Search record meal breaks

Quick Story:
An HR lead recently ran a simple 30-minute spot audit and uncovered two issues—meal breaks were routinely starting late at one location, and a manager at another location was unsure whether employees needed to record 10-minute rest breaks. Small corrections, but they prevented what could have escalated into a costly PAGA claim, potentially putting millions of dollars at risk in litigation.

If you haven’t pressure-tested your 2025 payroll yet, here’s a fast, focused audit you can run this week:

Your 30-Minute Payroll Spot Audit

1. Meal/Rest Timing Sweep (10 min)
Pull a week of timecards. Run a quick check and at least confirm that meal periods start no later than the end of the 5th hour. Flag any late, short, or missed breaks.
Resource for more information: Five Compliance Reminders on Meal and Rest Breaks

2. Premium Pay Check (5 min)
For each non-compliant meal or rest break, make sure a premium payment is made to the employee and that it is recorded properly on their wage statement.
Resource for more information: Five Reasons Employers Consider Voluntarily Making Premium Payments

3. Expense Reimbursements (5 min)
Spot-check mileage logs and mobile stipends. Anyone using personal phones or vehicles for work should have proper reimbursements.
Resource for more information on personal cell phones: Five Lessons from Cochran v. Schwan’s Home Services

Resource for more information on mileage reimbursement: Mileage Reimbursement Considerations

4. Wage Statement Scan (5 min)
Review paystubs for required details: gross/net wages, legal entity name, total hours and rates, overtime, and other required information under Labor Code section 226.
Resource for more information: Wage Statements: Five Issues Employers Need to Review on a Regular Basis

5. Document the Fix (5 min)
Write down what you reviewed, what you found, and what you corrected. Even a brief note in Excel or your payroll system is enough to show good faith. This log matters for demonstrating “reasonable steps” if a PAGA claim ever comes your way.

Bottom Line

Thirty minutes this week could save you from a million-dollar headache next year. Don’t wait for a claim to force your audit—get ahead now.

The recent California Court of Appeal decision in Allison v. Dignity Health (June 24, 2025), involving claims over meal and rest breaks, is a reminder that class certification in wage and hour cases is not the end of the story. Even after a class is certified, it can still be decertified if evidence shows that individual issues outweigh common ones. Here are five lessons California employers should take from this important case.

1. Class Certification Is Not Set in Stone

In Allison, two registered nurses sued Dignity Health alleging missed meal and rest breaks, unpaid work time, and related claims. The trial court initially certified the class based largely on time records and a survey showing a high rate of meal-period noncompliance.

But after 19 months of discovery, the employer successfully moved to decertify the class. The Court of Appeal affirmed the decertification, showing that certification can be revisited—and reversed—if new evidence reveals that common proof won’t work for the whole group.

2. Post-Certification Discovery Can Change the Case

What led to decertification? Discovery revealed significant variations in employee experiences:

  • Some nurses voluntarily skipped or shortened breaks.
  • Timesheet entries were inconsistent and sometimes inaccurate.
  • Many employees testified that they were able to take compliant breaks.

These differences meant that the court would have to assess individual reasons for missed breaks—making a class action unmanageable. Employers should understand that thorough discovery can uncover facts that undermine the “commonality” element required for class claims.

3. Time Records Alone Are Not Enough

The plaintiffs relied heavily on time records and an expert survey to prove widespread violations. The Court of Appeal emphasized that these data sources were not conclusive:

  • Time entries can reflect voluntary choices rather than employer-caused violations.
  • Statistical surveys can be challenged for accuracy, methodology, and reliability.

The Court explained: “In Donohue, the Supreme Court held that a rebuttable presumption of liability arises when an employer’s time records show employees suffered noncompliant meal periods…. [But] it does not result in ‘automatic liability’ for employers.”

4. Employee Declarations Can Make or Break the Case

The court emphasized that testimony from employees themselves could rebut the presumption of liability. As the opinion explained:

“None of plaintiffs’ authorities bar the use of anecdotal testimony to rebut the presumption of liability….Pointing to class members’ conflicting deposition testimony, Dignity argued ‘class member testimony show[ed] wide variation of relevant experiences’ regarding meal period compliance and premium requests. For example, one RN testified that she ‘sometimes chose not to request premiums’; another testified he may have clocked in early from lunch on occasion because he ‘lost track of time’; and another RN stated she did not take a meal period on days when she wanted to go home sooner. In sum, Dignity argued ‘[n]early all of [the deponents] agreed their records were not entirely reliable indicators of when breaks were missed, late, or short because they sometimes chose to skip, shorten, or delay a meal period, or because they simply made mistakes.’”

5. The Decision Affirms Employer’s Defenses to Class Certification and Offers Guidance for PAGA Cases

The Allison decision confirms that employers can—and should—seek decertification when discovery shows that individual issues predominate. This is particularly relevant in:

  • Industries with variable work patterns (healthcare, hospitality, retail, etc.),
  • Cases relying heavily on time records without context,
  • Situations where employee choice plays a role in break practices.

While Allison itself was not a PAGA case, its reasoning also provides a roadmap for employers facing PAGA claims, since courts are increasingly scrutinizing manageability when individualized issues predominate.  By proactively documenting break compliance, training supervisors, and preserving favorable employee testimony, employers can create the evidence needed to challenge certification.

Final Thoughts

Allison v. Dignity Health is a timely reminder that wage and hour class actions cannot simply be determined based on a review of time records.  Courts will look closely at whether the plaintiff’s theory can truly be proven with common evidence—or if individual differences make a class unmanageable.

