Exempt and Non-Exempt California Employees Affected by Increase in California’s Minimum Wage

On July 1, 2014, California raised its minimum wage from $8/hour to $9/hour. Both non-exempt and exempt salaried employees will be affected. An additional increase to $10/hour will take effect on January 1, 2016. Some employers view the change as inconsequential as they already have to meet local minimum wage requirements for their non-exempt employees, but there will in fact be a noticeable impact because the change applies to exempt status employees and commissioned inside sales employees.

To understand the potential changes the increase in minimum wage could have for exempt employees you must first consider the requirements for the exempt status. In order to be classified as exempt, an employee must meet certain requirements regarding the type of work they are performing. In addition, they must meet the minimum salary test. California law requires that all employees classified as exempt earn a monthly salary that is at least twice the minimum required by the state for a full time employee (working 40 hours per week). ) Prior to the increase in California’s minimum wage, this left the minimum monthly salary for a full time, exempt employee at $33,280. The change that took effect on July 1, 2014 bumps it up to $37,440. By 2016, this number will be even higher, bringing exempt employees’ minimum salary to $41,600 per year in order to meet the minimum salary test. 

In regard to commissioned inside sales employees, the new California minimum wage applies to overtime pay. California law dictates that an inside salesperson is exempt from overtime pay if they earn more than 1.5 times the state minimum wage and more than half of their income is commission pay. After July 1, 2014, an inside sales person must earn at least $13.51 per hour in order to be exempt from overtime pay. With the arrival of 2016, these employees will need to be making at least $15.01 per hour in order to retain exempt status.

Employers who disregard of delay the necessary adjustment of applicable employee pay rates and exemption statuses could face costly penalties and interest on back pay due employees, possible overtime premium pay (as a result of the loss of exempt status for some workers) and more. If you have questions regarding how the change to minimum wage law may apply to you, get in touch with Blumenthal, Nordrehaug & Bhowmik today. 

California Law Protecting Whistleblowers Lacking Work Authorization from Retaliation

California Governor Jerry Brown recently signed Assembly Bill No. 2751 into being. The Bill amends a recently enacted law prohibiting employers from retaliating against undocumented workers who engage in protected activity. The amendment is in reference to Assembly Bill No. 263, which restricted employers’ ability to put disciplinary action in place for employees who misrepresented their personal information (criminal history, immigration status, etc.)

The new law makes it illegal under California law for employers to retaliate by targeting immigration status when employees lacking work authorization are exercising a protected right such as filing a complaint for unpaid wages. The new law would prohibit employers from responding to whistleblowers lacking proper work authorization with threats to contact immigration authorities, discharging the employee, etc. California law now prohibits this type of action unless employee updates to personal information are directly related to the skill set, qualifications, or knowledge necessary for their job. The original bill’s intended purpose was to protect employees who are updating their work-authorization status, but it can be read to include protection for those wishing to update other information based on prior misrepresentations like criminal history. The amendment (AB 2751) clarifies the scope of the bill (AB 263) so that it specifically protects those employees who are attempting to update personal information in relation to name, social security number or federal employment authorization documentation. The amendment’s clarification allows employers to discipline/terminate employees who provides false statements not related to immigrate status, but continues to prohibit retaliation or disciplinary action against any workers who update records on lawful changes to immigration related information and documentation.

If you are unsure whether or not the new California law applies to your situation, you should contact the employment law experts at Blumenthal, Nordrehaug & Bhowmik immediately for legal advice regarding your specific situation. 

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. 

California Labor Lawsuit Led to Class Action v. Barnes & Noble

A class action suit against Barnes & Noble based out of New York has roots in California. The California labor lawsuit will continue – a New York judge refused to grant summary judgment for the defendants. Barnes & Noble, the major chain and online bookseller, is being accused of avoiding the payment of overtime to employees by purposefully misclassifying them as exempt. Allegations would leave Barnes & Noble in violation of the Fair Labor Standards Act (FLSA).

Court documents indicate that until 2005, Barnes & Noble classified all assistant store managers as FLSA exempt. This meant that no assistant store managers were eligible for overtime pay on hours worked above and beyond the standard workweek or workday. Generally speaking, managers (who are paid a salary and perform managerial tasks) are properly exempt in just this fashion. However, Barnes & Noble assistant store managers in California filed suit citing violations of California labor law.

The assistant store managers who filed suit in this California case made allegations that they performed tasks that fell outside of the managerial realm. They also indicated that despite their official title (assistant store manager) they had no actual authority over other employees.

The lawsuit resulted in Barnes & Noble reclassifying its assistant store managers in California as nonexempt. As nonexempt employees, they can now qualify for overtime pay. But Barnes & Noble apparently did not make the change at other stores in other locations throughout the country until a much later date.

Barnes & Noble did eventually (in 2010) reclassify all of its assistant managers as nonexempt throughout the states. This was the basis for Barnes & Noble’s petition for summary judgment in the lawsuit (originally brought in 2005 as an action citing California labor code). It would seem that the FLSA violations ended in June 2010, but the wider lawsuit was filed in January 2013. The defendants cited that the lawsuit fell outside the FLSA’s two-year statue of limitations.  

US District Court Judge John Koeltl disagreed, pointing out that the FLSA two-year limit extends to three years when there is proof, evidence or suspicion that there was a willful violation. Considering that Barnes & Noble reclassified California based assistant managers as a result of the California labor lawsuit, but failed to do so nationwide for 5 years, it would be easy to suggest that there was at least some evidence that a jury could perceive as willful violation.  

