I just updated my Facebook settings to prohibit the software company from conducting facial recognition scans on my photos today due to a notification from Facebook that its software would be analyzing my likeness to automatically recognize me in photos posted on Facebook.  This was a coincidence because today I spoke at the American Bar Association’s National Symposium on Technology in Labor and Employment Law on the topic of biometrics in the workplace today.  As I’ve written about previously, Facebook has been sued for violating Illinois’ Biometric Information Privacy Act (BIPA) for the analysis it performs on individual’s images that are uploaded to Facebook, and indeed other companies are dealing with legal issues arising from Illinois BIPA.  This Friday’s Five consists of my five ruminations about biometrics use in the workplace.

1.     Technology is developing faster than society’s perceptions of privacy and the law’s ability to keep up. 

 Technology is quickly developing rapidly on biometric gathering and analysis of the information.  As reported today, cameras will likely have the ability to gather data to understand how an individual is feeling and thinking.  We are not at the point of a Star Trek type of body scanner to determine in an individual is sick or injured, but it is not inconceivable that this will be possible in the near future. Current technology allows the collection of a lot of biometric information that most of the public probably does not know is possible, such as thermo-images, identification by your “ear print,” heartbeats and possibly EEGs. It raises the key question: is your ear print, heartbeat, heat signature, or EEG signals private information?

2.     Only 3 states have legislation regarding the collection and analysis of biometric information of individuals. 

A bit surprising to me, all but three states allow for the collection and analysis by employers or consumer companies of biometric information without any type of disclosures or notice to individuals. Illinois, Texas and Washington state have statues that require some type of notice and voluntary consent before biometric information is collected by a private company.  There is no restriction regarding law enforcement collection of biometric data.

On one hand it is not, it is publicly shared and information that can be acquired through very unobtrusive means.  There does not have to be any contact (except for the EEG monitoring – which requires probes placed on the scalp) with the individual to obtain this information.  Indeed, this information can often be derived through taking a picture, with nothing more complicated than the camera found on most mobile phones.

On the other hand, the technology being developed can gather more intimate information about people beyond their identity.  Thermo-images, EEG scans, and carbon dioxide monitors can gather a lot more information than previously imaginable about an individual’s health and mood.  As this technology continues to develop, it will be able to derive even more detailed information about people’s health, propensities to become sick, such as likelihood of having cancer, or maybe even be able to detect cancer.

3.     Biometric information is useful in the employment context. 

Employer has already been using biometric information to track employees and for security issues, such as permitting access to certain areas based on fingerprint or retinal scans.  Employees are able to share passwords very easily to get around password safeguards, but it is harder (but not impossible) for them to share fingerprints or “earprints” (yes, you can be identified by your earprint, which are more reliable than fingerprints).

In the future, employers may be interested in tracking blood pressure, heartbeats, and the general anxiety level of employees for workers’ safety, workers comp claims, and productivity.  To the extent the employee asserts some accident or incident occurred on a certain day, it would be useful to have this biometric information for the same time period.  While it would be useful, does it violate an employee’s right to privacy?  While employees do have a reduced privacy rights a work as long as the employer provide notice to the employee that they may be monitored, California courts have also been clear in holding that employees do not forfeit all privacy rights while at work.

4.     If employers collect biometric information, is it simply creating a database that can be used by other third parties?

My libertarian tendencies cause an uneasy feeling in my stomach when realizing the current capabilities with biometric information.  This is partly while I opted out of Facebook’s facial recognition setting mentioned above.  I believe that many people have a concern that while an individual may consent that a company or an employer may collect and analyze their biometric information, it is unknown about what may happen to this information in the future.  This information is an asset that could be acquired by other companies in the future through company purchases or mergers.  This would result in the individual’s biometric information being available to third-parties that the individual never anticipated would have access to the information.  There are currently no legal safeguards restricting who has access to biometric information, expect the couple of states that have passed legislation on this issue.