For California employers, the takeaway is clear: invest in compliance now, ensure accurate employment policies, train supervisors on wage and hour compliance, and don’t hesitate to revisit class certification if the facts support it. Allison also underscores the value of conducting robust discovery and developing evidence that highlights employee choice and variation — tools that can be decisive in defeating class certification.

As we move deeper into 2025, it’s the perfect time for California employers to return to the fundamentals. With ever-evolving employment laws and aggressive enforcement—especially around wage and hour issues—getting the basics right can mean the difference between smooth operations and costly litigation.

As a preview to our upcoming webinar, “Wage and Hour Back to Basics for California Employers?”—a practical, no-nonsense session covering the most critical issues employers face in 2025, this article is focusing on five common wage an hour issues California employers should routinely audit. Please join us for a deeper dive into these and other key wage and hour issues for California employers, plus all attendees receive a 2025 PAGA Compliance Certificate.  Register for the webinar here. 

Whether you’re scaling a team or managing a legacy workforce, use this as a checklist to stay compliant and protect your business.

1. Payroll Compliance: The Foundation

Payroll isn’t just about issuing paychecks on time. Employers must ensure their systems and practices comply with California’s detailed legal requirements:

  • Established Workweeks and Paydays: Are your workweeks clearly defined and paydays consistently scheduled within required timelines?
  • Wage Statements: Do your itemized wage statements meet all statutory requirements? Common issues include missing hours worked, incorrect rates, or omitting the employer’s name and address.
  • Sick Leave Accruals: Each pay period must include an update on accrued and used paid sick leave as required under California law and may local city and county jurisdictions throughout California. 
  • Vacation Tracking: Ensure vacation policies are documented, accurately tracked, and accrued benefits are reflected properly.

2. Wages and Deductions: Avoiding Costly Errors

Missteps in deductions or reimbursements can lead to major penalties.

  • Permitted Deductions: Only a narrow list of deductions is allowed under California law. Err on the side of caution and consult counsel before withholding anything beyond taxes and benefits.
  • Expense Reimbursement: Are employees reimbursed for work-related expenses such as uniforms, personal cell phone use, mileage, and tools?
  • Final Paychecks: For terminations, final pay must include all wages and accrued vacation, and must be provided according to the requirements under California law.

3. Employee Classification: Exempt vs. Nonexempt (and Contractors)

Improper classification continues to be a top litigation trigger.

  • Exempt Status Review: Ensure duties and salaries meet California’s specific tests for exempt employees. Titles alone don’t determine exemption.
  • Independent Contractors: Use caution post-AB 5. Apply the ABC test to confirm true independent contractor status.

4. Timekeeping: Precision Prevents Problems

Timekeeping issues are among the most frequently litigated wage and hour claims.

  • Overtime Tracking: Ensure nonexempt employees are paid correctly for all overtime, and that policies prohibit unauthorized off-the-clock work.
  • Training Managers: Managers should know how to identify and prevent off-the-clock work—and understand the consequences of ignoring violations.
  • Time Rounding: If rounding is used, the policy must be neutral and not result in underpayment over time.  Employers should note that meal breaks cannot be rounded pursuant to Donohue v. AMN Services, and whether California employers may use time rounding at all is currently being reviewed by the California Supreme Court. Employers are cautioned about using time rounding given these cases.

5. Meal and Rest Breaks: Small Breaks, Big Liability

Meal and rest break violations are usually a key claim for PAGA and class action lawsuits.

  • Handbook and Reminders: Policies must be clearly documented and regularly communicated to employees.
  • Timely Breaks and Premium Pay: Breaks must be timely, and any missed meal or rest periods must be compensated with premium pay (and properly noted on wage statements).
  • Recordkeeping and Training: Are employees recording their meal breaks? Are managers trained to monitor compliance and escalate issues?

Final Thought: Routine Audits Are a Must

Employment laws don’t stand still—and neither should your compliance practices. Schedule a semiannual audit or partner with employment counsel to review these core areas. A proactive approach in 2025 will reduce risk, improve operations, and reinforce your commitment to treating employees fairly.

The first 90 days of employment are more than just an adjustment period—they’re a critical window to engage new hires, reduce turnover, and avoid legal risks. For California employers, where employment laws are especially protective of workers, effective onboarding is both a best practice and a compliance must.

Here are the top five things every California employer should focus on during the onboarding process:

1. Make a Strong First Impression—And Keep It Going

Many employees decide in the first weeks whether they’ll stay long term. Start with a warm welcome, clear orientation, and a structured 30-60-90 day plan. Don’t just hand over paperwork and leave them to figure things out—regular check-ins and mentorship help new hires feel supported and connected.

Stat: Organizations with strong onboarding improve new hire retention by 82% and productivity by 70%.

2. Be Clear on Policies—and California Compliance

California has unique onboarding requirements. Make sure new hires receive the required documents, such as:

Being transparent early helps prevent misunderstandings—and lawsuits—later.

3. Set Cultural Expectations and Build Connection

Culture matters. Use the onboarding process to communicate your mission, values, and behavioral expectations. Include the employee in team lunches, assign a “buddy,” and encourage relationship-building across departments. When employees feel like part of the team, they’re more likely to stay—and less likely to sue.

Stat: Employees who felt onboarded effectively were 18x more likely to feel committed to their employer.

4. Train Early and Often

Don’t let onboarding be a one-day event. Break training into manageable stages. Teach job-specific tasks, workplace safety, and compliance expectations. In restaurants and fast-paced industries, shadowing, checklists, and gradual independence help new employees thrive.

Tip: Use a 30-60-90 day plan to build skills, monitor progress, and reduce overwhelm.

