To qualify as an exempt employee, California requires that an employee must be “primarily engaged in the duties that meet the test of the exemption” and “earns a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.” Labor Code section 515. This forms the two-part test the employees must meet to be exempt: (1) the salary basis test and (2) the duties test. Here are five general issues employers should know about the salary basis test going into 2019:

1. Salary required to meet “white collar” exemption increases on January 1, 2019.

To be exempt from the requirement of having to pay overtime to the employee, the employee must perform specified duties in a particular manner and be paid “a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.” (Lab. Code, § 515, subd. (a).)  As of January 1, 2019, the minimum wage in California increased from $11.00 to $12.00 per hour for employers with 26 or more employees (the increase is from $10.50 per hour to $11.00 per hour for employer with 25 or fewer employees on January 1, 2019).  With the increase in the state minimum wage, there is a corresponding raise in the minimum salary required to qualify as exempt under the “white collar” exemptions.  Therefore, on January 1, 2019, in order to qualify for a white collar exemption, the employee must receive an annual salary of at least $49,920 for large employers and $45,760 for small employers.

2. Salary must be predetermined and guaranteed.

The court in Negri v. Koning & Associates set forth that in order to qualify as a “salary” the pay “must still be a predetermined amount that is not subject to reduction based upon the quantity or quality of work.”  Therefore, bonuses, commissions, and other payments made to the employee during the course of the year are usually not considered part of the employee’s salary to qualify as exempt.  Employers need to be careful about the salary calculation to ensure the employee is paid a sufficient salary that qualifies the employee as exempt.

3. The employee’s salary cannot be reduced for quality or quantity of work.

In Negri v. Koning & Associates (2013), an insurance claims adjuster challenged his employer’s exempt classification of his job.  The plaintiff was paid $29 per hour with no minimum guarantee, and when he worked more than 40 hours in a week, he still only received $29 per hour.  The employer attempted to argue that the plaintiff was an exempt employee under the administrative exemption.  The court rejected the employer’s position in holding that because the employee did not receive a guaranteed amount in “salary”, the employee did not meet the salary basis test to qualify as exempt.  In determining what constitutes a salary, the court looked to federal law:

An employee is paid on a “salary basis” if the employee “regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed. Subject to the exceptions provided in paragraph (b) of this section [(relating to absences from work)], an exempt employee must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked. Exempt employees need not be paid for any workweek in which they perform no work. An employee is not paid on a salary basis if deductions from the employee’s predetermined compensation are made for absences occasioned by the employer or by the operating requirements of the business. If the employee is ready, willing and able to work, deductions may not be made for time when work is not available.” (29 C.F.R. § 541.602(a) (2012)

Therefore, because the plaintiff’s pay varied according to the amount of time he worked, and was not guaranteed a base amount, he did not meet the salary basis test and was found to be non-exempt.

4. If misclassified, the employee is entitled to unpaid overtime.

For all non-exempt employees, overtime is owed at a rate of one and one-half times the employee’s regular rate of pay for all hours worked in excess of eight hours up to and including 12 hours in any workday, and for the first eight hours worked on the seventh consecutive day of work in a workweek.  Double the employee’s regular rate of pay is owed for all hours worked in excess of 12 hours in any workday and for all hours worked in excess of eight on the seventh consecutive day of work in a workweek.  California’s Department of Industrial Relations FAQ on California overtime provides a good overview of the overtime requirements under California law.  In addition to the unpaid overtime that is owed to misclassified employees, employers also fact substantial penalties that accrue as a result of the employee not being paid all wages when earned.

5. Employers bear the burden of proof in establishing the exemption.

California courts have made clear that the employer bears the burden of proof when asserting that an employee is an exempt employee.  “[T]he assertion of an exemption from the overtime laws is considered to be an affirmative defense, and therefore the employer bears the burden of proving the employee’s exemption.”  Ramirez v. Yosemite Water Co. (1999).

