Understanding Non-Exempt Employee Compensation in California

1. “Compensating the Non-Exempt Employee in California” The Employer’s Guide for Avoiding Common Payroll Potholes Presented By Roxana E. Verano, Esq. LANDEGGER BARON LAW GROUP, ALC Exclusively Representing Employers Employment Law, Advice, Litigation and Solutions www.landeggeresq.com

2. Wage and Hour Compliance Goal: 100% / Strict Compliance with Labor Code and regulations. Knowledge of applicable Wage Order- Industry/ Occupational. Avoid Technical Violations- statutory and civil penalties. Regular Audits – self audits or professional legal audits.

3. Unique Issues in Wage and Hour Claims • Burden is on employer to establish proper classification (exemptions) and record hours worked. • Non-compliance exposes Employers to significant liability – • Labor Code - minimum wage/ liquidated damages, overtime, meal and rest premiums, section 226 and 203 penalties, and potential individual liability. • PAGA and Class Action liability- statutory and civil damages. • Most laws provide for recovery of attorney fees to employees but not to employers.

4. Non-Exempt Employee Compensable Time LANDEGGER BARON LAW GROUP, ALC California law requires that employees be paid for all “hours worked” either at the Minimum Wage rate or Overtime Rate. IWC definition: All time an employee is subject to the employer’s control, and all time the employee is suffered or permitted to work. Regardless of whether the employee is required or instructed to work. Regardless of location or time.

5. Travel Pay Travel time spent from worksite to worksite during the work day considered “hours worked.” Coming & Going Rule – normal commute to and from work is not counted as hours worked. Mandatory mode of transportation to a worksite may also be considered hours worked. If an employee is required to report to a central location/worksite and then travel to another site, then all time spent traveling after is hours worked. Employer may pay a different rate of pay for travel time.

6. Reporting Time LANDEGGER BARON LAW GROUP, ALC • When applicable: • Employee shows up for a scheduled shift but is not permitted to work any time. • Employee shows up for work but works less than half their scheduled shift. • Employer is required to pay at their regular pay rate for at least half of the employees’ usual or scheduled day’s work, with a minimum of two (2) hours pay and a maximum of four (4) hours pay. 

7. Reporting Time LANDEGGER BARON LAW GROUP, ALC If employee is required to report to work for a second time during the same workday, an employer must pay the employee for a minimum of (2) hours regardless of how many hours the employee actually works. No need to pay if, (1) the employer’s operation cannot begin or continue due to a threat to employees or property, (2) authorities recommend that the employer not begin or cease operations, or (3) Act of God or any other cause not within control of the employer.

8. On-Call and Stand By Time LANDEGGER BARON LAW GROUP, ALC On-Call: Compensable time if employees on-call are required to remain on the employer’s premises or so close to the premises that they are unable to effectively use the time for their own purposes. Stand By: Compensable time if the employee is unable to effectively use the time for their own purposes, even if no actual work is performed. Employer may pay a different rate of pay.

9. Meetings, Lecture, Trainings, etc. LANDEGGER BARON LAW GROUP, ALC • Compensable if mandatory. • Not compensable if: • attendance occurs outside regular working hours; • attendance is voluntary; • the meeting, lecture, or training is not directly related to the employees job; and • the employee does not perform productive work while at the meeting, lecture, or training.

10. Meetings, Lecture, Trainings, etc. LANDEGGER BARON LAW GROUP, ALC A meeting, lecture, or training is directly related to an employee’s job, if it is designed to help the employee perform his or her current job duties more effectively as distinguished from preparing the employee for a new job or helping the employee learn a new skill. Not voluntary if the employee is led to believe that their absence would lead to their termination or otherwise negatively impact their present working conditions in some other manner.

11. Split Shift Premium Wage Orders require an employer to pay a premium of 1 hour pay at the minimum wage rate to an employee who works a split shift in a workday, unless the employee resides on the premises. Defined as any employer-established work schedule interrupted by an unpaid nonworking period, other than a rest or meal period.

12. Split Shift Premium However, it needs to be paid only if the difference between (a) an employee’s total pay at his regular rate for the day, and (b) the minimum wage multiplied by the number of hours worked in the day is less than the minimum wage. Moreover, the split shift premium does not need to exceed the amount of such difference.