5.     Once biometric data is hacked, it may be hard to identify people. 

Again, I recognize that employers and companies have legitimate uses for biometric information.  However, the type of information that is contained in biometric information under current technology and the information that will be able to be gathered by future technology is critical to an individual’s identity.  What if the data is hacked and used by a third party to steal an individual’s identity?  How will one be able to prove that they are who they claim to be if their finger print data base has been changed by a hacker?  These are issues that will have to be resolved as this technology and area of the law are developing.

I’m conducting a poll of the readers to see if they believe biometric information is private or not.  Please vote and share your comments here, and I will report back the data.

Clients come to my firm often frustrated by California employment laws and their complexity, the raising costs of doing business in California (such as the higher minimum wage), and the legal system in general.  I have to agree that California poses one of the most difficult business environments businesses have to operate within, but I come back to thinking that many of the issues the clients voice frustration with can be managed if they are given the tools to do so.  This Friday’s Five lists five things every employment attorney should tell their California clients:

1. Litigation is expensive (and no, I’m not just talking about legal fees).

Two lessons here:  1) Don’t approach litigation with the attitude that you are fighting for principle (unless you have unlimited resources), and 2) focusing on human resources/policy development/legal compliance before litigation (see #5 below) can help prevent litigation and save resources.  For most businesses, litigation should be avoided, but to the extent it cannot be avoided, companies should usually view the transaction not as a personal vendetta, but as a business transaction.  Executives should weigh the costs of litigation versus the benefits just as they do in any other business decisions to determine whether to litigate the case or make an attempt at settlement.  But don’t approach this decision based on any attorney’s advice that litigation can be completed fast and inexpensively.  As there are defense costs, but as just or possibly costlier is the time and effort that the company and its managers and employees will have to spend defending the litigation instead of running the business.  This is often a hidden cost that must be taken into consideration.

2. Treating people with respect will likely result in less litigation.

I understand, it seems like California employment law is always adding new requirements on employers that are difficult to comply with.  However, with a small amount of time and attention, most of the issues that present the largest amounts of potential liability for employers can easily be managed.  But for the few occasions when it is legally unclear about what action the company should take, or if legal counsel cannot be reached in time for a decision where the law is not clear, employers that treat the employee with respect will usually avoid litigation.  I believe that, for the most part, employees understand that employers/managers/supervisors must make difficult decisions.  When the employee is treated with respect during a difficult employment decision, even though they might not like the decision, they will probably understand why it was made, and most likely will not hold a grudge against the company.

3. When in doubt, document.

As a litigator, the worse feeling I have is when the employer provides me with an employee personnel file for a problem employee, but the personnel file contains less than a few pages.  Employers’ primary defenses to many employment lawsuits will be won or lost on the documentation created and maintained by the employer.  The employee that believes they were wrongfully terminated will face a much tougher case if there were a dozen documented performance write-ups in their file setting for the date and examples of what the employee did or failed to do.  For additional information, see my prior post, Five best document storage and retention practices for California employers.

4. Train front line managers and supervisors.

A company’s managers and supervisors are the eyes and ears of the company.  They must be well trained about what issues can create legal liability for the company, as well as be trained in new developments in the law (for example, so they are not asking about criminal histories during the interview process since the beginning of 2018) and are trained about how to be managers (and treat people with respect).  This training for managers/supervisors is the difference between a good and a great company.

5. A small investment in human resources will provide a return.

As I wrote about last week, human resource departments need to have a more critical role in organizations and should be viewed on the same level as marketing and finance departments.  Giving HR managers budgets to proactively update policies, handbooks, and training sessions for managers will provide a positive return to the company.  Now it may not be an immediate net gain on the financials, but if one lawsuit is avoided because of the proactive measures put into place, this will be money well spent (see item #1).

In a huge development in the last couple of weeks, a change in federal law now permits California employers to include back of the house employees in tip pools.  This week’s post is an update and a general discussion about issues facing restaurants, hotels, and other industries where tipping and gratuities are left for employees.  This simple concept is surprisingly complex for employers.  Here are five issues employers should understand about tips in California.