As we are in the midst of the holiday season, employers need to be mindful about the parameters that may apply when granting employees time off to volunteer, paying employees to volunteer to support a cause, and other potential issues involving volunteer time.  This topic was raised as a suggestion from a regular reader of the blog, and if you have any topics you would like to see covered, please let me know.  This Friday’s Five covers five issues employers need to be aware of regarding time off and pay issues for volunteer time:

1. When does an employer need to pay for employee’s volunteer time?

The California Division of Labor Standards Enforcement (DLSE) issued some guidance for California employers in an opinion letter addressing whether workers for religious organizations are employees or volunteers.  The DLSE took the position that “the intent of the parties is the controlling factor.  If the person intends to volunteer his or her services for public service, religious, or humanitarian objectives, not and an employee and without contemplation of pay, the individual is not an employee….”  The DLSE continued explaining that employees of the religious, charitable, or non-profit organization can donate services as a volunteer, but these services cannot be of the “usual services of that employees’ job.”

The United States Department of Labor issued an opinion letter on the issue under federal law similar to California’s DLSE.  The DOL maintained that “time spent in work for public or charitable purposes at the employer’s request, or under his direction or control, or while the employee is required to be on the premises, is working time. However, time spent voluntarily in such activities outside of the employee’s normal working hours is not hours worked.”

The DOL explained:

Therefore, the employer need not compensate an employee for time spent volunteering for charitable purposes if the work is performed outside of normal working hours and the employee is truly volunteering, not performing the volunteer work as a result of coercion or pressure by the employer.

The DOL’s opinion letter sets forth that under federal law, an employer who encourage employees to volunteer for “public or charitable purposes” outside of normal working hours is not obligated to pay wages to the employee as long as participation is optional.  If the employee does not participate in the volunteer activity, this “will not adversely affect working conditions or employment prospects.”

2. Volunteer firefighters, reserve peace officers or emergency rescue personnel are provided with protected time off under California law. 

California’s Labor Code, Sections 230.3 and 230.4 provide leave protections to employees who volunteer as a firefighter, reserve peace officer, and emergency rescue personnel.  An employer cannot not discharge or discriminate against an employee for taking time off to perform emergency duty as a volunteer firefighter, a reserve peace officer, or emergency rescue personnel.  In addition, employers with 50 or more employees must allow employees to take temporary leaves of absence, not to exceed an aggregate of 14 days per calendar year, for the purpose of engaging in fire, law enforcement, or emergency rescue training.

3. Civil Air Patrol members are provided protected time off under California law. 

Labor Code sections 1501 and 1503 provide that employers are required to allow employees no less than 10 days per calendar year of unpaid Civil Air Patrol leave to an employee who responds to an emergency operational mission of the California Wing of the Civil Air Patrol.

4. Employers need to be careful in permitting volunteer time for certain limited causes. 

If employers do allow employees unpaid time off to volunteer for certain causes, the employer should be careful that the causes supported by the company are not viewed as supporting one political view or cause.  For example, Labor Code section 1101 prohibits employers from forbidding or preventing employees from engaging or participating in politics or from becoming candidates for public office.  The law also prohibits employers from “controlling or directing, or tending to control or direct the political activities or affiliations of employees.”  Section 1102 prohibits employers from coercing or influencing employees through the threat of discharge or loss of employee to “adopt or follow or refrain from adopting or following any particular course or line of political action or political activity.”  Employers developing a volunteer time off policy must keep these requirements in mind in order to avoid any potential claims that the policy violates this labor code section.

5. Approach unpaid internships with caution. 

Sometimes workers that are young or are looking to break into a new industry will volunteer as an intern without pay for a company or individual to learn the industry and develop contacts.  In April 2010, the DLSE issued an opinion letter setting for the analysis it would conduct in making a determination regarding whether an intern is properly classified.  In its opinion letter, the DLSE set forth that it would examine the following factors:

  1. The training, even though it includes actual operation of the employer’s facilities, is similar to that which would be given in a vocational school;
  2. The training is for the benefit of the trainees or students;
  3. The trainees or students do not displace regular employees, but work under their close observations;
  4. The employer derives no immediate advantage from the activities of trainees or students, and on occasion the employer’s operations may actually be impeded;
  5. The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and
  6. The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.

While these factors are a fairly loose test, an intern attempting to challenge the classification as an intern would probably have at least a few good facts to support their position. This is why California employers need to approach the intern classification with caution.

