“Outside salesperson” in California are exempt from overtime, minimum wage, reporting time and meal and rest break requirements. (Labor Code 1171). Wage Order No. 7-2001(2)(J) defines outside salesperson as “any person… who customarily and regularly workes more than half of the working time away from the employer’s place of business selling tangible or intangible items or obtaining orders or contracfts for products, servies, or use of facilities.” Based on this definition, in order to qualify as an outside salesperson, an employee must (1) work more than half the time away from his employer’s place of business and (2) be engaged in sales. The main reason for this exemption is the fact that outside salesperson generally control their own hours and are paid on commission basis. A classic example of a correct application of outside sales exemption is a door-to-door vacujm salesperson, who is on the road traveling from residence to residence.
It’s important to note that the “employer’s place of business” is not limited, under California law, to a principal places of business or an administrative headquarters. For instance, in one of their opinion letters DLSE concluded that temporary trailers and model homes located at a tract housing site, although physically separate from the home builder’s or seller’s headquarters office, nonetheless constitute “the employer’s place of business” within the meaning of the definition of “outside salespersons”. Therefore, employees who work out of temporary trailers or model homes and who sell newly constructed tract homes would not fall within this exemption unless they are customarily and regularly engaged in sales work for more than half of their work time away from the temporary trailer or model home, or other property at the housing tract owned or controlled by their employer. In the absence of such work away from their trailer / model home, these facilities would be treated pretty much like an employer’s satellite office, making those workers “inside salespersons” and not qualified to be exempt. A similar analysis applies to car salesmen who spend much of their time on their employer’s car lot, perform all of their sales work at the employer’s place of business, and thus are not covered by the ouside sales exemptions. (Brennan v Modern Chevrolet Co. (1972)).
However, recently one California Court of Appeal noted in Espinoza v Warehouse Demo Services, Inc. (2022) that the relevant inquiry as to whether an employee works away from the employer’s place of business is not whether the employer owns or controls the work site, but the extent to which the employer maintains control or supervision over the employee’s hours and working conditions. Thus, this factor also must be taken into consideration when determination whether this outside sales exemption applies to any specific employee.
Under California Labor Code section 558.1, any employer or other person acting on behalf of an employer, who violates, or causes to be violated, any provision regulating minimum wages or hours and days of work in any order of the Industrial Welfare Commission, or violates or causes to be violated labor code sections 203, 226, 226.7, 1193.6, 1194, or 2802 may be held liable as the employer for such violation. For purposes of this section, the term “other person acting on behalf of an employer” is limited to a natural person who is an owner, director, officer, or managing agent of the employer, and the term “managing agent” has the same meaning as in Civil Code 3294(b). White v Ultramar, Inc., 21 Cal.4th 563, 573 (1999). This law was enacted to discourage business owners from rolling up their operations and walking away from their debts to workers and starting a new company. Voris v Lampert (1999).
It’s important to note that an individual could not be liable under section 558.1 simply by virtue of his status as an owner, director or officer but he must have been “personally involved” in the alleged violations or “engaged in individual wrongdoing”. Usher v White 64 Cal.App.5th 883 (2021). The Usher court noted that there is no bright-line rule when it comes to finding individual liability, and this determination requires an examination of the particular facts of each case. The Espinoza v Hepta Run Inc. (2022) case in instructive. There, the court found that the company owner’s approval of the policy regarding paying employees was sufficient to show that he caused labor code violations and therefore could be held personally liable, even if the same owner was not involved in day to day business operations.
The California on-call pay laws are largely based on balancing fairness between employees and employers. Generally, hours for which an employee has been hired to do nothing while merely waiting for something to happen are hours subject to the control of the employers, and constitute hours worked. (Armour & Co. v Wantock (1944); Skidmore v Swift (1944)). In the case of “standby” or “on-call” time, if the restrictions placed on the time of employee are such that the employee is unable to effectively engage in personal activities, the time is subject to the control of the employer and constitutes hours worked. (Madera Police Officers Association v. City of Madera (1984)).
The determination whether standby time is “controlled” such that it constitutes compensable hours under California law is a multi-factor analysis, set in the 9th Circuit case Berry v County of Sonoma (1994). These factors are:
- The geographic restrictions on the employee’s movements;
(1) Review the repayment obligation in your relocation package to make sure that it’s fairly drafted. Most relocation packages and sign-on bonuses include a repayment provision, also known as a “clawback” provision. An experienced employment attorney can go over it with you and discuss typical issues that arise with relocation packages, such as wanting or having to leave that job for one reason or another much sooner than expected, as well as negotiating the type of pro-rata repayment plan that will not hold you hostage till the very last day of the total repayment period.