5. Document Everything

Good documentation protects your business. Keep records of all signed policies, training completions, and performance check-ins. If a termination becomes necessary, documented onboarding efforts and feedback provide helpful evidence against wrongful termination or retaliation claims.

Final Thought:

In California’s legal landscape, strong onboarding is not just smart—it’s essential. By investing in a clear, structured, and supportive onboarding experience, you boost retention, limit risk, and help new hires become successful, long-term contributors to your team.

Need help reviewing or building your onboarding process? Contact our team for a compliance check-up and customized support.

California’s 2024 reform to the Private Attorneys General Act (PAGA) was intended to ease the burden on employers—but only for those who can demonstrate a real, documented effort to comply with wage and hour laws.

Under the revised law, employers now face reduced penalties if they take proactive steps to comply:

  • 15% of the applicable penalties if the employer took reasonable steps to comply before receiving a PAGA notice or a request for employment records
  • 30% of the applicable penalties if the employer took reasonable steps to comply within 60 days after receiving a PAGA notice

In both cases, the key phrase is “reasonable steps to comply”—and that’s where a PAGA audit comes in.

A thorough internal review, supported by legal counsel if needed, helps employers identify and correct compliance issues before they result in a claim. And if a claim does arise, an audit report and supporting documentation may help reduce penalties and demonstrate good faith.

Our law firm’s PAGA Compliance Audit and Certification Program focuses on many aspects of compliance, and here are five key areas most California employer should evaluate as part of their compliance strategy:

1. Payroll and Timekeeping Practices

PAGA claims frequently target wage-related issues, especially rounding practices, inaccurate time records, or missed overtime. Employers should evaluate:

  • Whether time rounding practices comply with recent court decisions
  • Accuracy of timekeeping systems, especially for remote or mobile workers
  • Proper payment of all hours worked, including split shifts and reporting time pay

A payroll audit can reveal small technical issues that, when repeated across a workforce, lead to significant penalties.

2. Meal and Rest Break Compliance

Missed, short, or late breaks remain one of the most common sources of PAGA exposure. Employers must ensure:

  • Breaks are provided within the legally required windows
  • Premium pay is issued when breaks are not compliant
  • Policies match actual practice, and managers are properly trained

Even minor inconsistencies in this area can add up quickly in class and representative actions.

3. Wage Statement Accuracy

Labor Code section 226 violations are especially dangerous under PAGA because even small formatting or data errors can result in significant penalties. A compliance check should include:

  • Verifying that wage statements list all required items under Labor Code section 226
  • Ensuring that deductions and net pay are clearly and correctly listed
  • Confirming statements are issued in a timely and accessible format

A detailed review can help avoid “gotcha” claims over technical defects.

4. Employee Handbooks, Policies, and Manager Training

Written policies set the tone for compliance—but only if they’re current and enforceable. Employers should audit:

  • Whether policies reflect updated laws, including those from the 2024 legislative session
  • Consistency between the handbook and actual day-to-day operations
  • Manager training about the policies and procedures, and how to implement these in operations legally

Legal review of policies can also strengthen defenses if a claim arises.

5. Termination and Final Pay Procedures

Final pay violations—whether due to late checks, unpaid vacation, or other unpaid wages—can trigger penalties under multiple Labor Code sections. Employers should assess:

  • Timing and accuracy of final pay for both voluntary and involuntary separations
  • Documentation of final wages, including bonuses and unused PTO
  • Whether the process is clearly outlined and followed consistently across locations

An audit of exit procedures can prevent common errors that spark litigation.

Moving Toward Certification

Employers who take the extra step to correct issues identified during a PAGA audit can demonstrate a strong, documented commitment to compliance. Programs like the Zaller Law Group’s PAGA Compliance Audit and Certification not only help identify risks but also provide a certificate of compliance that may serve as a powerful tool in resolving or defending against PAGA claims.

While certification does not immunize a business from lawsuits, it can:

  • Show reasonable steps in court or settlement discussions and cap penalties
  • Support negotiations with plaintiffs’ attorneys
  • Prevent litigation before it arises

Final Thought

With PAGA reform shifting some control back to employers, now is the time to take advantage of the opportunity. Conducting a thorough PAGA audit isn’t just about checking boxes—it’s about building a culture of compliance and reducing risk across the board.

Employers of any size are vulnerable to PAGA claims, but the potential liability really starts to add up for employers with 20 or more non-exempt employees—especially in hospitality, retail, healthcare, and logistics—should consider a proactive review.

As a business owner in California, you wear many hats—manager, strategist, and sometimes even janitor. But when it comes to managing employees, the Golden State’s complex employment laws can turn what seems like a simple task into a legal minefield. While small businesses often handle human resources tasks in-house, there comes a point when hiring a dedicated HR professional isn’t just a luxury—it’s a necessity. Here’s a guide to help you decide when it’s time to bring an HR expert on board.

1. Your Employee Count Hits 50 (or Approaches It)

In California, the magic number for many employment law thresholds is 50 employees. Once you reach this size, you’re subject to laws like the federal Family and Medical Leave Act (FMLA) (remember, the California counterpart, the California Family Rights Act (CFRA), applies to employers with five or more employees) which require you to provide eligible employees with up to 12 weeks of unpaid, job-protected leave. Managing compliance—tracking eligibility, handling requests, and ensuring proper documentation—can quickly overwhelm a business owner or untrained staff.

Even before you hit 50 employees, California imposes rules that smaller businesses must follow, such as the CFRA and mandatory sexual harassment prevention training for employers with five or more employees (including temporary or seasonal workers). An HR professional can streamline compliance and reduce your risk of costly mistakes.