Happy Thanksgiving!  I hope everyone is getting some time to relax and enjoy some time with their families.  Entering the holiday season, it is a good time to review employer’s obligations to accommodate requests for time off for holidays and best pay practices during holiday leaves.  This Friday’s Five covers five reminders for employers about holiday leaves and pay:

1. California employers are not required to provide employees time off for holidays.

There is no requirement that California employers provide time off (except for religious accommodations – see below) for holidays. California’s DLSE’s website states the following:

Hours worked on holidays, Saturdays, and Sundays are treated like hours worked on any other day of the week. California law does not require that an employer provide its employees with paid holidays, that it close its business on any holiday, or that employees be given the day off for any particular holiday.

2. California employers are not required to pay for time off for holidays, nor are they required to pay additional wages if employees work on holidays.

Likewise, there is no requirement that employers pay employees extra pay or “holiday pay” for work performed on holidays. Employers can voluntarily agree to pay employees extra pay for work that is required during holidays, but these terms would be governed by policy set forth by the employer. Therefore, employers are urged to make sure their holiday pay policies are clearly set forth.

California’s legislature has proposed bills that would require certain employers to pay employees double time for work done on Thanksgiving, but none of these bills have become law.  For example, the “Double Pay on the Holiday Act of 2016” proposed to require an employer to pay at least 2 times the regular rate of pay to employees at retail and grocery store establishments on Thanksgiving. None of these attempts by the legislature have been successful yet in requiring California employers to pay any extra “holiday pay.”

3. Employers must provide reasonable accommodations for employees who cannot work on certain holidays due to religious observances.

Employers need to be aware of any religious observances of their employees since employers need to provide reasonable accommodations for employees due to religious reasons. The analysis of reasonable accommodation is required is a case by case analysis based on the company’s type of business and the accommodation requested by the employee. If the employer’s operations require employees to work during normally recognized holidays, such as a restaurant, then this should be communicated to employees in the handbook or other policies and set the expectation that an essential function of the job requires work during normal holidays.

4. If an employer does pay for time off during holidays, the employer does not have to allow employees to accrue holiday paid time off.

If an employee leaves employment before the holiday arrives, the employer is not required to pay the employee for the day off.  But the employer’s policy regarding holiday pay must clearly set out that this benefit does not accrue to employees and that they must be employed during the specific holidays to receive the holiday pay.  Often the employer will also require that the employee works the days leading up to and following the holiday in order be eligible for the holiday pay.

5. If a pay day falls on certain holidays, and the employer is closed, the employer may process payroll on the next business day.

If an employer is closed on holidays listed in the California Government Code, then the employer may pay wages on the next business days.  The DLSE’s website explains this, and other considerations, for the timing requirements for payroll.  The holidays listed in the Government Code are as follows:

  • January 1 — New Year’s Day
  • Third Monday in January — Martin Luther King Jr. Day
  • February 12 — Lincoln’s Birthday
  • Third Monday in February — Washington’s Birthday
  • Last Monday in May — Memorial Day
  • July 4 — Independence Day
  • First Monday in September — Labor Day
  • Second Monday in October — Columbus Day
  • November 11 — Veterans Day
  • Fourth Thursday in November — Thanksgiving Day
  • Day after Thanksgiving
  • December 25 — Christmas
  • Other days appointed by the governor for a public fast, thanksgiving or holiday

The DLSE’s website provides the definition of “holiday” here.

A new decision was published this week on when commute time is required to be paid by employers. Plaintiffs represented current and former employees of defendant Pacific Bell Telephone Company who install and repair video and internet services in customers’ homes.

Plaintiffs alleged they were owed for the time they spent traveling in an employer-provided vehicle that carried equipment and tools between their homes and a customer’s residence under an optional and voluntary Home Dispatch Program established by the employer.

Key Facts

The Plaintiff technicians were paid on an hourly basis and installed equipment at customer’s homes.  The technicians could not use their own vehicles while on the job, were required to use a company vehicle. They were also required to carry all necessary equipment and tools to perform their job in the company vehicle.  Their work day schedule started at 8:00 a.m. and lasted eight hours.

There were two options made available to the technicians for travel with the company vehicle.  The first option was the Home Dispatch Program (HDP), under which the technicians were allowed to take a company vehicle home each night instead of returning all vehicles to the Pacific Bell garage. The HDP was optional, and the techs were permitted drive the company vehicles, containing tools and equipment, to and from home each day. Technicians were not paid for any time before 8:00 spent driving from their homes to the first worksite. The technicians were not paid for the time spent driving home with the equipment and tools after their last appointment. If the technicians had to drive to the employer’s warehouse to restock equipment, they were paid for this time.