1) Who owns a tip?

California law is clear that voluntary tips left for an employee for goods sold or services performed belong to the employee, not the employer. Labor Code section 351 provides, “No Employer or agent shall collect, take or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron…. Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for.”

2) Is employer mandated tip pooling legal?

Yes. In the seminal 1990 case on tip-pooling, Leighton v. Old Heidelberg, Ltd., the court held that an employer’s practice of tip pooling among employees was not prohibited by section 351 because the employer did not “collect, take, or receive” any part of a gratuity left by a patron, and did not credit tips or deduct tip income from employee wages. The court relied upon the “industry practice” that 15% of the gratuity is tipped out to the busboy and 5% to the bartender, which was “a house rule and is with nearly all Restaurants.” However, owners, managers, or supervisors of the business cannot share in the tip pool.  Employers need to be careful to exclude any employees who direct the work of other employees from tip pools, as lead shift supervisors, floor managers, and others who do not have the authority to hire or fire may still be considered a supervisor for tip pooling purposes.

There must be a reasonable relationship between tip pooling arrangements.  The following examples of mandatory tip pooling percentages have been approved by a court, the DLSE or DOL:

  • A policy in which 80 percent of tips were allocated to waiters, 15 percent to busboys and five percent to bartenders
  • A policy in which cocktail service must give one percent of tips to bartender
  • The Department of Labor responsible for enforcing Federal law has stated that a policy that requires servers to share 15 percent of their tips with other employees is presumptively reasonable
  • A policy in which a server contributes 15 percent to a tip pool, and other employees in the chain of service receive a portion of these tips based on the amount of hours they worked

The following examples were tip pooling policies disapproved by courts or the DLSE and therefore employers cannot legally establish them:

  • A policy providing 90 percent of tips to hostesses who spend only a small amount of time seating customers
  • A policy requiring food server to share 10 percent of tips with floor managers

3) When do tip tips left on credit cards have to be paid, and can a deduction made for processing the credit card transaction?

If a patron leaves a tip on their credit card, the employer may not deduct any credit card processing fees from the tip left for the employee. Moreover, tips left using a credit card must be paid to employees no later than the next regular payday following the date the credit card payment was authorized. See Labor Code § 351.

4) Can California employers have back of the house employees share in a tip pool?

On March 23, 2018, the Consolidated Appropriations Act, 2018 signed by President Trump changed federal law on this issue and allows employers to share tips with back of the house employees.  Therefore, as of March 24, 2018, California employers may include back of the house employees in any tip pooling arrangements.  Prior to President Trump’s approval on the new law, this was not the case, as a Court in Oregon Restaurant and Lodging Association v. Perez, the Ninth Circuit Court of Appeals, which covers California, held in February 2016 that the Department of Labor’s regulations about who can participate in tip pools applies to states like California which do not permit tip credits.  The DOL had issued regulations that under the FLSA a tip pool is only valid if it includes employees who “customarily and regularly” receive tips, such as waiters, waitresses, bellhops, counter personnel who service customers, bussers and service bartenders.  According to the DOL past rule, a valid tip pool “may not include employees who do not customarily and regularly receive[] tips, such as dishwashers, cooks, chefs, and janitors.”  The Plaintiffs in Oregon Restaurant filed a petition for review to the United State Supreme Court.  Given the new law that took effect, the Supreme Court’s review of the case is not necessary.

While some states provide the employer with a “tip credit”, California law does not allow this. However, with the recent passage of the increase in California’s minimum wage, there is more discussion of examining whether a tip credit should be considered in California. However, current law does not allow employers to “credit” an employee’s tips towards the minimum wage requirement for each hour worked.

A service charge added to a customer’s bill is not a tip or gratuity and remains the property of the employer.  Therefore, the employer may distribute the service charge to its employees, including back of the house employees as it wishes.  However, if a service charge is distributed to employees, it is considered wages and effects the employee’s regular rate of pay for overtime purposes as discussed below.

