The field of labor and employment law is constantly in flux, and nowhere more than in California. When it comes to paying and managing the working hours of your California-based employees, there are many common pitfalls to avoid.
Industrial Welfare Commission (“IWC”) Wage Orders
Not only are the laws in California different, but there are more of them. The IWC Wage Orders, which regulate wages, hours, and working conditions in particular industries, are a prime example of this. For example, the wage and hour rules applicable to the manufacturing industry (Wage Order #1) are different from those applicable to the transportation industry (Wage Order #9).
Thus, California employers must comply with all provisions of the California Labor Code, but also must determine which Wage Order applies to their business, and then comply with it as well. This determination is not always easy to make, and sometimes multiple Orders can apply.
For guidance on selecting the correct Wage Order, click here.
The Labor Code Private Attorneys General Act of 2004 (“PAGA”)
California employers that do not comply with the Labor Code and applicable Wage Orders are subject to liability for unpaid wages as well as hefty statutory penalties. In addition, they likely will be required to pay “civil penalties” in an action brought under California’s PAGA statute. PAGA authorizes employees to step into the shoes of the Attorney General of California and sue their employer on behalf of themselves, their fellow employees, and the State of California, for penalties which would normally be assessed by and paid to the State.
These PAGA penalties, calculated on a per-violation, per-employee basis, add up very quickly, and are extremely substantial. Moreover, they are in addition to any statutory penalties that one may recover in an individual or class action lawsuit.
To see an example of an employer’s potential liability for wages and California penalties after allowing employees to work off the clock (“OTC”) for only five minutes per day, click here.
As a Nevada employer, you are almost certainly familiar with Nevada’s constitutional two-tiered minimum wage system: which is currently $9.50 an hour for those employees who are provided qualifying health coverage, and $10.50 an hour for those who are not. Due to Nevada Assembly Bill 456, passed during the 2019 Legislative Session, these minimum wage rates will increase by $0.75 on July 1 of each year, until eventually reaching $11.00 and $12.00 on July 1, 2024. To read the Nevada Labor Commissioner’s minimum wage bulletin, click here.
In contrast, as of January 1, 2023, the State of California has a single minimum wage rate of $15.00 an hour for employers of all size. However, unlike Nevada, California has also seen an ongoing proliferation of so-called “local” minimum wage rates. Numerous cities and counties in California have passed minimum wage ordinances requiring higher minimum wage rates than state law. For example, as of July 1, 2022, the San Francisco minimum wage is currently $16.99 an hour for all employees.
While employing California-based employees, it will be necessary not only to stay apprised of changes to the state minimum wage laws, but also to the local rules of the communities in which your employees work.
Nevada and California both require an employer to pay “time and a half” for all hours worked over 40 in a workweek. However, that is where the overtime similarities cease.
California law also requires daily overtime pay—for hours over eight in a workday—for all non-exempt employees, regardless of their straight time hourly rate.
Furthermore, California employees must be paid “time and a half” overtime for the first eight hours worked on the seventh consecutive day of work in any given workweek, and must be paid “double time” (2x the regular rate of pay) for all hours worked in excess of 12 hours in a workday or in excess of eight hours on the seventh consecutive day of work in any workweek.
In June 2011, the California Supreme Court decided the case of Sullivan v. Oracle Corp., which stands generally for the principle that out-of-state workers are entitled to California overtime pay (and double time, as applicable) when they work a full day or week in California and work overtime hours as defined by California law. This case provides a cautionary tale that, even when employees are based outside of California, their employer may be required to follow California law with respect to any time worked by the employees in California.
Non-exempt employees in Nevada are entitled to a 30-minute meal period whenever they work a continuous period of eight hours or more.
In California, however, the rules applicable to employee meal periods are very different. For example, a first meal period is guaranteed after only five hours of work. The timing of an employee’s meal period is also very specific, in that it must be provided prior to the end of the employee’s fifth hour of work. Also, California law requires a second 30-minute meal period to be provided if an employee works more than 10 hours in a workday. The second meal period must be provided so that it may commence no later than the end of the employee’s tenth hour or work.
Failing to provide a compliant meal period in California also comes with expensive consequences, one is the requirement to pay an additional hour of pay at the employee’s regular rate of compensation for each workday a meal period was not provided. Additional penalties, such as PAGA penalties, may be imposed as well.
California employers are also required to keep and maintain accurate records showing the times at which employees start and end their meal periods. In February 2021, the California Supreme Court established a rule that makes it unlawful for employers to rely on rounded time records (e.g., employee time punches rounded to the nearest quarter hour) for purposes of records showing meal period start and end times. Therefore, employers who implement a neutral time clock rounding policy must also maintain records of actual, raw time punches for meal period start and end times. The failure to maintain these actual time punch records will give rise to a presumption that compliant meal periods were not provided, and it will be the employer’s burden to rebut this presumption with proof that employees were actually relieved of duty for compliant meal periods on any workday where the employee’s time records do not show compliant meal period punches. This rebuttable presumption also arises where the employer did maintain actual meal period punch records, but those records indicate that employees missed meal periods, or were provided late or shortened meal periods.
In general, California employers must authorize and permit their employees to take one paid, duty-free, 10-minute rest period for each work period of four hours or major fraction thereof. (Anything more than two hours is considered to be a “major fraction” of four.) In addition, California employees must be free of all employer control during their rest periods, meaning, among other things, that they cannot be required to respond to emergency calls or monitor a radio, and must be permitted to leave the work premises.
Like meal periods, whenever the employer fails to authorize and permit a full, 10-minute, duty-free rest period, the employer must pay an additional hour of pay at the employee’s regular rate of compensation for each workday on which a rest period was not provided.
A unique feature of California employment law is the requirement to provide recovery “cool-down” periods to employees who work outdoors. In general employees must be “allowed and encouraged” to take a duty-free, preventative cool-down rest in a shaded area, for a period of at least five minutes, whenever they feel the need to do so to protect themselves from overheating. On particularly hot days (when the outdoor temperature reaches 95 degrees or above), employers must ensure that employees take at least one 10-minute preventative cool-down rest for every two hours of work.
Alternative Workweek Schedules
Many employers, and employees, appreciate the ability to develop alternative workweek schedules (“AWS”) to suit their staffing needs, such as four ten-hour shifts per week in lieu of five eight-hour shifts. In Nevada, all that is necessary to institute an alternative workweek schedule is the mutual agreement of the employer and employee.
In California, however, the process involves an extraordinary amount of very strict rules and procedures. For example, among other things, California employers must first propose an AWS to all employees of the work unit or units that will be affected. Then the proposal must be approved by a two-thirds secret ballot vote of the affected employees. At least two weeks prior to the vote, the employer must inform all affected employees, in writing, of how the AWS will impact their wages, hours, and benefits, as well as hold a meeting to discuss the same. Employers must also report the results of any secret ballot elections to a state agency in San Francisco. If an AWS is approved, there are additional mandatory procedures to permit affected employees to repeal it at any time, by petition and secret ballot election.