2. You’re Struggling to Keep Up with California’s Employment Laws

California is notorious for its employee-friendly regulations, which are constantly evolving. From the Fair Employment and Housing Act (FEHA) protecting against discrimination to the ever-changing minimum wage laws (currently $16.50 per hour statewide as of 2025, with higher rates in many cities and counties), staying compliant is a full-time job. Add in paid sick leave mandates, meal and rest break requirements, and the intricacies of overtime rules, and it’s easy to see why DIY HR might not cut it anymore.

An HR professional brings expertise in navigating these laws, ensuring your policies—like employee handbooks, payroll practices, and termination procedures—meet legal standards. They can also keep you updated on new legislation, such as recent expansions to paid family leave or changes in independent contractor classifications under AB 5.

3. Employee Issues Are Eating Up Your Time

Are you spending more time resolving workplace disputes, drafting job descriptions, or figuring out how to handle a worker’s accommodation request than running your business? As your workforce grows, so do HR demands. Issues like complaints about harassment, requests for disability accommodations under the Americans with Disabilities Act (ADA) and FEHA, or even basic onboarding tasks can become overwhelming.

An HR professional takes these responsibilities off your plate. They can mediate conflicts, ensure accommodations are handled legally, and create efficient systems for hiring, training, and performance reviews—freeing you to focus on growth.

4. You’ve Had a Close Call (or a Lawsuit)

California employees have a low bar for filing claims with the Department of Fair Employment and Housing (DFEH) or the Labor Commissioner’s Office. A missed paycheck, an improperly classified exempt employee, or a failure to provide lactation breaks can snowball into fines, penalties, or litigation. If you’ve already faced a wage-and-hour violation, a discrimination complaint, or even a warning from a disgruntled worker, it’s a sign your HR processes need professional attention.

An HR expert can audit your practices, spot vulnerabilities, and implement safeguards—like proper record-keeping for hours worked or training supervisors on anti-discrimination policies—to prevent future headaches.

5. You’re Planning to Scale


Growth is exciting, but it amplifies HR complexity. Expanding your team, opening new locations, or hiring remote workers across California (or beyond) introduces challenges like multi-jurisdictional compliance, benefits administration, and consistent company culture. An HR professional can design scalable systems, from recruiting strategies to benefits packages.

What If You’re Not Ready for a Full-Time HR Hire?

For smaller businesses—say, those with 10 to 20 employees—hiring a full-time HR professional might feel premature. In that case, consider alternatives:

  • HR Consultant: Bring in an expert on a project basis to update policies or train staff.
  • Outsourced HR Services: Many firms offer affordable packages tailored to California businesses.
  • Of course – my favorite: Legal Counsel: Pairing with an employment attorney can bridge the gap until you’re ready for an in-house hire.

The Bottom Line

There’s no one-size-fits-all answer to when you need an HR professional, but a good rule of thumb is this: If employee management is distracting you from your core business, exposing you to legal risks, or becoming too complex to handle alone, it’s time to invest in HR expertise. In California’s regulatory landscape, a skilled HR professional isn’t just a support role—they’re a strategic partner in protecting your business and fostering a thriving workplace.

I am attending VeeCon this week, which is taking place in Los Angeles from August 9 – 11.  VeeCon, the idea of Gary Vaynerchuk, is described as a conference that is a mix between Davos and South by Southwest. Today, a panel discussion titled “Is It Time For Another Look at Blockchain?”  The panel discussed how the blockchain can be used by brands to engage their community of customers through Web3 technologies.  The employment lawyer in me started thinking about whether it would be legal for employers to pay employees in cryptocurrency.  While the interest and attention on the blockchain, web3, and cryptocurrencies has waned over the last couple of years, I’m still bullish on the technology and believe it will be impacting employers in the next couple of year.s Here are five issues employers should understand about cryptocurrencies and the blockchain, and how it will likely impact the employment setting in the next few years:

1. What is a cryptocurrency and the blockchain?

Cryptocurrencies, such as Ethereum and Bitcoin, are virtual currencies that exits on the blockchain.  A blockchain is a type of database, but by using blockchain technology it is much more secure than a standard database and allows many different people to access and record transactions at the same time.  At the time of publishing this article, Bitcoin and Ethereum are the two largest cryptocurrencies (“crypto”) by market capitalization.  More information about cryptos can be read here.  A very detailed explanation about cryptos and how blockchains work can be read here.

2. Can employers pay wages in forms other than U.S. currency, such as in Bitcoin or Ethereum?

Paying employees in crypto could be used to attract talent or make payments to employees located around the world easier for a multinational company.  But would it be legal?  Under federal law, the Federal Labor Standards Act (“FLSA”) mandates “payments of the prescribed wages, including [minimum wage and] overtime compensation, in cash or negotiable instrument payable at par.” 29 CFR § 531.27(a).  Presumably, one could make the case that a payment to an employee in crypto would be a payment “at par” as long as the conversion rate was equal to the applicable minimum wage rate or other required salary amounts to meet the definition of an exempt employee.  Indeed, the Department of Labor has stated in the past that employers could combine the value of U.S. Dollars and foreign currency “in order to satisfy the minimum salary requirement for the application of the Fair Labor Standards Act (FLSA) executive, administrative, and professional exemption.”  If crypto is accepted as a valid currency, it seems reasonable that crypto should be treated similarly to foreign currencies in this regard.

