Source: http://brianmathiaslaw.com/legal-resources?category=employment
Timestamp: 2019-09-21 02:37:30
Document Index: 45786160

Matched Legal Cases: ['§ 201', '§ 201', '§ 203', '§ 203', '§ 204', '§ 2751', '§ 1198', '§ 432', '§ 226', '§ 246', '§ 245', '§ 246', '§ 246', '§ 246', '§ 246', '§ 246', '§ 246', '§ 12945', '§ 12945', '§ 3357']

September 16, 2019 Brian Mathias
Employers who terminate an employee are faced with the clear and sometimes onerous obligation to immediately pay the employee all of their unpaid wages. Employers who fail to do so face the consequence of paying the employee the waiting time penalty for each day that the wages are not paid, in addition to the unpaid wages. (Lab. Code §§ 201, 203.) A similar obligation is triggered when an employee suddenly quits, requiring the employer to pay all wages within 72 hours. (Id.) Both employees and employers should be cognizant of the California waiting time penalty.
What does the law actually say and how is the law applied?
There are three separate laws that describe a California employer’s obligations to pay final wages and the associated waiting time penalty for employers who fail to do so.
First, the law makes clear, “if an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately.” (Lab. Code § 201.) California courts have confirmed that this law means exactly what it says; final wages must be paid on the same day of termination. Furthermore, the employer must also pay the employee all other technical forms of wages, including paid time off (“PTO”), commissions, and bonuses.
Second, “If an employee quits his or her employment, his or her wages shall become due and payable not later than 72 hours thereafter, unless the employee has given 72 hours previous notice of his or her intention to quit.” Even if an employee abruptly quits the employer must still pay the employee their final wages within three days. Courts have clarified that an employer’s 72-hour window to pay begins only after receiving actual or constructive notice of the resignation. (Nishiki v. Danko Meredith P.C. (2018) 25 Cal.App.5th 883, 890.)
Finally, Labor Code section 203 defines the waiting time penalty itself, “If an employer willfully fails to pay, 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; but the wages shall not continue for more than 30 days.” This means that the waiting time penalty itself depends on the employee’s daily rate of pay.
Courts have repeatedly interpreted the term “willfully” in Labor Code section 203 to mean that the employer “intentionally failed or refused to perform an act that was required to be done,” or “that the person knows what he is doing, intends to do what he is doing, and is a free agent.” (Nishiki v. Danko Meredith, P.C. (2018) 25 Cal.App.5th 883, 891.) In other words, to obtain the penalty the employee does not need to prove that the employer intentionally sought to defraud the employee of his or her final wages. (Nishiki v. Danko Meredith, P.C. (2018) 25 Cal.App.5th 883, 891 [The word “willful” does not imply anything blameworthy, malice toward the other party, or an evil purpose to defraud employees of wages.”].)
Furthermore, Courts have confirmed that ignorance of California’s sometimes draconian labor laws is not a defense. (Diaz v. Grill Concepts Services, Inc. (2018) 23 Cal.App.5th 859, 869.) Employers cannot claim as a defense that they were unaware of the final paycheck requirement.
How is the waiting time penalty calculated?
The amount of the waiting time penalty depends on the employee’s daily rate of pay. (Lab. Code § 203.) Calculating an employee’s daily rate of pay for purposes of the statute can be somewhat confusing, especially if the employee’s wages or hours worked fluctuate from week to week, or if the employee receives occasional commission payments. The rule of thumb, however, is that the daily rate of pay is calculated in a manner that is very favorable to the employee and assures a larger than expected waiting time penalty. The maximum waiting time penalty of thirty days will always exceed what the employee actually earned in salary or wages in any given month while employed.
As an example, an employee who works five days per week and earns $80,000 per year in salary would have a daily rate of pay of $307.69 per day for a maximum waiting time penalty of $9,231, even though the employee’s average monthly salary was just $6,667.00. An article that discusses the calculation of the daily rate of pay in detail may be found here.
As the statute makes clear, there is a thirty-day cap on the waiting time penalty. The waiting time penalty stops at thirty days, once the owed wages are fully paid, or once the employee files a lawsuit. (Lab. Code. § 203.)
How do employers end up owing the waiting time penalty?
There are several common ways that employers may end up owing a waiting time penalty to their former employees.
First, employers will not infrequently require employees to wait until the next normal pay day to give the employee their final paycheck. This approach may be appealing for the many employers who have third-party payroll companies issue pay checks, however the practice immediately triggers liability for the waiting time penalty unless the normal pay day coincidentally falls on the day of termination.
Second, final wages are due regardless of the employee’s conduct or performance as an employee. The world’s worst employee must still be paid immediately upon termination or within 72 hours of their resignation.
Third, employers frequently end up being liable for a waiting time penalty if they misclassify their workers as salaried or “exempt” employees, if the employer allows off-the-clock work to occur, or if the employer fails to pay overtime to an hourly or “non-exempt” employee.
To illustrate, take the hypothetical case of Jared, a former employee of Hot Dog on a Stick. Jared is hired as a restaurant manager for Hot Dog on a Stick and is classified as a salaried or “exempt” employee earning $50,000 per year. However, Jared spends the majority of his time engaged in non-exempt duties such as frying food, squeezing lemons, and washing uniforms rather than exempt duties of hiring and managing the restaurant’s other workers. Jared also works an average of 50 hours per week.
