Suit against Tourism Company Provides Appellate Court with Opportunity to Visit a Variety of Employment Law Issues

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Suit against Tourism Company Provides Appellate Court with Opportunity to Visit a Variety of Employment Law Issues

 By: Jarred Lieber

A recent California Court of Appeal decision serves as an important reminder of the importance of properly classifying employees and adhering to other wage and hour requirements under the law.  In Ming-Hsiang Kao v. Joy Holiday the Court clarified when an employee can be treated as a “trainee,” addressed what benefits may be used to determine if an employee is exempt from overtime requirements, and stressed that the requirement that employers pay employee immediately upon termination is a strict one.

The plaintiff in Ming-Hsiang Kao v. Joy Holiday was a Taiwanese national who came to the United States to work for a tourism company. While awaiting his H-1B guest visa, the plaintiff worked approximately 45 hours per week as a “trainee” performing office tasks and was paid $2,500 a month, $800 of which was intended as a “stipend” to help cover his rent.  He did not receive wage statements during this time. After receiving his visa, the plaintiff continued to perform the same duties and receive the same pay but signed a work agreement stating he was an “office manager.”  He began to receive wage statements, but they did not include his hourly rate or hours worked.  The employer ultimately terminated the plaintiff and took five days to provide his final pay.  Not surprisingly, the employee sued his employer, alleging that he was misclassified as an exempt employee and therefore owed minimum and overtime wages, was not provided itemized wage statements, and was not timely paid wages upon termination. 

Although the trial court found for the employer, the Appellate Court reversed each part of the trial court’s decision.  The Appellate Court held that a noncitizen who is working while waiting for an H-1B visa is still an “employee” subject to all California and Federal wage and hour laws. The Court clarified that “trainee” is a narrow definition that only applies to persons who receive training without a salary and whose work serves only the trainee’s own interests, and that such a label was not appropriate in this case where the plaintiff was paid for work that clearly benefited the employer.   And based upon the duties being performed by the employee throughout his employment, the Court held that he should have been classified as a non-exempt employee, receiving itemized wage statements detailing hours worked and applicable hourly rates.  The Appellate Court also rejected the trial court’s consideration of nonmonetary benefits in determining whether or not the employee was properly exempt, clarifying that employers cannot use nonmonetary benefits such as board, lodging, cell-phone, vehicle use, or other noncash items of value as credit to satisfy the overtime exemption salary requirement.  Lastly, the Appellate Court held that the plaintiff’s final paycheck was due immediately upon his termination and that the plaintiff was entitled to waiting time penalties for the employer’s 5-day delay.


There are several important lessons that Employers should take from this case. The first is that the burden is on Employers to establish that an employee is properly classified as exempt, and that misclassification exposes Employers to significant liability. Further, this case serves as good reminder that nonmonetary benefits may not be considered when determining if an employee meets the minimum salary requirement for exempt employees and that when employees are terminated, their final pay must be paid immediately upon discharge.  Please contact the experts at The Saqui Law Group if you have any questions or concerns regarding whether or not your exempt employees are properly classified.


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