Our economic recession has wrought hiring freezes, lay offs, business closures, etc. Both employers and employees are suffering. To keep afloat and perhaps avoid layoffs, employers are seeking creative ways to save money and conduct business more efficiently. One option is to reduce employer liability for payment of overtime. The adoption of an “alternative workweek” may be a means to accomplish this goal.

A narrow exception to California’s special overtime laws, the alternative workweek provides flexibility for employees and reduces employers overtime liability. However, specific requirements must be met when adopting an alternative workweek. Failure to follow these requirements could result in unplanned liability for overtime as well as penalties that could place a struggling employer and its employees in the very positions they were hoping to avoid: business closure and unemployment. Thus, employers should be well versed in the procedures that must be followed and adopted to implement an alternative workweek schedule.

California’s Overtime Rules

Under the federal Fair Labor Standards Act, employees are entitled to overtime only when they work over 40 hours in one workweek. California’s overtime is regulated by statute and a number of occupational wage orders issued by the Industrial Welfare Commission. Employees who work in California are entitled not only to weekly overtime, but also to daily overtime.

Employees who are not “exempt” from California’s overtime laws must be paid 1Œ_ times their regular rate of pay for any day of the workweek in which they work over eight hours. Generally, double the regular rate is due for work in excess of 12 hours in the day, and for over eight hours of work on the seventh consecutive day.

“Alternative Workweek Arrangements”

Under federal law, there is no daily overtime. So, an employee can work four 10-hour days, or three 12-hour days and a four-hour day without earning overtime pay. California law recognizes these schedules as “alternative workweek arrangements.” If implemented properly, employers may avoid paying daily overtime in these circumstances.

Employers are not the only fans of alternative workweek arrangements. Employees often may save on commuting, daycare, and other expenses. Employees with families may also enjoy the extra flexibility in their schedules. And, some may desire a three-day weekend every week.

Procedures for Implementing Alternative Workweek Programs

Labor Code section 511 and all but two of California’s occupational wage orders authorize a limited exemption from daily overtime for certain alternative workweek arrangements. Alternative workweeks are not provided for in certain agricultural occupations (covered by Wage Order 14) and household jobs subject to Wage Order 15. Determining which wage order applies may be tricky. In some circumstances, more than one wage order may apply to different employees working for the same employer. Employers should carefully review the wage orders to ensure they are complying with the laws applicable to their employees’ occupations.

Employers may not unilaterally impose alternative workweek arrangements on their employees. The central requirement is a properly conducted, secret ballot election. The applicable wage orders contain detailed procedures and limits on alternative workweeks. Employers should strictly follow these procedures, as the wage orders have the force of law.

Employers may propose alternative workweek schedules to employees in a readily identifiable “work unit,” such as a division, department, job classification, shift, separate physical location, or recognized subdivision of any such work unit. A readily identifiable work unit may even consist of one employee. The proposed alternative workweek must be approved by at least two-thirds of the number of employees in the affected work unit (as opposed to the number of employees who vote). Therefore, an employee’s failure to vote is equal to a vote against the alternative workweek.

At least 14 days before the vote, the employer must disclose the proposal in writing and hold a meeting to explain the alternative workweek. The disclosure must include the number of days each week and the number of hours each day the employees will be required to work if the alternative schedule is adopted. If more than five percent of the employees in the work unit speak another language, all materials regarding the proposed alternative workweek must be presented in the applicable language.

The meeting, which must be held on company time and on company premises, should address how the schedule will affect overtime and benefits. Employers may express their opinions about the alternative workweek schedule, but they must refrain from coercing employees to adopt the alternative schedule. Employers are also prohibited from discharging or otherwise discriminating or retaliating against any employee who expresses an opinion either for or against the adoption of the alternative workweek.