The second option available to the technicians was to pick their company vehicle up at the company garage prior to going to the first customer visit.  Under this option, they were compensated for time spent traveling to and from the garage.

Plaintiffs alleged three causes of action: failure to pay the minimum wage, failure to pay wages timely, and unfair business practices.  All causes of action were based on the failure to pay for the transporting time. Here are five key issues regarding the new decision in Hernandez v. Pacific Bell Telephone Company.

1. The Control Test

The court explained that the wage order defined “hours worked” as: the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so.

The court noted that the California Supreme Court rejected an argument that to constitute “hours worked” the time must be spent actually working. Instead, the court held that as long as the employee is “subject to the control of an employer,” the time is considered compensable “hours worked.” Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575, 582-584.

In Morillion, although the employees could read or sleep on the bus, they could not use the time for their own purposes; they “were foreclosed from numerous activities in which they might otherwise engage if they were permitted to travel to the fields by their own transportation.” The court in Morillion noted that during the bus ride employees could not drop off their children, stop for food, or run other errands.  Therefore, the Supreme Court concluded, “When an employer requires its employees to meet at designated places to take its buses to work and prohibits them from taking their own transportation, these employees are ‘subject to the control of an employer,’ and their time spent traveling on the buses is compensable as ‘hours worked.’ ”  Therefore, under these facts, the employer controlled the employees within the meaning of “hours worked.”

In Morillion, the Court, however, made it clear that

“employers do not risk paying employees for their travel time merely by providing them transportation. Time employees spend traveling on transportation that an employer provides but does not require its employees to use may not be compensable as ‘hours worked.’ [Citation.] Instead, by requiring employees to take certain transportation to a work site, employers thereby subject those employees to [their] control by determining when, where, and how they are to travel. Under the definition of ‘hours worked,’ that travel time is compensable.” (Morillion, supra, 22 Cal.4th at p. 588.)

The court in this case noted: “The rule of Morillion applies only where use of the employer-provided transportation is compulsory.”  Plaintiffs relied on the case of Rutti v. Lojack Corp. (9th Cir. 2010) for support that the employees should be paid for this commute time.  The court rejected this argument in finding that the employees in Rutti were “required to use the company vehicle; here, plaintiffs were not.”

2. Time spent commuting in a company provided vehicle is only compensable when it is compulsory.

The court explained that employers are only required to pay for employee’s commute time in company provided vehicles if it is required.  The court examined the case of Overton v. Walt Disney Co. (2006) where Disneyland employees sued seeking compensation for the time riding the company provided shuttle from the employee parking lot one mile away from the theme park.  Because Disney did not require the employees to take the shuttle, and they were free to walk, bike, or could have been dropped off at the employee entrance, the court held that this was not considered work time.

3. Suffer or Permit to Work Test

Plaintiffs also argued that the drive time was compensable as “hours worked” under the “suffered or permitted to work” definition. They argue they were working while driving to and from home because they were transporting tools and equipment that were necessary for them to do their job.

The court explained that the phrase “suffered or permitted to work, whether or not required to do so” “encompasses a meaning distinct from merely ‘working.’ ”  The court explained: “Our high court explained an employee is “suffered or permitted to work” when the employee is working, but not subject to the employer’s control, such as unauthorized overtime when an employee voluntarily continues to work at the end of a shift with the employer’s knowledge.”

Here, the court explained that “the standard of ‘suffered or permitted to work’ is met when an employee is engaged in certain tasks or exertion that a manager would recognize as work. Mere transportation of tools, which does not add time or exertion to a commute, does not meet this standard.”  Therefore the court held that under the suffer or permit to work test, the employee’s time was not compensable.

4. Court rejected Plaintiffs’ reliance on workers compensation cases

Plaintiffs attempted to rely on two workers compensation cases, Joyner v. Workmen’s Compensation Appeals Board (1968) 266 Cal.App.2d 470 and Lane v. Industrial Acc. Com. (1958) 164 Cal.App.2d 523.  These cases held that where an employee is injured in a traffic accident on his commute home, while carrying equipment for his job, the employer relationship continued such that the employee’s injuries were compensable and not subject to the coming and going rule.  In rejecting these holdings as binding in this case, the court noted, “These cases address a different issue than the one before us and therefore we find them inapposite. Further, we note that in both of these cases, the employee was not being paid by his employer for his commute time when the accident happened.”