Under California law, Labor Code section 200(a) defines wages as “all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation.” There is no specification that wages must only be paid in U.S. Dollars.  California courts have also held that wages are “not only the periodic monetary earnings of the employee but also the other benefits to which he is entitled as a part of his compensation.” Wise v. Southern Pacific Co. (1970).  Wages can include money, room, board, clothing, vacation pay (a form of deferred compensation) and sick pay.

California Labor Code section 212 also prohibits employers from paying employees in “script, coupon, cards, or other thing redeemable, in merchandise or purporting to be payable or redeemable otherwise than in money.”  This section was designed to make it illegal for employers to pay employees with a coupon that was only redeemable at the “company store”, a past practice documented in the song “Sixteen Tons” written by Merle Travis.

A California court explained, “The accepted purpose of Labor Code section 212 is to prevent employers from paying wages by giving orders … payable only in goods, or orders of an indefinite nature not payable on demand, but at some future time, or paychecks which cannot be honored because of the drawee’s insufficient funds.”  Brown v. Superior Court (2011).  However, since cryptocurrency is a form of “money,” and Labor Code section 212 does not specifically require U.S. currency, there is an argument that section 212 does not prohibit payment of wages in cryptocurrency.  As set forth above, “wages” under California Labor Code section 200 can take many forms, not just fiat currency.

Until there is further guidance on this issue under the FLSA and California law, employers who are looking to pay employees in crypto could take a hybrid approach.  The employer could avoid many of these foundational issues by paying the employee minimum wage or the required salary needed to meet an exemption in U.S. Dollars, and then offer the employee additional payment in crypto.  While employers considering this type of hybrid approach would still need to be careful not to run afoul various federal, state, and local regulations, the approach would remove some of the more fundamental issues that the legal system will need time to develop regulations to catch up to the technology.

3. California’s additional restrictions on forms of wages.

Employers considering paying employees in crypto would also need to navigate other areas of the California Labor Code.  For example, Labor Code section 212 California requires that wages must be payable without discount.  Therefore, any transaction fees that an employee must pay to redeem or access the cryptocurrency would violate this provision.  Moreover, Labor Code section 212 requires payments by “order, check, draft, note, memorandum, or other acknowledgement of indebtedness” to show the name and address of an establishment within California where the instrument can be redeemed.  Since crypto is virtual, it is an open question regarding how this requirement would apply to payments made to employees.  It also raises the potential argument that since crypto currency is not “negotiable and payable in cash, on demand…at some established place of business in the state,” it is not a valid form of “money” to make payments to employees.  On the other hand, it could be argued that crypto is redeemable anywhere in California with an internet connection, and an employee can “cash” their crypto into their bank account almost instantaneously.

4. Value fluctuation issues.

With the volatility of cryptocurrency, there could also be potential issues regarding the value of the cryptocurrency in terms of when it is paid to employees.  Given the volatility of crypto, there could be wide valuation fluctuations even from the end of the payroll period to the time that the employee receives the payment.  There would also be potential calculation issues regarding the appropriate conversion rate employers would need to make if an employee was owed past unpaid wages, or premium wages for missed meal or rest breaks.  What if the crypto currency increased in value over 500% since the time it is determined that an employee was owed a premium wage for a missed meal break?  Could the employer pay the employee the value of the crypto at the time the missed meal break occurred, or would the employer need to pay the current increased value of the crypto?

5. Future potential of the blockchain in the employment setting.

Beyond cryptocurrency, the blockchain technology will likely become a part of everyday life and will have many applications in the employment context.  Since a blockchain is like a database that can store private information, the blockchain could be used by employees to prove educational history, work history, and the attainment of certain certifications.  In 2017, Massachusetts Institute of Technology has issued students virtual diplomas recorded on the blockchain, that the students can securely share with whomever they choose.  Likewise, employers could utilize the technology to issue titles, internal certifications, and record dates of employment to create a digital record that employees could chose to share the information with when searching for another job or verifying salary for a loan.

The recent surge in Private Attorneys General Act (PAGA) lawsuits and the amounts of damages sought in these cases in California has become a significant cause for concern among the business community. This legislation, initially designed to empower employees to file lawsuits for labor code violations on behalf of themselves and other workers, has seen a dramatic increase in its application. This uptick has not only heightened the legal and financial pressures on companies across various industries but also raised questions about the broader implications for the state’s business environment. The California Supreme Court recently heard oral arguments in Estrada v. Royalty Carpet Mills, Inc., regarding whether a trial court has discretion to limit PAGA cases that are unmanageable.  This article reviews the split in California Appellate courts on this issue, and how the case could impact the potential future of PAGA litigation in California.

1. Background of PAGA

PAGA was enacted in 2004 to authorize aggrieved employees to file lawsuits against employers on behalf of themselves, other employees, and on behalf of 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 statute was intended “to punish and deter employer practices that violate the rights of numerous employees under the Labor Code.” Iskanian v. CLS Transportation Los Angeles, LLC (2014).   The plaintiff’s ability to bring claims on behalf of other employees is referred to as “non-individual claims.” PAGA is “simply a procedural statute allowing an aggrieved employee to recover civil penalties … that otherwise would be sought by state labor law enforcement agencies.” Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court (2009).

2. Supreme Court issue being reviewed in Estrada v. Royalty Carpet Mills, Inc.

Do trial courts have inherent authority to ensure that claims under the Private Attorneys General Act (Lab. Code, § 2698 et seq.) will be manageable at trial, and to strike or narrow such claims if they cannot be managed?

The parties had oral argument before the California Supreme Court on November 8, 2023.  Therefore, a decision should be expected at any time.  This decision will resolve a split in authority between two cases: Wesson v. Staples of the Offices Superstore, LLC and Estrada v. Royalty Carpet Mills, Inc.

