Commonly Overlooked and Misunderstood Aspects of California Wage and Hour Law

California’s wage and hour laws are constantly evolving. This advisory highlights the following areas:

Overtime and Double Time for Non-Exempt (Hourly Paid) Employees

• Daily and weekly overtime requirements:
• Straight time pay for hours up to 8 in a workday and/or 40 in a workweek
• 1½ times the “regular rate” for hours worked over 8 in a workday and/or 40 in a workweek
• 1½ times the “regular rate” for the first 8 hours worked on the employee’s 7th consecutive workday in a workweek
• 2 times the “regular rate” for hours worked over 12 in a workday
• 2 times the “regular rate” after 8 hours worked on the employee’s 7th consecutive workday in a workweek
• Alternative work schedules like 4-day work weeks are permitted only after a secret ballot election conducted according to
  strict procedures, and filing of the results with the stat
• “Regular rate” includes virtually all compensation (e.g. non-discretionary bonuses include commissions, performance bonuses, attendance bonuses, incentives, etc.) Bona fide business expense reimbursements and meal and rest period premiums are also not included in the “regular rate.”
• Paid work time includes all time the employee is “subject to the control” of the employer or is “suffered or permitted” to work:
  • Time spent “donning and doffing” some uniforms is work time
  • Time spent traveling from one work location to another is work time
  • Time spent filling out required paperwork is work time

Exemptions from Overtime Pay Requirements

• All employees are entitled to overtime pay except exempt employees who perform exempt duties more than 50 percent of their
  work time. Exemption from overtime in California is not based on title or overall responsibility; it is based on the time spent
  on exempt duties (a manager who spends 51 percent of his or her time working alongside staff is not exempt from overtime)
• Compensation for exempt employees must be on a fixed salary of at least 2 times the state minimum wage for full time
  employment (40 hours per week, generally no reductions for missed time, but may charge vacation and sick pay accruals). There is no such thing as a part-time salary of less than twice the minimum wage for less than 40 hours per week.

Split Shifts for Non-Exempt Employees

• Workdays interrupted by an unpaid period of more than an hour (at the employer’s request) generally require an additional
  hour of pay at minimum wage for non-exempt employees, unless the employee is paid in excess of one hour over the
  minimum wage for the day

Reporting Time Pay for Non-Exempt Employees

• Employees who are required to report to work for a scheduled period of time, but at the employer’s request work less than
  half that time, are entitled to be paid for just the time worked, as long as the time worked is at least half of the scheduled
  time. If the employee is not provided with work for at least half of the scheduled time, or there is no set period of time, the
  employee is entitled to the greater of 2 hours of pay, or half of the usual or scheduled day of work, up to a 4-hour maximum.

Rest Periods for Non-Exempt Employees

10-minute, paid rest periods are required according to the following schedule:

• If the employee’s shift is between 3.5 hours and 6 hours long, one rest period is required during the shift
• If the employee’s shift is more than 6 hours and up to 10 hours long, two rest periods are required
• If the employee’s shift is more than 10 hours and up to 14 hours long, three rest periods are required
• If the employee’s shift exceeds 14 hours, an additional rest period is required for each additional 4-hour work period

If possible, the paid rest periods should be scheduled about midway through each 4-hour work period, or major part of 4 hours.

• Failure to provide rest period(s) entitles an employee to a premium payment of 1 hour of pay per day
• Suitable resting facilities other than bathrooms must be provided
• Employers must have a policy requiring rest periods and make a “good faith” effort to encourage employees to take them
• Employers must not do anything to impede employees’ ability to take rest periods and must not merely look the other way if
  employees don’t take them. Employers should pay meal and rest period penalties when they cause or work demands cause an employee to miss his
  or her rest period.

Meal Periods for Non-Exempt Employees

• A 30-minute unpaid meal period (during which the employee is relieved of all work and able to leave the premises) must be
  provided after no more than 5 hours of work unless:
  • 6 hours completes the day and the employee waives the meal period; or
  • The circumstances are such that the employee cannot be relieved of duty and/or permitted to leave the premises and
    the employee voluntarily agrees in writing to an on-duty the meal period that makes clear the employee can revoke the
    agreement at any time.
• A 2nd 30-minute unpaid meal period must be provided if the employee works more than 10 hours in a workday unless:
  • 12 hours or less completes the day,
  • the 1st meal period was not waived, and
  • the employee consents to waive the 2nd meal period (slightly different for some wage orders for certain industries).
• Failure to provide meal period(s) entitles employees to a premium payment of 1 hour of pay per day.
• Suitable eating facilities must be provided for on-duty meal periods, and for any meal period during shifts starting or ending
  between 10:00 p.m. and 6:00 a.m.
• Employers must have a policy requiring meal periods and explain to employees that they are expected to take them.
• Employers must not do anything to impede employees’ ability to take meal periods and must not merely look the other way if
  employees don’t take them.
• Employers should pay meal and rest period penalties when they cause an employee to miss his or her meal period and
  should provide a way for employees to report if they are unable to take a meal period.
• Exempt employees need not track time for meal periods, and there is no meal period penalty for missing them, but they are
  entitled to meal periods under the Labor Code.

Timekeeping for Non-Exempt Employees

• Employers must record the beginning and end of each workday and the beginning and end of unpaid meal or other unpaid
  periods and keep the records for at least 4 years.
• A clock must be provided in or near work area, unless impracticable.

