The Letter of The Law: December 2015
IN THIS ISSUE:
EMPLOYMENT: Two New Laws Significantly Affecting Piece Rate Employers
EMPLOYMENT: How a Detailed Job Description Can Prevent Violation of California’s New Fair Pay
FAMILY LAW: When Spouses are Living “Separate and Apart” for Purposes of Determining When the Community Estate Stops Accumulating
Two New Laws Significantly Affecting Piece Rate Employers
By: Kyle D. Kring
The California legislature recently passed two bills that were significantly amended late in the legislative session. Senate Bill 588 was passed on September 10, 2015 and Assembly Bill 1513 was passed late in the day on the last day of the legislative session, September 11, 2015. Both bills are effective January 1, 2016, and will have a significant impact on employers who have paid employers piece rate compensation anytime over the past four years.
Senate Bill 588
In short, SB 588, A Fair Day’s Pay Act, authored by Senate President pro Tem Kevin De Leon, gives the California Labor Commissioner new mechanisms to collect back wages from employers who have exhausted all appeals for their non-payment of wages and have final judgments owed. The bill would authorize the Labor Commissioner to use any of the existing remedies available to a judgment creditor and to act as a levying officer when enforcing a judgment pursuant to a writ of execution. It requires a business that has an outstanding unpaid judgment against them to purchase a wage bond of $150,000. If it fails to do that, the employer can be subject to a stop work order and a lien at the Labor Commissioner’s discretion.
SB 588 also gives the Labor Commissioner the authority to hold individual business owners liable for their company’s debts to workers. By applying an existing employment law (Labor Code section 558) to wage claims, responsible individuals can held personally liable. This was done to discourage business owners from closing up their operations and starting a new company and avoiding their debts to employees. The new law also improves collection methods by giving the Labor Commissioner greater flexibility and power in choosing how to secure the assets needed to pay judgments a business owes its employees.
Assembly Bill 1513
AB 1513 is a bill that significantly affects any employer who has compensated their employees on a piece-rate basis for any work performed during a pay period for the last four years. The new law has two main purposes: (1) to set forth “new” requirements for compensating piece rate workers for their non-productive time (hereinafter “NPT”), including rest and recovery periods (“R&R”), travel time, safety meetings, etc.; and, (2) to create an affirmative defense for employers who are currently facing lawsuits for failure to pay piece rate workers for the NPT.
Existing law prohibits an employer from requiring an employee to work during any meal or rest or recovery period mandated by an applicable statute or specified regulation, standard, or order, establishes penalties for an employer’s failure to provide a mandated meal or rest or recovery period, and requires rest or recovery periods to be counted as hours worked. Existing law establishes the Division of Labor Standards Enforcement in the Department of Industrial Relations for the enforcement of labor laws, including laws related to wage claims. Existing law requires every employer, semimonthly or at the time of each payment of wages, to furnish each employee with an accurate itemized statement in writing showing specified information. A knowing and intentional violation of this provision by an employer is a misdemeanor, as specified.
This bill will require the itemized statement provided to employees compensated on a piece-rate basis to separately state the total hours of compensable rest and recovery periods, the rate of compensation, and the gross wages paid for those periods during the pay period, and the total hours of other nonproductive time, as specified, the rate of compensation, and the gross wages paid for that time during the pay period. The bill would require those employees to be compensated for rest and recovery periods and other nonproductive time at or above specified minimum hourly rates, separately from any piece-rate compensation. The bill will define “other nonproductive time” for purposes of these provisions to mean time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis. Because a knowing and intentional violation of these requirements would be a crime, the bill would impose a state-mandated local program.
The bill provides that, until January 1, 2021, an employer shall have an affirmative defense to any claim or cause of action for recovery of wages, damages, liquidated damages, statutory penalties, or civil penalties based solely on the employer’s failure to timely pay the employee the compensation due for rest and recovery periods and other nonproductive time for time periods prior to and including December 31, 2015, if, by no later than December 15, 2016, the employer complies with specified requirements (basically paying all employees unpaid or underpaid back wages).
