Employment Lawyers Attacking Local Businesses

I have noticed over the past couple of months several out-of-area law firms sending letters to local businesses accusing them of wrongful employment practices.  The letters focus on wage and hour issues, and on appropriate record-keeping.  It appears that these lawyers may be aggressively marketing the Central Valley for cases that can result in substantial legal fees for those law firms.  In light of this apparent marketing push, I want to remind my clients of some of the areas that can result in litigation. 

Record of Hours Worked.  An employer is required to maintain time records of all non-exempt employees.  The records should include start time and ending time, and also time in and out on a meal period.  A time record should show actual times as opposed to merely a number of hours worked each day.  An employer is not required to keep time records of rest periods.  However, in some businesses, time records may be the only method of determining if employees are taking rest periods.  I recommend that employers use a certification on their timecards where employees can verify that the hours recorded are the actual hours worked, and that the employee was provided the opportunity to take all rest and meal periods. 

Record-keeping Requirement for Payroll Records.  Assembly Bill 469, which went into effect January 1, 2012, clarified the law in California regarding the retention of payroll records.  Payroll records must be maintained for a period of not less than 3 years.  (Labor Code § 1174.) 

An employer who receives either a written or an oral request to inspect or copy records pertaining to employment must comply within 21 calendar days.  (Labor Code § 226(b).)  Failure to timely comply can result in a penalty of $750.  (Labor Code § 226(f).) 

Paystub Rules.  Labor Code § 226 requires employers to include the following categories of information on paystubs accompanying paychecks:  (1) gross wages earned; (2) total hours worked*; (3) the number of piece-rate units earned and any applicable piece rate; (4) all deductions; (5) net wages earned; (6) the inclusive dates of the pay period; (7) the name of the employee and the last four digits of his or her social security number or an employee identification number other than a social security number; (8) the name and address of the legal entity that is the employer and, if the employer is a farm labor contractor, the name and address of the legal entity that secured the services of the employer; and (9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate. 

I hope you noticed the * under category #2.  You are not required to indicate total hours worked of any employee “whose compensation is solely based on a salary and who is exempt from payment of overtime” under Labor Code section 515 or a Wage Order.  Typically, the only categories of persons covered under this exception are managers, professionals and administrators.  Employees either exempt as outside sales or inside sales are generally paid at least in part on commissions.  Accordingly, under a strict reading of this exception, an employer is still required to list hours worked of an employee otherwise exempt from overtime if the employee’s compensation is not exclusively salary. 

The penalty for a violation of section 226 is a civil penalty in the amount of $250 per employee per violation in an initial citation and $1,000 per employee for each violation in a subsequent citation.  (Labor Code § 226.3.)  In addition, an employee “suffering injury as a result of a knowing and intentional failure by an employer” can seek damages of $100 per pay period, up to a maximum of $4,000.  (Labor Code § 226(e).)  The employee’s attorney is also “entitled to an award of costs and reasonable attorney’s fees.”  (Labor Code § 226(e).) 

Meal Periods.  We are all waiting for a ruling from the Supreme Court in the Brinkercase.  However, that does not stop plaintiffs’ lawyers from contending that the employer did not provide a meal period to an employee.  If an employer interfered with the employee’s right, a “penalty” (which is really considered a wage) is imposed, calculated at the employee’s hourly rate of pay. 

These lawyers are also challenging employees’ on-duty meal periods.  Under the law, an on-duty meal period is permitted, provided that the employee signs an agreement and “the nature of the work prevents an employee from being relieved of all duty.”  I have many clients in various industries that employ workers who work alone.  This is common in the hotel, alarm, retail, including convenience stores and gas stations and other industries where employees work through the night.  Typically, due to the need for someone present at the facility, an employee is not permitted to leave for a meal period. 

The claim made by plaintiffs’ lawyers is that it is not the nature of the work, or any specific job activity, but rather the decision of the employer, that the employee cannot be relieved of duty.  If two employees were performing the same job, each could be relieved of duty.  Therefore, it is not the work that compels an on-duty meal period. 

This is a very artful claim.  Of course, there is no legal authority supporting the claim.  However, there is no legal authority expressly rejecting the claim.  This leaves employers in limbo with workers who work alone on a job and cannot leave.  I think the better argument is that the nature of the work is working without co-workers or supervision.  Leaving a post in such a position where an employee must be available for an emergency or to assist a customer, can result in inconvenience, discomfort and even harm.  Therefore, it is the nature of the work that compels an on-duty meal period. 

It should also be considered whether the inability to leave a post when an employee is working alone makes it impossible for the employee to take a 10-minute rest period.  Most of the overnight workers who are alone have nothing to do most of the time.  However, asking someone to be available to do something is considered “work.”  (Yes, sometimes doing nothing is work!)  An employer should ask itself whether a 10-minute rest period on the premises could be provided without jeopardizing services. 

Penalties for Late Payment.  An employee who is not paid all wages due at the time of termination is entitled to a penalty for waiting to be paid calculated at his/her daily wage, for a period of up to 30 days.  The one-hour penalties imposed for not providing employees with meal or rest periods are considered “wages.”  Therefore, non-payment of that penalty gives rise to these waiting period penalties. 

Conclusion.  We always advise clients to avoid claims.  Avoidance is cheaper than litigation.  In many cases alleging wage and hour or record-retention violations, the damages to the employees is relatively low, and perhaps even minimal.  However, the attorneys’ fees provisions of these statutes allow the lawyers to reap thousands, and hundreds of thousands, of dollars.  Many of you have heard me tell about the Fresno County case where the employee was awarded $42,000 (and after deducting fees and costs went home with about $19,000, only to be taxed on $42,000).  The employee’s lawyer was subsequently awarded $420,000. 

Please take these wage issues seriously.  If you have any concerns regarding your wage and hour or record-keeping practices, please call us.