(2) Do not rush to spend every dollar of your relocation package. There is just no way to know for sure how your new job that you are excited about is going to work out. There could be so many reasons why you would want to quit that job and /or even move back as soon as possible. If you receive a generous relocation package of say $50,000.00, you may only need $10k-$15k for your moving expenses. Hold on to the rest for at least while, until you are settled at your new job in the new city. This way, if you have to leave it all and move back, repaying your employer while you only spent a small part of that amount would be so much easier than if you hurry to spend all that amount right away. I would recommend waiting for at least 6 months after you move, before you touch the remainder of the relocation package that you didn’t have to spend when you moved.
Under California Labor Code section 515.5, certain software industry employees are exempt from overtime pay requirements, if they perform specific, exempt duties and receive a rate of pay not less than the statutorily-specified rate.
Effective January 1, 2020, the computer software employee’s minimum hourly rate of pay, in order to be subject to this exemption, increases from $45.41 / hour to $46.55 / hour, the minimum monthly salary exemption will increase from $7,883.62 to $8,080.71, and the minimum annual salary exemption will increase from $94,603.25 to $96,968.33.
In order to be correctly classified as exempt from overtime under the California computer professional exemption, all of the requirements of section 515.5 must be met. Thus, for instance, an employee how is paid more than the above referenced minimum, but who performs work that lacks in creativity and independent judgment required by this law, as it’s often the case with IT administrators, will not qualify for this exemption and should be eligible for overtime pay, like any other non-exempt, hourly employee.
In most cases, it’s not a good idea for an employer to refuse to issue an employee his final paycheck until he repays his relocation bonus. Likewise, it’s a bad idea to unilaterally deduct the relocation bonus amount from that employee’s final paycheck. Here is why:
First, an employee’s failure to repay his relocation bonus or his failure to honor some other part of your employment agreement is legally not a defense to the legal requirement of paying all wages. A number of laws mandate upon employers to promptly pay all wages due to employees and prohibit taking improper deductions from paychecks except as authorized by law. Further, it has been held that an employer may not set off debts a terminated employee owes the employer against wages due to that employee. Barnhill v Robert Sunders & Co. (1981).
Secondly, when you don’t pay the wages due to an employee, you may be liable not only for the wages unpaid, but also for penalties, interest, and possibly – that employee’s legal fees, if he decides to pursue his claim for unpaid wages in court as a single claim or along with other claims (i.e. wrongful termination, discrimination, retaliation, etc…). This can be especially costly and not worth the risk in a situation where an employee is a high-wage earner, who received a relatively modest relocation bonus, as it may result in much greater liability for waiting time penalties (up to 30 days of that employee’s ordinary wages). To illustrate, imagine the following scenario: you hire a worker at a rate of pay of $800/day after issuing him $10,000 as a relocation bonus to be repaid, if the employee quits or is fired for cause before his one-year anniversary of employment with you. That employee resigns three months later. You refuse to issue his final paycheck until he repays his relocation bonus. That employee waits for a month and then files a claim for unpaid wage with the Department of Labor. He will then be entitled to his unpaid wages for two weeks plus up to $24,000(!) in waiting time penalties ($800 x 30 days as per California Labor Code 203). That employee then repays you relocation bonus, ending up receiving a total of $14,000 more from you than he should have and otherwise would have.
By now, the California Dynamex decision (Dynamex Opertions West Inc. v. Superior Court) has been thoroughly discussed and analyzed in many publications and legal seminars. However, here is the big picture that both workers and especially employers should keep in mind, as it will help them understand what’s behind this significant ruling, and avoid liability and significant expenses associated with employee misclassification.
Through the Dynamex decision, California’s highest court sought to address common abuses of workers’ rights that became pretty much an epidemic in this new “gig” economy, where employers would classify workers as contractors under the guise of outsourcing or telecommuting. Companies would argue that since a worker is free to perform him duties from anywhere and at the time of his choosing, he should be classified as a contractor. The California Supreme Court, however, made it clear that a worker should be classified as an employee even if he has flexibility in work hours and work location, contrary to what many employers have gotten used to believing. The Court has articulate a new “ABC” test for determining whether a worker can be classified as a contractor that has been the law since. This three-factor test states that in order to be properly classified as a contractor, all of the following criteria has to be met:
(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
On April 30, 2018, the California Supreme Court issued its unanimous ruling in Dynamex Operations West, Inc., v Superior Court, making it even harder for companies to classify workers as independent contractors (rather than employees). The previous standard used for classifying workers as employees or independent contractors had been in place since 1989 and was based upon a multifactor test that considered, among other factors, the worker’s skill, the method of payment by the hirer, existence of contractor agreement between the parties, and the nature of the business to determine the level of control exercised over the worker and respectively – whether sufficient control took place for employee-employer relationship to exist. Thus, companies such as Dynamex had classified their delivery drivers as independent contractors, arguing that their drivers had significant control over their own working conditions by being able to set their own hours and drive for multiple companies.
The new standard adopted by the Supreme Court requires hirers to establish three factors in order to properly classify a worker as an independent contractor – and in the process greatly expands the definition of “employee” under California law:
A. The worker is free from the control and direction of the hirer in connection with the performance of the work, both under contract for the performance of such work and in fact; and