WHAT’S COOKING FOR 2013? HOT EMPLOYMENT LAW TOPICS FOR THE HOSPITALITY INDUSTRY

1. WHAT’S COOKING FOR 2013?HOT EMPLOYMENT LAW TOPICS FOR THE HOSPITALITY INDUSTRY Presented by: Beth A. Schroeder, Esq. Lathrop & Gage LLP 1888 Century Park East, 10th Floor Los Angeles, California 90067 310.789.4611 direct bschroeder@lathropgage.com

2. Hot Issues • Regular Rate Issues/Salaried Non-Exempt Employees • Labor Code §2802 • Meal and Rest Breaks –Life After Brinker? • Social Media

3. Overtime Rules in California • 1 ½ times employee’s regular rate for hours over eight in a day or 40 in a week, or for the first eight hours on the seventh day of work in a work week • 2 times employee’s regular rate for hours over twelve in a day or over eight on the seventh day in a work week

4. Regular Rate Federal and State Law • Overtime is calculated on the basis of an employee’s “regular rate” • Must include “announced and expected” bonuses, commissions, and other extra compensation, including service charges paid to the employee by the employer

5. Regular Rate Bonuses • Marin v. Costco Wholesale Corp., 169 Cal. App. 4th 804 (2008) • “[T]here is no controlling California authority apart from the directive that overtime hours be compensated at a rate of no less than one and one-half times the regular rate of pay. . . . In deciding whether defendant's bonus plan fulfills that directive, we are persuaded that the [DLSE] Manual provision for overtime on production bonuses set forth a valid formula" • Faulkinbury v. Boyd & Associates, Inc., ___ Cal.App.4th ___ (Jun. 24, 2010) • “The issue whether the annual bonus must be included in calculating the overtime rate also can be decided on a class wide basis “

6. Regular Rate Bonuses (continued) • Bonus ÷ Total Number of Hours Worked = Regular Bonus Rate • Regular Bonus Rate × .5 = Overtime on the Bonus

7. Payroll Stub Requirements • An accurate itemized statement in writing showing • (1) Gross wages earned; • (2) Total hours worked by the employee, except for exempt employees; • (3) # of piece-rate units earned and any applicable piece rate(s); • (4) All deductions; • (5) Net wages earned • (6) Inclusive dates of the period for which the employee is paid; • (7) The name of the employee and no more than the last four digits of his or her SSN or an employee ID #; • (8) The name and address of the legal entity that is the employer; and • (9) All applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee. • Must be kept in ink or other indelible form • Record must be kept for at least three years. • We are seeing lawsuits on just this issue!

8. Paystub Issues • Issue with Salaried/Non-exempt Employees • Must still break down actual number of hours worked

9. Tools & Equipment and Employee Expenses • Labor Code Section 2802 requires the employer reimburse employees for out of pocket expenses related to their employment • Pursuant to Section 9 of the Wage Orders, employers, not employees, must pay for the tools and equipment necessary for their businesses • EMPLOYERS must pay for bar equipment, knives, crumbers, pens, pads of paper, uniforms, etc., except for highly paid BOH employees • Exception: if employees make at least two times minimum wage ($16 an hour) they may be required to provide "hand tools and equipment customary for the trade or craft”

10. Rest and Meal Periods The Initial Controversy • Meal Period - Basic Law After October 1, 2000 • Minimum 1/2 hour, unpaid period for employee working at least five hours • DLSE interpreted this to mean that an employee cannot work more than five consecutive hours without a meal break • Employee MUST actually take the meal period • If employee works no more than six hours, meal period may be waived. Need not be in writing, but highly recommended • Employee must be fully relieved of all duties during the meal period, Per Labor Code Section 512 and the Wage Order • Rest Period – Basic Law • Ten minute paid break for every four hours worked • Need only be made available, i.e. need not force employees to take breaks (unlike meal period!!)

