Articles Posted in Wages and Compensation

The following are the key points of California law regarding entitlement to a day’s rest after working more than six consecutive days that both employees and employers should know:

  • California Labor Code sections 551 and 552 generally guarantee workers a day of rest after six days of work.
  • A day of rest is guaranteed for each workweek. An employer is not prohibited from employing workers for more than six consecutive days that stretch across more than one workweek.

employee compensation at start-upsIt’s common for start-ups in the Bay Area that are low on funding to compensate their employees by granting equity only and without providing any actual salary or hourly pay. This is a mistake that entitles any such employee in California to make a claim for unpaid wages, interest, and possibly penalties. Many start-up owners assume that just because they themselves are only compensated with equity, and their company doesn’t have the money to pay their employees, it’s fair to pay their employees with stock options only. It might or might not be the fair thing to do, but in California it’s definitely not legal.

California labor code is very clear on this – an employee should be paid for every hour of work. Stock options are not pay because they don’t have have immediate (liquid) value. The law does not exempt employers from paying wages to their employees just because they don’t have the money to pay or just because the owner doesn’t draw salary, so this is not a valid defense in a potential claim or a lawsuit for unpaid wages.

Although laws in other states allows company not to pay those employees who who hold a certain % of ownership / stock in the company, this is not the case in California – at least not yet. Therefore, start-ups should at least pay their employees minimum wage to avoid liability for non-payment of wages, regardless of whether these employees also receive stock options.

computer professional exemptionOn October 5, 2016, the Division of Labor Statistics and Research (DLSR) has announced a slight increase in the salary requirements for exempt employees under computer professional exemption. The increase is 1.3% as per California Consumer Price Index.

Thus, effective January 1, 2017, the computer software employee’s minimum hourly rate of pay (to be properly exempt) increases from $41.85 to $42.39. The minimum monthly salary exemption will increase from $7,265.43 to $7,359.88, and the minimum annual salary will increase from $87,185.14 to $88,381.55.

It’s easy to see how not complying with the above requirement can become quite costly to an employer. Here is an example to illustrate this point. Suppose the employer pays the purportedly exempt computer professional $88,000 a year instead of the required $88,381.55, and that employee worked 12 hour workday for 100 days. Arguably, exemption won’t apply because of non-compliance with the pay rate. Therefore, the employer will be liable to pay that employee as follows:

mandatory cellphone use at workIn the opening line of Cochran v. Schwan’s Home Service, Inc. (2014) the court says: “We hold that when employees must use their personal cell phones for work-related calls, Labor Code section 2802 requires the employer to reimburse them. Whether the employees have cell phone plans with unlimited minutes or limited minutes, the reimbursement owed is a reasonable percentage of their cell phone bills.”

The above holding is an important reminder to both employees and employers that employees are entitled to reimbursement of at least part or their cellphone bill when they must use their personal cellphone for work. This is true even if they are on an unlimited plan with their carrier, and the amount of calls their make does not make a difference to that bill.

intern california lawThe distinction between an internship and employee / employer relationship has been subject to much debate and litigation all over the country during the past few years. However, in California the existing law states that a worker can be classified as an intern (and not be paid) only if all of the following six requirements are satisfied:

Factor 1: Training similar to that provided at a vocational school.  

Training should be closely tied to the intern’s educational goals.  This factor is more easily met if the employer’s office or facilities provide resources not necessarily available to the intern outside of an industrial or professional setting. For instance, in once case the interns – trainees learned how to operate trains in the rail yard. The DSLE’s Opinion Letter found this factor to be satisfied when “an intern’s use of the employer’s computers, network systems, and tools to perform tasks” was “directly related to training and the educational and vocational objectives of the program.”

stock options start-ups terminated laid offOne of the more painful things that happen to employees of start-ups in San Francisco and the rest of Silicon Valley is being laid off shortly before or right before they become eligible for a stock or right before an important vesting deadline. Sometimes, employers terminate an employee specifically for that reason – to avoid giving them these stock rights. As unfair as this type of action may sound, usually it’s perfectly legal.  Most stock agreements are written in a way that does not create a binding contract. These agreement allow employers to do this lawfully, and there is not much that the terminated employee can do to not lose the stock he was looking forward to receiving.

However, this loss of stock can often be used in negotiating a severance or a better severance packager, especially if an employee is terminated days before his stocks vest, which is not uncommon. Different strategies are appropriate for negotiating a severance depending on the length of your tenure with the company, your most recent position, duties and compensation, any potential legal claims you might have against the employer, and other specific circumstances of your employment and termination.

