California’s Department of Finance provided a letter to Governor Newsom as required under Labor Code section 1182.12 to reflect the adjustment in the state minimum wage each year.  The Department announced that California’s minimum wage will increase by 3.5% to $16.00 per hour for all employers as of January 1, 2024. This Friday’s five reviews how the increase impacts California’s employers:

1. White Collar Exemptions – Salary Requirement Tied to State Minimum Wage

California’s employment laws classify employees into two main categories: exempt employees and nonexempt employees. Federal and state laws exempt certain employees from wage and hour requirements. An exempt employee is an individual who is exempt from any overtime pay or minimum wage requirements. The “white collar” exemptions are: Professional, Executive and Administrative. To qualify as an exempt employee, the employer bears the burden to meet the requirements of a two-part test the employees must meet to be exempt: (1) the salary basis test and (2) the duties test. The salary basis test requires that the employee must be paid a salary that is at least two times the state minimum wage, which will increase as California’s minimum wage increases.

With the increase to the California minimum wage on January 1, 2024, the minimum annual salary to meet the white-collar exemption increases to $66,560 per year, and $5,546.67 per month (increasing from $64,480 per year in 2023).  For more information on exempt employee classifications, see our prior article here.

2. Computer Professional Exemption Salary Requirement Increases in 2024

Labor Code section 515.5 sets forth that certain computer software employees are exempt from overtime requirements under the Labor Code. One aspect to meet this exemption is a minimum salary.  For 2023, California’s Department of Industrial Relations adjusted the computer software employee’s minimum hourly rate of pay exemption from $50.00 to $53.80, the minimum monthly salary exemption from $8,679.16 to $9,338.78, and the minimum annual salary exemption from $104,149.81 to $112,065.20 effective January 1, 2023.  The DIR will be announcing the increase for computer professionals in October 2023. 

3. Local Minimum Wage Ordinances

There are over 35 local minimum wage ordinances throughout California.  Employers are required to comply with the higher of the state or local minimum wage that applies to them.  Many of the local minimum wage rates increase on July 1 of each year, but there still are some that have a January 1 increase date.  Employers must carefully review all applicable local minimum wage (and paid sick leave) requirements.

4. Industry Specific Minimum Wages

  • Hotel Workers:

In addition to state and local minimum wage rate, some localities also have industry specific rates. The employers should always check their local ordinances that might apply to their workforce/industry. There are some cities that apply specific rates for hotel workers. For example, the City of Long Beach and the City of West Hollywood have adopted ordinances requiring a higher minimum wage for these workers.

  • FAST Act – Fast Food Workers:

As we have written about on this blog, on September 5, 2022, California Governor Gavin Newsom signed into law AB 257, termed the Fast Food Accountability and Standards Recovery Act or FAST Recovery Act.  The law proposes to establish a Fast Food Sector Council to regulate California’s fast food restaurants and set the minimum wage rate, among other workplace regulations, for the fast food industry. However, the law has been challenged and a coalition, the Save Local Restaurants Coalition, submitted over one million signatures on December 5, 2022, in opposition to the FAST Act and now the bill will be on the November 2024 ballot as a referendum for California voters to decide the fate of the law.

5. Planning For Minimum Wage Increases

As employers start to prepare for 2024, some best practices for ensuring compliance with all minimum wage requirements include:

  • Review all exempt employee classifications and specifically list which exemption they qualify for and ensure they are paid the statutorily required salary.
  • Develop a chart listing all nonexempt employees by location and ensure compliance with the location where the employee is working.
  • Audit your payroll processing company to ensure they are updating the minimum wage and salary payments to employees. Do not rely on your payroll company to know or understand the minimum wage requirements here in California.

Finally, there is an initiative that qualified for the November 2024 ballot that would increase California’s minimum wage to $18 per hour and then increase each year based on the cost of living.  Employers will need to continue to monitor this initiative in 2024.

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 she 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 a successful mediator is able to have each party questioning the strength of their case. A successful mediation 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 to realize that maybe they are still too far apart to agree to a settlement and there needs to be further discovery and/or motions filed to narrow down the issues that are being litigated.

