretion to certify expansive overtime classes E.g., “all of a Defendant’s employees who were improperly classified as exempt."
700508066 7 Sav-On Aftermath (Cont.) Appellate Courts are beginning to reign-in overbroad certification rulings, and affirm denials Unfortunately, most are unpublished In re Home Depot –Due process right to raise affirmative defense of individual overtime exemptions Nguyen v. Dollar Financial Group –No uniform policy of meal/rest break violations –Some employees signed revocable waivers –Time cards showed some compliance –Individual issues predominated
700508066 8 Sav-On Aftermath (Cont.) Dunbar v. Albertsons (certified for publication on August 10, 2006) Plaintiffs submitted pro-forma declarations Defendants showed inconsistencies in declarations Proof of varying times in varying tasks Trial court judge (R. Sabraw) found that common issues did not predominate Appellate court found that trial court had properly weighed the evidence to reach its conclusion
700508066 9 Smith v. L’Oreal California Supreme Court, July 10, 2006 When is an employee “discharged” under Section 201? Section 201 requires immediate payment at discharge Section 203 waiting time penalties for untimely payment Plaintiff invoked 30 day penalty provision, but was only employed for one day Holding: “Discharge” includes when employee is released after completing the job assignment/duration for which the employee was hired Lessons: Pay immediately Any delay can result in waiting time penalties Review employment practices to ensure compliance
700508066 10 Meal/Rest Labor Code § 512 – five hour rule for meal period Employee must keep records Second meal period if employee works 10 hours Rest Periods: “Net” ten minutes every four hours
700508066 11 Meal/Rest Labor Code § 226.7 requirements One hour’s pay for missed meal or rest period IWC order Sections 11, 12 One year or three year statute of limitations? One hour pay maximum per day?
700508066 12 DLSE Regulations First Issued: December 2004 Withdrawn: January 13, 2006
700508066 13 Meal/Rest Period Litigation (Labor Code Section 226.7) One or three year statute of limitations Courts of Appeal find it a penalty, 3 to 1 San Diego Appellate Court applies three-year statute Three cases already before California Supreme Court
700508066 14 “Donning/Doffing” (IBP v. Alvarez) United States Supreme Court Specialized protective gear: Donning is “hours worked” Safety goggles, lab coat, etc. Not hours worked (de minimis) Walking Time – Compensable if “integral and indispensable” to job duties Time wait for gear – not “hours worked”
700508066 15 Bearden v. Borax: Validation of IWC Orders IWC Order 16 (Construction, Logging) IWC created collective bargaining exception to meal rules No authority in Labor Code for IWC to do so Other provisions in doubt? On duty meal period Section 20 penalties
700508066 16 Classification Challenges for IT Personnel Employees presumed to be non-exempt Employer has burden of proving an exemption High salary, alone, not sufficient for any California exemption (cf. DOL Regulations) Technical knowledge and expertise, alone, not sufficient for any exemption Employee’s preference for being exempt is not a defense
700508066 17 Dangerous Exempt Classifications for IT Employees “Managers” of very small IT departments Often perform substantial amount of computer installation/maintenance “Working foremen” who work on same type of projects as subordinates 50% rule not met “Managers” with no subordinates Help Desk personnel
700508066 18 Administratively Exempt Computer Professionals Where exemption found, duties generally include: Problem analysis and resolution; Research and System Design; Project Management; Budgeting Work with outside vendors and department heads Training; Planning, scheduling and coordination duties In CA, must satisfy “50% Rule”
700508066 19 What To Do? Regularly evaluate jobs Maintain/distribute accurate job descriptions Clearly define job duties and expectations Consider acknowledgment procedures Properly classify new-hires Reclassify? (Was held to be a factor supporting class certification in SavOn) Identify “triggering” event Change and reissue job descriptions with restructured duties Separate exempt and non-exempt functions Concentrate exempt duties in positions likely to be exempt Use promotions as opportunity to reclassify
700508066 20 Commission Chargebacks Steinhebel v. LA Times (CA Court of Appeal, Feb. 2005) Rare victory for employers Court upheld LA Times’ commission chargeback plan for telemarketers Subscriptions cancelled before 28 days were not “commissionable” LA Times advanced commissions prior to expiration of 28 day period If order cancelled, deduction made from future commission advances (not hourly wage) Harris v. Investors Business Daily (March 2006) No signed commission plan Issue when commission “earned”
700508066 21 Lessons from Steinhebel and Harris Write commission plans in simplest terms possible Define when commission is “earned” Have employees sign plan prior to sales activity Acknowledge understanding of terms Authorize chargeback deduction Chargeback against advances, not wages Make qualifying conditions reasonable and fair Ensure full minimum wage received regardless of net level of sales
700508066 22 Vacation Docking Conley: OK to dock exempt employee’s PTO or vacation in less than full-day increments Improper salary or vacation docking can destroy exempt status Conley applies where employee requests partial day off Does not apply to shut-downs, furloughs Labor Commissioner 5/31/05 memo
700508066 23 Travel Time California rule – “Under the Control” Commuting time not compensable Travel within a day – compensable Out of town travel (overnight) Pay travel time at lower rate?
700508066 24 Looking Ahead Class Actions Likely to Continue Focus on Higher-Paid Employee Groups Do Not Count on Help From Administrative Agencies Bonuses Challenges to profit-based plans (Ralph’s case); California Supreme Court to decide