5) Do tips change an employee’s regular rate of pay for overtime calculations?

No. Because tips are voluntarily left by customers to employees, tips do not increase an employee’s regular rate of pay used to calculate overtime rates.

However, if an employer implements mandatory service charges and shares these service charges with employees, the service charges must be considered wages for overtime and tax purposes.  Therefore, the employee’s regular rate of pay for overtime purposes will be higher when mandatory service charges are distributed to the employees.  To calculate an employee’s regular rate of pay, the employer must divide all compensation for the week by the total number of hours worked by the employee.

**Additional issue: Pay attention to other requirements under local ordinances regulating service charges.

For example, Santa Monica’s minimum wage ordinance requires employers to “distribute all Service Charges in their entirety to the Employee(s) who performed services for the customers from whom the Service Charges are collected.”  Santa Monica Municipal Code § 4.62.040.  “Service Charge” is defined as “any separately-designated amount charged and collected by an Employer from customers, that is for service by Employees, or is described in such a way that customers might reasonably believe that the amount is for those services or is otherwise to be paid or payable directly to Employees…under the term ‘service charge,’ ‘table charge,’ porterage charge,’ ‘automatic gratuity charge,’ ‘healthcare surcharge,’ ‘benefits surcharge,’ or similar language.”  Santa Monica Municipal Code § 4.62.010(g).

I just posted a new video on my YouTube channel about the issues facing employers with the state and local minimum wage increases in 2018 (embedded below).  At the end of the first quarter in 2018, it is a good time to review compliance with the state and local minimum wage laws, and to start to prepare for the local minimum wage increased on July 1, 2018.  For example, Los Angeles city and county minimum wage rates will increase to $13.25 per hour from the current $12.00 per hour for employers with 26 or more employees on July 1.  In addition to my regular blog posts, I’ll be featuring more videos on my channel as well, so please subscribe to both.

California employment law is a mind field that carries huge exposure for employers not proactively monitoring legal developments and potential legal issues.  There are some statements employers in California should never make, and this Friday’s Five reviews misaligned statements that can create significant liability for an employer.

1. My company has employment practices liability insurance, so there cannot be much exposure from employment lawsuits.

In California, it is very common for insurance companies to exclude wage and hour claims from the employment practices liability (EPLI) coverage.  This applies to single plaintiff and class action claims and representative claims under California’s Private Attorney General Act (PAGA).  This is a significant area of potential exposure for employers, and therefore, the costs and benefit analysis of an EPLI policy must take these considerations into account.

Moreover, under California law an insured cannot buy insurance to cover willful acts.  See Insurance Code section 533.  Therefore, if the employment lawsuit alleges willful acts, it is also likely not going to be covered by insurance.

Employers should seek coverage counsel to assist in reviewing the exclusions and limitations of any EPLI policies prior to purchasing in order to completely understand the coverage that is being purchased for the cost of the policy.

2. I’m busy right now, can you tell me about your workplace complaint tomorrow?

California employers have a legal obligation to conduct workplace investigations.  California Government Code section 12940(j) provides that it is “unlawful if the entity, or its agents or supervisors, knows or should have known of this conduct and fails to take immediate and appropriate corrective action.”  The law also provides that employers are liable if they “fail to take all reasonable steps necessary to prevent discrimination and harassment from occurring.”  Gov. Code section 12940(k).  If the employer fails to take the preventative measures, they can be held liable for the harassment between co-workers.  If the harassment occurs by a manager, the company is strictly liable for the harassment.  If the harassment occurred by a non-management employee, the employer is only liable if it does not take immediate and appropriate corrective action to stop the harassment once it learns about the harassment.  Investigations must follow certain parameters in order to be deemed adequate under the law.  Click here for more information about conducting adequate investigations.

3. There is no need for our company to record meal breaks, all of the employees know that they can take breaks whenever they want.

