In Otsuka v. Polo Ralph Lauren Corp., a federal district court in Northern California recently approved a $4 million class action settlement for unpaid wages. Plaintiffs alleged that, as part of the retailer’s loss prevention program, they were required to submit to inspections of their personal bags and belongings before exiting the store. However, the inspections occurred after the employees had already clocked out. The settlement will compensate as many as 6,700 class members for the off-the-clock time waiting for and submitting to these bag inspections.    Employers are cautioned against retaining control over employees after the employee has clocked out.  Retaining sufficient control over what the employee does after clocking out, may amount to nothing short of forcing the employee to work off the clock, thereby entitling the employees to back pay, penalties and attorneys fees.

California Labor Code §2802 requires an employer to indemnify (reimburse) its employees for all necessary expenses or losses incurred in the course of his or her duties. This includes an employee’s expenses when an employee uses their own vehicle for business purposes. Many employers reimburse their employees on a per mileage basis for use of their own vehicle during business errands.  The reimbursement is used to cover the costs (fuel, insurance, etc..) associated with the use of the vehicle for non-personal use.  However, many employers are not sure what mileage reimbursement rate they should use in making the reimbursement calculation.

While there is no specific reimbursement rate provided for in the Labor Code, there is guidance on the matter in both the Opinion Letters issued by the California Department of Labor Standards Enforcement (DLSE) and Labor Code Section 2802.

The DLSE has stated in its manual and opinion letters that it in the absence of other “evidence to the contrary” it will consider the use of the IRS mileage allowance rate as satisfying the requirement that the employer reimburse the expense’s incurred in use of an employee’s car. Businesses using the IRS mileage rate for calculating reimbursements should therefore be safe from under reimbursing their employees and violating Labor Code Section 2802.

On December 23, 2009, the Internal Revenue Service (“IRS”) issued the mileage rates used to calculate the deductible costs of operating an automobile for business purposes in 2010. Beginning on January 1, 2010, the mileage rates for the use of a car (also vans, pickups or panel trucks) will be $.50 cents per mile for business miles driven.

Failing to reimburse your employees at the proper rate subjects the business to a potential lawsuit, which could seek damages for the amount not properly reimbursed, interest from the date on which the employee incurred the necessary expenditure or loss ,and the employee may also seek all reasonable costs (including attorney’s fees incurred by the employee enforcing the rights granted by Labor Code §2802).

Double check the rates you are using when reimbursing employees for use of their personal vehicle for business purposes.

Apparently, there is a new set of class action cases that have been filed recently against several large employers for alleged “seating” violations under the California Labor Code (“Labor Code”). In these cases, plaintiffs seek to enforce Section 14 of the relevant Industrial Welfare Commission (“IWC”) Wage Orders, which until recently was a largely unnoticed provision of the Order that requires employers to provide seating for their employees under certain circumstances. While past case law gave employers some comfort, a new Northern District of California decision, Curie-White v. Blockbuster, has expanded damages available to plaintiffs in such cases, and will likely lead to further claims being filed.

Section 14 of IWC Wage Order 7 (entitled “Seats”), which is typical of several other industry specific wage orders, requires that (a) all workers shall be provided with suitable seating when the nature of the work reasonably permits it; and (b) when the nature of the work requires standing, the employer must provide reasonable seating in proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.  However, Section 14 does not contain its own penalty provision and does not address seating claims.

The new class action claims assert that employers who fail to comply with Wage Order seating requirements violate Section 1198 of the Labor Code, which makes it illegal to employ an employee under conditions that are prohibited by an IWC Wage Order.  These new seating claims have been brought under the Private Attorneys General Action of 2004 (“PAGA”), which allows recovery for violations of all provisions of the Labor Code except those for which a civil penalty is specifically provided.  PAGA penalties consist of $100 for each aggrieved employee per pay period for the first violation, and $200 for each aggrieved employee per pay period for each subsequent violation.

Prior to the decision in Curie-White v. Blockbuster, the only court opinion to address a seating claim was in Hamilton v. SF Hilton and the decision there weighed heavily in favor of the employer.   However, In Curie-White, the court significantly undermined several of the key defenses that had succeeded in the Hamilton case.  Most significantly, the court ruled that plaintiffs may seek civil penalties under PAGA because the penalty provision of the Wage Order “does not provide a penalty for the violation…specifically a failure to provide seats for employees.”

