Articles Posted in Wages and Compensation

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.

To qualify for the administrative exemption from overtime compensation requirement an employee must be primarily engaged in a work of a type that is “directly related to management polices or general business operations.” This requirement of course must be interpreted as it is inherently vague. In one sense, every type of work directly relates to management policy because every employee does work that carries out, or is governed by, management policy. But for obvious reasons, such an interpretation wouldn’t make sense, as it would make virtually all employee exempt from overtime.

In Harris v. Liberty Mutual Insurance Co. (2007), the court clarified that the work is “directly related to management policies or general business operations” for the purposes of determining whether administrative exemption applies only if it “relates to the administrative operations of a business as distinguished from ‘production’ or in a retail or service establishment ‘sales” work.” This means, the court continued, that only work performed at the level of policy or general operations can qualify as “directly related to management policies or general business operations.” On the other hand, work that merely carries out the particular, day-to-day operations of the business is production and not administrative work, and thus doesn’t qualify for administrative overtime exemption.

California overtime law, administrative exemptionThe Harris court, applying this analysis, found that insurance adjusters, who sued the defendant for unpaid overtime, were primarily engaged in “production” – adjusting individual claims for their employer. They investigate claims, make coverage determination, set reserves, negotiate settlements, make settlement recommendations for claims beyond their settlement authority, identify potential fraud, and so forth. Noe of that work was found to be carried out at the level of management policy or general operations. Rather, it is all part of the day-to-day operation of defendants’ business.

In it recent decision, filed in November 6, 2008, the 9th Circuit clarified an important point of California Overtime Law. In that case, the issue was whether Oracle employees, who are not residents of California, are entitled to the protections and privileges of California overtime compensation laws, if they work in California. In its well reasoned decision, the court summarized California Labor Code section 510(a). The court reminded that this law requires overtime pay of one and one-half regular pay beyond 8 hours worked in any single day, 40 hours in one week, and the first 8 hours of work on the seventh day worked of any one workweek. Additionally it requires double pay for hours worked beyond 12 in a day or 8 hours on the seventh day of any one workweek.

California Supreme Court has concluded that California’s employment laws govern all work performed within the state, regardless of the residence or domicile of the worker, citing Tidewater Marine Western Inc. v. Bradshaw 927 P.2d 296. That case held that California employment laws implicitly extend to employment occurring within California state law boundaries. Please feel free to read the full decision on California Overtime Law as it applies to non-residents of California.

Thus, this recent decision suggests that all employees who would otherwise qualify for overtime compensation, regardless of the state of their residence, are entitled to overtime compensation under California law, if they perform the work at issue within the territory of state of California.

One exemption from overtime compensation under Fair Labor Standards Act is known as the “Outside Salesperson Exemption.” This exemption permits an employer to not pay overtime as otherwise required under California law, but only if a particular worker (a) has the primary duty of (a) making “sales” or (b) obtaining orders or contracts for services or facilities usage, and

(b) is customarily and regularly engaged away from the employer’s place of business in performing such primary duty.

The information above can be found at 29 USC § 213(a)(1) and 29 C.F.R. § 541.500. In order to qualify for this exemption under California law, however, the employee must spend more than 50% of his/her working time performing truly-exempt sales functions away from the employer’s business establishment (or away from the employee’s home, if that is where the employee is normally based).

Under FLSA an employee will be considered to be paid on a “salary basis” and thus exempt for the purposes of overtime compensation, if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all of part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed. 29 C.F.R. section 541.602(b)(1)(2004). Employees must also be paid a specified minimum salary in order to qualify as exempt.

exempt salaried employee under FLSA

The effect and the reason behind those provisions is to prevent employers from docking the pay of an employee for an absence of less than a day (partial day absence). In other words, the employer should only deduct pay for one day absences or longer. Thus, if an exempt employee takes a few hours off, that should not be deducted from pay. If an employee takes one day and a half off, the employer, with a small number of exceptions, can only deduct one day from that pay period. If the employer makes partial day deductions, then the employees subject to those deductions do not meet the salary basis test, and are non-exempt for the purposes of overtime pay.

Thus, an employer should be very careful with partial day deductions against exempt employees’ pay, as classifying employees as “salaried exempt” while docking their pay for partial day absences will likely subject an employer to liability for failure to pay overtime compensation for at least the entire time that the policy of partial day deductions has been in place.

The Supreme Court has held that time spent waiting for work is compensable if the waiting time is spent “primarily for the benefit of the employer and his business.” Armour & Co. v. Wantock (1944). Whether the time spent predominantly for the employer’s benefit depends on the specific circumstances of each situation. Although there is no hard and fast rule, the cases dealing with the question of compensation and overtime for on-call duty consider two major factors: (1) the degree to which the employee is free to engage in personal activities; and (2) the agreement between the parties.

While the second factor – the existence or non existence of the agreement to waive on-call duty compensation – is usually easy to determine, the first factor includes sub-elements that determine whether the employee is free to engage in personal activities while on call: (a)whether there was an on-premises living requirement; (b) whether there were restrictions on employee’s travel during on-call duty; (c) whether the frequency of calls was so high that it prevented employee from engaging in typical off-duty activities of a person; (d) whether a fixed time limit for response was unduly restrictive; (e) whether the employee could easily trade on-call responsibilities; (f) whether employee actually engaged in personal activities during call-in time.

The above list is not exhaustive but merely illustrative.

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