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Wage & Hour Disputes

California Labor Code § 200 defines wages as “…all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation.” Just as the federal wage claims are governed by the FLSA, California law which deals with wages and how they should be paid is contained in the Labor Code and the Industrial wage Commission Orders, and the Labor Commissioner’s office is charged with enforcing these laws. There are currently 17 Wage Orders which can be viewed at Department of Industrial Relations site at Industrial Welfare Commission Wage Orders. These wage Orders covers all fields of occupation and provide guidance to employers as to whether as employee should be classified as “exempt” or “non-exempt” from overtime requirements. Except for overtime claims other claims which involve wages due to an employee include violation of break and meal period requirements, deduction from an employees paycheck, non-payment or untimely payment of a paycheck and penalties levied on non complying employers. These topics are generally addressed by the Labor Code. Labor Code § 203 specifically deals with untimely remittance of an employees final paycheck and states that “If an employer willfully fails to pay, without abatement or reduction, in accordance with Sections 201, 201.5, 202, and 205.5, any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefore is commenced; but the wages shall not continue for more than 30 days…” This penalty could be quite substantial for those employees whose earning are high. It is important to note though that Labor Code’s protection only applies to employees and not independent contractors. That is why large parts of many employment cases are spent by plaintiffs on trying to establish that he/she was actually an employee of the employer. Following is a link to California’s Labor Code.

Exempt Non-Exempt Debate:

As stated earlier the question of whether an employee can be classified as exempt and hence not entitle to overtime wages has become one of the most litigated issues facing labor law practitioners. The reason is that the difference could mean millions of dollars for employers and thousands of dollars for employees. Conventional wisdom was that if an employee is tagged as salaried and did in fact receive a salary that employee was not entitle to overtime. This assumption was specially held to be true when applied to high earning employees, i.e. sales people, engineers. Fact of the matter is that what an employer calls an employee has no bearing on whether that employee is entitled to overtime or not. What determines whether an employee is entitled to overtime wages or not is whether the employee is considered exempt or not. Federal laws dealing with this topic are documented in FLSA and California relies on Wage Orders to determine if an employee is exempt or not.

California currently has 17 wage orders issued by Industrial welfare Commission (IWC) many of which deal with how to classify employees in different fields. Employers would be best advised to contact the Employment Law Team ™ or another competent attorney to help them navigate these treacherous waters. This site is to provide a brief glimpse into this complicated field and should not be relied on as legal advice by either an employee or employer.

As a starting pint it should be noted that the following categories of employees are generally considered to be exempt from the IWC rules:

  • Licensed professionals, i.e. doctors, lawyers, architects, engineers, and certified public accountants.
  • Managers who hire, fire, and train, and who spend less than 50 percent of their time performing the same duties as their employees.
  • Top administrators who create policies for a business.
  • Outside salespersons.

Once we get past the above group the determination as to how classify an employee becomes more complicated and will require and analysis of that employees duties, pay, skills and education. For instance to qualify for the so called “while collar” exemption, the employee must meet both the duties and salary test. These tests will look to see if: the employee: primarily spends work time on white-collar duties, exercises discretion and independent judgment, and receives a fixed salary. There are a number of other exemptions, i.e. professional exemptions or artistic professionals, which can apply to an employee as well. The initial assumption of all employers should however, be to treat employees as non-exempt; then try to see if application of the IWC and other rules would in fact take that particular employee into the exempt status or not.

Illegal Deductions From an Employee's Check:

Generally an employee must receive all of his/her wages on payday. California and federal laws protect employees' wages and limit the deductions that may be taken, i.e. taxes, social security, disability or court ordered garnishments. In fact, employers may not make certain deductions even if employees agree to them. One of the exceptions to this rule is deductions for “advanced wages.” In this situation as employee has received an advance pay for her upcoming paycheck and would like to pay that advanced sum back from her next check. If the employer procures the employees authorization to deduct this sum from the next paycheck in writing or gives the employee that he intends to make the deduction, then the employer can go ahead and make that deduction.

There are also differences between a “loan” to an employee and an “advance” to an employee which must be considered before the employer decides to make any kind of deduction to an employee’s check.