By Pooja Patel and Anthony Zaller

July was a busy month for California employment law issues.  The issue that dominated the news in July was the California Supreme Court’s ruling in Adolph v. Uber Technologies, LLC holding that employers cannot implement arbitration agreements with employees that waive the employee’s ability to bring claims on behalf of other employees, effectively overruling the U.S. Supreme Court’s Viking decision issued last summer.  While this was a significant development that California employers need to assess, there are a number of other new developments that occurred in July.  Here is a roundup of the other key issues impacting employers:

1. New I-9 Form and changes to verification process – November 1, 2023 deadline to implement.

On July 21, 2023, the U.S. Citizenship and Immigration Services (USCIS) announced that it will release a new I-9 form on August 1, 2023. Employers may use the current I-9 form through October 31, 2023. Beginning November 1, 2023, Employers will be required to use the new I-9 form. While the new form has not been published yet, it appears to streamline and simplify the process. The changes include a checkbox for employers to check if they examined the I-9 documentation remotely, instead of by physical examination.

The Department of Homeland Security (DHS) has also ended the temporary COVID-19 rule that allowed for flexibility for in-person examination of the I-9 documentation. Moving forward, only employers who participate in E-Verify may examine the 1-9 documents electronically:

Employers who do not participate in E-Verify:

By August 30, 2023, must physically examine the identity and employment authorization documentations for all individuals hired on or after March 20, 2020, whose documents were previously only examined by virtual or remote examination under the COVID-19 flexibilities. Additionally, beginning August 1, 2023, these employers must perform in-person examinations.

Employers who participate in E-Verify:

Effective August 1, 2023, employers who participate in E-Verify and are in good standing, may examine the I-9 documents electronically using a live video call. As a reminder, employers who participate in E-Verify must photocopy all U.S. passports, passport cards, Permanent Resident Cards (Form I-551), and Employment Authorization Documents (Form I-766) and retain them with the Form I-9.

It is recommended that California employers develop and update a new hire packet each year.  Given this new I-9 requirement, it is a good time for employers to update their entire new hire packet (and review and update their arbitration agreements given the Uber ruling). 

2. Employees boast about having “lazy girl jobs.”

Social media has created new and rapidly evolving trends in the modern workforce.  Another recent trend, sparking intense debates across the internet, is the phenomenon known as the “Lazy Girl Job.” As reported by the Wall Street Journal, a “Lazy Girl Job” is characterized by remote work, a laid-back boss, fixed working hours until 5 p.m., and an annual salary ranging from $60,000 to $80,000.  Is it merely a shift in priorities among the younger generation, seeking better work-life balance? Or does it place unreasonable expectations on employers, where employees anticipate high pay for lesser work?

The pandemic changed employees’ outlook on work.  Just like the “quiet quieting” trend, the “lazy girl job” discussion is yet another aspect of employees reevaluating their goals in life.  Employers need to recognize that not all employees are motivated by money and have the drive to become an executive who works 80 hours a week.  It is important to recognize this and have jobs and positions that fit each employee’s goals. 

3. California’s Industrial Welfare Commission receives funding to issue updated Wage Orders in 2024.

Governor Newsom signed AB 102 on July 10, 2023 and a part of that bill funds the Industrial Welfare Commission (IWC) to reconvene to issue wage orders regulating the “wages, hours, and working conditions” for various industries.  Therefore, employers need to expect new regulations in nearly every industry (as the current wage orders cover most industries) by October of 2024.  AB 102 specifies that the wage order “shall not include any standards that are less protective than existing state law.” 

Of concern for employers is that the IWC is made up a panel of appointed individuals and have quasi-legislative power to adopt wide-ranging employment regulations across California, but the process of adopting new regulations is not as open to public review compared to the legislative process.  Just as the legislature is attempting to delegate its authority to an appointed council in the FAST Act, AB 102 is a clear move in delegating authority to unelected governing bodies, such as the IWC.  This permits the governing bodies to issue unpopular regulations without having the elected officials to account for the new regulations with the voters.  This is a concern, and it I am expected that we will be discussing the new wages orders and regulations extensively next year. 

4. Report finds that nearly half of employees spend half of their workday on social media.

A new report finds that 48% of employees spend up to four hours a day during work on social media for personal use.  As reported by SHRM, a Monster Worldwide survey found that employees are spending nearly half of their working time on social media. The next question usually posed by employer is how they stop this from occurring.  But should employers embrace employee’s use of social media on the job? I’m of the opinion that social media has become a critical part of our lives – it is how we stay informed on current events, stay on top of what competitors are doing, and stay in touch with colleagues. Regardless, if social media did not exist, employers who were not engaging their employees or had unengaged employees still faced this problem, but the employees would have done something else with their time at work, such as read a book or day dream. I’d be curious to hear your thoughts: Is employee use of social media at work a problem, or should it be encouraged?