To qualify for the litigation safe harbor defense, (1) the employer must be a defendant to a lawsuit that is filed on or after March 1, 2014, and (2) an employer who is a defendant in such a lawsuit would be required to do the following:
(1) Pay all its piece-rate employees for uncompensated or undercompensated rest and recovery periods and other miscellaneous NPT for the period of July 1, 2012 to December 31, 2015, using one of the following calculation methods:
(a) Actual sums due plus 10% interest; or
(b) 4% of each employee’s gross earnings over the same 42 month period minus any amounts already paid for rest and recovery and other NPT (but such credit not to exceed 15 of each employee’s gross earnings in that pay period).
(2) Provide notice of such payments to the Department of Industrial Relations on or before July 1, 2016.
(3) Complete all such payments on or before December 15, 2016 (Note, if the employer cannot locate an employee, payment must be made to the Labor Commissioner pursuant to Labor code section 96.7); and
(4) Provide detailed statements regarding the payments to each employee.
Note the bill does not address (1) overtime claims, (2) meal period violations, or (3) claims relating to unlawful employment policies such as failure to advise employees to take their breaks or preventing employees from taking R&R breaks.
Additional Assembly Bill 1513 Comments/Concerns .
- AB 1513 doesn’t affect overtime or minimum wage compensation requirements.
- Rest and recovery and other non-productive time must be tracked separately from piece rate compensation.
- Itemized statements required by Labor Code section 226 shall state: (1) total hours of R&R time and the agreed to hourly rate, (2) non-productive time and the agreed to hourly rate. Rest breaks are now required to be paid at the regular rate of pay, not at the contractual hourly rate (in excess of minimum wage) as was previously set forth in the Bluford case.
- Non-productive time may be compensated at a rate different than the regular rate of pay as long as it is agreed to in advance (on Notice to Employee) and in excess of the applicable minimum wage.
- Contractors can expect to see a significant rise in piece rate wage and hour claims given the attention these two bills will provide employees and attorneys. As such, if you continue to pay workers by piece rate, you must make sure your piece rate compensation system is compliant with all aspects of the law.
What You Should Be Doing
- An internal audit with legal counsel experienced in piece rate compensation and AB 1513, to determine if your piece rate compensation plan is legally complaint. Are you properly paying overtime at the regular rate of pay? Are you properly paying for rest and recovery breaks? What is nonproductive time and how are you tracking and paying for nonproductive time? Don’t wait. Call us for a consultation and/or audit of your existing piece rate compensation plan including a review of the following documents: (1) Notice to Employee, (2) Time card, (3) Piece Rate pay sheet, and (4) itemized wage statement.
- Develop and prepare appropriate documents to prevent class action and/or representative actions.
- If you get served with a PAGA claim notice, contact us immediately to insure that you analyze whether to take advantage of resolution strategies that expire after 30 days.
Please call us for an initial consultation..
How a Detailed Job Description Can Prevent Violation of California’s New Fair Pay .
By: Kyle D. Kring.
California has historically proven itself a leader in progressing women’s rights and was one of the first states to adopt a statewide Equal Pay Act. Despite this, the California Legislature determined that in 2014, women in California who work full-time make only 84 cents for every dollar a male makes during the same amount of time, which amounts to a staggering $33 billion dollar loss for the state and families. To combat this, California’s new Fair Pay Act (Senate Bill 358) – which takes effect on January 1, 2016 – intends to close that gap by modifying existing laws and requiring employers to pay men and women equal pay for “substantially similar” work.