13. Overtime Rules Regular Rate – Overtime is computed based on the regular rate of pay. The regular rate of pay includes many different kinds of compensation, including hourly earnings, salary, commissions, bonuses, etc. Workweek- any seven consecutive 24-hour period starting with the same calendar day each week. Workday- any consecutive 24 hour period beginning at the same time each calendar day.

14. Overtime Rules • California requires overtime pay in 5 different situations: • Over 8 hours of work in a work day (1 ½). • Over 40 hours of work in a workweek (also consistent with federal law) (1 1/2). • The first 8 hours of work on the 7th consecutive day of work in a workweek (1 1/2). • Over 12 hours of work in a work day (double time) • Over 8 hours of work on the 7th consecutive day in a workweek (double time).

15. Overtime Rules • Limited Exceptions for Overtime: • Make-up Time provisions • Employee is allowed to work up to 11 hours in a day without overtime payment if they are “making up” time they lost in the SAME WORKWEEK due to personal circumstances. • Employee must make the request – Employer is not permitted to coerce or intimidate employees in their decision. • Employers are permitted to have a policy and form.

16. Overtime Rules • Limited Exceptions for Overtime: • Vacation: Vacation pay is not considered “hours worked” and thus is not included in the calculation of whether overtime premium pay is owed. • Holiday/Sick: The same as vacation. Not counted as hours worked. • Meal/Rest Period Penalties: Extra hour of compensation is not considered “hours worked” for overtime purposes.

17. Wage and Hour – Traditional Employee Breaks • Meal Periods: • Employee must receive 30-minute, duty-free meal period if he works more than 5 hours in a workday. • Employee who works 5 hours or less is not required to have a meal period. • Employer should relieve employees of all duties,relinquish control over their activities and not impede or discourage. • A second meal period is required if an employee works more than 10 hours. • If more than 10, but less than 12, second meal period can be waived by written agreement if the first meal period was taken.

18. Wage and Hour- Traditional Employee Breaks • Meal Periods: • Period may be waived by mutual consent if the employee works 6 hours or less. • If an employer fails to provide an employee a meal period in accordance with the applicable provisions of the order, the employer shall pay the employee one (1) hour of pay at the employee’s regular rate of compensation for each work day that the meal period is not provided.

19. Wage and Hour – Traditional Employee Breaks • On Duty Meal Periods • Permissible only if: • (1) the nature of the work prevents the employee from being relieved of all duty; • (2) Employee and employer agree in writing; • (3) Employee may revoke in writing at any time; • (4) Employee is paid for the meal period; and • (5) Employee is permitted the opportunity to eat while performing duties.

20. Wage and Hour Claims –Traditional Employee Breaks • Rest Periods: • Employee must receive 10-minute, duty-free rest period for every 4 hours of work, or major fraction thereof. • Employer should permit and authorize employee to take rest period. • Rest periods and meal periodscan not be pooled. • Rest period starting and stopping times do not have to be documented.

21. Payroll Records • Documents to Include in Payroll File • Timesheets- acknowledgment • Wage Statements – a duplicate of the wage statement or a computer generated record showing all required information (Payroll Registry not necessarily sufficient.).

22. Timekeeping Records - Timesheets • Non-exempt employees must record accurate start and end times, as well as start and end of meal periods. • Rest periods do not need to be recorded. • All corrections/revisions must be made/approved/initialed by employee. • Employee should sign timecard, acknowledging true and accurate recordkeeping.

23. Wage Statements/Pay Stubs • Labor Code Section 226 requires 9 items: • Gross wages • Total hours worked – not applicable to exempt employees • Piece rate and number of units • All deductions • Net wages • Pay period • Legal Name of employee and last 4 digits of SSN • Name/address of employer [special requirements for temporary services employer] • All hourly rates and hours worked for each rate • Missing any one above can result in penalties [$50/$100/$4000]. • Paid Sick Leave Accruals.

24. Off The Clock and DeMinimis Doctrine • Off-The-Clock Work • Strong written policy. • Employer’s obligation to record all time worked. • Employee should be directed not to perform work that is not accounted for in the timecard.

25. Rounding – Legal or Not? Landegger Baron Law Group, ALC Is rounding of time no longer legal?The Troester v. Starbucks decision favorably cites a well-established decision involving See’s Candy, which held that neutral rounding policies are permissible provided they do not result in a disadvantage to employees. The problem is that, in practice, it is very difficult to predict in advance whether a neutral rounding policy will disadvantage employees.