5. Zaller Law Group webinar discussing the impact of Adolph v. Uber Technologies on Thursday August 3, 2023. 

As we reported on earlier, the California Supreme Court issued a game-changing decision in Adolph v. Uber Technologies for California employers. It effectively overruled the U.S. Supreme Court’s decision in Viking River Cruises, clearing the way for employees to bring a case on behalf of other employees in PAGA cases against employers. What does this mean for you as an employer? Our seasoned PAGA litigation attorneys are here to give you a deep dive into the impact of this ruling, practical guidance, best practices, and what the future might look like.  Join us on Thursday, August 3, 2023 – registration is here.

In Adolph v. Uber Technologies, Inc., the California Supreme Court held that even when an employee enters into an arbitration agreement requiring the employee to arbitrate only their individual claims, the employee still has a right to continue to pursue remedies under California’s Private Attorneys General Act (PAGA), if they are able to win on their individual claims in arbitration.  The California Supreme Court was quick to overturn the U.S. Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana issued last summer, which provided employers with some hope to limit PAGA litigation.  Here are five key issues California employers must understand about the issues in the Uber decision:

1. Quick refresher on the California’s Private Attorneys General Act (“PAGA”).

PAGA was enacted in 2004 to authorize aggrieved employees to file lawsuits against employers on behalf of themselves, other employees, and the State of California for Labor Code violations.  PAGA allows aggrieved employees to act as a “Private Attorneys General” to seek remedies against their employer not only for the violations committed against them, but also to recover any violations committed by their employer against other employees.  The plaintiff’s ability to bring claims on behalf of other employees is referred to as “non-individual claims.”

California’s PAGA was designed by the California Legislature to offer financial incentives to private individuals to enforce state labor laws to recover certain civil penalties. The issue regarding whether employers can implement arbitration agreements with PAGA representative waivers was addressed by the U.S. Supreme Court in June 2022 in Viking River Cruises, Inc. v. Moriana. 

2. U.S. Supreme Court’s Decision in Viking River Cruises, Inc. v. Moriana in June 2022 looked promising for California employers.

In June 2022, the U.S. Supreme Court held in Viking River, that California law (and the prior holding by the California Supreme Court in Iskanian v. CLS Transportation Los Angeles, LLC) “cannot condition the enforceability of an arbitration agreement on the availability of a procedural mechanism that would permit a party to expand the scope of the arbitration by introducing claims that the parties did not jointly agree to arbitrate.” Therefore, the U.S. Supreme Court found that the Federal Arbitration Act preempted California law and permitted employers to implement arbitration agreements that required employees to bring only their individual claims and not PAGA representative (non-individual) claims in arbitration.  The U.S. Supreme Court said that, as it understood PAGA, because the employee had to arbitrate their individual claims, the employee would not be entitled to continue with their non-individual PAGA claims because PAGA did not provide a method for the employee to continue with their non-individual claims on behalf of other employees in court.  Justice Sotomayor’s concurring opinion in Viking stated that “[o]f course, if this Court’s understanding of state law is wrong, California courts, in an appropriate case, will have the last word.”  Jumping on this opening, and only a few weeks after the Viking River decision, the California Supreme Court granted review in Adolph v. Uber Technologies to address this issue. 

3. In Adolph v. Uber, the California Supreme Court rejected the U.S. Supreme Court’s interpretation of PAGA, and held that even through employees may be required to arbitrate their individual claims, they still can potentially continue with a PAGA claim.

In Uber, the California Supreme court reviewed the issue of whether an employee who has been compelled to arbitrate his or her individual claims “maintains statutory standing to pursue non-individual ‘PAGA claims arising out of events involving other employees’ in court.” 

The California Supreme Court explained that in order to have standing to bring a PAGA claim as an “aggrieved employee,” the plaintiff must be “(1) someone who was employed by the alleged violator and (2) someone against whom one or more of the alleged violations was committed.”  The Court explained that this standing requirement is very easy to meet, and as it held in Kim v. Reins International California, Inc., a plaintiff that settled and dismissed his individual claims for damages, still had standing to proceed with his PAGA claims on behalf of other employees.  The Court in Uber continued to explain that PAGA does not require the plaintiff to have an ongoing injury, and that “post-violation events” do not “strip an aggrieved employee of the ability to pursue a PAGA claim…” and went even further in citing Johnson v. Maxim Healthcare Services, Inc., which held that even when a plaintiff’s individual claim may be time-barred as outside of the statute of limitations, this does not prevent the plaintiff from pursuing PAGA remedies. 

4. The Uber decision draws a roadmap for employers in litigating PAGA claims: (1) enforce arbitration agreement, (2) stay the non-individual PAGA claim during arbitration, and (3) a win against the plaintiff in arbitration can prevent the plaintiff from bringing the PAGA claim.