If it passes with the appropriate two-thirds vote, the employer may implement the alternative workweek schedule within 30 days of the election. Regardless of the outcome, the employer must report the results to the Division of Labor Statistics and Research within 30 days of when the results become final. If an employee in the work unit cannot work the adopted alternative workweek, the employer must make a reasonable attempt to provide the employee with a schedule of not more than eight hours per day.

The Procedures for Repealing an Alternative Workweek Election

Employers need employees’ approval to adopt an alternative workweek arrangement. Yet, employees do not need employer approval to repeal an alternative workweek. An employer must hold a recall election if at least one-third of the work unit signs a petition to hold a recall election. This election must be held within 30 days of the petition. If two-thirds of the work unit votes to repeal the alternative workweek, the employer must reinstate the traditional work schedule within 60 days. Alternatively, the employer could keep the alternative workweek schedule, but pay overtime as appropriate. All but one of the applicable wage orders limit repeal elections to once per year.

Alternative Workweek Limitations

The wage orders not only strictly limit the method for implementing an alternative workweek, but also the way it is administered. Most wage orders limit alternative workweek schedules to 10-hour days without the payment of daily overtime. So, work in excess of 10 hours must be paid at the applicable overtime rate. Wage Order 5, applicable to the health care industry, allows 12-hour alternative workweek schedules without overtime pay for health care workers.

While a common alternative workweek schedule is four 10-hour days, an alternative workweek may be any combination of hours per day (so long as overtime is paid when applicable). A schedule need not be the same every week, as long as the schedule is reoccurring (such as every other week, every third week, etc.) Alternative workweeks must be consistent with the schedule upon which the employees voted. Frequent deviations may result in a DLSE finding that the arrangement is void.

Depending on which wage order applies, an employer may be required to provide employees two consecutive days off for employees working an alternative workweek schedule. Wage orders 4, 5, 9, 10, 15 and 16 do not include this rule.

Implications for Failure to Follow Proper Procedures

The foregoing merely summarizes the wage orders’ requirements. The state’s Division of Labor Standards Enforcement provides further guidance and opinions in its Enforcement and Interpretations Manual. The DLSE’s views are not necessarily obvious from the text of the wage orders. They also are not legally binding on a court. However, their deputies will follow the agency’s opinions when adjudicating wage claims filed there. Failure to heed the DLSE’s opinions therefore may be risky.

Employers that do not follow the correct procedures outlined in the applicable wage order(s) may face significant repercussions. For one, the election could be voided. The result would be that all hours worked under the flawed alternative workweek schedule would be subject to ordinary overtime rules. Thus, the employer would be liable for any overtime the employees worked during the alternative workweek. For example, if an employee worked 10 hours a day, four days a week, the employer would be liable for eight hours of overtime pay. In addition, the Labor Code and wage orders impose significant penalties for underpayment of wages, including overtime. Former employees may seek “waiting time” penalties of up to 30 days’ pay in addition to the underpayment penalties and interest. Employees pursuing unpaid wages in court may obtain costs and attorneys’ fees if they prevail.

The Future of California’s Overtime and Alternative Workweek Schedules

As discussed, alternative workweeks are difficult to implement given the strict procedural requirements. Governor Schwarzenegger recently called upon the legislature to amend certain statutes, including those imposing overtime.

Congress is considering legislation encouraging alternative workweeks. In December 2007, the Working Families Flexibility Act was introduced. The Act would allow employees to request flexible work schedules. The bill would not require employers to grant permission to employees requesting such schedules. But it would require employers to engage in an interactive process to discuss the employee’s scheduling needs and how they can be addressed. This legislation died in the last congressional session, but it will likely reappear given that President Obama co-sponsored the bill.

Conclusion

In these economic conditions, employers may be tempted to impose alternative workweek arrangements to save on overtime pay in lieu of layoffs, furloughs and the like. As discussed above, California employers seeking to do so must successfully run a gauntlet of confusing rules. Therefore, as always, employers should consult competent counsel to help ensure compliance with California’s wage and hour laws and rules.

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