5. Simply carrying tools does not necessarily make employee commute time compensable.

Defendant made that because the employees were carrying tools in the vehicle during the commute, this made the time compensable work time.  The court rejected this argument in noting defendant’s argument that “if carrying equipment necessary for the job were always compensable, every employee who carries a briefcase of work documents or an electronic device to access work emails to and from work would need to be compensated for commute time.”

The court agreed with a federal district court’s decision in Dooley v. Liberty Mut. Ins. Co. that:  “To the extent that some of these cases state broadly that travel time is compensable if employees are transporting equipment without which their jobs could not be done, e.g., Crenshaw, 798 F.2d at 1350, I read these statements as implying that the transportation involves some degree of effort. Otherwise, as observed earlier, the commutes of police officers who carry guns, or indeed, employees who carry badges, would always be compensable.”  There is a difference in effort between transporting heavy equipment for servicing oil wells as compared to the “incidental” transportation of cable TV equipment and tools in the case at hand.  Therefore, the fact that employees carried tools from and from work in this case did not make the time compensable.

The case, Hernandez v. Pacific Bell Telephone Company (November 15, 2018) can be downloaded here.

Parties involved in litigation should always keep an open mind about mediation at every stage of litigation.  Cases that resolve without having to go through a trial or arbitration can potentially save the parties a lot of time and money in litigation.  This article touches on five items parties need to understand about mediation.

1. Mediation is non-binding.
Mediation is a voluntary process in which litigants (or even parties prior to litigation) agree to use a private third-party to help settle the case. People sometimes confuse mediation with arbitration. Arbitration is when parties agree to use a private third-party to hear their case, much like a judge, to make decisions about the case, and eventually decide the case. Arbitration can be binding on the parties, and the arbitrator actually decides who is right and wrong as a matter of law. On the other hand, a mediator is not deciding any issues about the case, but is simply hearing both sides’ positions, and then works with the parties to see if there is a potential resolution that the parties would both agree to. The mediator has no ability to decide issues of the case, or make any binding rulings about the case. The mediator is only an unbiased third-party attempting to get the parties to consider a possible resolution to the case.

2. Mediation takes place with a private mediator –usually not the court.
The parties voluntarily agree upon the selection of a mediator. Usually the mediator has expertise in the area of the law that the case involves so that he or she can move quicker into the substance of the parties’ disagreement. There are many retired judges or lawyers that work as mediators. Some mediators are active practicing lawyers that also have a mediation service established.
The mediation usually takes place at the mediator’s office. Normally the mediator has the parties in separate rooms, and the mediator walks between the two rooms. There are many mediations during which the parties will not see other side the entire day.

3. Negotiations during the mediation are privileged and cannot be used against either party during litigation.
California law prevents any of the negotiations or potential admissions made during mediation from being brought up in court or during litigation. The rationale for this rule is that the courts want people to be able to negotiate during mediation, this involves some give and take. Therefore, in order to assist the mediation process, any of the discussions or negotiations during mediation are prevented from being used against the other party. This allows parties to discuss items more freely during mediation in hopes of having a better chance at resolving the case. However, it should be noted that if a party makes an admission during mediation, the other party can still conduct discovery after the mediation and bring that admission into the case through the standard discovery process. So parties should follow their counsel’s advice about which facts to share during the mediation process. But rest assured, the fact that one party agreed to offer a certain amount to settle the case during mediation, this offer to settle cannot be brought up to the jury later in the case as a way to establish liability.

4. The mediator’s only role is to get the case settled.
The mediator is not there to make friends, tell you if he believes you more than the other side, or make a value judgment about the case or people involved. His or her role is simply to get the case resolved. This usually means that for a successful mediator both sides don’t like the mediator. This is because the mediator was able to move two opponents to agree to a resolution of the case, and to get to this point usually means that both sides are unhappy with the resolution.