Meal breaks taken by the employees must be recorded by the employer. However, there is no requirement for employers to record 10-mintute rest breaks.  For more information about meal and rest break obligations, see my previous article.

4. Our company’s handbook is current, it was updated four years ago.

Any California employer can attest, the employment legal landscape changes on a yearly (if not more often basis).  Employers should have someone well versed on employment law reviewing the employee handbook on at least a yearly basis.

5. I’m sure my payroll company is issuing compliant pay stubs.

Employers are cautioned not to rely on their payroll companies for compliant itemized wage statements, as these companies often times do not understand the legal requirements of the Labor Code. Ensuring the required information is properly listed on the itemized wage statements is an item that employers should review at least twice a year for compliance.

Labor Code Section 226(a) requires the following information to be listed on employees’ pay stubs:

  1. Gross wages earned
  2. Total hours worked (not required for salaried exempt employees)
  3. The number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece rate basis
  4. All deductions (all deductions made on written orders of the employee may be aggregated and shown as one item)
  5. Net wages earned
  6. The inclusive dates of the period for which the employee is paid
  7. The name of the employee and the last four digits of his or her social security number or an employee identification number other than a social security number
  8. The name and address of the legal entity that is the employer
  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

Here is an example of an itemized wage statement published by the DLSE.

Also, do not forget that under California’s paid sick leave law that went into effect on July 1, 2015 employers have additional reporting information regarding employees’ accrued paid sick leave and usage. Employers must show how many days of sick leave an employee has available on the employee’s pay stub or a document issued the same day as a paycheck.

Companies are ultimately liable for these violations, so it is best to double check your payroll company’s work to ensure compliance.

The U.S. Supreme Court heard oral arguments on October 2, 2017 in Epic System Corp. v. Lewis.  And while the case may not make headline news, it has very important ramifications for employers across the country.  At issue is whether employers can legally compel employees to enter into arbitration agreements which contain class action waivers.  The decision is likely to be decided by the U.S. Supreme Court this December.  Below are five issues regarding the Supreme Court’s decision and the impact it may have on employer’s businesses going into 2018:

1. There is a split in Circuit Courts regarding if arbitration agreements with class action waivers are enforceable

Many courts have been upholding arbitration agreements that contain class action waivers, including the California Supreme Court in Iskanian v. CLS Transportation Los Angeles, LLC.  That case held that class action waivers are enforceable, following the standards set forth by the U.S. Supreme Court in AT&T Mobility v. Concepcion.

However, the Ninth Circuit’s ruling in Morris v. Ernst & Young holding that a class action waiver in an arbitration agreement is unenforceable because the class action waiver is contrary to the rights provided to employees under the National Labor Relations Act (“NLRA”).  The arbitration agreements in the Morris case were mandatory, and they contained a “concerted action waiver” clause preventing employees from bringing a class action.  Plaintiffs claimed that the “separate proceedings” clause contravenes the NLRA, 29 U.S.C. §§ 151 et. seq.  The Ninth Circuit held:

This case turns on a well-established principle: employees have the right to pursue work-related legal claims together. 29 U.S.C. § 157; Eastex, Inc. v. NLRB, 437 U.S. 556, 566 (1978). Concerted activity—the right of employees to act together—is the essential, substantive right established by the NLRA. 29 U.S.C. § 157. Ernst & Young interfered with that right by requiring its employees to resolve all of their legal claims in “separate proceedings.” Accordingly, the concerted action waiver violates the NLRA and cannot be enforced.

This holding is contrary to the holdings in the Second, Fifth, and Eight Circuits that have concluded that the NLRA does not invalidate collective action waivers in arbitration agreements.  This split in circuit courts will be resolved by the U.S. Supreme Court’s holding in Epic System Corp. v. Lewis.

2. U.S. Department of Justice changed its position to support class action waivers

Under the Obama Administration, the DOJ supported the position taken by the NLRB that class action waivers found in arbitration agreements violated Section 7 of the NLRA.  However, under the Trump Administration, the DOJ has changed its view and in the summer of 2017 filed an amicus brief explaining it now does not believe class action waivers violate the NLRA.  This further adds to the split in authority that will be resolved by the U.S. Supreme Court’s ruling in Epic System Corp. v. Lewis.