Despite disagreeing with the U.S. Supreme Court’s decision in Viking, the California Supreme Court clarified the roadmap for employers in litigating PAGA cases.  Employers who have arbitration agreements can enforce the agreement, and “the trial court may exercise its discretion to stay the non-individual claims pending the outcome of the arbitration pursuant to section 1281.4 of the Code of Civil Procedure.  Following the arbitrator’s decision, any party may petition the court to confirm or vacate the arbitration award under section 1285 of the Code of Civil Procedure.”  The Court continued to explain that, “If the arbitrator determines that [the plaintiff] is not an aggrieved employee and the court confirms that determination and reduces it to a final judgment, the court would give effect to that finding, and [the plaintiff] could no longer prosecute his non-individual claims due to lack of standing.” 

Even if the employer is not successful in winning on all claims in arbitration, the Uber decision nearly forces every employer to take the case through arbitration for the chance of a complete win, which would bar the employee from continuing in bringing a representative action on behalf of other employees in the PAGA case.  Even if the employer does not achieve a complete win in arbitration, the process will provide key discovery and binding testimony from the plaintiff, will likely expose how individualized resolution of the key issues is, and show how long and complicated a trial could potentially take to resolve issues for all employees across the workforce.  This could open potential arguments that the PAGA representative case has trial manageability issues that the plaintiff cannot overcome. 

5. Next steps for employers after the Uber decision.

Review current arbitration agreements and update terms:  California employers need to review their current arbitration agreements with counsel to ensure that they are (1) enforceable and (2) have the correct language to get the most out of enforcing arbitration of employment claims.  For example, employers should consider adding language the agreement will be enforced under section 1281.4 of the Code of Civil Procedure, whereby the trial court must stay the non-individual claims pending arbitration of the plaintiff’s own individual claims.  Employers should also review whether all or most of their workforce have signed the applicable arbitration agreement and review the agreement in place to see if employees who have worked for the company for a long time need to sign an updated agreement. 

Arbitration agreements are still beneficial for most employers in California:  The holding in Uber does not change the prior rule that employers may have employees waive their ability to bring a class action lawsuit, which still provides a huge benefit to employers.  For example, the applicable statute of limitations in a class action lawsuit can extend back four years, and the statute of limitations in a PAGA case is only one year.  Employers should be able to track which employees have not signed arbitration agreements, have a method of easily obtaining copies of all signed arbitration agreements, and periodically review if their arbitration agreements need to be updated and which employees need to sign the updated versions.  Of course, arbitration agreements are not right for all California employers, but companies should review their issue carefully with experienced employment counsel. 

As employers grow and hire new employees, it is important that employers and their authorized representatives are up to date on various on boarding requirements. One of these requirements come from the U.S. Citizenship and Immigration Services. The Form I-9 is required for all employers who hire employees in the United States. This Friday’s Five provides employers and their authorized representatives with answers to five questions about the Form I-9.

1. What is a Form 1-9?

Form I-9 is a federal requirement to verify the identity and employment authorization for all individuals hired for employment in the United States. This form requires the employee to provide their information and affirm that they are authorized to work in the United States, and the employer to review and verify the documentation provided by the employee. The Form I-9, including instructions, can be found here: https://www.uscis.gov/i-9

2. What are employers’ obligations regarding the Form I-9?

The employer, or authorized representative, should first review Section 1 to ensure that the employee completed it properly. Then, the employer should review the documents from the Lists of Acceptable Documents provided by the employee, in the presence of the employee. The employer should ensure that the document is an unexpired original (a certified copy of a birth certificate is acceptable). The employer should complete the information requested in Section 2 based on the information provided. The individual who physically examined the original document(s) and completed Section 2, must sign their name and attest that, to the best of their knowledge, the employee is authorized to work in the United States, and if the employee presented document(s), the document(s) they examined appear to be genuine and relate to the employee.

 Practice tip: An employer cannot specify which documents the employee can or cannot present from the list. Both California and Federal Law prohibit an employer from discriminating against employees on the basis of their citizenship status, immigration status, or national origin.

3. Do employers need to photocopy the documents presented?

No, unless the employer participates in E-Verify. If the employer chooses to photocopy any documents, then they should do so consistently for all new hires and retain them with the Form I-9. If the employer participates in E-Verify, you must photocopy all U.S. passports, passport cards, Permanent Resident Cards (Form I-551), and Employment Authorization Documents (Form I-766) and retain them with the Form I-9.

