Commission Wage Allocation Limited by California Supreme Court Ruling

The California Supreme Court ruling on June 14, 2014, limited commission wage allocation by holding that employers could not satisfy the California compensation requirements for commission sales exemptions by assigning commission wages paid in one pay period to alternate pay periods. The decision could have a notable impact on employers who regularly pay their employees on a commission basis. It could have a particularly significant impact on those who pay commission sales employees a base salary that falls near the minimum wage requirement.

California’s commissioned employee exemption requires (among other things) employee’s earnings to exceed one and a half times minimum wage. It also requires that more than half of the employee’s compensation be commissions.

In Peabody v. Time Warner Cable, Inc. Case No. S204804, the employer (Time Warner) argued that their former account executive wasn’t entitled to overtime pay due to the fact that she was a “commissioned employee” and was therefore exempt. As noted above, there are limitations as to which employees can fall under the commissioned employee exemption. In the case of Time Warner, Peabody was paid an hourly wage of $9.61. This did not fulfill the one and half times minimum wage minimum pay requirement. The wages were paid every other week. Total compensation of the plaintiff did exceed the minimum one and a half times minimum wage requirement when the hourly was combined with the commissions paid to the employee. Commissions were paid only once/month. The commissions paid were earned throughout the previous month.

Due to the pay structure set up by Time Warner, the employee’s compensation fell short of the one and a half times minimum wage requirement during some pay periods. It is also notable that there was no dispute regarding the fact that the employee worked 45 hours per week and was not paid any overtime. In an attempt to meet requirements set down in the commission employee exemption, Time Warner suggested that employee commissions should be reallocated to be paid during earlier pay periods (in which they were earned) rather than the bi-weekly pay periods that were in place. They felt that satisfying the exemption’s minimum wage earnings requirement in this manner should free them from the obligation to pay commission employees overtime. The California Supreme Court rejected their argument. It was concluded that the Time Warner’s attribution of commission wages to meet minimum requirements was impermissible.

If you need to discuss implications of the recent ruling and how it could affect you as a commission employee, contact Blumenthal, Nordrehaug & Bhowmik, the Southern California employment law experts. 

Accusations from Workers Indicate Costco Stiffs Workers on Meal Breaks and Ignores Sexual Harassment Charges

A proposed class action in California court alleges that Costco Wholesale Corp. doesn’t provide compensation for rest or meal breaks. The former employee making the allegations further claims that the discount retail giant retaliated against him when he reported sexual harassment to supervisors. Lead plaintiff is Micah Ornelas. Micah claims that warehouse employees were not provided with rest and meal periods and were not compensated for breaks as mandated in California law. Micah also claims that he was fired when he reported instances of both sexual harassment and unsafe working conditions to his direct supervisor.

The plaintiff claims that as a result of Costco’s labor law violations, he has suffered and will continue to suffer:

• Economic damages
• Emotional distress
• Humiliation
• Mental anguish/embarrassment
• Manifestation of physical symptoms related to the case

In addition to his own personal experience with a failure to respond to reports of sexual harassment, Ornelas claims that a female employee was harassed and physically threatened by the supervisor and told to “keep quiet” about the incident after reporting the problem. When the warehouse manager was approached about the problem, Ornelas claims that he was told the direct supervisor would be fired. Instead he was promoted. When Ornelas went back to the warehouse manager with concerns over this “resolution” he also informed him of unsafe working conditions (that had been discussed in pre-shift meetings previously with not action taken to remedy the situation by management). He was told that the harassment complaint was none of his business. Ornelas was suspended for three days. Upon returning from his suspension, Ornelas was subjected to sexual harassment as well.

Ornelas complained one last time about instances of sexual harassment, which resulted in his immediate termination without explanation. Ornelas claims that he was not paid all his wages upon termination.

If you have unfair wage and hour practices in force at your place of employment, contact Blumenthal, Nordrehaug & Bhowmik to quickly remedy the situation. 

Workers Sue Crabtree and Evelyn Over Missing Meal Break Pay

California courts recently heard accusations against a luxury skin care product manufacturing company, Crabtree & Evelyn Ltd. The Connecticut based company was founded in 1972. They have grown to include several hundred retail locations all selling a range of products: fragrances, soaps, lotions, home spa products, etc. Former employees claim that they were denied mandated meal breaks and rest periods. Three plaintiffs filed suit in Los Angeles Superior Court: Irina Eremina, Fernando Hernandez and Lillian Zamora. The plaintiffs indicated that they believed Crabtree & Evelyn was in violation of California Labor Law when they failed to provide duty-free meal and rest periods. They also claim that the company manipulated pay stubs/time sheets to make it look as if breaks and meal breaks had been provided and used. In addition to not receiving their required break times, workers were not compensated for overtime accumulated by working through said breaks and meal breaks.

Proposed class is seeking a jury trial and financial restitution (for unpaid wages, attorney costs, etc.), but potential class members have not yet been defined. The three plaintiffs filed a grievance with California’s Labor and Workforce Development Agency in February in an effort to settle the matter, but didn’t hear back within the 33-day period required prior to filing suit under California state law. This fulfilled the requirement (under California’s Private Attorney General Act) to exhaust all administrative remedies prior to presenting claims to the court.