3. Potential benefits of arbitration agreements for California employers

There are a number of benefits for California employers to have arbitration agreements.  One major benefit is the class action waiver discussed above.  For large employers this can be an effective bar from employees bringing class actions.  However, in California, employees still have rights to pursue “representative actions” under the Private Attorneys General Act (PAGA) as discussed below.  Moreover, the arbitration process can proceed faster than civil litigation, saving a lot of time and attorney’s fees in the process.  For example, often the discovery process moves faster in arbitration, and if there are any disputes, the parties can raise them with the arbitrator telephonically, instead of the lengthy and formal motion process required to resolve disputes in civil court.

The arbitration process is also confidential, so if there are private issues that must be litigated, these issues are not filed in the public records of the courts. The parties also have a say in deciding which arbitrator to use in deciding the case, whereas in civil court the parties are simply assigned a judge without any input into the decision. This is very helpful in employment cases, which often involves more complex issues, and it is beneficial to the parties to select an arbitrator with experience in employment law.

4. Potential drawbacks of arbitration agreements in California

While there are many benefits of arbitration agreements, they do not come without a few drawbacks. The primary drawback is that in California, the employer must pay all of the arbitrator’s fees in employment cases. Arbitration fees can easily be tens of thousands of dollars – a cost that employers do not need to pay in civil cases. However, if the company values the confidentiality and speed of process provided in arbitration, and potentially limiting class action liability exposure, this extra cost may well be worth it.

In addition, even if the U.S. Supreme Court rules in favor of employers in Epic System Corp. and upholds the use of class action waivers, the California Supreme Court held that employees may still bring representative actions under the Private Attorneys General Act (PAGA). Even though PAGA claims are limited to specific penalties under the law, and have a much shorter one-year statute of limitations than compared to potentially a four-year statute of limitations for most class actions brought for unpaid wages under the Labor Code, the potential penalties under PAGA can still be substantial for employers.

5. Impact on employers

Employers who utilize arbitration agreements will need to monitor the Supreme Court’s decision in Epic System Corp.  If the Supreme Court rules that class action waivers violate Section 7 of the NLRA, employers will need to review and potentially modify any arbitration agreements with class action waivers.  Such a ruling could spur many more class actions.  With that said, employers should always be auditing their wage and hour policies and practices to ensure compliance with Federal and state laws.

If the Supreme Court holds that arbitration agreements with class action waivers do not violate Section 7 of the NLRA, it is likely that employers can continue to implement the agreements with employees.  However, as mentioned above, California employers still must remain vigilant about their wage and hour practices, as there is still substantial liability under representative actions under PAGA.

It has been a few years that the California Supreme Court issued its groundbreaking ruling in Brinker Restaurant Group v. Superior Court.  With the end of the year approaching and employers preparing for the new year and the new legal obligations that come with it, now is a good time for employers to audit meal and rest break policies and practices. Regular readers of the blog are familiar with these issues, but it is always a good practice to review these issues at least once a year and audit meal and rest break policies and practices.  This Friday’s Five covers five issues employers should not forget regarding about meal and rest breaks.

1. Timing of breaks.
Meal Breaks
The California Supreme Court made clear in Brinker Restaurant Group v. Superior Court that employers need to give an employee their first meal break “no later than the end of an employee’s fifth hour of work, and a second meal period no later than the end of an employee’s 10th hour of work.” Here is a chart to illustrate the Court’s holding:

Rest Breaks
As for of rest breaks, the Court set forth that, “[e]mployees are entitled to 10 minutes’ rest for shifts from three and one-half to six hours in length, 20 minutes for shifts of more than six hours up to 10 hours, 30 minutes for shifts of more than 10 hours up to 14 hours, and so on.” This rule is set forth in this chart:

In regards to when rest breaks should be taken during the shift, the Court held that “the only constraint of timing is that rest breaks must fall in the middle of work periods ‘insofar as practicable.’” The Court stopped short of explaining what qualifies as “insofar as practicable”, and employers should closely analyze whether they may deviate from this general principle.