11. Rest and Meal Periods The Initial Controversy • What is the cost? • If employee does not receive meal or rest break, per Labor Code Section 226.7, et seq., employer must pay one additional hour of compensation for each day on which employee does not get all breaks and meal periods • Per UPS case in 2011, employees may receive one hour of pay for a missed rest break, plus another hour of pay for a missed meal break

12. Evolution of the Brinker Decision August 20, 2008 Appellate Court Decision became final August 29, 2008 Petition for Review filed September 19, 2008 Answer to Petition filed October 22, 2008 Supreme Court Agreed to hear case January 20, 2009 Opening Briefs were filed May 1, 2009 Answering Brief was filed July 19, 2009 Reply was due October 8, 2009 Fully Briefed November 8, 2011 Oral Argument April 12, 2012 Decision issued

13. The Brinker Decision:  California Supreme Court 2012 • The Supreme Court decided all the threshold issues presented by the Court of Appeals; • "On the most contentious of these (issues), the nature of an employer's duty to provide meal periods, we conclude an employer's obligation is to relieve its employee of all duty, with the employee thereafter at liberty to use the meal period for whatever purpose he or she desires, but the employer need not ensure that no work is done.“ (Emphasis added)

14. The Brinker Decision: California Supreme Court 2012 • Rest Breaks…When is it earned? • " . . .to earn the first 10 minutes, one must be scheduled for a work shift of at least three and one-half hours, while to earn the next 10 minutes, one must be scheduled to work four hours plus a major fraction, to earn the next, eight hours plus a major fraction, and so on.“ • Timing of Breaks • "Neither this part of the wage order nor subdivision 11, governing meal periods, speaks to the sequence of meal and rest breaks.“ • "Employers are thus subject to a duty to make a good faith effort to authorize and permit rest breaks in the middle of each work period, but may deviate from that preferred course where practical considerations render it infeasible.“

15. The Brinker Decision: California Supreme Court 2012 • Meal Breaks – The Nature of the Duty • "To summarize: An employer’s duty with respect to meal breaks under both section 512, subdivision (a) and Wage Order No. 5 is an obligation to provide a meal period to its employees. The employer satisfies this obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so.“ • What will suffice may vary from industry to industry, and we cannot in the context of this class certification proceeding delineate the full range of approaches that in each instance might be sufficient to satisfy the law. “ • "On the other hand, the employer is not obligated to police meal breaks and ensure no work thereafter is performed.“

16. The Brinker Decision: California Supreme Court 2012 • Meal Breaks, What the Employer Must Do: • "Proof an employer had knowledge of employees working through meal periods will not alone subject the employer to liability for premium pay; employees cannot manipulate the flexibility granted them by employers to use their breaks as they see fit to generate such liability.“ • "Bona fide relief from duty and the relinquishing of control satisfies the employer’s obligations, and work by a relieved employee during a meal break does not thereby place the employer in violation of its obligations and create liability for premium pay under Wage Order No. 5, subdivision 11(B) and Labor Code section 226.7, subdivision (b).“

17. The Brinker Decision: California Supreme Court 2012 • Meal Breaks, What the Employer CANNOT Do: • "On the other hand, an employer may not undermine a formal policy of providing meal breaks by pressuring employees to perform their duties in ways that omit breaks.” • For example: "proof of common scheduling policy that made taking breaks extremely difficult would show violation,"  and "indicating informal anti-meal-break policy “enforced through 'ridicule' or 'reprimand'  would be illegal." (citations omitted) • " The wage orders and governing statute do not countenance an employer's exerting coercion against the taking of, creating incentives to forego, or otherwise encouraging the skipping of legally protected breaks."

18. The Brinker Decision: California Supreme Court 2012 • Meal Breaks, Timing: • " . . .the statute requires a first meal period no later than the start of an employee’s sixth hour of work“ • The Court also dealt with the argument that Section 512 should be read as requiring as well a second meal period no later than five hours after the end of a first meal period.  "The text does not permit such a reading. It requires a second meal after no more than 10 hours of work; it does not add the caveat “or less, if the first meal period occurs earlier than the end of five hours of work.”

19. The Brinker Decision: California Supreme Court 2012 • More Importantly on the Timing of the Meal Period . . . • Plaintiff and even the DLSE had argued that the meal periods must be timed "to prevent work periods, before or after, exceeding five hours.“ • The Court was clear:  "While we agree that the period before a first meal is limited to five hours (see § 512, subd. (a)), we cannot agree that the current version of Wage Order No. 5 limits to five hours the amount of work after a meal.“ • In summary, the Court held that "that Wage Order No. 5 imposes no meal timing requirements beyond those in section 512. Under the wage order, as under the statute, an employer's obligation is to provide a first meal period after no more than five hours of work and a second meal period after no more than 10 hours of work."