When Jared is fired for theft of food, his employer correctly pays him his last and final paycheck on the actual day of termination, as calculated by his $50,000 salary. However, his final paycheck fails to include the many overtime hours that Jared should have paid all along given that he was an improperly classified exempt employee. His final paycheck therefore did not include all of Jared’s earned wages, triggering the waiting time penalty. Jared may sue his former employer for non-payment of overtime wages and also the associated waiting time penalty.
How may an employee collect their waiting time penalty?
Most employers do not automatically pay the associated waiting time penalty. This means that the employee must take action to collect the penalty, either on their own or with the help of an employment law attorney. An employee may negotiate directly with their former employer, file a civil lawsuit, or may file a claim with the Labor Commissioner. Before attempting to file any type of lawsuit, employees should contact a plaintiff’s employment law attorney to see if representation may be warranted. Most employment attorneys take such cases on contingency and will obtain a result that is greater than what the employee could obtain on his or her own.
Have you been recently terminated from your job? Contact the Law Office of Brian Mathias to see if you may be entitled to the California waiting time penalty.
September 10, 2019 Brian Mathias
Commissions, like bonuses, are a form of incentive compensation. Incentive compensation is money paid to an employee, in addition to the employee’s salary or wage, to encourage increased performance from the employee or to retain the employee’s services for a longer period of time.
Commissions are a form of employee wages and are legally defined as “compensation paid to any person for services rendered in the sale of [an] employer’s property or services and based proportionately upon the amount or value thereof.” (Cal. Lab. Code § 204.1.) In plain English, commissions are money, stock options, or other forms of compensation issued to an employee for having met predetermined performance standards, such as the sale of the employer’s products. The predetermined performance standards are determined in advance on a contractual basis, meaning that the actual benchmarks that must be satisfied by the employee to earn the commission will vary on a case-by-case basis.
Any contract to pay commissions must be in writing. (Cal. Lab. Code § 2751.) This contract, called a Commission’s Agreement, must describe how any commissions are calculated, when the commissions must be paid, and what benchmarks (called “conditions precedent”) the employee must satisfy in order to earn the commission.
Commission’s Agreements can take a number of different forms. Most frequently, the employee will receive a fixed percentage on every dollar of sales made, or in the alternative, the employee may receive a fixed percentage of sales made after reaching a predetermined quota of goods sold (i.e. five percent of all products sold or 10% after $150,000.00 of goods have been sold.)
What happens to an employee’s right to receive commissions if they are fired?
Many employers require an employee to be currently employed in order to receive a commissions payment. This is highly problematic for the employee who performs most of the expected legwork to generate a commission, but is then abruptly terminated just prior to finalizing the underlying sale, thereby depriving the employee their commission.
The law on this particular subject is very complicated. However, a terminated employee’s right to collect a commission for work performed depends on a number of factors, including: 1) The language of the underlying written Commission’s Agreement between the employer and employee; 2) Whether the employee was terminated in violation of the California Fair Employment and Housing Act or other public policy; 3) Whether the employee was terminated for good cause, malfeasance, or theft; and 4) Whether the employer committed fraud against the employee to evade paying the employee their commission. Employees who have been terminated in violation of the California Fair Employment and Housing Act or other public policy stand a much greater chance of being able to collect their unpaid commissions than employees who have simply been terminated for actual or perceived poor performance.
How can employees collect an unpaid bonus or commission?
Once a commission or bonus is earned by the employee, it essentially becomes the employee’s property. Legally, the non-payment of an earned commission is viewed no differently than the non-payment of the employee’s wages or salary. An employee can use a variety of legal procedures to collect any unpaid commission or bonus, including a civil lawsuit, to collect their unpaid wages. If an employee prevails in a civil lawsuit against their employer to collect their unpaid commission, the employee may also be entitled ten-percent interest, court costs, the employee’s reasonable attorney’s fees, waiting time penalties, and penalties under the Labor Code Private Attorney General Act (“PAGA”.) In many instances, the penalties and attorney’s fees associated with an unpaid commission or bonus will exceed or be many times larger than the unpaid commission itself. This incentivizes aggrieved employees to vigorously enforce their rights and pursue unpaid commissions.
Are you owed any unpaid commissions or bonuses? Contact the Law Office of Brian Mathias today.
April 24, 2019 Brian Mathias
Current and former California employees have a right to inspect certain employment records kept by their employer. These include the employee’s personnel file and payroll records. This article briefly discusses some of California’s employment record keeping requirements.
The Personnel File.
A personnel file is commonly understood as the collection of documents kept by an employer about a particular employee. California’s Labor Code states (1) what documents must be kept in a personnel file, (2) how current and former employees may request and inspect their personnel file, and (3) what penalties employers face if they refuse a lawful employee request to inspect their personnel file. (Cal. Lab. Code § 1198.5.)
California law does not provide much guidance for what documents must actually be included in the employee’s personnel file. However, the law does specify that the file must include “records that the employer maintains related to the employee’s performance or any grievance concerning the employee.” Therefore documents such as disciplinary write-ups, records of verbal warnings, reprimands, performance improvement plans, suspensions, performance evaluations, and termination letters must be kept in the employee’s personnel file. California also states that an employee, upon request, shall be given a copy of “any signed instrument related to the obtaining or holding of employment.” (Cal. Lab. Code § 432.) Therefore, any contracts signed by the employer and employee such as commission agreements, agreements for bonus compensation, employment contracts, signed employee handbooks, and arbitration agreements must be produced along with any request for the employee’s personnel file.