4. How to maintain Form I-9’s?

Completed Form I-9’s and any photocopied documents should be maintained together and, in a file, separate from the employee’s personnel file. Employers must retain these documents for three years from the date of hire, or one year after separation of employment. The documents should be maintained in a way that they can be produced within three business days of an inspection request from the Department of Homeland Security, the Department of Justice’s Civil Rights Division, Immigration and Employee Rights Section, or U.S. Department of Labor.

Employers may maintain these documents electronically by scanning and uploading the original and destroying the original. However, if they choose to do so, they must ensure they follow all of the electronic records security requirements outlined here. 

5. What if the employee does not speak English?

If an employee utilizes a preparer and/or a translator to assist them in completing Section 1, they must check the appropriate box at the end of Section 1 and complete the rest of the box, including the name and address of the preparer or translator. If the employee uses more than one preparer and/or translator, they must complete Form I-9 Supplement to list each preparer and/or translator that helped the employee.

I have published this post since 2015 recognizing the Fourth of July (one of my favorite holidays).  Hopefully I’ll be able to keep publishing it for many years to come.  Wishing you a great Fourth, and hope you have some time to put aside your work for a bit and enjoy some time with your family.  Happy Fourth of July!

Five things I’m thankful for this Fourth of July:

1.     For the great risk and sacrifice our Founding Fathers took to establish the country. 

When learning about the Founding Fathers in high school history class I did not have a perspective about the risks the Founders took in establishing the country.  Only now that I have a business, a family, and am relatively successful, can I realize the huge risks the Founders took.  By all means, they were the establishment, the elite of the American society, and if anyone had an interest in preserving the status quo, it was them.  Their sacrifices of life (theirs and their family members) and their fortunes helped build the foundation we benefit from today.

2.     The ability to speak freely and practice or not practice any religion I want.

It is great being able to freely speak your mind and believe in whatever you want.  It is also great be free to practice (or not) any religion you want.  We live in a very tolerant society, and it is even better when the government is not telling you how to live your life.  It is important to remember that throughout history, this is the exception for how a government normally behaves.

3.     Our Country’s ability to attract creative people.

People that like creating things and being productive want to practice their trade where the government will basically leave them alone and provide a good environment to protect their gains derived from their hard effort (see item #5 below).  The U.S. provides this environment, and that is why so many people come to the U.S. to create a business or to practice their trade.  It is also important to recognize how lucky we are to be in the U.S.

4.     My right to practice any profession and access to unlimited resources to learn the required skills.

No one is dictating what students need to be after they graduate high school or college.  Everyone is free to pursue their interest, and the market decides the value of the effort.  With basically any information freely available on the Internet, anyone can learn almost any skill, and like no other time in human history individuals have an almost free method to sell their services or products over the Internet.  In your mid-40’s and want to make a career change?  Perfect, and you don’t even need to go back to school as the information is freely available on the Internet.  Didn’t finish college and are 20 years old with an idea?  Perfect.  Venture capitalists don’t care about your pedigree, they are only interested if you work hard and don’t give up.

5.     Our legal system.

Yes, it sounds trite.  But while I don’t think our legal system is perfect by any means, it is the best system established in the history of mankind.  Everyone living in the U.S. presently is very lucky to have this benefit.  It is a foundation for many of the items I mentioned above.  Because people have a good basis for predicting the outcomes of their actions, such as being able to retain property legally obtained, and knowing if someone breaches a contract there will be repercussions, it creates an environment that attracts hard effort and the best talent from around the world.  This is why the U.S. has been the leader in ideas and new businesses.  However, just because the system is established does not mean our work is done.  We have to be vigilant not to lose the fairness, reasonableness, and lack of corruption in the legal system.

Happy Fourth of July!

It is a common argument by plaintiff’s counsel in wage and hour class actions: The employer’s policy that requires the employee to remain on the company premises during 10-minute rest breaks facially violates California law.  Because the employer has a facially invalid rest break policy, it is a company wide policy that is uniform, and is an issue that should be certified as a class action or entitle the Plaintiff to penalties under the Private Attorneys General Act (PAGA).

However, there are many cases that support the position that an on-premises rest break policy is not facially invalid, and that such a policy, alone, is not sufficient to establish that the employer did not relinquish control as to how the employees spent their rest breaks. The key factor is whether the employer controlled how the employee spent their rest break time, in addition to requiring the employee to remain on premises, such as limiting the employees to stay close to their work area for example. Here are five key cases discussing on-premises rest break policies under California law:

1. Augustus v. ABM Security Services Recognized There Exist Practical Limitations Where an Employee Can Go During a 10-minute Rest Break.