26. De Minimis Doctrine AFTER Troester v. Starbucks Landegger Baron Law Group, ALC In Troester, the California Supreme Court held that the federal de minimis doctrine did not apply to Troester’s claims, because Starbucks could record the time and it was not administratively difficult to do so. It found that “employer that requires its employees to work minutes off the clock on a regular basis or as a regular feature of the job may not evade the obligation to compensate the employee for that time by invoking the de minimis doctrine.” 

27. Reimbursement of Expenses • Labor Code Section 2802: • Provides that all expenses necessarily incurred by the employee in discharge of their duties to the employer must be reimbursed. • Use of Personal Automobile – Reimburse IRS rate • Cell phone • Personal computer or office equipment • Uniforms • Meals and Entertainment • Liability

28. Payroll Deductions • As required by State and Federal Laws. • Expressly authorized in writing by employee for premiums or benefit plan contributions. • Garnishments. • Deductions not allowed for: • Uniforms • Medical or Physical examinations • Balloon payment on outstanding loan • Damage of company property due to negligence • Exception: dishonest or willful act, or gross negligence

29. Payroll Period/Pay Day LANDEGGER BARON LAW GROUP, ALC Wages are due and payable twice during each calendar month on days designated in advance as the regular pay day. Work performed between the 1st and the 15th day must be paid between the 16th and the 26th. Work performed between the 16th and the last day of the month must be paid between the 1st and the 10th of the following month. Workers paid weekly must be paid within 7 days. Overtime can be paid on the following payroll period.

30. Final Pay Rules Termination – Pay is due immediately at the time of termination. Resignation with 72 hours notice – Pay is due immediately at the time of separation. Resignation without notice – Pay is due within 72 hours. Cannot mail final pay without authorization of employee. Labor Code Section 203 requires a daily penalty for ANY unpaid wages (including accrued vacation and unpaid meal/rest period penalties) for up to 30 calendar days after separation.

31. Document Retention LANDEGGER BARON LAW GROUP, ALC Payroll Records -4 years or more. Personnel Files- 4 years or more. Employment Eligibility – at least 1 year after separation of employment. Health and Medical Records (keep separate from personnel records) – 5 years. Union contracts – 3 years after expiration.

32. California Minimum Wage LANDEGGER BARON LAW GROUP, ALC • California’s Minimum Wage- Increases each year on January 1, from 2017 to 2022. Goal: $15.00 per hour by 2022. • Beginning January 1, 2019- • Employers with 26 or more employees $12.00 per hour. • Employers with 25 or less employees $11.00 per hour. • Beginning January 1, 2020- • Employers with 26 or more employees $13.00 per hour. • Employers with 25 or less employees $12.00 per hour. • Beginning January 1, 2019- • Employers with 26 or more employees $12.00 per hour. • Employers with 25 or less employees $11.00 per hour. • Beginning January 1, 2019- • Employers with 26 or more employees $12.00 per hour. • Employers with 25 or less employees $11.00 per hour.

33. Local Minimum Wage LANDEGGER BARON LAW GROUP, ALC • Local municipalities, cities and/or counties, have set their own higher minimum wage for employees who work 2 or more hours per week within city limits, for all hours worked within city limits. (FT, PT, Temp.) • City of Los Angeles effective July 1, 2018- • Employers with more than 26 or more employees - $13.25 per hour ($14.25 effective 7/1/2019). • Employers with 25 or less $12.00 per hour ($13.25 effective 7/1/2019).

34. Local Minimum Wage LANDEGGER BARON LAW GROUP, ALC Number of employees: Average number of employees employed during the previous calendar year. Los Angeles County – same schedule as Los Angeles City applies to employees working in unincorporated areas of Los Angeles County (Marina Del Rey, Calabasas adjacent, Universal City, Valencia, Newhall, etc.).

35. Preventative Solutions • Conduct regular audits to determine areas of potential exposure. • Follow record keeping requirements • Review payroll practices • Review and understand applicable wage orders. • Train Supervisors to do regular weekly audits. • Enforce meal/rest period policies. • Counsel employees for non-compliance. • Consult with legal counsel.

36. Thank you for attending! Roxana E. Verano, Esq. Roxana@Landeggeresq.com LANDEGGER BARON LAW GROUP 15760 Ventura Blvd., Suite 1200 Encino, California 91436 751 Daily Drive, Suite 325 Camarillo, California 93010 Los Angeles Office: 818.986.7561 Ventura County Office: 805.987.7128 LANDEGGER BARON LAW GROUP, ALC