Employees of AirTouch who worked for the cellular provider filed a putative class action alleging that the AirTouch employees were entitled to additional wages under California’s “reporting time pay” requirements. The plaintiffs alleged that they were owed reporting time pay for days on which they were required to attend store meetings, which lasted only a short period of time, but were not scheduled to work after the meetings.

California law requires an employer to pay “reporting time pay” under the applicable Wage Order, which states:

Each workday an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee’s usual or scheduled day’s work, the employee shall be paid for half the usual or scheduled day’s work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee’s regular rate of pay, which shall not be less than the minimum wage.

AirTouch would schedule store meetings that all employees were required to attend.  The meetings were scheduled at least four days in advance and were usually held on a Saturday or Sunday before the stores opened.  The meetings lasted from one hour to an hour and a half. Plaintiffs argued because the employees were required to report for the work meetings, which only lasted one to one and a half hours, and then did not work after the meetings, the employees were entitled to two hours of pay under the reporting time pay requirement. 

In rejecting plaintiffs’ argument that the Wage Orders required employers to always pay employees two hours of work when required to report to work, the court stated the following:

To simplify, the issue may be framed by the following question: If an employee’s only scheduled work for the day is a mandatory meeting of one and a half hours, and the employee works a total of one hour because the meeting ends a half hour early, is the employer required to pay reporting time pay pursuant to subdivision 5(A) of Wage Order 4 in addition to the one hour of wages?

The answer to this question is no, because the employee was furnished work for more than half the scheduled time. The employee would be entitled to receive one hour of wages for the actual time worked, but would not be entitled to receive additional compensation as reporting time pay. Although somewhat lengthy and cumbersome, Wage Order 4’s reporting time pay provision is not ambiguous. There is only one reasonable interpretation of subdivision 5(A) as it pertains to scheduled work—when an employee is scheduled to work, the minimum two-hour pay requirement applies only if the employee is furnished work for less than half the scheduled time.

It is important to note a few critical facts of this case. The employer scheduled the meeting times and provided employees with at least four days’ notice of the scheduled meetings. Also, the employees always worked at least half the duration of each scheduled period for the meetings. The case, Aleman v. AirTouch Cellular can be read here.

There are some significant changes regarding California employers’ duties in 2013. This list is an overview of the major changes that employers should consider and be aware of at the beginning of 2013.  

Employers Cannot Ask Applicants Or Employees For Social Media Passwords – AB 1844
This law created Labor Code section 980, which is effective 1/1/2013. The law prohibits employers from asking employees or applicants for passwords to their social media accounts, accessing their accounts in the presence of the employer, or divulging any personal social media. There are two exceptions to this: (1) if the request is made to a current employee as part of an investigation of allegations of employee misconduct or violation of law, and the request is based upon a reasonable belief that the information is relevant, and (2) to devices issued by the employer.

Commission Agreements Must Be In Writing – AB 1396 and 2675
Beginning 1/1/2013, when an employee is paid commissions, the employer must provide a written contract setting forth the method the commissions will be computed and paid. The written agreement must be signed by both the employer and employee. Commission wages are “compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount or value thereof.” Commissions do not include (1) short-term productivity bonuses, (2) temporary, variable incentive payment that increase, but do not decrease, payment under the written contract, and (3) bonus and profit-sharing plans, unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed.

Breastfeeding is added to definition of “sex” under the Fair Employment and Housing Act – AB 2386
The new law clarifies that the definition of sex under the FEHA includes breastfeeding and any medical conditions relating to breastfeeding. This amendment makes breastfeeding and the related medical conditions, a protected activity and therefore employers cannot discriminate or retaliate against employees on this basis under California law. While the amendment is effective 1/1/13, the law states that the amendment simply is a statement of existing law, and therefore employers should treat this amendment as existing law immediately.

New Religious and Dress Standards – AB 1964
The new law clarifies that religious dress and grooming practices are protected under FEHA. The law explains that “religious dress practice” is “shall be construed broadly to include the wearing or carrying of religious clothing, head or face coverings, jewelry, artifacts, and any other item that is part of the observance by an individual of his or her religious creed.” The law continues in defining religious grooming as: “Religious grooming practice shall be construed broadly to include all forms of head, facial, and body hair that are part of the observance by an individual of his or her religious creed.” The law also states that it is not a reasonable accommodation it the action requires segregation of the individual from the public or other employees.

Changes in Calculating Employees’ Regular Rate of Pay – AB 2103
The new law revises Labor Code 515(d) to clarify that “payment of a fixed salary to a nonexempt employee shall be deemed to provide compensation only for the employee’s regular, nonovertime hours, notwithstanding any private agreement to the contrary.” Therefore, overtime must be paid above any nonexempt employee’s agreed upon salary. This law was in response to the court opinion in Arechiga v. Dolores Press. The legislature history described the opinion in Arechiga as follows:

In the Arechiga case, a janitor and his employer agreed that payment of a fixed salary of $880 a week would provide compensation for 66 hours of work each week. The Court of Appeal held that this method of payment comported with California overtime law, and that no additional overtime compensation was owed. The Court rejected the employee’s contention that existing Labor Code Section 515(d) prohibits any sort of agreement that would allow a fixed salary to serve as a non-exempt employee’s compensation for anything more than a 40 hour workweek.