In Augustus v. ABM Security Services (2016), the California Supreme Court held that by requiring employees to remain on call by monitoring a pager during a 10-minute rest break violated California law.  Our prior analysis on Augustus can be read here.  However, the Supreme Court was clear that because the 10-minute rest breaks are only 10-minutes, there are “practical limitations on an employee’s movement.”  The Court continued, “Thus, one would expect that employee will ordinarily have to remain on site or nearby.  This constraint, which is of course common to all rest periods, is not sufficient to establish employer control.”  It was the additional requirement in the Augustus case were the employees had to carry a pager and respond to the employer’s calls during the break that provide the facts for the Supreme Court to hold that the employer violated the 10-minute rest break obligations.

Many Courts have acknowledged the California’s Supreme Court’s holding in Augustus regarding on premises rest breaks.

2. Hubbs v. Big Lots Stores (C.D. Cal., July 11, 2018): A United States District Court for the Central District of California rejected the argument that a policy requiring employees to remain on the premises during the 10-minute rest break reflects the exercise of employer control that qualifies the time as on-duty work. The Court noted that an employer may not require employees to remain “on call” during a ten-minute rest period, Augustus nevertheless recognized that an employer may require an employee to remain “on premises” during such rest periods. The Court stated that Augustus acknowledged that “employers must . . . relinquish any control over how employees spend their break time” and that “compelling employees to remain at the ready, tethered by time and policy to particular locations or communication devices” imposes job-related duties and constitutes employer control because employees are not “free[] to use rest periods for their own purposes.” That requiring employees to remain “on site or nearby” during a ten-minute break was “not sufficient to establish employer control.”  The Court stated that Augustus concluded that these were short breaks, and this restriction was a “practical limitation[] on an employee’s movement” permitted under California law.

3. Schmidtberger v. W. Ref. Retail (C.D. Cal., Sep. 28, 2021): In Schmidtberger the court rejected Plaintiff’s contention that a policy of requiring employees stay on the premises during rest breaks is invalid facially. The Court stated that in Augustus, the California Supreme Court explained that “[b]ecause rest periods are 10 minutes in length . . . one would expect employees will ordinarily have to remain on site or nearby.”  This restriction “which is common to all rest periods, is not sufficient to establish employer control.” The Court also noted that multiple federal courts have implemented a straightforward interpretation of California law established in Augustus, and have dismissed arguments establishing liability on an employer’s policy of prohibiting off-premises rest breaks.

4. Ritenour v. Carrington Mortg. Servs. (C.D. Cal., Sept. 12, 2018): Plaintiffs alleged that the rest break policy was “facially unlawful” under Augustus v. ABM Security Services, Inc., and guidance from the California Division of Labor Standards Enforcement (“DLSE”). After Augustus, the DLSE’s website page of Frequently Asked Questions directly addressed the issue of whether an employer can require an employee to stay on the worksite during a rest period. Citing to Augustus, the DLSE stated, “No, your employer cannot impose any restraints not inherent in the rest period requirement itself.” (See DLSE FAQ #5 here).

The Court held that Plaintiffs failed to show that Defendant’s rest period policy requiring employees to remain on site is facially invalid. The Court held that the policy did not conflict with Augustus and that the California Supreme Court never stated that an employer cannot require an employee to remain on the premises during a rest period. Moreover, the court held that the DLSE’s expansive interpretation of Augustus in a Frequently Asked Questions page is neither binding on nor persuasive to the court. Indeed, the DLSE’s FAQ even notes that “[a]s a practical matter,” when an employee receives a 10-minute rest period, “the employee can only travel five minutes from a work post before heading back to return in time.”

5. Bowen v. Target Corp. (C.D. Cal., Mar. 27, 2020):  The Court assessed whether Plaintiffs could state a viable claim based on an “on-premises rest period theory” — the theory that employers who force their employees to remain on-premises for the duration of a rest period effectively fail to provide a rest period at all.  In concluding that Plaintiffs had failed to state a claim, the Court observed that a “rest period” was defined in the Wage Order as “time during which an employee is relieved from all work-related duties and free from employer control.” After the Court defined rest periods, it turned to the California Supreme Court’s opinion in Augustus v. ABM Sec. Servs. to determine whether an on-premises rest period policy constituted sufficient “employer control” to deprive employees of a rest period. Focusing on language in Augustus that practical and temporal constraints common to all rest periods meant that “employees will ordinarily have to remain on site or nearby” and that “this constraint… is not sufficient to establish employer control,” the Court held that Target’s alleged on-premises rest period policy did not constitute sufficient “employer control” to deprive employees of a rest period. As a result, the Court dismissed Plaintiffs’ claims to the extent they relied on an on-premises rest period theory.