If you fear you may need to talk to someone about potential violations of the Fair Labor Standard Act (FLSA) in your workplace, contact the experts at Blumenthal, Nordrehaug & Bhowmik today. 

Work Off the Clock: Nurses Allege Wage and Hour Violations at Houston Methodist Hospital

Allegations have been made that the Houston Methodist Hospital requires nursing staff to work off the clock due to a payroll system that automatically deducts a 30 minute lunch break. A former nurse named Joy Corcione is seeking permission from a local federal court for collective action on behalf of over 5,000 workers from the facility. The lawsuit Corcione filed alleges that as a result of the automatic lunch break deductions the hospital owes back wages to the nurses, nursing assistants, patient care assistants, etc. Corcione explains that workers are required to respond to patient calls as well as meet with doctors and perform other duties as necessary during their so called “lunch breaks.” The lawsuit also alleges that sometimes nurses and other hospital employed caregivers don’t get to eat lunch at all, they are too busy.

The hospital has responded to the allegations made in the suit saying:

1. They make sure to pay workers appropriately even if their lunch is interrupted.

2. Hospital administration makes a great effort to ensure a fair compensation process as well as a fair work place environment.

3. The hospital will address claims otherwise during the process of litigation.

According to the Federal Labor Law, employers don’t have to pay employees during their lunch breaks if they are not working, but it’s been specified that if workers are still on duty (answering calls, going through emails, performing other work-related activities) during their lunch break then this time is considered work time even if they are eating, making personal calls or texts etc. while performing said duties.

It will be interesting to see what U.S. District Judge Gregg Costa has to say about the payroll system that automatically deducts the 30-minute break and the alleged discouragement of employees to manually correct the deduction of meal time and break time on their time sheets. The judge will need to decide whether or not to certify it as a collective action, but if he does, other nurses and patient care employees from the hospital can expect to receive notices regarding their chance to opt in – only employees who opt in can share in any eventual settlement.

If you have any questions about class action lawsuits or meal break violations, please get in touch with the experts at Blumenthal, Nordrehaug & Bhowmik. 

Warehouse Wage Theft Case Results in $21 Million Settlement

Walmart and their most prominent import distribution subcontractor, Schneider Logistics, Inc. will pay an historic $21 million settlement for wage and hour violations (federal and state level) in connection to case Carrillo vs. Schneider Logistics et al. Violations were committed at a warehouse facility in Riverside County, California. According to the terms of the settlement, Schneider is to pay the full settlement awarded for unpaid wages as well as interest and penalties for multiple wage and hour violations that occurred over the process of a decade. The facility was dedicated to Walmart operations, but the settlement agreement doesn’t indicate whether or not Walmart will be contributing to the settlement payment as a part of a behind the scenes agreement. Walmart did receive a complete release alongside Schneider in the settlement.

The settlement will go to over 1800 workers employed between 2001 and 2013 at three different distribution centers in Mira Loma, California. All three facilities were dedicated 100% to Walmart distribution. Together, the three facilities function as the largest Walmart distribution center in the western United States.

Allegations made in the suit included major wage theft over the course of 10 years against “lumpers.” Lumpers are workers who are paid to load and unload boxes by hand from shipment containers arriving on site onto trailers waiting to be loaded for Walmart delivery. Workers often worked double shifts (meaning 16 hours/day), seven days per week. There were no mandated, required breaks and no overtime premiums. The work they completed was often done for wages lower than the federally mandated minimum wage. Payment rates were based on an elaborate piece rate system that was changed quickly after the suit was filed in November 2011. (It was found to be illegal).

For additional information on wage and hour violations and how to identify them in the workplace, contact Blumenthal, Nordrehaug & Bhowmik, the wage and hour theft experts. 

Workers are Filing Wage and Hour Lawsuits at a Record Pace

Experts are noting that federal wage and hour lawsuits were filed at record rates throughout 2013-2014. (According to data collected by the Washington-based Federal Judicial Center, the education and research agency for the federal court system).

While the full range of data is extensive, there are some interesting pieces of information included in the analysis that can provide a clear summary of recent filing activity related to wage and hour allegations:

8,126 federal wage and hour lawsuits were filed between the dates of 4/1/13 and 3/31/14.

This was almost a 5% increase in comparison to the year previous in which only 7,764 cases were filed

Since the year 2000, the number of cases has risen 438%

Many experts predict that the wage and hour litigation epidemic will continue and even expand in the upcoming year. The rise in the number of cases is shocking, but doesn’t even take into account the number of suits filed in state courts regarding state pay practices. The number of cases is expected to continue to accelerate in the coming months as a result of multiple factors: the tightening of federally mandated standards for class certification, the possibility of an increased minimum wage, the President’s directive to the Secretary of Labor to complete revisions for regulations on white-collar exemptions, etc.

Wage and hour issues are a common problem in many workplaces. If you feel pressured to work more hours than you are paid for or if you feel that your pay is inadequate in relation to the federal wage and hour standards, get in touch with the experienced attorneys at Blumenthal, Nordrehaug & Bhowmik.