California law also provides some examples of what documents do not have to go into an employee’s personnel file including records relating to the investigation of a criminal offense and letters of reference. Law enforcement personnel also have separate rights related to the maintenance and inspection of their personnel files.
How to inspect your personnel file.
Both current and former employees have a right to inspect their own personnel files following the submission of a written request to their employer. While the law states that the inspection may be done in-person at the place of employment, the common practice is to mail or email the employee a copy of the records in lieu of an in-person inspection. Employers may elect to charge the employee for the actual reproduction costs of the personnel file (i.e. $0.10 per page).
Importantly, employers are required to produce the personnel file for inspection within 30 days of receipt of the employee’s request. Employers who do not permit the inspection face a $750.00 penalty. The employer may also be sued by the employee through a civil lawsuit or at the Labor Commissioner if records are not produced. Under certain circumstances, the employee may recover their attorney fees if a lawsuit was required to compel production of the personnel file.
Payroll records are commonly referred to as “pay stubs” and are legally referred to as “itemized wage statements”. In contrast to personnel files, California is very strict in regard to what employee payroll information must be kept by the employer.
California requires employers to provide an accurate and written itemized statement showing: (1) the gross wages earned (ithe amount before deductions) (2) the total hours worked by the employee, (3) the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis (the number of units sold, picked, miles driven, etc.), (4) all deductions (taxes and withholdings), (5) net wages earned (the amount after deductions are taken), (6) the inclusive dates of the period for which the employee is paid, (7) the name of the employee and only 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 (9) all applicable hourly rates in effect during the pay period and the corresponding number of hours (the employee’s regular hourly rate and any overtime rates). (Cal. Lab. Code § 226(a).)
The itemized wage statement must be provided to the employee semi-monthly and even more frequently in some circumstances. The failure to maintain any records or even providing the employee with inaccurate payroll information by mistake can expose the employer to very harsh penalties of up to $4,000 per employee, as well as penalties under the Labor Code Private Attorney General Act (“PAGA”).
Like personnel files, current and former employees have a right to inspect their payroll records even when the payroll records were furnished to the employee on a regular, semi-monthly basis. Employers must produce payroll records no later than 21 days of the employee’s request and employers who fail to timely produce records face a $750.00 penalty as well as paying the employee’s attorney fees.
Employees who believe they have been fired as a result of unlawful discrimination, retaliation, or harassment will often request their personnel file and payroll records shortly after their termination. If you have been terminated and would like assistance requesting and reviewing your own employment records, contact the Law Office of Brian Mathias.
February 4, 2019 Brian Mathias
California’s laws regarding medical leaves of absences can be tricky to understand. For starters, have you heard of the FMLA, CFRA, FEHA, PDL, HWHFA, PSL, or PFL? Probably not, and even most California lawyers could not begin to tell you the difference between the legal abbreviations. Assuming you knew what the abbreviations meant, do you know which protected leave applies to large employers versus small employers? Or which type of leave allows a new father to take paternity leave? What about which type of leave provides you with the right to reinstatement?
This article provides and overview of California’s sick leave laws and is part of a series discussing each type of employment leave of absence. The article discussing California’s Baby Bonding leave may be viewed here and the article discussing California’s Pregnancy Disability Leave Law may be viewed here.
Sick leave is the least protective form of a medical leave of absence available to California employees, essentially requiring employers to provide just three days of paid sick leaves per year to employees who need to miss work for a medical reason. Unlike other forms of medical leave, sick leave does not require the employee to have disability or that the employee be seriously ill.
There are two forms of sick leave in California: Kin Care and sick leave under the Healthy Workplaces Healthy Families Act (HWHFA). Although Kin Care and the HWHFA are technically separate laws, they are most easily understood as one concept and are discussed together in this article.
What is the minimum amount of sick leave that must be offered?
Only after the enactment of the HWHFA in 2015 did California require employers to offer any sick leave to their employees. Now all private and public employers must offer a minimum of 24 hours worth of paid sick leave annually -the equivalent of just three work days. While many employers offer more than the 24 hour minimum, this is voluntary and is not legally required of the employer. All but very short term or very new employees have the right to at least some sick leave under the HWHFA.
What can employees use sick leave for?
An employee does not actually need to be ill to take sick leave under the HWHFA; only a medical reason is required to use the leave. Routine medical appointments, medical diagnoses, check-ups, and any form of preventative care are all allowable reasons to take accrued sick leave. (Cal. Lab. Code § 246.5(1)).
Both the HWHFA and Kin Care allow employees to use their own accrued sick leave to care for the medical needs of certain family members. The legally recognized family members include children, parents, grandparents, siblings, spouses, and Registered Domestic Partners. (Cal. Lab. Code § 245(4)(c)(1-7)). Not included among the legally protected list of family members are in-laws, girlfriends, boyfriends, fiancés, nephews, nieces, cousins, housemates, partners, or pets. (Id.)
Sick leave may also be used by an employee who is a victim of domestic violence, sexual assault, or stalking.
What must an employee do to take sick leave?