While there is case law supporting on-premises rest breaks, this type of policy is routinely challenged by plaintiffs in California, and employers need to review these types of policies with employment counsel.  This issue is a good example on how a simple sentence in an employee handbook could potentially create huge amounts of liability for the employer. 

As we enter the summer and employees looking to take time off during the upcoming summer holidays, it is a good time to review employer’s obligations to accommodate requests for time off for holidays and best pay practices during holidays.  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 closes 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 on case-by-case basis depending 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 pays for time off during holidays, the employer does not have to allow employees to accrue holiday paid time off.

If an employer pays for time off during certain holidays and 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 forth that this benefit does not accrue to employees and that they must be employed during the specific holidays to receive the holiday pay.  Often employers will also require employees to work 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 day.  The DLSE’s website sets forth this requirement, and other considerations, regarding the timing obligations for payroll.  The holidays listed in the Government Code section 6700 are as follows:

  • Every Sunday
  • January 1 — New Year’s Day
  • Third Monday in January — Martin Luther King Jr. Day
  • Second new moon following the winter solstice – Lunar New Year
  • February 12 — Lincoln’s Birthday
  • Third Monday in February — Washington’s Birthday
  • March 31 — Cesar Chaves Day
  • Good Friday from 12 noon to 3 p.m.
  • Last Monday in May — Memorial Day
  • June 19 —  Juneteenth
  • July 4 — Independence Day
  • First Monday in September — Labor Day
  • September 9 — Admission Day
  • Fourth Friday in September — Native American Day
  • Second Monday in October — Columbus Day
  • November 11 — Veterans Day
  • Fourth Thursday in November — Thanksgiving
  • December 25 — Christmas
  • Other days appointed by the governor for a public fast, thanksgiving or holiday

Wishing all of our readers a great summer!

By Pooja Patel and Anthony Zaller

A new proposed law, AB 1228, called the Fast Food Franchisor Responsibility Act, that targets the franchise business model is making its way through California’s legislature.  At first glance, the Fast Food Franchisor Responsibility Act seems to benefit franchisees – it requires franchisors to take responsibility for complying with employment laws and share the liability of violations with franchisees. However, a deeper review reveals that this Act is not that straightforward.   

1. How did the Fast Food Franchisor Responsibility Act come about?

    After multiple amendments, Governor Newson signed the Fast Food Accountability and Standards Recovery Act (“FAST Recovery Act”) (AB 257) into law in September 2022. The FAST Recovery Act was supposed to go into effect on January 1, 2023, and create a 10-member Council whose purpose is to establish minimum standards on wages, working hours, and other working conditions. Notably, the Council would have the power to raise the minimum wage of fast food employees up to $22 per hour in 2023 and by up to 3.5 percent annually after that. However, a Sacramento Superior Court Judge granted a preliminary injunction preventing the FAST Recovery Act from going into effect. As a result, the FAST Recovery Act will now be on the 2024 ballot for voters to approve or deny.  

    One of the key amendments to the FAST Recovery Act, was the removal of the provision which imposed joint employer liability on a fast food franchisor for the employment violations of the fast food franchisee. This previously withdrawn provision is precisely what is proposed by the Fast Food Franchisor Responsibility Act.  

    2. What does this have to do with the Fast Food Franchisor Responsibility Act?

    The main component of the Fast Food Franchisor Responsibility Act would require fast food franchisors to share in civil legal responsibility and liability for the franchisee’s violations. An employee, or former employee, would be able to bring an administrative charge or civil lawsuit against not only the franchisee, but also the franchisor for violation of various employment laws, including:  

    • Unfair Competition Law; 
    • The Fair Housing and Employment Act; 
    • California Labor Code provisions regarding working conditions, hours worked, payment of wages, immigration status;  
    • CalOSHA rules; 
    • Private Attorneys General Act (PAGA);
    • Emergency and executive orders issued by the Government regarding employment standards, worker health and safety, or public health and safety; and  
    • Orders issued by a county or municipality regarding employment standards, worker health and safety, or public health and safety. 

    3. Contracts by franchisor and franchisee to indemnify each other are void under the bill.

    A franchisor and franchisee cannot contract around this provision: an agreement by the franchisee to indemnify the franchisor for liability under this section would be against public policy and be considered void and unenforceable.  

    4. The bill provides limited rights to franchisors and franchisees.

    Prior to filing any civil action, the employee must give notice to the franchisor of the alleged violation(s). If after 30 days, the violation(s) are not corrected, the employee may continue with their civil lawsuit. However, the franchisor can make a written request for additional time, for up to 60 days, to complete their investigation. If the franchisor corrects the violation within the time period, then the franchisor will not be liable under a civil action.  