Given the conflict between the Hamilton and Curie-White decisions, it is likely that the issue will continue to be litigated in the more recent seating claims cases.  The ultimate resolution in those cases will likely determine whether the these seating claims form a new fad in class action litigation.

WHAT TO DO:

• Document any efforts that have been made to determine whether seats are necessary;

• Review and analyze current job descriptions and customer service standards to determine whether they clearly identify jobs where continual mobility and standing are essential functions of the job, and incorporate those standards into the job descriptions;

• Provide an adequate number of suitable seats in a nearby break room and allow employees to use the seats when it does not interfere with the performance of their duties.

Here is a link to Wage Order 7, which contains the relevant Seating Requirements at Section 14

Is there a new wave of Class Action cases coming in California?

Employers, please remember that you need to keep on top of your non-exempt employees about taking their statutorily required meal and rest periods.  You should have a copy of the wage order that governs your place of business (get it here) and review it every now and then to be sure you are still keeping up on the wage and hour compliance issues discussed in the orders.

For meal periods: Remember that no employer shall employ any person for a period of more than five (5) hours without providing them with a meal period of not less than 30 minutes, except that when the person is working less than 6 hours a day the employee may waive the meal period. The waiver, however, must be in writing, signed by the employee and in the personnel file ahead of time. The employee has the right to revoke the wavier too.

For days when the employee will be working more than 10 hours, the wage order requires you to provide a second 30 minute meal period for the employee, except that if the total hours worked will not be more than 12 hours for the day, the employee may waive the second meal period if they actually took the first meal period and have a signed waiver in their file ahead of time.

Unless the employee is relieved of all duty during a 30 minute meal period, the meal period will be considered an “on duty” meal period and counted as time worked. An “on duty” meal period is only allowed only when the nature of the work prevents an employee from being relieved of all duty and when by written agreement between the parties an on-the-job paid meal period is agreed to. The written agreement shall state that the employee may, in writing, revoke the agreement at any time.

If you fail to provide your employee with a meal period as outlined above, you are required to pay the employee one (1) hour of pay at the employee’s regular rate of compensation for each workday that the meal period is not provided. These penalties can add up fast so you need to make sure your employees are tracking their time worked, their meal periods, and whether they missed the meal period. You should also be tracking when you paid them the one hour penalty, which should be right away after finding out about any missed meal period.

Similar to the meal periods (except rest periods are paid breaks), every employer shall authorize and direct that all employees take a rest period, which insofar as practical should be in the middle of each work period. The authorized rest period time shall be based on the total hours worked daily at the rate of ten (10) minutes net rest time per four (4) hours or major fraction thereof.  However, a rest period need not be authorized for employees whose total daily work time is less than three and one-half (31/2) hours. If you call someone off break before the get their net 10 minutes, you should give them a new 10 minute break after whatever necessity that required they be called back to duty has ended.

Like the one hour penalty in the meal period context, if an employer fails to provide an employee a rest period in accordance with the applicable provisions of the wage order, the employer shall pay the employee one (1) hour of pay at the employee’s regular rate of compensation for each workday that the rest period is not provided.

Often times the employer feels bad about disciplining the employee who works through a meal period because they are simply trying to work hard. Let them know that its nothing personal (you are not trying to punish hard work), but as the employer you can be held liable for missed meal and rest periods, so they must take them or face discipline.  You can and should discipline employees who do not adhere to company policy regarding the tracking and taking of meal and rest periods.

Employers, please remember that section 5 of most, if not all, of the Industrial Welfare Commission Wage Orders (available for download here) provides that an employee shall be paid, as Reporting Time Pay, half of their usual or scheduled day’s work (not less than two (2) hours, nor more than four (4) hours) at the employee’s regular rate of pay whenever the employee is required to report for work and is not put to work, or is given less than half of the employee’s usual or regularly scheduled day’s work.

Also, where the employee is required to report for work a second time in any one workday and is furnished less than two (2) hours of work on the second reporting, the employee should be compensated for two (2) hours at the employee’s regular rate of pay.

The Reporting Time Pay is not applicable when:

(1) Operations cannot commence or continue due to threats to employees or property; or when recommended by civil authorities; or
(2) Public utilities fail to supply electricity, water, or gas, or there is a failure in the public utilities, or sewer system; or
(3) The interruption of work is caused by an Act of God or other cause not within the employer’s control.

Reporting Time Pay is also not applicable for employee on paid standby status who are called to perform assigned work at a time other than the employee’s scheduled reporting time.

For some compliance tips on meal and rest periods – check out this post too.