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July 01, 2009
Top 10 Pitfalls of California Wage and Hour Law

by Patricia Trainor, J.D.
Legal Editor

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New Orleans--California has some “bizarre” wage and hour laws, and the deck is stacked against employers trying to comply with them, says Jennifer Shaw, founding partner of the Shaw Valenza law firm in California. At the Society for Human Relations Management's (SHRM) 61st Annual Convention and Exposition, Shaw provided an overview of the 10 most common wage and hour pitfalls for employers.

10. Not Understanding Which Wage Order Applies . Shaw explained that in California, 17 separate wage orders establish the minimum wages and conditions for all employees, including public sector employees. For employers that are confused about which wage order(s) apply to their employees, Shaw suggested going to the Industrial Welfare Commission's (IWC) website ( ) and clicking on the link: “Find out which wage order pertains to my occupation.”

9. Misclassifying Nonexempt Employees as Exempt. In California, employees are presumed to be nonexempt. Therefore, the burden of establishing that an employee is exempt is on the employer. As with the federal Fair Labor Standards Act (FLSA), California has both a salary and duties test for exempt employees. However, Shaw noted that many California employers do not realize that unlike the FLSA, California 's salary test requires exempt employees to have a fixed salary that is two times the minimum wage. Thus, each time the state minimum wage increases, the minimum salary level for exempt employees' salaries also increases.

Another quirk of California law is that while most exempt employees are exempt from minimum wage, overtime, timekeeping, and rest and meal break requirements, highly skilled computer professionals are only exempt from the minimum wage and overtime laws, not timekeeping, rest break and meal period requirements.

8. Not Providing Employees with the Required Breaks and Meal Periods. California generally requires that employees be given a 10-minute break every 4 hours and a 30 minute break after 5 hours of work. Shaw noted that meal periods can be waived if employees work no more than 6 hours in a workday, but if an employee exceeds 6 hours of work, the waiver is inapplicable. She also noted that the state's supreme court is now considering whether employers are obligated only to provide meal and rest breaks or if they must ensure that employees take these breaks. Until the court issues its decision, Shaw strongly recommends mandating that employees take their rest and meal breaks.

7. Not Properly Paying Employees for All Hours Worked . Shaw reminded attendees that under California law, nonexempt employees must be paid overtime for all hours worked over 8 in one day and 40 in one week. She also stressed that employees cannot waive the right to overtime. If an employee works unauthorized overtime, the employee must be paid for that overtime, but the employer may discipline the employee. Shaw also noted that compensatory time in lieu of overtime pay is not permitted for private sector employees.

6. Miscalculating the Regular Rate of Pay. Shaw stated that overtime is generally a straightforward calculation. However, it is important to consider how the employee is paid (i.e., hourly, salary, piecework) and bonuses or commissions.

5. Not Posting Required Notices. Both federal and state laws require certain notices to be posted in the workplace. In California, along with other required postings, employers must post applicable wage orders.

4. Failing to Properly Handle Employee Expense Reimbursements, Uniforms and Tools, and Losses. California's labor code requires employers to reimburse employees for “all expenses” incurred on behalf of the employer. Also, if employers require employees to wear specific uniforms or use specific tools, they must provide them.

Employers may not charge employees for losses or breakage, unless the employee engaged in theft or gross negligence. Also, employers may not make deductions from an employee's final pay (other than regular payroll deductions), unless the employee agrees to the deduction at the time of termination. An agreement allowing for deductions from final pay made before that time is void.

3. Failing to Appropriately Pay Final Wages. If an employer terminates an employee, wages are due immediately at the time and place of termination. If the employee uses direct deposit, the wages must be deposited at the time of termination. Employers may not wait until the next regular payday. If employees quit with at least 72 hours' notice, wages are due on the last day of work; if the employee gives less than 72 hours' notice, wages are due within 72 hours after notice is given.

2. Maintaining an Unlawful Vacation Policy. Shaw reminded attendees that vacations are not required by law. However, if an employer offers vacation, it cannot have a “use-it-or-lose-it” policy. All accrued vacation must be paid out at termination at the employee's current rate of pay. Employer's can, however, mandate when vacation will be used and they can impose a “reasonable cap” on vacation accrual.

1. Misclassifying employees as independent contractors. Shaw noted that almost all workers are employees, not independent contractors and that an agreement between the parties cannot establish an independent contractor status. That is determined by law, based primarily on whether the employer has control over the work to be done and the manner in which it is performed.

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