20. The Brinker Decision: California Supreme Court 2012 • Life After Brinker . . . What Happens? • Continue to schedule breaks for all non-exempt employees to start before the end of the fifth hour of work • Continue to get meal waiver forms for those who work no more than six hours for their shift/day • Be prepared to PROVE that you made the meal break available –DAILY! • Written policies putting the burden on the employee to report • Check lists or logs showing the break was offered and declined • POS System – Plusses & Minuses • Keep time records tracking EXACTLY when the employee DOES work • Establish clear cut policies of the expected hours of work • Use of “breakers” issue • Train managers!!! • Pending cases? • The case interprets existing law, so it should apply immediately.

21. How Much Can a Mistake Cost? • Unpaid overtime or other wages and/or penalties per employee • One year for penalties per California Law • For wages, three years under Labor Code • For four years under Business & Professions Code §17200 • Double damages under FLSA • Attorneys’ fees for actions brought in court (except for the Kirby case) • Cost of defense of the claim

22. How Much Can a Mistake Cost? Plus Penalties • Failure to pay any owed wages upon termination • Labor Code §203 – 30 days waiting penalties at employee’s daily rate • Refusal to pay owed wages • Labor Code §225.5 - $100 per employee, per violation, plus 25% of amount unpaid

23. Paystubs - Penalties • Cal. Lab. Code 226(a) • Must produce copies to employee within 21 days or $750 penalty • Up to $4000 penalty ($50 initial/$100 subsequent) • Cal. Lab. Code 226.3 • $250 per employee initial citation • $1000 per employee, per citation • NO CAP!!!

24. How Much Can a Mistake Cost? More Penalties • Underpaid employee • Labor Code §558 - $50 for first violation, $100 thereafter, per violation, per employee • Labor Code §1197.1 - $100 for first violation, $250 thereafter per violation, per employee • Failure to pay minimum wage • Labor Code §1194.2 – liquidated damages in amount equal to unpaid wages • Fair Labor Standards Act – double damages • EPLI – Remember to look to insurance! • Wage & Hour defense may be available…for now!

25. SOCIAL MEDIAAB 1844 Disclosure of Social Media Information • AB 1844 prohibits an employer from requesting or requiring that an employee disclose user or password information for accessing personal social media. • AB 1844 prohibits employees from requiring employees or applicants to access personal social media in presence of management. • On the heels of decisions of the National Labor Relations Board concerning employer social media policies, AB 1844 further emphasizes that employers must be cautious in how they treat employee social media.

26. Information from Social Networking Sites- NLRB Position • Concerted Activity • An activity is concerted when an employee acts “with or on the authority of other employees, and not solely by and on behalf of the employee himself.” • Protected Activity • Employee statements are considered protected when it is clear from the context of the statements that they implicate “working conditions” of the employee.

27. Social Media Policies… • On May 30, 2012, the NLRB issued NEW Guidelines on Social Media Policies. • The Memo discusses six relatively common policies that it found unlawful, including: • “Don’t release confidential guest, team, or company information;” • “Offensive, demeaning, abusive or inappropriate remarks are as out of place online as offline…;” • “Think carefully about “friending” co-workers;” • “Don’t pick fights. Communicate in a professional tone;” • The Memo is simply guidance, and the courts will have to sort out the interplay between protected speech and good business practices.

28. NLRB Flexing Its Muscles: Position on Communications with Media & Harassment Investigation • January 25, 2013: NLRB issued a ruling on Direct TV’s policy. • Cannot tell employees not to speak to media. • Violation of NLRA Section 7 which allows employees to speak to media about a labor dispute. • Position on Sexual Harassment Investigations. • Question regarding instructions to an employee regarding confidentiality. • How far will the NLRB go?

29. Hot Litigation Trends • Wage and hour – even with the Supreme Court’s decision in Brinker, these cases are still hot. • ICE audits and DOL audits are on the rise. • Sexual harassment and leave of absence or disability cases still popular.

30. THANK YOU FOR ATTENDING! • Presented by: • Beth A. Schroeder, Esq. • bschroeder@lathropgage.com Follow me on Twitter! @BethASchroeder