Employees only need to submit a verbal or written request to take accrued sick leave. (Cal. Lab Code § 246.5 (a)). If the reason to take the paid sick leave is foreseeable, the employee is required to provide reasonable advance notification to the employer. (Cal. Lab Code § 246(l)). If the reason for the sick leave is unforeseeable (i.e. a sudden illness) the employee is only required to provide notice for the leave as soon is reasonably possible. (Id). Employers cannot require the employee to find a substitute or replacement employee as a precondition of taking paid sick leave. (Cal. Lab Code § 246.5 (b)).
There no requirement that employees provide their employers with a doctor’s note to verify the reason for the sick leave. (Cal. Lab Code § 246.5 (a)). Employers who require employees to provide a doctor’s note or who pry into the reason for the leave can be sued for interfering with the employee’s right to use sick leave.
What are an employer’s obligations under California’s sick leave laws?
Employers are required to grant an employee’s request to take paid sick leave if the employee has accrued sick leave available and the absence is for a legally covered purpose.
Employers are also required to document the total amount of paid sick leave on the employee’s biweekly pay-stub (sometimes called a “wage statement”). (Cal. Lab. Code § 246(i)). Unlike vacation pay or paid time off, employers do not have to pay the employee the value of the unused sick leave when the employee is fired or quits.
What are an employee’s legal rights under California’s sick leave laws?
In short, employers cannot give their employees a hard time for taking sick leave. Employers are prohibited from denying the employee the ability to use accrued sick leave, and are prohibited from firing, threatening to fire, demote, suspend or any manner discriminating against an employee for using or attempting to use sick leave. If an employee is fired, suspended, or otherwise discriminated against within 30 days of complaining about an unlawful sick leave practice there is a rebuttable presumption that the firing/suspension was retaliatory. (Cal. Lab. Code § 246.5(2)).
Employees may sue their employers for violating California’s sick leave law requirements and may seek monetary damages for lost wages and benefits, emotional or psychological damages (called “general damages”), as well as attorney fees and costs.
Do you have questions about California’s sick leave laws? Contact the Law Office of Brian Mathias.
January 28, 2019 Brian Mathias
California’s laws regarding pregnancy and medical leaves of absences can be tricky to understand. For starters, have you heard of the FMLA, CFRA, FEHA, PDL, HWHFA, or PFL? Probably not, and even most California lawyers could not begin to tell you the difference between the legal abbreviations. Assuming you knew what the abbreviations meant, do you know which protected leave applies to large employers versus small employers? Or which type of leave allows a new father to take paternity leave?
This article series will discuss each type of protected leave in detail. This article provides an overview of California’s Pregnancy Disability Leave Law (called “PDL” or “PDLL” for short). A separate article discussing California’s Baby Bonding leave may be viewed here.
Pregnancy Disability Leave is one of several types of “legally protected” maternity and/or pregnancy leaves of absences available to California employees. A leave of absence is “legally protected” if an employer is prohibited from interfering with an employee who exercises her right to take and use the protected leave (i.e. protected from termination).
A pregnancy disability leave lasts up to four months, one month longer than another common type of pregnancy-related leave of absence through the California Family Rights Act (“CFRA”). The employee may use the four months continuously, or in smaller increments of time totaling four months called “intermittent leave”. An employer is not required to continue paying the employee her wage or salary while the employee is on leave. However, the employer must continue the employee’s employer-provided health insurance and must reinstate the employee to her old position and rate-of-pay upon returning from her leave of absence.
Even though a Pregnancy Disability Leave is unpaid by the employer, an employee with a pregnancy disability may qualify simultaneously for a form of public assistance offered by the State of California called Paid Family Leave or “PFL”, a different law entirely from PDL, where the employee is paid a portion of their normal wages for up to ten weeks.
Who Gets to Take Pregnancy Disability Leave?
An employee’s right to take a Pregnancy Disability Leave requires their employer to be a “covered employer” and also requires that the employee is an “eligible female employee” permitted to take the leave. (2 C.C.R. 11035 (g)).
The most unique aspect of California’s Pregnancy Disability Leave law is that most private employers are covered employers required to provide leave if the employee is eligible. An employer is required to provide PDL if they have five or more employees. (2 C.C.R. 11035 (h).) The five employees can be part-time or full-time. If the total number of employees fluctuates during the course of the year prior to the employee’s requested leave, an averaging method is used to calculate the total number of employees. All California governmental entities are covered employers. (2 C.C.R. 11035 (h).)
An employee is an “eligible female employee” entitled to take PDL if they are an employee who is “disabled by pregnancy, childbirth, or a related medical condition”. (Cal. Gov't. Code § 12945). Importantly, there is no length of service requirement for an employee to be eligible for PDL. In contrast, other forms of pregnancy and medical leave required the employee to have been employed for a minimum of one year and to have worked for 1,250 hours in the past twelve months, excluding new employees. Under California’s PDL law, even brand-new employees must be provided with the leave if they are otherwise eligible. Spouses and fathers are not protected under California’s PDL law.
What Types of Medical Conditions Qualify Under PDL?
Being pregnant does not automatically qualify an employee as eligible to take PDL. The employee must be disabled by pregnancy, childbirth, or a related medical condition. Being “disabled” by pregnancy, childbirth, or a related medical condition means that in the opinion of a medical care provider, the employee is unable to perform one or more “essential functions” of their position. (Cal. Gov't. Code § 12945 (a); 2 C.C.R. 11035 (d).) An essential function of the employee’s position is an integral or critical job component, in contrast to a marginal or occasional job requirement.