One practice that gets many employers in trouble is the practice of deducting money owed by the employee from that employee’s final paycheck. Employees may quit or be fired before earning the wages, vacation, or sick days that a company has advanced. In this situation, the company may follow the appropriate procedure to deduct any balance owed from wage advances when non-exempt employees leave their jobs. However, an employer may not dock the final paycheck of exempt white-collar employees to recover advanced wages or days off. For employee debts other than wage advances, a company may not collect any outstanding balances at termination (a "balloon" payment) unless the employee gives a new written authorization.Failure of an employer to follow the proper procedures in making deductions from an employee’s check could subject the employer to sever penalties which could include : civil penalty of up to $100 for each employee and each payday they wrongly withhold wages, plus 25 percent of the unpaid amount. Employers may also be convicted of a misdemeanor and fined up to $1,000, imprisoned for up to six months, or both. Finally, if employers fail to pay employees correctly because of improper deductions, they may violate minimum wage, overtime, and payday rules.

Timeliness of Final Paycheck to an Employee:

Labor Code §§ 201, 202 and 208 deal with payment upon termination of employment. If the employer “willfully” violates the provisions of Labor Code §§ 201 and or 202 regarding timing of payment, § 203 provides “waiting time penalties” of up to 30 days' wages. California Labor Code § 208 states that the final payment of wages to a discharged employee should be “at the place of discharge, and every employee who quits shall be paid at the office or agency of the employer in the county where the employee has been performing labor.” This is an important fact as in situations in which the check is mailed and thereafter lost or stolen, the employer can be held liable for “nonpayment” of wages. Labor Code § 201 makes it mandatory except for few exceptions that all terminated employees be paid their wages immediately and upon discharge. Discharge is held to apply to termination of a project and not just situations in which the employee-employer relationship is terminated. Labor Code section 202 addresses the issue of payment of wages to employees who quit or resign. Under this code section, employers must pay all compensation to an employee who voluntarily resigns within 72 hours of resignation. Vacation pays which are owed to an employee will be treated as regular pay for the purposes of payment.

Prevailing Wage Claims:

Under California law (just as federal law) contractors and subcontractors working on public work projects are mandated to pay their workers what is called the "Prevailing Wage." This requirement is codified by California Labor Code Section 1774 et seq. The code defines "public works" as such work as construction, demolition, installation or repair done under contract or paid out of public funds. Work done during design and preconstruction phases are also subject to this law. California Labor Code Section 1720 has an in-depth definition list for all jobs subject to paying prevailing wages. California Labor Code.

What are Prevailing Wages:

Prevailing wages are generally set by the Director of Industrial Relations. Labor Code Section 1773 further provides that " In determining the rates, the Director of Industrial Relations shall ascertain and consider the applicable wage rates established by collective bargaining agreements and the rates that may have been predetermined for federal public works, within the locality and in the nearest labor market area. Where the rates do not constitute the rates actually prevailing in the locality, the director shall obtain and consider further data from the labor organizations and employers or employer associations concerned, including the recognized collective bargaining representatives for the particular craft, classification, or type of work involved. The rate fixed for each craft, classification, or type of work shall be not less than the prevailing rate paid in the craft, classification, or type of work." An experienced prevailing wage attorney such as employment and discrimination attorney of Employment Law Team can assist you in making sure that your rights are not abused and tax payers money is not wasted.

What is the Procedure to Ensure Compliance With the Laws:

Who can bring a lawsuit to enforce Labor Code § 1770 et seq. has been the topic of many court of appeal cases. In Tippett v. Terich (Crt Appl 4th Dist 1995) 37 Cal.App.4th 1517, Court of Appeal for the 4th District of California held that previous decisions by the labor commissioner that there was no private right of action to enforce public works statute was NOT LAW of the case in subsequent cases. Tippette further held that an affected worker could bring a breach of contract if he was promised prevailing wages and denied them later. The court also stated that indirect action can be brought under the theory of “third part beneficiary”. Employment Law Team California employment attorneys can assist you in deciding whether a violation of prevailing wage laws has taken place.