How to Avoid Wage and Hour Lawsuits in California: A Guide

Posted by: kevensteinberg
Category: Areas of Practice, Blog, Employment Law
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California is well known for its remarkably employee-friendly labor laws. A 2018 report from U.S. News ranks California as one of the best states for employee rights based on compensation laws, anti-discrimination policies, and other labor conditions.

An annual rising minimum wage; empowerment to attorneys to file class actions and other representative actions, such as PAGA actions; and other yearly changes in California’s wage and hour laws continue to make California an employee-friendly environment. These present unique challenges for employers in the Golden State. Maintaining compliance with wage and hour laws is vital to protecting your business from liability and providing the best possible workplace for your employees.

What Are California’s Wage and Hour Laws?

The Fair Labor Standards Act (FLSA) establishes a federal minimum wage and federal guidelines for overtime pay, recordkeeping, and other employment standards. California has expanded and raised many of these wage and hour standards to more effectively benefit employees and to be more stringent upon employers. Knowing the intricacies and complicated aspects of these ever changing labor laws is critical to avoid costly litigation, potential large liability issues, significant penalties, and perhaps even punitive damages.

Minimum Wage

Employers in California are required to pay employees at least the minimum wage for all hours worked. Beginning in January 2018, the minimum wage for all industries in California was “$11 per hour for employers with more than 26 employees and $10.50 per hour for employers with 25 or fewer employees.” Currently, the minimum wage in Los Angeles County for employers with more that 26 employees is $15.00 per hour and $14.25 per hour for employers with fewer than 26 employees. This minimum wage is scheduled to increase yearly until it reaches $15 per hour in 2023.

Some cities have implemented a local minimum wage that is greater than the current state rate. When faced with a local or state wage that varies from the federal minimum wage, employers are required to pay whichever rate is highest.

And unlike federal wage law, which allows employers to use tips as credit towards the minimum wage, California requires employers to pay tipped employees at least the full minimum wage for every hour worked.

Overtime Pay

Any work performed over eight hours in one workday or 40 hours in a workweek is considered overtime under the California labor code and must be compensated at one and one-half times the employee’s regular hourly rate of pay. For any work performed over 12 hours in one workday, an employee must be paid twice their hourly rate.

These provisions apply to all nonexempt employees over age 18 and to minor employees age 16 or 17, who the law does not require to attend school. Overtime law does not apply to exempt employees, however.  Employers should be very careful in not misclassifying employees as exempt, as if it is determined that the employer misclassified that employee, the employer, among other things, will be responsible to pay that employee all past due overtime wages, penalties, and interest.

Timing and Method of Payment

Most employees must be paid at least twice each month on days “designated in advance as regular paydays.” These paydays, as well as other wage information, must be posted so employees know exactly when and how they will be paid, what the minimum wage is, and other employee rights. Any overtime wages owed must be paid by the payday of the payroll period following the period in which the wages were earned.

Wages may be paid by cash, check, by direct deposit into an account of the employee’s choosing, or through an approved payroll card program.

All wages in California must also be paid by and through a proper paycheck with an itemization of all wages withheld, usually in the form or a pay stub.

Meals and Breaks

Employees who work more than five consecutive hours must be provided with a 30-minute uninterrupted, unpaid meal period. If an employee works more than 10 hours in a day, they are entitled to a second 30-minute meal period. During these meal periods, employees must be relieved of all work-related duties and cannot be disturbed. If an employee is interrupted or must remain on-duty during a meal period, they must be compensated for that time.

Employers must also provide paid 10-minute rest periods to nonexempt employees for every four hours worked. These breaks should occur near the middle of a four-hour work period, if possible, and employees should be relieved of all duties during that time. California law further requires employers to provide a reasonable amount of break time for lactation if needed.

The Difference Between Exempt and Nonexempt Employees—Don’t Fall for the Salary vs. Hourly Trick!

Generally, when we think of exempt and nonexempt employees, we assume that all exempt employees have salaries and nonexempt employees are paid on an hourly basis. That is absolutely wrong. In fact, employers who believe so or treat their employees as such are exposed to great liability.

Who Qualifies as a Nonexempt Employee?

Nonexempt employees are typically paid on an hourly basis, but may also be paid on a salary basis. They receive the broadest protections under California wage and hour law. Nonexempt employees are entitled to minimum wage, overtime pay, and a rest period for every four hours worked. Nonexempt jobs typically include “blue-collar” jobs, or jobs in which the employee works under a manager and is subject to their judgment and supervision. Nonexempt employees are those whose responsibilities and jobs do not fall under any of the exemptions dictated by California Law.

Who Qualifies as an Exempt Employee?