California provides a non-exhaustive list of example medical conditions that may qualify for PDL; remember that some of these medical conditions arise after the birth of a child when the employee is no longer pregnant: severe morning sickness, prenatal or postnatal care, bed rest, gestational diabetes, pregnancy-induced hypertension, preeclampsia; post-partum depression, actual childbirth or recovery from childbirth, loss or end of pregnancy, and medical complications with lactation or breastfeeding. (2 C.C.R. 11035(d)(f).) Although women experiencing “normal pregnancies” are not eligible for PDL, given that actual child birth is a protected medical condition, all pregnant women who give birth will be eligible at least once during their pregnancy.
To complicate matters, an eligible employee under California’s Pregnancy Disability Leave law may also qualify for other forms of legally protected leave.
What Must an Employee do to Take Pregnancy Disability Leave?
Assuming the employer is a covered employer and that the employee is eligible to take leave, the employee is next required to provide timely verbal- or written-notice sufficient to make the employer aware that the employee needs pregnancy disability leave. (2 C.C.R. 11050). Typically, the notice is provided in the form of a written note from a medical provider (i.e. a doctor’s note). Notice is considered “timely” if provided within 30-days before the leave is to commence. However, if providing less than thirty-days’ notice is not possible, for instance, due to a sudden medical diagnosis, the employee must only provide notice to the employer “as soon as practicable”.
If required by an employer, the employee must provide a medical certification to their employer confirming that they are disabled by pregnancy, stating the accommodations required by the employee, and providing the estimated duration of the leave. (2 C.C.R. 11050). An employer has a very limited ability to pry further into the medical details of an employee’s pregnancy disability or otherwise challenge the medical certification. Id.
What are a Covered Employer’s Obligations Under California’s Pregnancy Disability Leave Law?
Employers covered by California’s PDL have clear but very rigorous obligations with regard to employees who are disabled by pregnancy, employees who request and/or take a Pregnancy Disability Leave, and employees who are returning from a protected Pregnancy Disability Leave.
Employers do not have to continue paying the employee’s salary or wages during the Pregnancy Disability Leave, however, employees may apply accrued paid time-off (“PTO”) towards the absence if they choose to do so. Employers must, however, continue any employer-provided health care coverage for an employee while she is on a Pregnancy Disability Leave.
An employer’s clearest obligation under California’s Pregnancy Disability Leave law is to reinstate the employee to her old position and rate-of-pay upon returning from the leave. In other words, after the employee returns from her four-month leave, the employee must be given her exact job back or a virtually identical position that she held prior to the disability leave in terms of pay, benefits, working conditions, schedule, and status. (2 C.C.R. 11035 (i)(j).) There are very limited exceptions and defenses available to employers who do not reinstate their employees after returning from leave.
Lastly, employers are required to provide a specific form of written notice to their employees regarding the employee’s rights to take Pregnancy Disability Leave. This obligation is triggered when the employer learns that the employee is pregnant or when the employer learns that the employee needs a Pregnancy Disability Leave. (2 C.C.R. 11051).
What Are an Employee’s Legal Rights Under California’s PDL law?
Employers are prohibited from interfering with, or retaliating against, an employee who exercises their rights to take Pregnancy Disability Leave or who attempts to exercise those rights. Unlawful “interference” includes refusing to reinstate an employee at the end of a protected leave or refusing to grant a Pregnancy Disability Leave altogether.
Employees may sue their employers for violating California’s Pregnancy Disability Leave law and may seek monetary damages for lost wages and benefits, emotional or psychological damages (called “general damages”), as well as attorney fees and costs.
Do you have questions about California’s Pregnancy Disability Leave law? Contact the Law Office of Brian Mathias.
January 15, 2019 Brian Mathias
The term “independent contractor” is commonly understood as a person, who is not an employee, who provides labor or services to another person or company. While an employee is understood to be under the control, guidance, and authority of an employer, by contrast an independent contractor is generally understood to be an actually independent person in business for themselves.
In California, the rights of an independent contractor depend on whether they have been properly classified under the law as an independent contractor, or in the alternative, if they have been misclassified and are in-fact an employee. There are potentially very severe repercussions for misclassifying an employee, even if the misclassification was unintentional. Misclassifying an employee as an independent contractor can trigger stiff overtime wage obligations, taxation, and withholding liabilities, and protections against unlawful termination under the California Fair Employment and Housing Act (called the “FEHA”). For instance, a properly classified independent contractor is not entitled to overtime, even if they work longer than 8 hours per day or 40 hours per week. Similarly, since a properly classified independent contractor is not an employee, they by definition cannot have their employment terminated—let alone, unlawfully terminated—in violation of the independent contractor’s civil rights under the FEHA. Every year it generally gets tougher for an employer to properly claim their workers are independent contractors; California wants workers to be classified as employees and not as independent contractors.
It is therefore critical to have a basic understanding of how California determines whether a person providing labor to another is properly classified as an independent contractor, or is in-fact an employee.
How is an Independent Contractor Defined in California?
To complicate matters, California does not have a traditional definition of “independent contractor”. First, California has a general presumption that “any person rendering service for another, other than as an independent contractor, is presumed to be an employee.” (Cal. Lab. Code § 3357). It is assumed that a person providing services to another is an employee; it’s then up to the employer to prove that the worker is an independent contractor.
