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Posts Tagged ‘non-exempt’

On-Premises Rest Breaks: Should I Stay or Should I Go?

Posted on: July 18th, 2018

By: Allison Hyatt

Under California law, non-exempt employees are entitled to a 30-minute meal break if the employee works more than 5 hours in a workday, and a 10-minute break for every 4 hours worked (or “major fraction” thereof).  In the past, employers commonly required employees to remain on the premises during rest breaks.  However, with the California Supreme Court’s decision in Augustus v. ABM Services, Inc. (2016) 2 Cal. 5th 257, which emphasized the fact that employers must “relinquish any control over how employees spend their break time,” employers should discontinue any such policies still in practice.

Although the issue in Augustus was on-call rest periods and therefore the Court did not directly consider an on-premises rest break policy, the California Labor Commissioner’s office updated its fact sheet on rest breaks to specially address on-premises break policies in light of the Augustus opinion.  Quoting the Supreme Court’s opinion, the Labor Commissioner’s office explained that employers cannot impose such restraints, stating: “‘during rest periods employers must relieve employees of all duties and relinquish control over how employees spend their time.’  As a practical matter, however, if an employee is provided a ten minute rest period, the employee can only travel five minutes from a work post before heading back to return in time.”

Moving forward, it is unclear as to how courts will address pre-Augustus on-premises rest break policies believed to be legal at the time.  The Augustus Court did not clarify any limitations to what appears to be a sweeping ruling described by the Dissent in Augustus as a “marked departure from the approach we have taken in prior cases.”  2 Cal. 5th 257, 277.  In one post-Augustus case, Bell v. Home Depot U.S.A., Inc. 2017 U.S. Dist. LEXIS 55442 (E.D. Cal. April 11, 2017), the Eastern District of California declined to reconsider a summary judgment ruling in favor of Home Depot on the plaintiffs’ claims that Home Depot violated California law by requiring employees to remain on premises during rest breaks.  The Eastern District had ruled, prior to the decision in Augustus, that such a policy did not violate the applicable California wage order and statute.  In response to the plaintiffs’ motion for reconsideration, Home Depot argued that the Augustus decision implies that restricting employees to the premises, without additional duties or constraints, does not violate the rule.  The Eastern District declined to alter its ruling, noting:

“[t]he facts in Augustus and the present matter are distinct, as the present case does not concern ‘on-call’ rest periods. . . The Augustus court did not directly consider an on-premises rest break policy which does not require employees to remain on call such as the one at issue here.  While the Court finds Defendants’ reading of Augustus more persuasive and accurate than Plaintiffs, it does not specifically adopt Defendant’s interpretation that Augustus affirmatively condones on-premises rest breaks.  Rather, the Court finds that the holding in Augustus does not go as far as Plaintiffs contend.”  2017 U.S. LEXIS 55442 at *5.

It will be interesting to see how other courts interpret the implications of the Augustus opinion.  For now, employers are encouraged to follow the California Labor Commissioner’s advice and discontinue any practices that impose any restraints on how employees spend their break periods.  If you have any questions or would like more information, please contact Allison Hyatt at (916) 472-3302 or email at [email protected].

Bonus or No Bonus? California Supreme Court Clarifies Calculation of Overtime

Posted on: April 16th, 2018

By: Christine C. Lee

Calculating the correct overtime pay rate for non-exempt employees just got a little more complicated for California employers who elect to pay bonuses.  In the recent case of Alvarado v. Dart Container Corporation of California, plaintiff Hector Alvarado, a non-exempt warehouse worker, was paid a flat “attendance bonus” of $15 per day in addition to his hourly rate if he worked a full shift on a Saturday or Sunday.  Because there was no California statute, regulation or wage order directing how employers should calculate the rate of pay for overtime purposes when such non-discretionary flat sum bonuses are paid, the employer, Dart Container Corporation of California, followed the methodology set forth in the federal Fair Labor Standards Act (FLSA).

Dart calculated the overtime pay rate by taking Mr. Alvarado’s total earnings in the relevant pay period, which included the attendance bonuses, and dividing that figure by all hours worked in the pay period including overtime.  Using this figure, Dart paid Mr. Alvarado 1.5 times this rate for every overtime hour worked.

To thank his employer for the bonuses, Mr. Alvarado sued Dart in a wage and hour class action alleging Dart miscalculated the overtime rate of pay.  He argued Dart should have divided the period’s earnings and attendance bonuses only by the amount of non-overtime hours worked which would have resulted in a marginally higher overtime rate of pay.  In support of his position, Mr. Alvarado relied on the California Division of Labor Standards Enforcement’s (DLSE) Enforcement Policies and Interpretations Manual which states that when employees earn a flat sum bonus, their overtime rate is determined by dividing the regular and bonus earnings only by the regular non-overtime hours worked during the relevant pay period.  The case reached the California Supreme Court for guidance.

There, Dart argued because its formula complied with the federal FLSA when California law gave no guidance, its methodology was lawful.  Dart also argued the DLSE Manual was merely an underground regulation and interpretation of the law and therefore was not entitled to any special deference.  The Court agreed the DLSE manual was not entitled to special deference.  Nevertheless, the Court held “[W]e are obligated to prefer an interpretation that discourages employers from imposing overtime work and that favors the protection of the employee’s interests.”  The Court found Mr. Alvarado’s method was “marginally more favorable to employees” and should now be the law of California.  To add further ambiguity to its ruling, the Court cautioned this methodology only applied to non-production related flat sum bonuses and not necessarily to production-based bonuses such as piece rate or commission-based bonuses.

Dart requested only prospective application of the Court’s rulings since California law had been unclear up to that point.  The Court refused the request, leaving Dart on the hook for 4+ years’ worth of unpaid overtime, penalties for inaccurate wage statements, penalties under Labor Code §203 and California’s Private Attorney General Act, and attorney’s fees and costs.

The unfortunate result of this decision is that employers may stop bonusing non-exempt employees and/or flee California to avoid this kind of catastrophic litigation.

If you have any questions or would like more information, please contact Christine Lee at [email protected].