Appellate Court Emphasizes Narrow Nature of Administrative Exemption

On August 16, 2007, the California Court of Appeal issued Harris v. Superior Court, another in a series of California cases emphasizing the narrow scope of the administrative exemption under California law. In Harris, a class of insurance claims adjusters alleged that they were improperly classified as exempt from California's overtime compensation requirements.The defendant insurance companies contended the adjusters were properly classified as exempt pursuant to the administrative exemption.The Court explored the "administrative/production worker dichotomy."The administrative/production worker dichotomy is a concept which explores the extent to which the employees' performed work generally related to the ongoing operation of the business (administrative), or the day-to-day tasks necessary to operate the employers' business (production work).

While acknowledging the line between exempt administrative and non-exempt production work is not clear, the Harris decision is yet another that narrowly interprets the exemption.In particular, the Court found that exempt administrative work must be carried out at the general operational or policy making level, and that producing the employer's product is not necessarily a condition for doing production work.That is, day-to-day systematic activities necessary for the employer's business operations may well be non-exempt work even if such activities are not producing the employers' product. Employers are advised to carefully evaluate those classified as exempt administrators, as the availability of this exemption continues to narrow.To read a copy of Harris v. Superior Court, click here.

Hear Partner Mark S. Spring Discuss Solutions to the Meal and Rest Break Dilemma Facing California Employers

Mark S. Spring, our firm's Managing Partner, was the featured guest expert for the most recent In the Know Podcast series.In this podcast, Mr. Spring discusses the issues related to the California meal and rest break compliance difficulties and the recent waive of class action lawsuits against California employers related to the meal and rest break regulations.You will hear Mr. Spring discuss the ramifications of several recent court opinions and provide some recommendations that California employers can use to try to minimize the risk of being the next defendant in one of these class actions.To listen/download the podcast click here.

New Federal Regulations Require Employers To Respond To Social Security Administration “No-Match Letters”

For years, the Social Security Administration ("SSA") has been sending "No-Match Letters" to employers who had a significant number of employees whose social security numbers ("SSN") did not match their personal information. The SSA, however, provided unclear guidance for responding to the letters, and little consequence appeared to befall those employers who ignored them.

Last year, the U.S. Immigration Customs Enforcement, a legacy of the disbanded INS, changed all that. It announced the use of no-match letters to target employers in high-profile immigration raids, including the April 2006 raid of IFCO Systems that led to the arrests of thousands of undocumented workers and numerous current and former IFCO Executives. In June 2006, the Department of Homeland Security followed-up the IFCO raids with proposed regulations regarding responding to no-match letters. The final version of those regulations was announced on August 10, 2007 and published on August 15th. In sum, employers who do not comply with the regulations will be considered to have "constructive notice" of the status of those unauthorized workers who were subjects of no-match letters and whose employment eligibility the employer failed to re-verify. Click here to review the regulations in their entirety.

In addition to announcing the final regulations, the Department of Homeland Security also announced that it would increase civil penalties by approximately 25% and expand criminal investigations of those employers who knowingly hire unauthorized workers. Employers therefore now face the potential of significant civil penalties and criminal sanctions for ignoring no-match letters.

What should employers do? Following is a brief summary of the steps employers should take after receiving a no-match letter:

1) Within 30 days of receipt of a "no-match" letter, employers must check their personnel and payroll records to determine if an SSN mismatch was the result of an internal clerical error (such as transposing numbers in a tax form). The employer must then notify the SSA of the clerical error and verify that a corrected SSN matches SSA records.

2) If the employer is unable to find an internal clerical error for a mismatched SSN, the employer must notify the employee about the no-match letter and ask the employee if the employer's records are correct. If the employee claims the records are incorrect, then the employee should provide a corrected SSN, which the employer must verify with the SSA.

3) If the employee claims the employer's information is correct, the employer should direct the employee to resolve the discrepancy directly with SSA. If the employee states that the discrepancy has been resolved, the employer must verify the employee's representation. If, however, the employee is unable resolve the no-match situation within 90 days of the date of the no-match letter, the employer must re-verify the employee's eligibility status within 3 days after expiration of the 90 day period. The re-verification procedure is the same as for new employees except that the employee may not use a document with the disputed social security number and the document used to establish identity must include a photograph. Employers must retain the new I-9 in addition to their prior I-9.