The three plaintiffs (named) in the current, New York based lawsuit, are all former assistant store managers for Barnes & Noble. They note that their duties were not limited to managerial duties, they often performed tasks performed by other non-exempt employees, such as working the cash register, processing product returns, etc.

If you feel you have been misclassified as an exempt employee, contact the employment law experts at Blumenthal, Nordrehaug & Bhowmik today. 

Landmark Iskanian Decision’s Effect on Private Attorneys General Act (PAGA) Claims

Attorneys are predicting an uptick in PAGA claims that open up California employers to greater financial exposure as a result of the California Supreme Court’s landmark Iskanian decision. The decision strengthened the enforceability of class waivers in arbitration agreements, but also held that PAGA (Private Attorneys General Act) claims can’t be waived in employment arbitration deals.

The decision allows employees to sue on behalf of other workers to recover California Labor Code violation penalties. The issue of whether PAGA and other claims will be decided in a single forum or separately via bifurcation with individual claims going to arbitration and the PAGA claim to litigation has been remanded by the Court. If bifurcated, the lower court could decide to stay one of the matters. Employers would be likely to push for arbitration of individual claims to proceed first in bifurcated matters since the arbitrator’s findings could make a difference in whether or not plaintiffs were able to proceed with PAGA claims in the court system. The argument that employers could present to obtain their end would be that arbitration going first would be more quick and efficient and that putting the individual claims on hold while the PAGA claim is determined isn’t the best use of the courts’ or involved parties’ resources and time. Courts who are overseeing bifurcated cases could potentially choose not to stay the arbitration or litigation. Individual actions are not necessarily dispositive of the issues in the PAGA action – this is something to consider as the potential differences between the individual pursuing a claim in arbitration and the end result the class as a whole is pursuing in court could be notable.

If you have questions on California employment law and how recent landmark decisions could affect your workplace situation, please contact the experts at Blumenthal, Nordrehaug & Bhowmik immediately. 

Preliminary Approval on Uncapped Settlement of Another NFL Concussion Lawsuit

U.S. District Court Judge Anita B. Brody rejected the previous $765 million concussion settlement between the NFL and former players with head trauma who were suing the league, but she offered preliminary approval of the more recent settlement produced saying the NFL would uncap the payments to former players suffering debilitating systems. The first settlement was thrown out because Judge Brody felt that the $765 million would be insufficient to cover the lifetime of the 65 year settlement. Her preliminary approval of the new settlement left the former players another step closer to receiving payment from the NFL. 

The plaintiffs are pleased with the preliminary approval and state that the settlement for retired NFL players and their families is extraordinary. It would apply to those suffering from neuro-cognitive illnesses today to any who suffered head injury without current signs of major damage, but who fear serious symptoms could develop in the future. The settlement would provide guaranteed benefits and long-term security. They look forward to finalizing the agreement.

The NFL’s response was to offer gratitude to Judge Brody for her guidance and thoughtful approach to the serious issues being addressed. They state that they will work with the plaintiffs’ counsel in order to implement the terms of the settlement as per the Court’s final decision.

According to the terms outlined for the compensation program, funds would be established and retired players would qualify to use the funds if they were to develop a qualifying neurocognitive condition. The plaintiffs now have 90 days to opt out or challenge the settlement. At that point in time Brody will be able to give her final approval of the settlement agreement.

For additional information or to ask questions regarding employment law please contact the experts at Blumenthal, Nordrehaug & Bhowmik. 

California Supreme Court and Questions Defining “Employers” Liable for Wage Violations

Ramifications of Ayala v. Antelope Valley Newspapers could result in changes for California workers. The California Supreme Court unanimously affirmed a Court of Appeal decision that reversed the denial of class certification in the independent contractor misclassification case. Judge Werdegar, Justice Baxter and Justice Chin all concurred that the Court of Appeal correctly reversed the trial court decision that denied certification in the case of Ayala v. Antelope Valley Newspapers. In the case, Newspaper delivery workers filed against a daily newspaper. They were classified as independent contractors and as such, were denied minimum wage payment, overtime pay, minimum rest and meal period premiums, as well as employer contributions toward Social Security.

The trial court held that there were too many individual inquiries necessary in order to determine how the various newspaper delivery workers handled their day to day operations, but the Supreme Court felt that the trial court missed the point of the case: whether a common law employer/employee relationship exists dependent upon the degree of the hirer’s right to define/control the relationship or how the end result is actually achieved. The Supreme Court further explained their decision by pointing out that while there was evidence of variation in work habits between newspaper carriers, which supports claims made by Antelope Valley’s position that they didn’t control their carriers’ work, this fact didn’t negate the actual question at hand. How much right does the employer (Antelope Valley) have to control what their carriers’ do?

This case reinforces the common proof method that turns to governing contracts: a common method used to determine the answer to the independent contractor vs. employee question. The Court has pointed out that at the certification stage, the form contract’s importance is not particularly in what it says, but in what degree of control it defines and whether it is uniform across the class.

Countless California workers are misclassified as independent contractors even though their employers retain control of their working conditions. If you are one of these California workers and you’d like to join with fellow workers to address the issue of misclassification claims, contact Blumenthal, Nordrehaug & Bhowmik. There’s precedence in the legal system that empowers you to raise your wage claim.