An experienced employment attorney can guide you through how to go about negotiating a higher severance and getting the best deal you can, as you transition to your next job or the next stage in your career. Negotiating a higher severance is always a good idea for a simple reason – you have nothing to lose, and if a 10 minute conversation can result in putting a few more thousand dollars in your pocket, then why not try.

truck drivers employees independent contractorsOver the past few years, a number of cases in California regarding whether various drivers are employees or independent contractors have been reviewed by appellate courts, and many of them found drivers to be in fact employees. Garcia v Seacon Logix, Inc. (2015) is a recent case on point. In that case, the truckers transported cargo for a logistics company from the Port of Long Beach and Port of Los Angeles to warehouses and other facilities. Prior to 2008, the drivers were using their own trucks to perform the work, and it was undisputed that they were properly classified as independent contractors. However, after 2008 the employer started leasing their own newly purchased cleaner energy trucks to employees.

Three truck drivers brought a claim for reimbursement of deductions for insurance lease payments from their paycheck under Labor Code section 2822. The employer insisted that he truck drivers were still independent contractor. The court disagreed, concluding that under the California employee / independent contractor control test the drivers were now employees because (1) the drivers were obligated to use company vehicles; (2) they were required to come to work at a specific time and call if they were late or could not show up; (3) their delivery assignments were tightly controlled by the company, and they didn’t have much choice in choosing assignments, (4) the drivers were not permitted to work for other companies while they were working for the defendants; and (5)  the company could terminate the drivers’ employment at anytime without cause and without notice, which made the whole situation look all the more like a typical at-will employment rather than a contractor relationship.

Of course, besides the issues of not having typical expenses deducted from a paycheck, being determined to be an employee will mean that these truck drivers are also entitled to overtime, workers compensation insurance coverage, unemployment insurance, and other benefits of being an employee.

waiting-time-penalties-californiaUnder California Labor Code section 203, an employer must pay a waiting time penalty on wages owed when the employer willfully fails to pay wages due under section 201 ore 202. A waiting time penalty is equal to one day’s pay fore each day that a full payment of final wages is late, up to a maximum of 30 days. So, if for instance you are terminated from a full-time job that pays $160/day (or $20/hour), and your final wages are due immediately at termination, but your employer only issues you your final paycheck 10 days later, you are due additional $1,600 in penalties.

As noted above, the penalties only run up to 30 days, so if in the above example you had to wait for your final paycheck for two, three or more months, the maximum penalty that can be imposed under section 203 is $4,800 ($160 x 30).

If an employer leaves the employee’s final check in the employer’s office and asks the employee to pick it up in person shortly after the employment separation, the employe cannot “create” waiting time penalties by not picking that check up on purpose and just sitting and waiting for the extra days to accrue in order to demand waiting time penalties later.

san-francisco-minimum-wage-2015Starting from January 1, 2015, the San Francisco minimum wage increased to $11.05 / hour. This increase reflects the recognition by the authorities of a significantly higher cost of living in the city, driven up by the tech boom, the shortage of housing and the soaring prices for studios and one bedroom apartments.

Today, it would not be unusual to see a studio in one of the luxury high rises downtown to rent for $3,000/month and above, and for one-bedroom units to go for $3,500 and above. Because there is sufficient number of high earners in the area who can afford paying this much in rent in order to enjoy the convenience of living downtown and being able to walk to their office, these prices are not expected to go down, in the absence of some kind of unforeseen event, such as unexpected economic slowdown.

$11.05/hour is certainly not high enough compensation to be able to afford decent housing of any size in any part of San Francisco, but it’s a step in the right direction. Employer have an obligation to have the posting on the image above prominently displayed in the office (typically in the kitchen/rest area) along with other labor / employment posters required to be displayed by law.

Most employers are well aware that if they terminate an employee for any reason of if it’s a lay-off, they must pay that employee’s wages (which includes vacation and sick time if applicable) in full immediately upon discharge. But, what if an employee works for a certain company on per assignment basis, where upon completion of one assignment of a certain duration, the employee might have to wait a shorter or a longer period of time till he receives the next assignment, where having such future work is not even guaranteed.

Recently, my client’s employer tried to argue that because my client was expected to receive a new work project within a few months, they did not have to pay him his outstanding, accrued vacation time which accumulated to nearly 500 hours. The employee was out of work for several months, and there was no real assurance that the employer was going to put him on a new project.

At the labor board hearing in San Francisco, the commissioner was persuaded by my argument that under the California Supreme Court ruling in Smith v. Superior Court 39 C4th 77 (2006), “discharge” includes not only termination from ongoing employment relationship, but also release of an employee upon completion of a specified job assignment or time duration for which the employee was hired. In Smith the court determined that a fashion model, who was hired for one-day assignment, had to be paid at the end of that day.