    Additionally, the Fast Food Franchisor Responsibility Act creates a right of action against the franchisor by the franchisee: if the franchisor prevents or creates a substantial barrier in the franchisee’s compliance of these regulations, then the franchisee may file an action against the franchisor for monetary or injunctive relief.  

    5. AB 1288’s future and potential impact on California fast food businesses.

    AB 1288 was approved by the California Assembly on May 31, 2023, and is now being reviewed by the state Senate.  Although the Fast Food Franchisor Responsibility Act still needs to be approved by the Senate, its ramifications are significant and California employers need to understand the implications of the law if passed. Fast Food Franchisor Responsibility Act places the franchisor in a de facto employer relationship with the franchisee by imposing liability for the actions of the franchisee on the franchisor. If passed, the Fast Food Franchisor Responsibility Act would likely force franchisors to play a larger role in the day to day management of fast food restaurants, and take decision-making authority away from franchises. This could significantly impact franchisees autonomy and ability to conduct business independently. Finally, the bill would likely drive the fast food franchise model out of California due to the increased liability for franchisors. 

    California employers need to review their practices and policies to ensure compliance with the various local minimum wage increases taking effect across California on July 1, 2023.  Here are five items employers should consider prior to the July 1 deadline:

    1. Ensure the company understands which city and county they are located within.

    Many cities and counties provide resources to help companies determine which city or county’s jurisdiction they are located within. For example, the City of Los Angeles provides this resource.

    2. Ensure employees who travel and work in other cities and counties are paid the appropriate minimum wage.

    Many of the local ordinances that require a higher minimum wage than the state minimum wage specifically state when that city or county law will cover an employee who works within that jurisdiction.  For example, Santa Monica and the City of Los Angeles assert jurisdiction over employees who work within their jurisdiction for a minimum of two hours a week:

    • Santa Monica:  Law applies to any employee working a minimum of two hours within Santa Monica in a given week (even if employer is located outside of Santa Monica).
    • City of Los Angeles: Ordinance applies to “[a]n employee … who performs at least two hours of work in a particular week within the City of Los Angeles….”

    Employers should review the various jurisdictions that their employees may travel into to ensure compliance with those requirements.

    3.Ensure pay stubs reflect the increased minimum wage (as well as all other requirements).

    The DIR provides an example of a pay stub for an hourly employee the meets all of the required items under Labor Code section 226:

    Ensure that all employees earning minimum wage who are covered by a local minimum wage increase on July 1, 2023 are updated to reflect the increased minimum wage.

    4. Update posters to ensure the compliant posters are being used in the workplace.

    Many local cities and counties have issued updated posters to reflect the increased minimum wage as of July 1, 2023.  Employers should review to ensure they are using the most current versions of the posters as of July 1, 2023.  Here are a few links to city and county posters in Southern California:

    County of Los Angeles:

    The County of Los Angeles’s minimum wage is increasing to $16.90 per hour on July 1, 2023.  The County’s required notices can be found here:

    City of Los Angeles:

    The City of Los Angeles’s minimum wage is increasing to $16.78 per hour on July 1, 2023.  The City of Los Angeles’s required notices can be found here:

    Pasadena:

    Pasadena’s minimum wage is increasing to $16.93 per hour on July 1, 2023. 

    Santa Monica:

    Santa Monica’s minimum wage is increasing to $16.90 per hour on July 1, 2023. 

    • July 1, 2023 Legal notice (English) (Spanish) (note that employers in Santa Monica are required to post both English and Spanish notices, even if they do not employ any Spanish speaking employees)
    • Posters in other languages can be downloaded here

    Malibu:

    Malibu’s minimum wage is increasing to $16.90 per hour on July 1, 2023.  As of June 2, 2023, Malibu has not issued an updated minimum wage poster, but the City has stated the updated poster will be available at this link prior to July 1, 2023:

    City of San Diego:

    The City of San Diego’s minimum wage in adjusted on January 1 of each year, so there will be no increase for the City’s minimum wage on July 1, 2023.  However, it is important to review the City’s poster requirements:

    5. Update notices to employee who are hired on or after July 1, 2023.

    Notices to Employee required under Labor Code section 2810.5 must be issued to all nonexempt employees when they start work.  The wage information section must reflect the higher minimum wage for minimum wage workers as of July 1, 2023.  Accordingly, the overtime rates of pay section of the Notice must also be updated to reflect the higher rates as a result of the higher minimum wage requirements.