Remembering the general presumption, California typically uses two multi-factor balancing tests called the “ABC Test” and the “Borrello factors” to determine if a person has been properly classified as an independent contractor. The new “ABC Test” is thought to be more favorable to employees than the older “Borrello factors”, and the underlying employment issues dictate which test is used.
What are some of the factors courts look at?
This article does not discuss or list all the underlying factors in both tests. However, here are some of the more important factors courts look at and how they are applied.
The level of employee control. Both independent contractor tests look at whether the person hiring the contractor (called the “principal”) has the right to control the manner and means by which the worker accomplishes the work. In other words, the worker must be free from the control and direction of the person hiring them and mostly make their own decisions about how to get the job done. The more of a principal’s rules, policies, and procedures the independent contractor must follow, the more likely it is they are actually an employee. Independent contractors who must report to a specific place of work each day, who must work a schedule set by the principal, or who must wear a company uniform are probably not true independent contractors.
Whether the worker performs labor outside the usual course of the hiring entity’s business. Both tests look closely at what type of labor and function the worker is performing for the principal and how integral that employee’s work is to the principal’s business. For example, at a restaurant the jobs of cooking and preparing food, waiting tables, and washing dishes are integral to its core purpose of making and selling food. It would be difficult to argue that workers performing those functions are proper independent contractors. On the contrary, the function of repairing computers is not integral to the operation of a restaurant, even if computers are incidentally used in the operation of the business. Therefore, a worker hired periodically to repair the restaurant’s computers may very well be an independent contractor.
Whether the worker is engaged in an independently established trade or occupation of the same nature as the work performed. Both tests look to whether the worker is actually an independent business person, or on the contrary, whether they work exclusively for the principal as an employee would. In other words, does the independent contractor hold him or herself out to the public at-large as being able to perform the same type of work? For example, a tech consultant with their own LLC, website, business cards, and a long list of current clients would likely be a true independent contractor. On the contrary, an in-house tech support worker who only performs services for a single company and does not hold themselves out as a separate business is likely to be classified as an employee.
Employers will frequently assert that if an employee uses their own tools they are automatically independent contractors. This is not the case. Whether or not a worker supplies their own “instrumentalities and tools” is just one factor in the multi-factor independent contractor test. Furthermore, to the extent that a worker provides their own tools, courts will determine how much investment the employee has in those tools (i.e. the cost of those tools). A restaurant chef that brings his own knife to work each day would not automatically be classified as an independent contractor, especially, if that same chef worked for one restaurant on a full-time basis and cooked a menu to the restaurant’s owners’ specifications.
Employers often over-rely on a contract with the worker, sometimes called an Independent Contractor Agreement. In these agreements, the worker and the principal agree in-writing, sometimes from the beginning of their relationship, that the worker will be designated as an independent contractor. These types of agreements are often void as contrary to California public policy, especially if minimum wage and overtime allegations are at issue. Even if the contract is not automatically void, the parties’ belief that they are in-fact creating an employer-employee relationship or principal-independent contractor relationship is just one factor in a multi-factor balancing test to determine the worker’s classification.
Repercussions for Misclassifying Independent Contractors
In California, employees of all types have a multitude of rights and protections, including but not limited to, the right to overtime pay, rest and meal breaks, reimbursement for expenses, and protection against unlawful discrimination in employment, including termination in violation of the California Fair Employment and Housing Act. While a properly classified independent contractor is typically limited to the rights under their contract, a misclassified independent contractor has the same rights and remedies as any employee. A misclassified independent contractor may therefore sue their former employer for wrongful termination and many other common wage-and-hour violations, albeit after establishing their misclassification. Employer’s often face tax consequences from misclassification of independent contractors, including claims from California’s Employment Development Department (called “the EDD”) if the misclassified independent contractor seeks unemployment benefits after their termination.
Do you believe you are an independent contractor who has been misclassified? Call the Law Office of Brian Mathias.
Give Me A Tip: Golden State Employee Gratuities
September 20, 2017 Brian Mathias
The practice of giving employee gratuities or “tipping” allegedly originated from the 17th century English practice called “To Improved Promptitude” or “TIP”. As the story goes, bar patrons would slip waiters a coin to speed up delivery of their drinks. The practice has now changed so that the tip is given at the end of the service and not the beginning. And now, California law has quite a bit to say on the issue of tipping. Here are five things to know about employee gratuities in California.
The Gratuity is the Exclusive Property of the Employee
California law clearly states that the tip belongs to the employee, not the employer,
“Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid…” Labor Code Section 351.
This raises two common legal issues. First, it is unlawful (both civilly and criminally) for the employer to take any part of the tip that was left for the employee. Employers cannot require their employees to share their tips with the employer. One-hundred percent of any tip must go to the employee.
Next, it is legal under specific circumstances for employers to require employees to share their tips with other employees, called “tip pooling”. However, managers, certain supervisors, and owners cannot share in the pooled tips, even if those persons participated in the table service of the customer.
2. Minimum Wage Must Still Be Paid
People are often surprised to learn that California employees who receive regular tips, such as waiters, must still be paid at least minimum wage before tips. This requirement applies no matter how much the employee is tipped on a given day. For example, a waitress could receive $100.00 in tips over the course of an hour and the employer must also pay at least minimum wage of $10.50 per hour. It is illegal to pay employees exclusively in tips.
California’s employee-friendly tip law is in the minority. Most states and the federal government allow employers to credit or offset the applicable minimum wage if the employee receives tips at work. Furthermore, roughly 40% of the states only require a base wage of just $2.13 per hour for tipped employees; the rest of the wage may come from tips.