5. Even if the case does not settle at mediation, it could still be a successful mediation.
The parties need to understand that mediation is a process and it is hard to settle cases in one day – even a long day – of mediation. Sometimes it is clear during the mediation that the parties cannot settle the case. Sometimes it takes the mediator working with the parities for weeks after the mediation to arrive at a settlement. If the case does not settle, it is also beneficial for the parties that during the course of a mediation to realize that maybe they are still too far apart to agree to a settlement and there needs to be further discovery and motions filed to narrow down the issues that are being litigated.

Regular readers of the blog probably know about my YouTube channel for the Employment Law Report.  This Friday’s Five focuses on recent popular videos I’ve published covering employment law updates, best practices, and an interview with a restaurant consultant.  Hope you enjoy the videos, and please subscribe to the channel to make sure you don’t miss any future updates.

1. 5 Huge Misconceptions About California Employment Law

2. California’s Paid Sick Leave – Quick Update

3.California’s New ABC Test For Independent Contractors

4. My Five Free Resources for California Employers

5. My interview with Salar Sheik from Savory Hospitality

I am not sure of the cause, but my office has seen an increase in Labor Commissioner claims filed over the last two months.  Employers need to prepare and plan on how to defend these claims, and with some planning, the process is a lot less daunting.  Here are five effective strategies in defending Labor Commissioner claims:

1. Understanding the claims made by the employee.

Employers usually become aware of a complaint to the Labor Commissioner when they receive a Notice of Claim and Conference from the Labor Commissioner’s office.  Employers are not required to file any paperwork in response to the notice of conference, but the employer or an employer’s representative is required to appear at the conference at the date and time indicated on the notice.  The conference is not the actual hearing on the matter, rather the conference is structured as a non-binding settlement conference during which the Labor Commissioner discusses the various allegations, the employer’s response, and will attempt to mediate a resolution between the parties.

2. Ensure the claims alleged by the employee can be heard by the Labor Commissioner.

The Labor Commissioner can only hear disputes for “any action to recover wages, penalties, and other demands for compensation.”  Labor Code section 98(a).  Therefore, the Labor Commissioner cannot adjudicate any other types of employment claims, such as harassment or discrimination.  Likewise, if the employer has a counter claim against the employee, it cannot be heard by the Labor Commissioner, but must be filed in court.

Likewise, if the employee has an arbitration agreement with the employer, the employer can compel arbitration of the claim and remove jurisdiction from the Labor Commissioner.

3. Decide if legal representation is required during the Labor Commissioner complaint process.

Neither the employee and the employer are required to have an attorney during any stage of the Labor Commissioner process.  Whether or not an employer decides to have legal representation during the process depends on how comfortable the employer is with handling these issues and how well they understand the law in order to articulate the appropriate defenses available to them.  Also, many employers attend the settlement conference (discussed below) without legal representation if they are comfortable with the issues, and if the case does not settle and is set for a hearing, then the employer has an attorney assist with the hearing.

4. Understanding strengths and weaknesses of case going in to settlement hearing.

Although it is not mandatory, most Labor Commissioner offices will often set the matter for a settlement conference.  Employers often misunderstand the purpose of the initial settlement conference.  The settlement conference is not the hearing on the matter in which the Labor Commissioner takes sworn testimony and makes a decision.  While this step is not the actual hearing that will determine who should prevail, employers should prepare evidence and documents that will be persuasive during the settlement conference to establish defenses to the employee’s claims.  It is also good to listen to the employee’s facts and learn what they are claiming, what evidence they may have, and who may be witnesses.  It is important to learn this information in the event that the case does not settle and is set for a formal hearing.

It is important for employers to review the paperwork provided from the Labor Commissioner’s office to ensure that they gather and bring the required paperwork to the settlement conference.

Usually the Labor Commissioner requires the following background information from the employer:

  1. Completion of the DLSE’s Report of Workers’ Compensation Insurance
  2. City business license
  3. Articles of information filed with the Secretary of State
  4. Any documentation that may be applicable to the employee’s claims: payroll records, time sheets, handbook and applicable policies, correspondence with the employee, etc.…

The employer should also review the employee’s allegations in the notice of claim and prepare an outline of defenses and facts that support their position.

Employers should also understand the arguments in support of their defenses so that those can be articulated to the employee and Labor Commissioner.  The more persuasive the employer’s case is, the more likely that the case can be resolved for a nominal amount during the settlement conference.