Exempt employees, on the other hand, are exempt from requirements regarding overtime, minimum wage, or rest break laws. In order to be classified as exempt, an employee must meet three requirements:

Salary Requirements

Exempt employees must be paid a minimum salary that is at least two times the state minimum wage for full-time employment. Simply paying an employee a fixed salary does not make them exempt. In order to qualify, the salary must meet this minimum requirement. As of July 2020, the salary for an exempt employee in Los Angeles must be at least $62,400 per year for employers with more than 26 employees and at least $59,280 for employers with 25 or fewer employees.

“White Collar” Requirement

In order to be qualified as exempt, an employee’s primary duties must consist of executive, administrative, or professional work. Having “executive” in the job title is not enough; an exempt position requires that the employee spend at least half of their time performing these white collar duties. The following list can help you determine whether an employee’s duties are executive, administrative, or professional in nature.

  • Executive: An executive employee’s duties involve the management of a business or one of its recognized subdivisions. They regularly direct the work of two or more employees. Executives also have the authority to hire and fire employees or heavily influence the promotion, hiring, or change in status of other employees.
  • Administrative: An employee is considered administrative if their duties involve non-manual work “directly related to management policies or general business operations.” Administrative employees also include academic administrators who work in school systems or other educational institutions and whose duties are directly related to instruction and training. Both types of administrative employees may “regularly and directly” assist the proprietor, an executive, or another administrator. They may also perform specialized or technical work that requires specialized training, experience, or knowledge, and minimal supervision. Administrators may also complete special assignments or tasks under only general supervision.
  • Professional: A professional employee is someone who primarily practices a recognized profession requiring a license or certification. The recognized professions in California are law, medicine, dentistry, optometry, architecture, engineering, teaching, and accounting. Professional employees also include those whose occupation is considered a “learned or artistic” profession. A profession is considered learned or artistic when the work requires advanced knowledge in a field or science that is acquired through extended study or specialized instruction, such as an advanced college degree; or when the employee’s work is dependent on their invention, imagination, originality, and creativity in a recognized artistic field./li>

Independent Judgment Requirement

To be considered exempt, California labor law dictates that an employee’s duties must include the regular exercise of discretion and independent judgment. Exercising discretion involves considering possible courses of action and making informed, important decisions based on those considerations. And independent judgment implies that the employee is free to make those decisions free from immediate supervision.

Other Exemptions

California law also allows for exemptions for select occupations. Some of these exempt occupations include outside salespersons, truck drivers, professional actors, and computer professionals. Because nonexempt employees have a right to overtime pay, failing to classify employees correctly as exempt or nonexempt can lead to severe consequences for employers. If an employee is incorrectly classified as exempt, they are entitled to back-pay for unpaid overtime and compensation for missed rest periods. Luckily, HR teams and legal counsel can help employers review and classify employees to avoid costly claims.

How an Employment Law Attorney Can Help Your Business Avoid Wage and Hour Liability

Payroll, break policies, and other procedures regarding wage and hour laws can subject an employer to significant liability and costly lawsuits if not followed properly. To avoid such issues before they arise, employers should consult with an employment law attorney to work with the employer and its HR staff. Doing so also provides the following additional benefits:

  • Become familiar with wage and hour laws specific to their company’s state and city.The first step to observing laws and regulations is to know and understand those laws.
  • Provide training to supervisors and management.Effective training provides an avenue for supervisors to learn about the differences between exempt and nonexempt employees, overtime rules, and other wage and hour laws and requirements and to ensure that they and the employer implement and adhere to proper procedures that comply with the law. Formal trainings can also educate supervisors about common wage and hour pitfalls, such as failing to track overtime hours, misclassifying employees as exempt, paying below the current minimum wage, paying wages late, or failing to provide proper meal and rest breaks. Trainings may also include a review of timekeeping practices and record-keeping responsibilities.
  • Regularly review employee job descriptions with supervisors. Reviewing an employee’s job description presents an excellent opportunity to work with supervisors to ensure each employee is classified correctly as either exempt or nonexempt. Job descriptions should reflect the work being done. For exempt employees, they should include professional, administrative, or executive duties as defined by California law.

With California’s complex and changing wage and hour laws, employers are also encouraged to conduct a yearly review of employees and management to adjust for any changes and ensure compliance with existing law.

Whether you want to conduct a training or review your business for labor law compliance, a wage and hour attorney can help. Knowledgeable lawyers, like the team at Steinberg Law, can help ensure you have all the information you need to accurately classify employees and implement proper wage and hour policies. Keven Steinberg has extensive experience with wage and hour law cases in California and has twice presented these cases to the United States Supreme Court. Help provide the best workplace for your employees and ensure wage and hour law compliance by getting in touch with the team at Steinberg Law today.


Author: kevensteinberg