3. Employers Cannot Deduct Credit Card Fees
Issues with employee tips increasingly arise as more and more people pay by credit card. Employers are expressly prohibited from deducting any credit card transaction fees from tips. For example, if a customer pays a gratuity of $5.00 and a $20.00 bar tab by credit card, and the employer pays a $1.00 transaction fee to the credit card processor, the employer is not allowed to require the employee to pay the twenty-cent pro rata share of the credit card fees. All of the credit card fees must be paid by the employer.
This law is a good example of how California wage laws can be very favorable to employees and burdensome for employers.
4. Tipped Employees Must (Usually) Get Rest and Lunch Breaks
Tipped employees (like waitresses, hair stylists, bartenders, valets) often work jobs that are classified as “non-exempt”, meaning that the employees are entitled to a paid, duty-free rest break every four hours of work and an unpaid, duty-free lunch break (called a “meal period”) for every five hours of work. Click here to read an article that explains the difference between “non-exempt” and “exempt” jobs.
In the hustle and bustle of a restaurant, it can be easy for employers to overlook their rigorous obligations to allow for the opportunity for breaks under California law.
5. Employers Can Be Sued For Violations
Employers who even unknowingly violate California’s gratuity laws can face a variety of legal claims. This includes minimum wage violations, tip theft “conversion”, and violation of California’s tip laws. Employers with 20 or more employees who violate these laws may be sued as a part of a class action lawsuit, or under California’s Private Attorney General Act (called “PAGA” and pronounced “pah gah” by lawyers).
Are you a tipped employee in California? Do you have questions or concerns about how your tips are being handled by your employer? Contact the Law Office of Brian Mathias.
In employment Tags tips, minimum wage, breaks
Eat At Your Desk! All About On-Duty Lunch Breaks
California requires employers to provide the opportunity for certain employees (called “non-exempt employees”) to take a lunch break.
Lunch breaks (legally called “meal periods”) must be provided after five working hours and must be at least one half-hour in length. Importantly, lunch breaks must be “duty-free”. A duty-free lunch break means that the employee is not required to perform any work. Employers who require employees to eat at their desk or do not allow the employee to leave the business premises do not provide “duty-free” breaks and are in violation of California law.
Employers who fail to provide a duty-free meal period are required to pay a penalty to the employee called a “meal period premium” of one additional hour of pay for every missed meal break. (For example, a non-exempt employee paid $10.00 per hour would be owed a $10.00 meal premium for each missed break).
Employers who systematically do not provide employee lunch breaks, especially those with many employees, face potentially enormous exposure in premiums, interest, penalties, and attorney fees.
There are only a few exceptions to California’s otherwise stringent lunch break requirement. One such exception is the “on-duty meal period”. Under the on-duty meal break exception, an employer may require an employee to work during their lunch break, provided that the employee is paid their normal wage during their lunch. Since it can be burdensome for employers to schedule and provide regularly occurring meal breaks, employers frequently attempt to use this exception.
However, on-duty meal breaks come with a huge catch. The exception is so narrow that only a tiny fraction of all employers could ever successfully use it to defend against a meal break lawsuit.
To apply the on-duty meal break exception, the employer must prove that the nature of the work makes it “virtually impossible” for the employee to take a duty-free half hour meal break. In other words, there is literally nothing the employer could reasonably do to create the circumstances that would allow a proper, duty-free lunch break.
Legally enforceable and valid on-duty meal periods also require the employer and the employee to enter into a revocable, written agreement stating that both parties agree to the on-duty meal period. This requirement is often overlooked by employers.
To illustrate these concepts, Mike works at Hot Dog on a Stick in Watsonville and is paid $15.00 per hour. Because Mike is the only manager during the night shift, Jared the owner requires him to be on-duty at all times to answer employee questions and deal with difficult customers. Jared verbally tells Mike that he must take “on-duty meal breaks” and forbids Mike from leaving the restaurant for longer than 10 minutes. Mike works for many years under these circumstances, and then is abruptly fired after he is wrongfully accused of stealing a corn dog.
Mike has a great case for unpaid meal breaks because the narrow on-duty meal break exception does not apply.
Even though Mike is the only manager at Hot Dog on a Stick, it is not “virtually impossible” for him to take a thirty minute, duty-free meal break. Other employees could have simply been trained to handle employee questions and customer complaints. Jared could have re-scheduled other employees to assure coverage during Mike’s half hour lunch break. Additionally, Jared failed to ever enter into a written On-Duty Meal Period Agreement with Mike, as is required by the narrow exception.
In employment Tags non-exempt, breaks
Are You Working An Alternative Workweek Schedule?
With very few exceptions, overtime pay must be paid to any non-exempt employee who works longer than eight hours per day or forty hours per week. (Click here to read an article to help determine if you are a "non-exempt" or "exempt" employee.)
One of the very few exceptions to paying overtime in California is called an Alternative Workweek Schedule.
An Alternative Workweek Schedule is a written agreement between the employer and their employees for the employee to work longer than eight hours per day without paying overtime. The most common type of Alternative Workweek Schedule is called a “Four-Ten” meaning the employee works four, ten-hour days per week instead of five, eight-hour days per week. Under a lawfully enacted Four-Ten Alternative Workweek Schedule the employee is not entitled to any overtime even though that employee worked ten hours in a single day, which under normal circumstances would entitle her to two hours of overtime pay.