Employers should be prepared to negotiate during the settlement conference and be prepared with a range of how much they would be willing to settle the case. An experienced employment law attorney can help address the strengths and weaknesses of the claims and can help advise on the appropriate settlement offer, if any, that could be made.

5. Preparing for hearing.

If the case does not settle at the settlement conference, or if there was never a settlement conference set, the Labor Commissioner will set the matter for a hearing pursuant to Labor Code section 98(a).  The hearings are often referred to as “Berman” hearings after the name of the legislator who sponsored the bill creating this procedure.  The basic idea behind Berman hearings is to provide a relatively fast way to resolve wage disputes.  However, with the state budget constraints, the hearings are usually set for about one year from the date that the settlement conference takes place.

The hearing takes place in the Labor Commissioner’s office, and is usually in a conference room.  The Labor Commissioner will tape record the hearing, and all witnesses’ testimony is provided under oath, just like it would be if they were testifying in court.  The Labor Commissioner can issue subpoenas compelling the attendance of parties at the hearing, as well as compelling parties to produce documents at the hearing.

  • Direct examination questions for the employer’s witnesses
  • Cross-examination questions for claimant, and potential cross-examination questions for any witnesses that claimant may bring to the hearing
  • Prepare key exhibits. Prepare to have documents that support the employers case ready to present at the hearing (generally it is good to have multiple copies of the exhibits so that they can be handed out during the hearing and everyone has a copy to refer to).  Handbook policies, meal and rest break policies and acknowledgments, timekeeping policies, and time records are generally the types of exhibits that an employer would rely on in establishing that the employee was permitted to take breaks and was paid for all time worked.
  • Prepare witnesses that support defense. Employers can bring in witnesses that support the employer’s defense.  For example, evidence can be submitted through managers or supervisors that are able testify to the fact that the employee was always clocked-in when they were working or had the ability to take meal and rest breaks.  Also, co-workers who worked with the claimant are also good witnesses to establish that they always saw the claimant take breaks and never saw them working off the clock.

Generally, employers need to be prepared but flexible for how the hearing will proceed.  The Labor Commissioner conducting the hearing has a lot of flexibility on how the parties are to present witnesses and conduct cross-examinations.  The rules of evidence are not controlling in the proceeding, but the Labor Commissioner generally has discretion to control the evidence presented during the hearing.  The Labor Commissioner can, and usually will, ask questions of their own to get a better understanding of certain issues.

After the hearing, the Labor Commissioner will issue a written order that must be served on all parties.  Unless this order is appealed, it is a binding judgment against the parties, and a certified copy of the order is filed with the superior court and judgment is entered.

Last Sunday was the deadline for Governor Brown to sign any new bills into law, and I was fielding a lot of questions about the bills that were signed by the Governor (as well as the bills that were vetoed) this week.  So, I thought it would be appropriate for this Friday’s Five to be a round up of my recent content across various social media platforms California employers should not miss:

1. My article on the new employment bills signed by Governor Brown that will impact employers as well as the major bills that were vetoed by the Governor.

2. I published a new episode on my podcast discussing in a bit more detail the new employment bills signed by Governor Brown.

Listen and subscribe my podcast available on Spotify (link here) or iTunes (link here).

3. I’ve also been publishing a few thoughts on Instagram.

4. My recent Facebook post on wage and hour issues that employers need to understand.

5. Portion of a recent panel I moderated on how California employers manage meal and rest breaks in California (on YouTube or available below):

Have a great weekend.

Employers need to be aware of the requirements and tight deadlines they have in responding to an employee’s request for various employment documents under California law.  This Friday’s Five focuses on five areas of records that are typically requested by applicants, current or former employees, and some common deadlines to comply with those requests.

1. Current and former employees have a right to their personnel records under Labor Code section 1198.5.

Under California Labor Code section 1198.5(a) provides that every current and former employee, or their representative, has the right to inspect and receive a copy of their personnel records.  In terms of requests pursuant to 1198.5, the request must be made in writing through two methods:

  • Written and submitted by the current or former employee or his or her representative.
  • Written and submitted by the current or former employee or his or her representative by completing an employer-provided form.

Employers must comply with the request no later than 30 calendar days from receipt of the written request.  Labor Code section 1198.5(b)(1).