2. Rule regarding waiver of breaks.
Meal Breaks
Generally meal breaks can only be waived if the employee works less than six hours in a shift. However, as long as employers effectively allow an employee to take a full 30-minute meal break, the employee can voluntarily choose not to take the break and this would not result in a violation. The Supreme Court explained in Brinker (quoting the DLSE’s brief on the subject):

The employer that refuses to relinquish control over employees during an owed meal period violates the duty to provide the meal period and owes compensation [and premium pay] for hours worked. The employer that relinquishes control but nonetheless knows or has reason to know that the employee is performing work during the meal period, has not violated its meal period obligations [and owes no premium pay], but nonetheless owes regular compensation to its employees for time worked.

Rest Breaks
Rest breaks may also be waived by employees, as long as the employer properly authorizes and permits employees to take the full 10-minute rest break at the appropriate times.

3. Timekeeping requirements of meal breaks.
Meal breaks taken by the employees must be recorded by the employer. However, there is no requirement for employers to record 10-mintute rest breaks.

4. Implementing a procedure for employees to notify the company when they could not take a break.
If employers have the proper policy and practices set up for meal and rest breaks, the primary issue then becomes whether the employer knew or should have known that the employee was not taking the meal or rest breaks. Therefore, many allegations that the employer was not providing the required breaks can be defended on the basis that the employer had an effective complaint procedure in place to inform the employer of any potential violation, but failed to inform the employer of these violations.

5. Implementing a policy of paying employees for missed breaks and recording these payments.
Employers should show that in addition to the complaint procedure mentioned above, that the company has a system in place to correct any violations. If during an investigation, the employer confirms that the employee in fact missed the break because of the rush of business or some other factor, the company should pay the employee the one hour “premium pay” penalty at the employee’s regular rate of pay. Also, the company should record these payments made to employees in case it needs to prove later on that it has an effective remedial process in place to address missed breaks.

Happy Friday.  Through my defense of wage claims this year, I found that employers need to establish and periodically review issues pertaining to employees’ timekeeping.  This Friday’s Five is a list of the top five timekeeping issues that employers should routinely audit:

1. Establish and communicate a time keeping policy

Employers should establish and regularly communicate a time keeping policy to employees.  The policy should set forth that employees always have an open door to complain to their supervisors and other managers or human resources about missed meal and rest breaks, unpaid wages, or unpaid overtime.  If employees routinely acknowledge that they understand the time keeping policy and are agreeing to record their time through the employer’s system, this can go a long way in defending any off-the-clock claims.

2. Rounding

Employers need to review whether their time keeping system or payroll company is rounding employees’ time.  While rounding can be legal under California law, employers must still meet certain requirements to have a compliant rounding practice.  In See’s Candy Shops Inc. v. Superior Court, a California court held that the employer’s rounding policy that rounded both up and down from the midpoint of every six minutes was permitted under California law.  The employers’ policy did not result in a loss to the employees overtime.  Therefore, the court found it to be lawful.  Employers need to review:

(1) Do they have a rounding policy?

(2) If they do round, is the policy compliant with the law?

(3) Is a rounding policy necessary or is it easier to pay the exact time the employee clocks in and out?

3. De minimis time

Employers need to review if they are compensating employee for all time worked.  The de minimis doctrine may permit employers a defense for claims by employees that they were not compensated for very small amounts of time that are difficult to track.  The de minimis doctrine holds that “alleged working time need not be paid if it is trivially small: ‘[A] few seconds or minutes of work beyond the scheduled working hours … may be disregarded.’” Troester v. Starbucks Corporation (this decision is currently under appellate review).   More information about the de minimis doctrine can be read here.  While this defense may be available to California employers, employers should not rely upon the defense when it is known the employee is working time that is not compensated.