Under existing California law, an employer cannot pay an employee a wage less than what an employee of the opposite sex earns in the same establishment for equal work. (Cal. Lab. Code § 1197.5). The Fair Pay Act therefore amends that law by ensuring that men and women who perform substantially similar work, receive the same wages, even if they have different job titles or they work in different locations for the same employer. This can be concerning because it seems as though virtually any employee whose job title or location differs from a higher paid and similarly situated employee of the opposite sex can file a lawsuit against their employer for discrimination and violation of the Fair Pay Act. “Substantially similar work,” however, will be considered as a composite of skill, effort, and responsibility when performed under similar working conditions. For example, the Act seeks to equalize wages of a male “janitor” who is performing the same type of work for the same company as a female “maid”.
Under the Fair Pay Act, an employer must show that the difference in pay is based on factors that are reasonable and related to the employee’s job, and unrelated the employee’s gender. Specifically, an employer must demonstrate that (a) the difference in pay is reasonably based on factors such as a seniority or merit system (e.g., the amount of hours an airplane pilot must fly to qualify as a captain); (b) the quantity or quality of their production (e.g., the standard by which a head chef must prepare food compared to a line cook); or (c) on a business necessity such as a difference in education, training, or experience. The Act defines a “business necessity” as an “overriding legitimate business purpose…that…effectively fulfills the business purpose it is supposed to serve.” For example, if a lower paid professor at a university challenged the higher salary of another professor of the opposite sex, the university would have to show that the higher paid professor possesses a more advanced degree, has conducted extensive research in that field, or has taught the subject for a longer period of time.
The California Legislature also included additional safeguards for employees who want to discuss or ask about their wages. Under the Fair Pay Act, an employer cannot prohibit an employee from (1) disclosing his or her own wages, (2) discussing the wages of others, (3) inquiring about another employee’s wages, or (4) aiding or encouraging another employee to exercise his or her rights under the Act’s provisions. The Legislature indicated that pay secrecy contributes to the gender wage gap because employees cannot challenge wage discrimination that they do not know exists. They went on to say that although California employers currently cannot ban discussions about wages and cannot retaliate against employees for doing so, many employees are unaware of these protections and others are afraid to exercise these rights due to potential retaliation. Therefore, employees may freely discuss their own wages and inquire about the wages of other employees without the fear of being fired.
As a preventative measure, employers should prepare detailed job descriptions for each of their employees. A basic job description includes information regarding the general nature of the work to be performed, some indication of the responsibilities and duties, and the employee characteristics required to perform the job. On the other hand, an effective detailed job description should include an unambiguous job title; whether the position is full-time, part-time, or temporary, and exempt or non-exempt; the essential and specific duties, responsibilities, and functions of the job; the type and extent of knowledge and skill, and physical abilities necessary to perform the job; the scope of the employee’s decision-making authority and whether they can hire/fire or supervise other employees; the qualifications (e.g. licenses and skill) of the position; and the physical/geographic location of the job.
Using a detailed job description to be specific about an employee’s role will help dispel whether two employees perform substantially similar work. Thus, an employee will know precisely what his or her duties are and the justification for their wages, leaving little room for confusion or a perception of unfairness when a person of the opposite sex earns a higher wage. Employers should also proactively audit their existing employee pay rates and reevaluate the current market rates for certain positions.
California’s new Fair Pay Act may be the nation’s most aggressive attempt yet to close the salary gap between men and women. Although the Act’s intentions are obvious and its rules are clear, employers should seek a legal advisor who can effectively guide them through the process of ensuring that their current compensation policies are compliant with the new Fair Pay Act and ensure that they have documents supporting their compensation policies.
When Spouses are Living “Separate and Apart” for Purposes of Determining When the Community Estate Stops Accumulating .
The California Supreme Court has defined the rule as to when a couple is considered separated for purposes of cessation of community property. Prior to the California Supreme Court’s definitive “line-drawn-in-the-sand” ruling in In re Marriage of Davis (7/20/2015), the concept of when parties are considered separated might be explained as follows:
As long as one party communicates to the other that they believe the marriage to be irreversibly broken and they intend to live a separate life, and their actions match their words, the parties are separated within the meaning of Family Code section 771. When pressed for more detail, some family law attorneys might offer that spouses can dwell in the same house, but as long as their actions support the fact that at least one party believes them to be separated, then they should be fine – with a caution that the client should not be providing or receiving marital benefits or the separation can be set aside by the court or the other party.
