E-Blasts

In a recent decision out of Oregon (Brunozzi v. Cable Communications), the Ninth Circuit discussed the effects of the Fair Labor Standards Act (“FLSA”) requirement that employers must use all payments, wages, piece work rates, and non-discretionary bonuses to compute an employee’s “regular rate of pay” for purposes of calculating the rate at which overtime must be paid. In Brunozzi, the plaintiffs were cable tv installers who were paid on a piece-rate basis for each installation, with a guarantee of at least minimum wage, plus overtime for hours worked over 40 in the week. Plaintiffs were also paid a production bonus equal to one-sixth the amount of their piece-rate earnings. However, in what was the fatal flaw for the Court, the employer subtracted the overtime premium earned on the piece-rate work from the production bonus for weeks in which the Plaintiffs worked overtime.  As a result, the more overtime hours Plaintiffs worked, the smaller their production bonus became. Because production bonuses must be included in an employees’ regular rate of pay for calculating overtime pay, the Court concluded that this diminishing “bonus” device in the employer’s pay plan caused it to undervalue the plaintiffs’ regular rate of pay during weeks in which they worked overtime. The Court concluded that this was a violation of the FLSA and reversed the trial court’s order granting summary judgment in the employer’s favor.

In addition to establishing an overtime pay phase-in for wage order 14 employees, AB 1066 also eliminated other longstanding exemptions.  This included eliminating the exemption to the seventh day rest requirement, which provides that employees are entitled to one day’s rest in every seven days.  Under the California Labor Code, employers cannot “cause” their employees to work more than six days in every seven.  However, at the time of AB 1066’s passage, there was no accepted interpretation of what “cause” meant, although the matter was before the California Supreme Court.

Last week, the Fifth Circuit granted the Department of Labor (“DOL”) yet another extension to file its reply brief in the appeal of the Obama Administration’s proposed changes to the federal overtime rules. The DOL’s brief is now due on June 30, 2017.

As anticipated, the Trump Administration has slowed the appeal process on the injunction of the Obama Administration’s proposed changes to the federal overtime rules.  You can read more about the proposed rule here, which would have increased the federal “white collar” overtime exemption from $23,660 to $47,476, and information about the injunction granted by a U.S. District Court (here).

Before President Trump’s inauguration, the Department of Labor (“DOL”) attempted to expedite the briefing process as it hoped (perhaps foolishly) that it could get the Court to hear the appeal before Trump took over. That did not happen. On February 17, 2017, the DOL requested, and was granted, their second extension to file its final brief, with the deadline now on May 1, 2017. In its unopposed motion, the DOL requested the additional time to “allow incoming leadership personnel adequate time to consider the issues.” This further request may be due to Andrew Puzder’s “withdrawal” from consideration as Secretary of Labor, or may be due to other interests that are priorities to the administration at this time.

The Private Attorneys General Act (PAGA) allows employees, who comply with certain notice and filing requirements, to bring lawsuits for Labor Code violations and recover civil penalties on behalf of themselves, other employees, and the State.  Although PAGA was created to enable employees to pursue claims that the State lacked the resources to pursue, PAGA has become an exploited and abused tool for plaintiffs’ attorneys to line their own pockets. Under the current provisions of PAGA, employers face duplicative penalties, limited procedural safeguards, and costly litigation.

For years, some Legislators have attempted to curb PAGA’s excesses. Some Bills were successful, such as AB 1506 (2015), which gave employers the ability to fix paystubs to include the pay period’s start and end dates, and to fix their legal name and address, as further discussed here. Other Bills have not been successful, such as AB 2463 (2016), which was an attempt to establish a $1000 penalty cap for each aggrieved employee. Notably, eight of the nine PAGA Bills introduced last session did not pass.

In a decision unfavorable to employers, the California Supreme Court in Augustus v. ABM Security recently ruled that employees must be relieved of all duties and relinquish all control over employees during rest periods. At issue in the case, the defendant employer, a security company, required its security guard employees to keep pagers and radio phones turned on and with them during rest periods. The Court reasoned that on-duty or on-call rest periods require employees to essentially perform free work, meaning that the employee receives the same amount of compensation for working through the rest periods as the employee would have had the employee been permitted to take off-duty rest periods.

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