4. Record meal breaks

In addition to recording the start and stop times for employee’s work, employers are required to record when employees take meal breaks.  The Wage Orders require that California employers keep “[t]ime records showing when the employee begins and ends each work period. Meal periods, split shift intervals and total daily hours worked shall also be recorded. Meal periods during which operations cease and authorized rest periods need not be recorded.”  IWC Wage Order 5-2001(7)(a)(3).

5. Time records

Under Labor Code section 1174, employers are required to keep time records showing the hours worked daily and the wages paid, number of piece-rate units earned by and applicable piece rate paid.  These records must be maintained in the state or at the “plants or establishments at which employees are employed.”  The records must be kept for at least three years.  Labor Code section 1174(d).  The statute of limitations for wage claims can extend back to four years, so employers generally keep the records for four years.

With the end of summer quickly approaching, this Friday’s Five (and next week’s post as well) covers broad topics employers should review periodically.  Today’s post covers five questions a company operating in California should be asking on a routine basis:

1. Has the company reviewed and updated the employee handbook and related policies?

As discussed in last weeks Friday’s Five about the new court decision on vacation pay in Minnick v. Automotive Creations, an employer’s policies are critical in defending claims.  Vague or out dated policies can create huge amounts of liability for employers. California’s requirements change throughout the year, and it is important that employers have a good relationship with employment counsel so that they are routinely communicating and reviewing the need to update policies based on new case law and legislation.

2. Does your company train supervisors and employees on its handbook and other policies, and does the company standby what it tells employees in these policies?

Legally drafted policies only get your company half of the way there.  Companies need to train managers and supervisors about what the policies mean and how they need to be implemented day-to-day.  Furthermore, the company needs to follow-through with what it tells supervisors, managers, and employees.  For examples, if the company maintains an open door policy, but none of the employees are utilizing the open door policy there could be a problem.  One solution is for the company to start pro-actively having open door sessions with employees to discuss their experience at the company (my post next week will discuss what should be asked during these open door sessions).

3. Has the company conducted a review of a local county and city laws that apply?

State, county and city laws regulating minimum wage and paid sick leave are numerous and California employers need to ensure they have closely reviewed they are complying with these requirements.  As Carl’s Jr. is finding out, noncompliance can have steep penalties.

4. When was the last time the company conducted an internal wage and hour audit internally? When was the last time an external lawyer or other professional reviewed wage and hour practices?

Many companies establish policies or simply continuing using policies from the past that have never been reviewed internally or externally by a lawyer or other professional.  I’ve published an HR audit list that covers a few of the essential areas that must be reviewed to lower a company’s legal exposure in California.

5. Is there an open line of communication with the employer’s payroll company and have specific wage and hour compliance issues been discussed?

The information that must be listed on employee’s pay stub is detailed, but easy to comply with.  A model pay stub published by the State Division of Labor Standards Enforcement can be found here (but note this only lists the state requirements – any other local county or city requirement will also apply).  The model pay stubs does not list paid sick leave, which employers must also remember to list on the employee’s pay stub or other writing provided to employees when they are paid.

Many payroll companies do not review the accuracy of the information listed on the pay stubs they generate, and this burden falls on the employer.  In addition to the California Labor Code requirements of the information that must be listed on pay stubs, the local requirements for reporting the amount of paid sick time available to employees must also be provided.  Employers need to proactively review and discuss these requirements with their payroll companies.

In this Friday’s Five I discuss:

  • new case decision on vacation pay and policies (Minnick v. Automotive Creations)
  • PAGA decision allowing contact information for other employees (Williams v. Superior Court),
  • new Form I-9 released and employers must start using by September 17, 2017 (download here)
  • new Notice of Rights for Victims of Domestic Violence/sexual assault/stalking required to be provided to California employees effective July 1, 2017 (download here), and
  • new law signed by Governor Brown prohibiting inquiries into litigant’s immigration status.