Now, in a post- Davis world, this advice and concept of living separate, but not necessarily apart, has been called into question.
We anticipated this reversal in case interpretation, and the California Supreme Court used the Davis case to do this. In their definitive ruling in In re Marriage of Davis , in which they retraced legislative history circa 1870 to the present, they pronounced their emphatic decision, “[w]e conclude that living in separate residences -is an indispensable threshold requirement‖ ( Norviel, supra, 102 Cal.App.4th at p. 1162) for a finding that spouses are -living separate and apart for purposes of section 771(a).”
Family Code section 771(a) is the statute that determines when community property stops accumulating and separate property starts accumulating. This issue touches nearly every divorce case, and in some cases can be a very costly determination. In a case I previously tried, I successfully argued that a date of separation occurred six years later than husband contended…and I won…even though the parties lived apart for those six years and dated other people. My client gained approximately $300,000 more in assets than she would have, had we lost that argument. That case involved a middle class estate. Imagine that in a high net worth estate, a similar ruling could mean millions of dollars being pushed from one ledger to the other.
I cannot stress enough that the issue of when spouses are living “separate and apart” for purposes of determining when the community estate stops accumulating, can be a very important issue. This is particularly true in high asset cases, or when there has been a windfall, such as a lottery winning. It can also impact a stay-at-home parent who continues to focus on the well-being of the children until the divorce is final.
Due to its potentially grievous impact on unknowing individuals, our California Supreme Court determined that parties are better served if they know the facts that are required in order for a date of separation to protect separate property assets. The courts have grown weary with playing Jenga with litigants’ lives as they pluck a fact out of a set of facts and move it to the top of the list as dispositive (in their mind) as to why there was or was not a true separation for purposes of determining the accumulation of separate property. In the past, family law attorneys would caution separated clients to not even acknowledge anniversary dates with their separated spouse. “Do not exchange gifts or cards, and for goodness sake – do not celebrate it over dinner! Do not have sex (together), do your own laundry, cook your own meals, separate your bank accounts-act like a single person! Act like a roommate…you wouldn’t ask your roommate to (insert action here)…would you?”
Now, thanks to the Davis ruling, we have a clear test of whether one of the spouses has moved out and away from the residence that was once shared. So, what used to be just one fact to be considered amongst many other facts, it is now a starting point – to wit, are the parties living in separate residences and apart from one another? If so, has one person communicated a desire to have a final break in the marriage? Did their actions and words continue uninterrupted from the original date of separation until the finalizing of the divorce? If the answer is yes to all three questions, then you have a date of separation for purposes of Family Code section 771(a).
I can appreciate the need for a definitive rule that is not subject to mental gymnastics. While I sympathize with the pending litigants whose cases may be turned upside down by the Davis ruling, we believe that having a definitive rule will work out best in the long run for all parties and their attorneys. It should also serve to reduce attorney’s fees to the litigants as the factual minutiae will not be as potentially determinative as it was pre- Davis. However, we also believe that the Davis ruling won’t be good law for very long. Revised legislation is currently being contemplated to amend Family Code section 771 to effectuate wording clarifying that the living in separate dwellings is only one factor to consider and not a necessity for a finding as to a date of separation.
But, until the new legislation is formally enacted, Davis is the rule of law.
Twenty-five Olive Crest Academy Families Receive Thanksgiving Meals.
We are excited to announce we reached our goal of providing 25 complete Thanksgiving meal baskets for the families of Olive Crest Academy. A huge “thank you” to our clients, business partners, friends and families who helped support our event. The OCA families were extremely grateful and appreciative of what we were able to provide.