Employers doing business in the Golden State are confronted with more legal challenges from their employees than are those in just about any other state. The goal of this podcast is to give you an overall heads-up on the most common legal vulnerabilities employers are facing here in California, including:
- California’s Private Attorney General Act (PAGA)
- California’s meal and rest break requirements
- Pay stub violations
These claims show no sign of slowing down in 2018. In fact, there are dozens of cases up for review in 2018 addressing a variety of PAGA issues. In November 2017, California’s Division of Labor Standards Enforcement (DLSE) released an updated Frequently Asked Questions page for rest break compliance recognizing recent case law holding “on-call” rest breaks are not permitted under California law. Additionally, the new FAQs specifically state that employers cannot require workers to remain on-premises during rest breaks. Employers should expect to see an increased focus on rest period requirements in the coming year.
Welcome to the Cook Brown Labor and Employment Law Podcast. I’m Lisa Ryan, a partner here at the firm. Cook Brown is a California-based labor and employment law firm. We represent public and private sector employers in everything from routine advice to complex class action litigation.
We also represent employers who have operations in a variety of states. But employers doing business in the Golden State seem to be confronted with more legal challenges from their employees than are those in just about any other state. Really, almost all of them. And that’s what we’re going to talk about today.
I’m going to share some insights about a few of the litigation trends we’re seeing in our practice in 2016. They’re based on three particular state laws. The goal of this podcast is to give you an overall heads-up on the most common legal vulnerabilities in the wage and hour arena employers are facing here in California.
- First is the California Private Attorney General Act
- Second are California’s meal and rest break requirements
- And third are pay stub violations
Before we start, I’d like to remind you that this podcast is for general informational purposes only. It doesn’t create an attorney-client relationship between Cook Brown and the listener, should not be treated as advice specific to your situation, and whether inside or outside of California, it is important that you consult a local attorney for specific advice.
California’s Private Attorney General Act
So, the first thing we’re going to cover is the California Private Attorney General Act (PAGA). Or as we refer to it here in California “PAGA.”
PAGA allows private citizens to sue for civil fines and penalties for violations of certain California Labor Code provisions. Before PAGA, this could only be done by a State agency such as the Labor Commissioner or the Attorney General. The law was enacted in 2004 but it took a few years for employees and their attorneys to truly figure out how they wanted to use PAGA to sue employers.
Here’s how it works. Under PAGA an employee can seek civil penalties for violations not only that he or she have suffered, but also for violations suffered by other current and former employees.
So employees can use PAGA to file claims for arguably minor violations of the law which, when amassed over multiple pay periods for an entire workforce, can add up to massive penalties for the employer.
The California Supreme court also held that an employee who brings a representative action under PAGA may recover civil penalties without satisfying class action certification requirements.
That’s become a major incentive for plaintiffs’ attorneys because it raises the amount of a potential settlement and thus their fees. But it’s a bad deal for employers who may see a relatively small, innocent mistake mushroom into a big pay-out.
Meal and Rest Break Claims
It’s well known that California has some of the most onerous meal and rest break requirements in the nation. Despite extensive litigation in this area and most often the best of intentions, California employers continue to be hit with lawsuits from employees who allege they weren’t able to take their legally mandated meal and rest breaks.
This is a problem that just doesn’t seem to be going away anytime soon.
Generally, in California, an employee shall not be required to work for a period of more than five hours per day without taking an uninterrupted and duty-free meal period of not less than thirty minutes.
If an employer fails to provide an employee a meal period in accordance with the applicable IWC Order, the employer must pay a penalty of one additional hour of pay at the employee’s regular rate of pay.
California employers must authorize and permit nonexempt employees to take a paid rest period that must be taken – insofar as practicable – in the middle of each work period. You can read more about that in an article on our website California Meal and Rest Break Compliance: The Bar Went Up a Notch in 2016.
And listen carefully to this part. The rest period is based on the total number of hours worked daily and must be at the minimum rate of a net 10 consecutive minutes for each 4-hour work period or major fraction thereof. This means that employers must authorize and permit employees to take two 10-minute paid rest periods in a typical 8-hour shift, with one rest break taken in the first half of the shift and another break in the second half of the shift.
But did you know that employees who are paid on a piece rate basis, also are now required to be separately compensated for their legally mandated rest breaks? Effective January 1, 2016, California employers must pay piece-rate employees for rest periods and other non-productive time at an average hourly rate that takes into account all earnings with no reduction in pay during mandated breaks.
In, 2015, the legislature amended the labor code to detail how employers are to compensate piece-rate workers for mandated rest and recovery periods and other work time that doesn’t generate piece-rate earnings.
The legislation came after recent court decisions found that piece-rate compensation only pays for productive time, and that mandated breaks and other nonproductive work time must be separately compensated.
This also means that time and pay must now be listed separately on the employee’s wage stub.
Pay Stub Violations
Which leads me to the third reason California employers are more likely to be sued: pay stub violations. The California Labor Code has a specific provision, section 226, which requires nine separate provisions to be included on an employee’s wage statement or pay stub. You probably already know that it requires basic information such as gross and net wages earned and total hours worked by the employee, and of course all deductions. For employees earning piece rate, the pay stub must show the applicable piece rate and number of piece-rate units earned.
But in recent years there was an increase in litigation involving claims of violation of Labor Code section 226 where the pay stub failed to exactly list the employer’s legal name or address, or listed a pay period ending date but not the inclusive dates of the period for which the employee was paid.
The state legislature has tried to respond to the dramatic increase in this frivolous litigation by now requiring notice, and an opportunity for the employer to cure some of the defects in the wage statement requirements. But we still regularly see employees claim Labor Code 226 violations since it is an easy way to seek penalties against an employer that add up quickly.
What to Do?
So what to do? No approach to compliance is full proof, but an employee handbook is critical to the well-run workplace and the best approach for enforcing it starts with training and vigilance. Training is available through a variety of professional associations and law firms like Cook Brown. Once the handbook is up to date and employees are trained in their rights and responsibilities, have managers and supervisors make a habit of spot-checking compliance with employees about their knowledge of company policies and how those policies affect their daily routines.
We have more information on these topics on our website. And if you haven’t already, please sign up for our newsletter so you can receive updates on developments in California law and notice of future podcasts.
I’m Lisa Ryan. Thank you for listening to this Cook Brown podcast.