3. Wesson v. Staples of the Offices Superstore, LLC – Holding that trial courts have authority to deem PAGA cases are unmanageable.

In Wesson v. Staples of the Offices Superstore, LLC (September 2021) the Second Appellate District, Division Four, of the Court of Appeal of California held, “We conclude that courts have inherent authority to ensure that a PAGA claim will be manageable at trial—including the power to strike the claim, if necessary—and that this authority is not inconsistent with PAGA’s procedures and objectives, or with applicable precedent.”  In so holding, the Wesson court found  that the trial court did not abuse its discretion in striking Wesson’s PAGA claim as unmanageable.

The Wesson court explained that, “California courts have exercised their inherent powers to preclude representative claims where a trial of those claims would be unmanageable. In the class action context, the courts have required class action proponents to demonstrate that ‘litigation of individual issues, including those arising from affirmative defenses, can be managed fairly and efficiently.’”

In Wesson, the plaintiff brought a PAGA claim for over 346 Staples General Managers for over $36 million in civil penalties.  Wesson’s claims were based on the theory that the GMs were misclassified as exempt employees, and should have been paid overtime, and provided meal and rest breaks.  The Appellate court noted that the record “raised significant manageability concerns.”  Staples presented evidence that the GM position was not standardized, and there were critical variations on how GMs performed their jobs and the extent to which they performed nonexempt tasks.  Staples produced evidence that showed the duties for each of the GMs varied based on each store’s “size, sales volume, staffing levels, labor budgets, and other variables.” Staples also presented evidence that showed GMs’ management duties varied based on each of their “experience, aptitude, and managerial approaches, among other factors.”  Based on this, Staples argued that Wesson’s PAGA allegations “would require individualized assessments of each GM’s classification and would lead to ‘an unmanageable mess’ that ‘would waste the time and resources of the Court and the parties … .’”

Therefore, the Wesson court held, “We do not believe a court is powerless to address the challenges presented by large and complex PAGA actions and is bound to hold dozens, hundreds, or thousands of minitrials involving diverse questions, depending on the breadth of the plaintiff’s claims.” 

4. Estrada v. Royalty Carpet Mills, Inc. – Holding that trial courts do not have authority to deem PAGA cases unmanageable. 

In March 2022, the Fourth Appellate District, Division Three of the California Court of Appeal issued a decision in Estrada v. Royalty Capet Mills, Inc. disagreeing with the holding in Wesson.  The court in Estrada stated, “After reviewing both perspectives, we respectfully disagree with Wesson and agree with the reasoning of the district courts that have refused to dismiss PAGA claims based on manageability.” The court in Estrada held that manageability is a requirement that plaintiffs must prove in a class action, but that “‘a representative action under PAGA is not a class action.’” The court explained that a class action is “a procedural device for aggregating claims ‘when the parties are numerous, and it is impracticable to bring them all before the court.’” However, PAGA claims “are administrative law enforcement actions that ‘are different from conventional civil suits. The Legislature’s sole purpose in enacting PAGA was ‘to augment the limited enforcement capability of the [Labor Workforce Development Agency (LWDA)] by empowering employees to enforce the Labor Code as representatives of the Agency.’” 

Due to the differences between class actions and PAGA representative actions, the California Supreme Court has held that PAGA plaintiffs need not meet class action certification requirements when pursuing PAGA penalties in Arias v. Superior Court, and Kim v. Reins International California, Inc. 

The court in Estrada held, “Accordingly, requiring that PAGA claims be manageable would graft a crucial element of class certification onto PAGA claims, undercutting our Supreme Court’s prior holdings.”

However, the Estrada court conceded that there are issues that trial courts must manage in PAGA cases, as “[s]ome PAGA claims involve hundreds or thousands of alleged aggrieved employees, each with unique factual circumstances. We do not intend our ruling to mean that in such scenarios, a court must allow for each of these alleged aggrieved employees to be examined at trial. Such a scenario would be unduly expensive, impractical, and place far too great a burden on our already busy trial courts. Rather, courts may, where appropriate and within reason, limit witness testimony and other forms of evidence when determining the number of violations that occurred and the amount of penalties to assess.”  Ultimately the Estrada court did not set forth a standard for trial courts to manage PAGA claims, just that, “[w]e encourage counsel to work with the trial courts during trial planning to define a workable group or groups of aggrieved employees for which violations can more easily be shown….If a plaintiff alleges widespread violations of the Labor Code by an employer in a PAGA action but cannot prove them in an efficient manner, it does not seem unreasonable for the punishment assessed to be minimal.”

5. 2024 Balot Initiative to reform PAGA

Anytime now, the California Supreme Court will issue a decision in the Estrada case, which may empower trial courts to more effectively manage Private Attorneys General Act (PAGA) claims. This could include the authority to restrict the use of this procedural device in cases where it is deemed inappropriate. On another front, PAGA faces a challenge directly from the voters of California. The California Fair Pay and Employer Accountability Act aims to replace PAGA. This initiative has garnered enough signatures to secure a spot on the November 2024 ballot. If approved, it would allow employees to receive 100% of the penalties collected, a significant increase from the current 25% allocation. Additionally, it proposes to prohibit the awarding of attorneys’ fees in such cases and to double the penalties for employers who knowingly violate the law. More details about the initiative are available on the Californians for Fair Pay and Accountability website.

In the ever-evolving landscape of California’s labor and employment regulations, the upcoming year promises to bring a fresh set of challenges for employers throughout the state. As we begin to close 2023, it’s imperative for businesses to familiarize themselves with the newest legal mandates and adjustments set to shape the way they operate, hire, and manage their workforce in 2024. This article delves into the key employment laws introduced for the forthcoming year, offering insights to ensure compliance and build a collaborative workplace.