What the regulations do not clarify is how employers should respond to a subsequent SSN no-match for an employee who provides a new SSN in response to a no-match letter, how the SSA will handle the new administrative workload, and how employers should harmonize their anti-discrimination obligations with their heightened immigration compliance responsibilities. Therefore, we advise employers to seek assistance from legal counsel if they have to navigate the intricacies of these new regulations.

For more information on issues affecting California employers go to the California Labor and Employment Law Blog at www.callaborlaw.com.

DLSE Holds Second of Two Public Hearings

On August 9, 2007, the Division of Labor Standards Enforcement ("DLSE") held its second public hearing -- this one in Los Angeles -- to hear comments regarding meal and rest break laws and regulations in California (the first session of the DLSE's public forums was held in Sacramento on August 2, 2007; please see August 3rd blog entry). The DLSE held these public hearings to allow both employers and employees the opportunity to explain how California meal and rest break laws affect their day-to-day work lives. Similar to the Sacramento session, this topic sparked very heated and passionate comments by both employers and employees.

Interestingly, employees in various industries spoke in favor of modifying the laws to provide more flexibility with respect to when they may take their meal breaks during the work day. Both the healthcare and transportation industries were represented in extremely high numbers. The majority of the nurses and driverswho spoke expressed their frustration with the current state of the law mandating that they must take their meal breaks at or before the five hour mark during their work day. Many nurses commented on the impracticality of being forced to immediately stop tending to patients because they must take their breaks or face disciplinary action. Drivers also expressed their frustration, explaining that it is almost impossible and extremely dangerous to expect them to comply with the law by pulling their vehicles off the road to ensure that they do not violate the five hour requirement.

On the other hand, there were also employees in attendance who voiced their concern that any modification of the current laws would result in employers taking away their right to meal and rest breaks. Several of the employees who opposed any changes testified about the poor working conditions in their current workplaces, and the fact that they are not permitted to take any breaks. Representatives of employee advocacy organizations in attendance claimed that any leniency in this area would reduce productivity and increase work-related injuries.

The employers who attended the hearing uniformly testified that they had no interest in eliminating breaks for employees; rather, they simply want some flexibility in this area, both for themselves and their employees. They complained that the current laws are too confusing, unrealistic, and overly burdensome, and that the DLSE needs to provide greater guidance on these issues. Many of the employers also stated that the current laws have a detrimental effect on their employees. For example, some employers testified that their employees sometimes ask to forego meal breaks in order to leave work early to tend to personal matters. Under the current state of the law, employers cannot consent to this arrangement, which in turn causes friction between employees and management. Additionally, employers in the restaurant industry indicated that their employees complain that taking breaks has a detrimental effect on their tip income. The employers who attended this hearing also made reference to the recent increase in litigation for alleged meal and rest break violations, including class actions, which are financially crippling some businesses.

Please note that the DLSEwillaccept written comments and legal briefs on these issues until August 31, 2007.

Employer Spending Delayed to 2008 Under San Francisco Health Care Security Ordinance

San Francisco's Office of Labor Standards Enforcement recently finalized its regulations relating to implementation of the City's Health Care Security Ordinance ("HCSO"). As previously discussed, the HCSO requires covered employers to make health care expenditures for their covered employees. In 2008, covered employees include any person who has been employed for at least 90 days and who performs at least 10 hours of work per week within the geographic boundaries of the City and County of San Francisco; effective 1/1/09, the hourly requirement is reduced from 10 to 8 hours per week. Affected employers may purchase health insurance coverage for their covered employees, make payments to the City for the benefit of their covered employees, or make the required health care expenditure in a variety of other manners.

Significantly, employers should note that recent amendments to the HCSO changed the operative date of the employer spending requirement (previously set for July 2007) to January 1, 2008 for employers with 50 or more employees, and to April 1, 2008 for employers with 20 -- 49 employees.

For specific questions regarding employer obligations relating to the implementation of the HCSO, please contact us directly.