Alternative Workweek Schedules are often desired by employees because they create regular three-day weekends. Similarly, employers desire alternative workweek schedules because they can work their employees for longer stretches on any given work day without paying time-and-a half.
But Alternative Workweek Schedules come with a very big catch. In order to be valid and enforceable, the employer must strictly follow many highly technical procedure requirements to enact a lawful Alternative Workweek Schedule. These requirements can be so technical and complicated that many employers do not implement them correctly and rendering them invalid. Alternative Workweek Schedules cannot be established with a simple handshake. In fact, the requirements are so technical that an attorney is often required to establish a valid and enforceable Alternative Workweek Schedule.
As an example of some of the requirements to enact a valid and enforceable Alternative Workweek Schedule, the employer must schedule an alternative workweek election among the affected employees, draft ballots, issue pre-election disclosures, hold an election at the worksite during regular work hours, and then report the results of that election to the California Department of Industrial Relations within 30 days. And these are just some of the requirements.
There are potentially severe consequences for employers who do not follow all the legal requirements for a valid and enforceable Alternative Workweek Schedule. This includes paying overtime pay to every employee who worked under the invalid Alternative Workweek Schedule, as well as interest and wait time penalties on those unpaid wages going back several years.
Are you working a four-ten schedule or other Alternative Workweek Schedule? Contact the Law Office of Brian Mathias for a free consultation.
Ready to stand up for your rights? www.brianmathiaslaw.com
In employment Tags overtime, non-exempt
June 13, 2016 Brian Mathias
Can I take breaks at work?
All “non-exempt” employees are entitled to legally protected work breaks. A non-exempt employee is typically a non-managerial level employee, an employee who performs a physical job, or any employee who earn less than $41,600 per year. In contrast, an “exempt” employee will typically work in management or will have specialized job or background. An employee may earn much more than $41,000 per year still be considered “non-exempt.”
Numerically, most employees are non-exempt and are entitled to take protected breaks. An employee’s “classification” as exempt or non-exempt is a very fact-intensive analysis that depends on what the employee spends the majority of his or her time doing.
Employers regularly misclassify their employees. Employers have a financial incentive to classify employees as “exempt” to avoid the obligation to provide legally required breaks and to avoid paying overtime. And many employers simply do not know how rigorous their obligations are under California law. For these reasons, many employees are not provided with rest and meal breaks when they should be.
What are protected rest and meal breaks?
There are three types of protected breaks in California: rest breaks, meal periods, and recovery periods.
Rest breaks are the most common form of legally protected break. All non-exempt employees are entitled to one, paid 10-minute rest break for every four hours worked. Most importantly, the rest break must be “duty-free”. A duty-free rest break means that the employee is not doing any work for the employer.
Meal Periods and Lunch Breaks:
Meal periods or lunch breaks are the next most common type break. One unpaid, half-hour meal period must be provided for every five hours worked. Like rest breaks, the employee must be given a realistic and meaningful opportunity to take a “duty-free” meal period. This means that employees must be permitted to leave work and be completely free of any work obligations. Employees who are required to take their lunch break at their desk are not being provided with a duty-free meal period.
Recovery or Cooldown Periods:
California also requires employers to provide five minute recovery periods or “cooldown periods” or “shade breaks” to employees who work outside in high temperatures. The purpose of this type of break is to prevent heatstroke illness. Recovery periods are the least most common form of protected break because they only apply to employees who work outdoors and in the heat, such as construction workers, agricultural workers, and landscaping employees.
What happens if an employee is deprived of their breaks?
Employers owe their employees penalties if the employee is deprived of the opportunity to take legally protected breaks. One such penalty is called a meal or rest break premium—equivalent to one additional hour’s pay at the employee’s regular rate of pay for missed breaks, up to two hours per day. These penalties can add up to thousands of dollars, especially for employees who have been deprived of their breaks for a long period of time.
As an illustration, take the case of José the bartender. José works as a bartender at a popular bar in downtown Santa Cruz. José works five nights per week from 4:30 p.m. to 2:30 a.m. and is paid $15.00 per hour. José works with one other bartender, Mike. Mike and José are the only employees on site at the bar. The bar is very popular among UCSC students and patrons are lined up at the bar waiting to buy drinks all night long. José has been repeatedly told by the bar’s owner, Jared, under no circumstance should any patron wait longer than 5 minutes at the bar for a drink.
Given the bar owner’s instructions to José about customer wait times, the bar’s popularity, and the understaffing, Jose never has the opportunity to take a duty free break at work.
Unfortunately, José is abruptly terminated after he presses the wrong button on the credit card machine, resulting in a loss of hundreds of dollars to the bar.
José does not have a case for wrongful termination. However, he does have a great case for failure to provide rest and meal breaks. Since José worked ten hours per shift, he should have received two duty-free half hour meal periods and two duty-free 10-minute rest breaks. José can get the maximum penalty of two hours additional pay for every day that he was deprived two or more breaks; $30.00 per day. That totals $7,800 per year going back up to four years, or $31,200.
After unpaid overtime, interest, and state penalties are factored in, José’s damages are in excess of $100,000.
Are you a Santa Cruz, Monterey, or Salinas employee who can’t get a break at work? Contact the Brian Mathias Law. Se habla español.
In employment Tags non-exempt, overtime, breaks