AB 1228: Fast Food Franchisor Responsibility Act 

This bill repealed the FAST Act and implemented new regulations of the fast-food industry in California. Notably, this bill increases the minimum wage to $20 per hour as of April 1, 2024, and establishes the Fast Food Council. For details on how this Act will affect you, take a look at our detailed post here.  

Assembly Bill 594: Public prosecution for wage theft/labor code violations  

Public prosecutors (meaning, the Attorney General, a district attorney, a city attorney, a county counsel, or any other city or county prosecutor) can enforce labor code violations by pursuing civil or criminal actions for certain labor code violations. These labor code violations include unpaid minimum wage, unpaid overtime, failure to provide meal breaks, and failure to provide rest breaks. Public prosecutors may also enforce these labor code sections independently. Any money recovered until this code will go to the affected workers, and all civil penalties recovered under this section will be paid to the General Fund of California. The Plaintiff may also be entitled to reasonable attorney fees. It is important for employers to note that this is in addition and separate from the Labor Commissioners right to investigate and hear employee complaints, and the Labor Workforce and Development Agency’s rights under PAGA.  

Assembly Bill 1076 and Senate Bill 699: Noncompete Agreements and Clauses 

AB 1076 and SB 699 codifies existing law. SB 699 voids any contract that restricts an employee from engagement in a lawful profession, trade, or business of any kind, or a noncompete agreement. This would prohibit an employer from seeking to enforce a noncompete agreement, regardless of where or when the contract was signed. This restriction applies even if the contract was signed outside of California, or if the employment was maintained outside of California. SB 699 also authorizes an employee, former employee, or prospective employee to bring an action seeking injunctive relief, or for the recovery of actual damages, and allows the prevailing employee, former employee, or prospective employee to recover reasonably attorney’s fees and costs.  

Similarly, AB 1076, makes it unlawful to impose a noncompete clause on employees, unless a narrow exception applies. Employers should review all of their offer letter, employment agreements, or other policies distributed to employees to determine if there are any noncompete clauses with employees. If there are such policies, employers are required to notify all current and former employees that were employed after January 1, 2022, that any noncompete agreement or similar clause within their agreement is void, unless it falls within one of the exceptions. This notice must be made by February 14, 2023, and be made in a written, individualized communication delivered to the last known address and email address.  

Senate Bill 616: Paid Sick Leave Expansion 

Currently, employers are required to provide employees with three days, or 24 hours, of paid sick leave. Beginning January 1, 2024, employers will be required to provide five days, or 40 hours. Employers will be able to control the amount used per year at five days or 40 hours per year and cap accrual at 10 days or 80 hours. Many California cities, including West Hollywood, have established local paid sick leave ordinances that provide more leave than required under California law. Employers should be sure to review local ordinances to determine which leave applies.  

Senate Bill 723: Re-Hiring Rights for Laid-Off Employees  

Currently, employers in the hospitality and business service provider industries are required to offer reemployment to qualified former employees as long as the former employees were (1) employed for at least 6 months in the year before January 1, 2020, and (2) laid off for a reason related to the pandemic. This is now expanded to apply to former employees who were employed for at least 6 months and laid off on or after March 4, 2020. Additionally, any separation due to a lack of business, reduction in force, or other economic, nondisciplinary reason is presumably a reason related to COVID-19. This law sunsets on December 31, 2025.  

Senate Bill 497: Presumption of Retaliation 

Employers are prohibited from discriminating, retaliating, or taking any adverse employment action against an employee or applicant because they engaged in protected conduct. Now, there is a rebuttable presumption of retaliation if the employer disciplines or takes adverse action against an employee within 90 days of that employee engaging in protected conduct. This means that simply by taking that action, the Plaintiff will be able to establish its prima facie case. It will be up to the employer to dispute this and establish that it did not discriminate, retaliate, or take an adverse employment action because the employee or applicant engaged in protected conduct.  

Senate Bill 848: Reproductive Loss Leave 

This bill expands employee’s bereavement rights. Employers must provide employees with five days leave for a “reproductive loss event.” A “reproductive loss event” is defined to include failed adoption, failed surrogacy, miscarriage, stillbirth, or an unsuccessful assisted reproduction. This bill applies to private employers with five or more employees, all public employers, and apply to employees that have worked for the employer for at least 30 days. As with the bereavement leave requirements, this leave may be unpaid; however, the employee can use other accrued leave. Employees must take the leave within 3 months of the reproductive loss event, and an employer would not be required to provide more than 20 days in a 12-month period.  

Senate Bill 428: Workplace Restraining Orders 

Employers are already authorized to seek a temporary restraining order on behalf of an employee who has suffered an unlawful violence or a credible threat of violence if it can reasonably be carried out in the workplace. Now, employers may also seek a temporary restraining order on behalf of employees who have suffered harassment. The employer must allow the employee the opportunity to decline being named in the order before filing the petition. The bill includes a carve out to prevent a temporary restraining order against speech or activities that are protected by the NLRB.   This bill goes into effect on January 1, 2025.  

Senate Bill 553: Workplace Violence Prevention 

The California Occupational Safety and Health Act of 1973 already requires employers to establish and maintain an effective injury prevention program. Now, employers will be required to establish and maintain a workplace violation prevention program. Employers must provide effective training to employees on the workplace violence prevention plan. In addition to the prevention program, employers must maintain records of workplace violence hazard identification, evaluation, and correction, training records, violent incident logs, and workplace incident investigation records. Employers have until July 1, 2024, to establish this program.  