DLSE Holds First of Two Public Meetings

On August 2, 2007, California's newly-appointed Labor Commissioner, Angela Bradstreet, held a public hearing to obtain comments regarding meal and rest break laws and regulations in California. This public hearing was sparked by recent court decisions concerning the standard for meal and rest breaks, including Murphy v. Kenneth Cole Productions, Inc., 40 Cal.4th 1094 (2007), White v. Starbucks Corp., 2007 WL 1952975 (N. D. Cal. July 2, 2007), and Brinker Restaurant Corporation et al. v. Hohnbaum et al. which is currently pending before the Fourth District Court of Appeal. At the hearing, this topic proved to still be a sensitive issue between employers and employees.

Employees from various industries voiced their concern that any modification of current law regarding meal and rest breaks would provide employers with the opportunity to essentially take away employees' rights to meal and/or rest breaks. Employees alleged that any leniency in this area would allow employers to pressure them to forego their breaks by praising others who did so and setting higher standards of enforcement. Moreover, employees claimed that reducing or eliminating the mandatory nature of breaks would reduce productivity and increase work-related injuries.

Employers, on the other hand, testified that they had no interest in eliminating breaks for employees; rather, they simply want some flexibility in this area. Employers complained that the current laws are too confusing, unrealistic, and overly burdensome on employers. For example, employers in the transportation and trucking industry testified that it is impossible to ensure that their drivers who are out on the road are taking a thirty minute meal period at or before five hours of work, as the law currently requires them to do. Additionally, employers in the restaurant industry stated that the unpredictable nature of their business makes scheduling breaks for employees impossible.Moreover,employees in this industry may resent their employers for forcing them to take meal breaks as it reduces their tip income and extends their workday. The employers who attended this hearing also referenced the recent increase in litigation for alleged meal and rest break violations, including class actions, which are financially crippling businesses.

The Department of Labor Standards Enforcement is holding another public hearing in Southern California to obtain additional comments regarding meal and rest break laws and regulations on August 9, 2007, from 9:00 to 2:00 p.m. at California State University Northridge. The DLSE is also accepting written comments and legal briefs on this issue until August 31, 2007.

DLSE to Hold Public Forums Regarding Meal and Rest Period Enforcement Practices

The Division of Labor Standards Enforcement ("DLSE") has announced that it will be holding two forums to allow members of the public to address newly-appointed California State Labor Commissioner Angela Bradstreet and raise concerns regarding recent changes to meal and rest period enforcement practices in California.

The first forum will be held on August 2, 2007, from 9:00 a.m. to 2:00 p.m. at the Sacramento State Alumni Center located in Sacramento; the second forum will take place on August 9, 2007, from 9:00 a.m. to 2:00 p.m. at theCalifornia State University Northridge Student Union. Specific information can be obtained by clicking here.

Additionally, the public may submit written comments to the DLSE regarding these issues on or before August 31, 2007.

New Poster Reflects Increased Federal Minimum Wage

The U.S. Department of Labor has issued a new poster reflecting the increased federal minimum wage, which goes into effect today. All employers subject to the federal Fair Labor Standards Act's minimum wage provisions must post this updated notice, available here.

As previously reported, the Fair Minimum Wage Act of 2007 increases the federal minimum wage in three increments over the next two years, with the first increase of $5.15 to $5.85 per hour taking place today (the federal minimum wage will then increase to $6.55 per hour beginning July 24, 2008, and to $7.25 per hour effective July 24, 2009). California employers should note, however, that this increase in the federal minimum wage will not affect the wages earned by California employees, who are currently entitled to the higher minimum wage of $7.50 per hour ($8.00 per hour effective January 1, 2008). Additionally, San Francisco employers must pay their employees the city's current minimum wage of $9.14 per hour.

For specific questions regarding the obligation to post the updated notice, please contact us directly.