New Penalties For Violations On Itemized Wages Statements – SB 1255
The new law provides that employees are deemed to have suffered injury for purposes of assessing penalties pursuant to Labor Code 226(a), if the employer fails to provide accurate and complete information. Furthermore, a violation occurs if the employee cannot easily determine from the wage statement alone the amount of the gross or net wages earned, the deductions the employer made from the gross wages to determine the net wages paid, the name and address of the employer or legal entity employing the employee, and the name and only the last 4 digits of the employee.

New Requirements On Retention And Inspection of Itemized Wage Statements and Personnel Files– AB 2674
Under Labor Code 226, employers must keep copies of employees’ itemized pay statements for at least three years, at the site of employment or at a central location within the state of California. The new law, effective 1/1/13, clarifies that the term “copy” means either a duplicate of the statements provided to employees, or a computer generated record that shows all information required under Labor Code 226. In addition, the law sets a new deadline for employers to either provide a copy or permit the employee to inspect the personnel file within 30 days after the employer receives the request. The employer and employee may only agree to extend this time period out to 35 days. The employer may also redact the names of any non-supervisory employees in the file. It is important to note, this requirement does not change the 21 day time period to produce or make available for inspection an employee’s itemized wage statements under Labor Code 226(c).

Itemized Wage Statements And Wage Theft Notices For Temporary Service Employers – AB 1744
This new law requires temporary service employers to provide wage statements that list the rate of pay and total hours worked for each temporary assignment. A “temporary service employer” is defined in Labor Code 201.3(a)(1) as a company that contracts with customers to supply workers to perform services for the customer. This is effective 7/1/2013. Furthermore, the law requires temporary services employer to provide Wage Theft Notices required under 2810.5 and include additional information regarding the name, the physical address of the main office, the mailing address if different from the physical address of the main office, and the telephone number of the legal entity for whom the employee will perform work, and any other information the Labor Commissioner deems material and necessary. This requirement is effective on 1/1/2013.

In See’s Candy Shops, Inc. v. Superior Court the court addressed whether an employer’s policy of rounding  employee’s time clock entries to the nearest tenth of an hour.  See’s Candy’s policy rounded employees’ time entries either up or down to the nearest tenth of an hour in its Kronos time keeping system. For example, if an employee clocked in at 7:58 a.m., the system rounds the time to 8:00 a.m., and if the employee clocked in at 8:02 a.m., the system rounds down the entry to 8:00 a.m.

Plaintiffs challenged this rounding policy by arguing that this policy prevented employees from receiving all of their wages twice a month as required by California law. The court noted that even though California employers “have long engaged in employee time-rounding, there is no California statue or case law specifically authorizing or prohibiting this practice.” See’s Candy argued that given this lack of clear authority on the issue, courts should adopt the federal standard, which is also used by California’s Division Labor Standards Enforcement (“DLSE”), which allows rounding.

The court agreed that time entry rounding is permissible under California law:

Relying on the DOL rounding standard, we have concluded that the rule in California is that an employer is entitled to use the nearest-tenth rounding policy if the rounding policy is fair and neutral on its face and ‘it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.’ (29 C.F.R. § 785.48; see DLSE Manual, supra, §§ 47.1, 47.2.)

See’s Candy presented evidence that across all of its employees the rounding policy actually resulted in a total gain of 2,749 hours for the class of employees involved in the litigation. Therefore, the court held that the rounding policy that rounded both up and down from the midpoint of every six minutes did not result in a loss to the employees.

It is important to note the limitation of this holding. This case involved clear evidence, presented in the form of an expert witness, establishing the effect on the total time paid to the employees did not result in a loss to the employees. Also, the rounding policy would round both up and down. Had the policy only rounded in favor of the employer, that would have violating the rule established in this case. Employers utilizing rounding for payroll must still do so with caution. For example, there should be periodic audits to ensure the effect of rounding does not favor the employer over a period of time. The opinion can be read here: See’s Candy Shops, Inc. v. Superior Court.

The DOL is pushing for regulations to require employers to provide more information about how employee’s paychecks are calculated. This week, the Labor Secretary Hilda Solis said that the Department of Labor is backing a proposal that would require employers to provide more information to employees in order help stop wage and hour violations. Bloomberg reported that the proposal “would require companies to give employees a report explaining how their pay and hours are set and is aimed at ensuring companies compensate workers for overtime.”

Many states already require certain information to be provided to the employees on their paystubs. For example, California Labor Code section 226(a) has specific requirements of the type of information that must be provided on employee wage statements. That section provides:

Every employer shall semimonthly, or at the time of each payment of wages, furnish each of his or her employees either as a detachable part of the check, draft, or voucher paying the employee’s wages, or separately when wages are paid by personal check or cash, an itemized statement in writing showing: (1) gross wages earned; (2) total hours worked by each employee whose compensation is based on an hourly wage; (3) all deductions; provided, that all deductions made on written orders of the employee may be aggregated and shown as one item; (4) net wages earned; (5) the inclusive dates of the period for which the employee is paid; (6) the name of the employee and his or her social security number; and (7) the name and address of the legal entity which is the employer.

Many California employers, as well as out-of-state employers, often are unaware of this requirement, which can expose them to substantial penalties, even for minor, technical violations of this section.