Piece Rate Pay for Non-Exempt Employees

• “Piece Rate” or “Piece Work” is when work is paid according to the number of units or tasks an employee completes or
  produces. An employee can be paid piece rate in addition to, or as an alternative to, an hourly rate or salaried rate. Note,
  however, that all requirements that apply to hourly, non-exempt employees still apply to piece rate employees. Employers
  must pay piece-rate employees for rest period, recovery periods, and all other periods of “nonproductive” time separately
  from and in addition to their piece-rate compensation.
• Piece rate employees, like hourly, non-exempt employees, are entitled to overtime pay. The overtime calculation is different,
  though, as it requires employers to calculate the employee’s regular rate of pay. To do this, employers must take the straight
  time wages and divide by the total actual hours worked.

Wage Theft Protection Act Notice, for Non-Exempt Employees

• Employers must provide notice to non-exempt, non-union employees of the below at the time of hiring, and within 7 days of a change not listed on the employee’s pay stub for the following pay period, in the language the employer normally uses to
  communicate information to the employee:
  • Rate of pay and basis for rate of pay (i.e., hourly, shift, day, weekly, salary, piece, commission, etc.);
  • Allowances, if any, claimed are part of minimum wage, including meal or lodging allowances;
  • The regular designated pay day;
  • The employer’s name, including any “doing business as” names;
  • The address of the employer’s main office or principal place of business, and mailing address if different;
  • The employer’s telephone number;
  • The name. address, and telephone number of the employer’s workers’ compensation carrier; and
  • That an employee may accrue and use sick leave, and on what terms, has a right to request and use accrued paid sick leave, may not be terminated or retaliated against for using or requested use of accrued paid sick leave, and has the right to file a complaint against an employer who retaliates.

Pay Stub Requirements

• Employers must provide to employees an itemized written statement at the time of each wage payment of the below:
  • Gross wages earned;
  • Total hours worked by the employee (not required for salaried, exempt employees);
  • For piece-rate employees, the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis, and 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, the rate of compensation, and the gross wages paid for that time during the pay period;
  • All deductions (all deductions made on written orders of the employee may be aggregated and shown as one item);
  • Net wages earned;
  • The inclusive dates of the period for which the employee is paid;
  • The employee’s name and the last four digits of his or her social security number or an employee identification number
    other than a social security number;
  • The name and address of the legal entity that is the employer; and
  • All applicable hourly rates in effect during the pay period, and the corresponding number of hours worked at each hourly rate by the employee.
• Paychecks must list the address of a specific location within the state where the check can be cashed without a fee.

Cellphone Reimbursement

• Employees who use personal cellphones for business purposes must be reimbursed for an equitable portion of their costs.
• Employers must: reimburse employees for actual voice and/or data fees incurred for business purposes; reimburse employees for a percentage of voice and/or data fees that reflects the percentage of mandatory business use; or, provide employees with a cellphone for business use.

Mandatory Paid Sick Leave

• Employers are required to provide paid sick leave to full-time, part-time, temporary, and other employees not covered by a collective bargaining agreement that provides similar paid sick leave benefits, and who have worked in California for at least 30 days within a year. Per state law, eligible employees accrue 1 hour of paid sick leave for every 30 hours worked. Employers can cap accrual at 48 hours per employment year.
• Employees may use their accrued sick leave benefits to take paid time off due to their own illness or injury or preventative care, for the illness or preventative care of certain family members, or if the employee was the victim of certain abuse. Employments may be limited in their use of accrued sick leave to the greater of 24 hours per employment year or one-half of their annual sick leave accruals to care for illnesses of family.
• Depending on the location of the employees and the size of the employer, employers must comply with local ordinances that have more employee-friendly paid sick leave eligibility, accrual, and use requirements.
• Employees must be provided with an itemized wage statement or a separate writing provided on the pay date that states the amount of paid sick leave the employee has available.
• Accrued but unused paid sick leave is not payable at termination of employment but may be recoverable if the employee is rehired within a year.

Vacation Pay

• Forfeitures of accrued vacation are not permitted:
  • “Use it or lose it” policies are not permitted
  • Vacation accrues over time as the employee works, unless awarded up front (cannot be awarded in arrears)
  • All accrued but unused vacation must be paid upon termination
• A cap on vacation that limits the amount that may accrue is permitted, provided the cap is, “reasonable,” e.g. 1.5 times the current annual accrual. Paid Time Off (PTO) is treated like vacation (except when it is to employees’ advantage for it to be treated as sick leave).

Final Paychecks

• Final pay must be provided to employees (direct deposit, delivered, or available for pick up):
  • Immediately upon involuntary termination
  • Within 72 hours if employee resigns without notice
  • On last day of work if employee resigns with at least 72 hours’ notice
• Must include all compensation the employee actually earned (including vacation and meal or rest period premiums); commissions or other performance-based pay must be paid as soon as it can be calculated, regardless of when it otherwise would be paid.
• No deduction may be taken from final paychecks unless legally mandated, authorized in writing by the employee, or for a loss attributable to the employee’s dishonest or willful act or gross negligence (but only if the employer is absolutely positive that it can be proven that the employee was not simply negligent). No balloon deductions for payoffs of employer loans to employees.