Misclassifying employees as “exempt,” maintaining “use-it or lose-it” vacation policies, and denying employees meal and rest breaks are examples of wage-hour law violations we have already thoroughly discussed. Below are a few unlawful practices of which employers may not be as aware.
Minimum Salary Levels of Exempt Employees Regularly
California law ensures minimum wage, overtime pay, and meal and rest break protections for most employees. However, some employees are exempt from those protections if they meet certain requirements. The principal exemptions – called the “white collar” or “executive, administrative and professional” exemptions – require employees to earn a minimum base salary. Employees who earn less than the minimum salary do not qualify for the above exemptions, regardless of their duties.
Employers must be mindful of federal, state and local wage-hour law and must comply with whichever law is more favorable to employees. For example, effective December 1, 2016, the minimum salary level for exempt employees under federal law increases from $455/week to $913/week. This federal minimum will adjust periodically beginning on January 1, 2020. California’s minimum salary is two times the state minimum wage, which by law will increase over the next several years to $15.00 / hour. Because the federal minimum salary will be higher than the state’s as of December 1, employers paying salaried, exempt employees less than $47,476 per year may lose the exemptions applicable to those workers.
Employers must monitor changes to the federal and state minimum wages to ensure they satisfy both federal and state criteria for the salary basis exemptions.
Failing to Calculate the Regular Rate of Pay Correctly When Paying Overtime
Employers must pay overtime premiums to non-exempt employees, e.g., “time and one-half” for hours worked over eight in a workday or 40 in a workweek. There also are “double time” premiums, e.g. , for hours worked over 12 in a day.
Overtime premium rates are multiplied by the employee’s “regular rate of pay.” For employees whose hourly rates vary, or who earn compensation besides hourly pay, the “regular rate” calculation may be complex. Incentive pay, production bonuses, commissions, on-call pay, and shift differentials are examples of wages that must be factored in to avoid miscalculation of the regular rate.
Improper Deductions From Wages
An employer generally may withhold amounts from an employee’s wages only if required to do so by state or federal law, e.g., income taxes or wage garnishments). Employees also may authorize certain deductions such as union dues, insurance premiums or benefit plan contributions.
California employers are not permitted to offset amounts owed by the employee against unpaid wages. For example, if an employee quits with a “negative” paid time off balance, that is considered a debt owed to the employer that the employer is not allowed to take from the final check. If an employer loans money to an employee, the employer may not take a “balloon” payment from the final check either. The courts consider the employer to be the same as any other creditor, and therefore not entitled to help itself to unpaid wages in the employer’s possession.
Employers make other unlawful payroll deductions as well, including: deducting the cost of required uniforms, photographs, or medical or physical examinations. Nor may the employer deduct for breakage or loss of property caused by the employee’s negligence.
Failing to Pay for All Compensable Time
Compensable “hours worked” includes the time the employee is “suffered or permitted” to work (i.e., performing work the employer knew or should have known about). But California employers must pay at least minimum wage to employees for each hour they are under the employer’s control, whether the employee is productively working or not.
It is illegal for employers to refuse to pay an employee for working unauthorized overtime. When employees do not follow instructions or policies, the employer’s remedy is disciplinary action or discharge.
Other mistakes employers make in this area include failing to pay employees for preparatory work, such as turning on equipment or changing in and out of mandated uniforms and protective gear, requiring employees to take calls or respond to electronic communications after hours without compensation; unfavorable time clock rounding policies; and allowing employees to “volunteer” to perform unpaid work.
Employers must be careful not to transform “on call” time into hours worked by imposing too many limits on employees’ off-work activities when “on call.” Finally, travel time under California law includes a great deal of paid time, some of which employers may not realize is compensable.
Paying Employees Correctly
California employers must pay workers in cash, or via a form of payment that readily can be exchanged for cash, free of charge, at a California-based business such as a bank. Most employers do not pay in cash. California law imposes significant detail about everything from the timing of payment, to what must be included on the check itself, to what information must be provided on a pay check stub. Employers who do not comply with the minutiae of these laws expose themselves to potentially massive penalties.
Many employers offer “direct deposit” of wages into an employee’s account, lawful if voluntarily authorized. Some employees resist direct deposit because, for example, they do not wish to maintain bank accounts. Employers have responded by offering the option of receiving their wages on a debit or payroll card.
The legislature has not expressly addressed the use of payroll cards in lieu of paper checks. Employers that treat payroll cards as a lawful means of payment may be in for a surprise if the practice is challenged. Employers therefore should treat payroll cards like direct deposit. Among other things, the employees’ participation should be voluntary. The entire sum of net pay must be accessible without a charge to the worker. Employers offering payroll card programs are still required to distribute proper itemized wage statements, and must ensure employees are furnished with an address where they may receive the full amount of the paycheck in cash.