Senate Bill 700: Marijuana Protections 

Employers may no longer ask an applicant about their prior marijuana use. This bill clarifies that the law against discrimination on the basis of marijuana includes information the employer obtained about prior marijuana use from the applicant’s or employee’s criminal history.  Our detailed article about SB 700 can be found here.

Senate Bill 525: Healthcare Workers Minimum Wage 

This bill creates a series of minimum wage requirements varying by type of healthcare employer with yearly increases. Additionally, covered health care employees that are paid on a salary basis must earn a monthly salary equal to no less than 150% of the health care minimum wage or 200% of the applicable minimum wage, whichever is greater, for full-time employment, to qualify as exempt from payment of minimum wage and overtime.  

Learn more during our webinar

Join our experts on Thursday, October 26, 2023, as we dig deeper into these new laws and how they may affect you. Register for our free webinar here: https://us06web.zoom.us/webinar/register/6316951613202/WN_RDLUQU6mSvKBzkCfB9eU-A.  

California law presumes that all employees are non-exempt employees, meaning that they are not exempt from the Labor Code requirements, such as overtime pay, meal and rest breaks, and minimum wage. Exempt employees are designated as such because they are “exempt” from certain wage and hour requirements due to their duties and pay. However, the employer bears the burden when classifying an employee as exempt, and simply providing a title to an employee does not make them exempt. The employee must meet very specific requirements for each applicable exemption, and if the requirements are not met the employer must comply with all wage and hour requirements – such as overtime pay, etc…. It is also important to note that some exemptions only exempt the employee from specific Labor Code provisions (for example, the inside sales exemption only exempts the employee from overtime pay requirements, but the employer is still required to provide meal and rest breaks).

Looking to learn more about exempt employee classifications?  My firm is hosting a webinar on Wednesday, February 28, 2023 at 10 a.m. PT: Understanding Exempt v. Non-Exempt Classifications Under California Law.  Registration is here.

Below is a review of some common exemptions that arise in a workplace under California law and the requirements to meet each one:

1. Executive/managerial exemption
In order to meet the executive (managerial) exemption, the employee must meet all of the following requirements:

  1. Employee’s duties and responsibilities involve the management of the enterprise in which he or she is employed or of a customarily recognized department or subdivision of the enterprise;
  2. Employee customarily and regularly directs the work of two or more other employees;
  3. Employee has the authority to hire or fire other employees, or whose suggestions and recommendations as to the hiring or firing and as to the advancement and promotion or any other change of status or other employees is given particular weight;
  4. Employee customarily and regularly exercises discretion and independent judgment in performing his or her duties;
  5. Is “primarily engaged” in duties that meet the test of the exemption;
  6. Earns a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.  With the increase to the California minimum wage, effective January 1, 2023, the minimum annual salary to meet the exemption increases to $64,480 ($5,373.34 per month).

The term “primarily engaged in” means that more than one-half of the employee’s work time must be spent engaged in exempt work and differs substantially from the federal test which simply requires that the “primary duty” of the employee falls within the exempt duties. Therefore, to qualify for this exemption, the employee must spend more than 50% of their work time on exempt duties.

2. Administrative exemption
To meet the administrative exemption, an employee must meet all of the following requirements:

  1. Employee spends more than one-half of their work time performing office or non-manual work directly related to management policies or general business operations for the employer or the employer’s customers;
  2. Employee “customarily and regularly” exercises discretion and independent judgment in carrying out job duties as to matters significant to the employer’s business;
  3. Performs his or her job only under general supervision and works along specialized or technical lines requiring special training, experience, or knowledge; and
  4. Is paid a salary equivalent to no less than two times the state minimum wage. With the increase to the California minimum wage, effective January 1, 2023, the minimum annual salary to meet the exemption increases to $64,480 ($5,373.34 per month).

3. Computer professional exemption
To be an exempt computer professional, the employee must meet the following requirements:

1. The employee is primarily engaged in work that is intellectual or creative and requires the exercise of discretion and independent judgment.

“Primarily” is defined as requiring more than 50% of the employee’s work time be spent on these types of duties.

2. The employee is primarily engaged in duties that consist of one or more of the following:

  • The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications.
  • The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to, user or system design specifications.
  • The documentation, testing, creation, or modification of computer programs is related to the design of software or hardware for computer operating systems.

3. The employee is highly skilled and is proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering.

4. The employee’s hourly rate of pay, or annual salary if paid on salaried basis, meets a minimum threshold amount set by California’s Division of Labor Statistics and Research (DLSR). Effective January 1, 2023, a 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.

4. Commissioned inside sales exemption
To qualify as an exempt commissioned inside sales employee, an employee must meet the following requirements:

  1. Employee’s earnings must exceed one and one-half times the California minimum wage; and
  2. More than half of the employee’s compensation must be commissions.

Employers must note that this exemption is only for the overtime requirement, and other wage and hour requirements such as minimum wage, meal and rest breaks, time recording requirements still must be met.

5. Outside salesperson exemption
To qualify as an exempt outside salesperson the employee must:

  1. Be at least 18 years old;
  2. Must customarily and regularly work more than 50% their work time away from the employer’s place of business; and
  3. Must be engaged in selling tangible items or obtaining orders or contracts for products, services, or use of facilities.

There are many exemptions, and many nuances to each exemption, so employers should perform this analysis very carefully and receive advice from an experienced attorney or HR professional when classifying employees as exempt.  Hope you can join us on February 28, 2023 for our webinar discussing this topic in more detail.