2. The terms “personnel records” or “personnel file” are not defined in the Labor Code.

Because Labor Code section 1198.5 refers to the terms “personnel records”, but never defines the term, there is considerable ambiguity about what documents should be keep in an employee’s personnel file and what documents must be made available upon a request to inspect or copy the personnel records.  While not legally binding on employers, there is some guidance from the Division of Labor Standards Enforcement(“DLSE”) expressing the following view:

Categories of records that are generally considered to be “personnel records” are those that are used or have been used to determine an employee’s qualifications for promotion, additional compensation, or disciplinary action, including termination. The following are some examples of “personnel records” (this list is not all inclusive):
1. Application for employment
2. Payroll authorization form
3. Notices of commendation, warning, discipline, and/or termination
4. Notices of layoff, leave of absence, and vacation
5. Notices of wage attachment or garnishment
6. Education and training notices and records
7. Performance appraisals/reviews
8. Attendance records

However, Labor Code section 1198.5(h) clearly sets forth that this section does not apply to: (1) records relating to the investigation of a possible criminal offense, (2) letters of reference, (3) ratings, reports, or records that were: obtained prior to the employee’s employment, prepared by identifiable examination committee members, or obtained in connection with a promotional examination.  In addition, employers may redact the names of “any nonsupervisory employee” contained in the personnel file being requested.  Labor Code section 1198.5(g).

Labor Code section 1198.5 provides that employers must keep a copy of the employee’s personnel records for three years after the employee has left the company.  Labor Code section 1198.5(c)(1).

3. The right to inspect a personnel file under section 1198.5 stops once a lawsuit is filed.

If the current or former employee files a lawsuit that “relates to a personnel matter against his or her employer or former employer” the right to inspect personnel records under Labor Code section 1198 ceases.  Labor Code section 1198(n) and (o).

4. Labor Code section 432 provides applicants and employees with a right to a copy of any document he or she signed.

An employee or applicant is entitled to receive any document relating to the “obtaining or holding of employment.”  The employee or applicant must be provided the document “upon request.”  Labor Code section 432.

5. Employers have 21 days to provide payroll information required under Labor Code section 226.

Employers are required to provide employees with itemized wage statements or pay stubs that lists various items.  I’ve written about the requirements of what must be on wages statements previously here, and the DLSE provides examples of compliance pay stubs on its website for hourly employees here and for employees paid by piece rate here.

Under Labor Code section 226(c), employers have 21 calendar days to respond to written or oral requests to inspect or copy the records covered by this section.  Under this Labor Code section, employers can take reasonable steps to ensure the identify of a current or former employee, and the actual costs of reproduction can be charged by the employer.

A request for personnel records and payroll records cannot be taken lightly by employers, and failure to comply with the various requirements can expose employers to liability.  It is important to seek legal counsel immediately once an employee or their representative makes a verbal or written request for employment related documents or ensure compliance with the request.  It is also a key time period to evaluate whether the employee may file litigation, and to take steps to resolve any potential issues prior to litigation, if at all possible.

Recently I had the honor of moderating a panel discussion on issues facing restaurant operators in California.  The panelists were Joseph Pitruzelli owner of Wurstküche, Francis Drelling General Counsel at Specialty Restaurants Corporation, Naz Moin former director of Human Resources at PizzaRev, and Madelyn Alfano owner of Maria’s Italian Kitchen.   

 You can listen to the discussion on my podcast available on Spotify (link here) or iTunes (link here).

 Even though the discussion is focused on the hospitality industry, the lessons are applicable to companies, owners, and human resource managers operating in nearly every type of company and industry.  This Friday’s Five covers the top five points I took away from the discussion: 

  1.  There is no one background that is best in determining success.  As you will hear, the panelists all are successful in their respective companies, but all have different backgrounds, and backgrounds that you would not necessarily think would make them successful in their respective positions.  Pursue what interests you, and you will be successful.   
  2. Single restaurant owners face the same issues as multi-unit operators.
  3. Hire for personality – everything else can be taught. 
  4. Back of the house workers do affect the company culture. 
  5. Employees should not be surprised when they are let go.  Constant coaching, counseling, and documentation is critical in managing employees.  Also, remember to give positive feedback to employees who you see doing exceptional work.   

I would like to thank the panelists again for joining me for the excellent discussion.  I hope you learn as much as I did from the conversation.