United States District Court Ruling Could Help Limit Employer Liability for Missed Meal Periods

Employers have reason to hope that their liability for missed meal periods may be less than somefirst thought when the California Supreme Court issued its much-publicized ruling in Murphy v. Kenneth Cole Productions, Inc.Murphy held that that fines arising from meal and rest break violations in California constitute "wages," for which there is a three-year statute of limitations, rather than a "penalty," which would have carried only a one-year statute of limitations.In White v. Starbucks, _ F. Supp. 2d _, 2007 WL 1952975, at *7-*8 (N. D. Cal. July 2, 2007), a federal district court held that California Labor Code § 226 and the IWC Wage Orders' requirements that employers "provide" employees with meal periods means simply that the employer must offer the employees meal periods; the employer is not required to ensure that the meal periods are taken.

In White, the court further held that in order to prevail on a meal period claim, a plaintiff would have to show that he or she was "forced to forego" a meal period by the employer.The court reasoned as follows:"The interpretation that [plaintiff] advances -- making employers ensurers of meal breaks -- would be impossible to implement [in industries] in which large employers may have hundreds or thousands of employees working multiple shifts.Accordingly, the court concludes that the California Supreme Court, if faced with this issue, would require only that an employer offer meal breaks, without forcing employers actively to ensure that workers are taking these breaks. In short, the employee must show that he was forced to forego his meal breaks as opposed to merely showing that he did not take them regardless of the reason. . . .[Otherwise,] employees would be able to manipulate the process and manufacture claims by skipping breaks or taking breaks of fewer than 30 minutes, entitling them to compensation of one hour of pay for each violation.This cannot have been the intent of the California Legislature, and the court declines to find a rule that would create such perverse and incoherent incentives."

The plaintiff admitted that any meal periods he missed were as a result of his own decision to skip the meal periods.There was no evidence that Starbucks had "forced [plaintiff] to forego" meal periods.On these facts, the court held that Plaintiff could not succeed on his meal period claim and summary judgment was appropriate.

The district court's ruling in White is significant because it does not place the burden on the employer to force employees to take meal breaks.Rather, it simply requires that the employer provide the opportunity to take the meal break.One cautionary note: in reading White, employers must be mindful the ruling was issued by a federal district court.Although the opinion of a federal district court can be used to persuade other state and federalcourts to decide the meal break issue similarly, neither the Ninth Circuit nor California state courts arebound by the district court's ruling.

Sexual Harassment Prevention Training Regulations Approved

On July 18, 2007, the Office of Administrative Law approved the Fair Employment and Housing Commission's oft-submitted regulations implementing AB 1825. The newly-titled "Sexual Harassment Training and Education" regulations (California Code of Regulations §7288.0) become effective on August 17, 2007 and are available online by clicking here. Briefly, the adopted regulations require:

  • Effective, interactive training, via either classroom, interactive computer programming, internet based seminar, or a combined use of audio, video or computer technology in conjunction with any of these three methods.Importantly, the training must be interactive; if a trainer is not present, one must be available to answer questions within two business days after the question is asked.
  • Tracking -- The biennial two-hour training can be tracked either by the individual, or by a "training year" method in which the employer designates training years for all supervisors, e.g. 2007, 2009, 2011, etc. Note, however, that new employees must be trained within six months of hire, so those hired in non-training years will actually be retrained sooner than required by the regulations. A record of who received the training, when, what type and from whom must be maintained for two years.
  • Covered Employers are those with 50 or more employees, regardless of the employee locations. However, only supervisors located in California are required to receive training.
  • Trainers must be highly qualified. For example, attorneys can be trainers, but only two or more years after their admission to a state bar, and if their practice includes employment law.

In addition, the adopted regulations contain a detailed, but not exhaustive, list of 11 topics mandated by the training.

Up until August 17, 2007, employers who make a good faith effort to follow the AB 1825 requirements without benefit of final regulations will bedeemed to be compliant. Toward that end, the finalized regulations are not retroactive. After August 17, 2007,however, "good faith efforts"will not suffice, such thatemployers are urged to take a hard look at their sexual harassment prevention training programs to ensure that the specific requirements of California Code of Regulations §7288.0 are met.

Editor
Cal Labor Law

Robin E. Largent is a Partner in CDF’s Sacramento office and may be reached at 916.361.0991 or rlargent@cdflaborlaw.com BIO »

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