Don't Sweat California Labor Law

California Wage & Hour Law ─ Avoiding
Common Pitfalls with a Distributed
Workforce
Featuring Seyfarth Shaw LLP

Welcome
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Michelle Lanter Smith
Chief Marketing Officer
EPAY Systems, Inc.
mlsmith@EPAYsystems.com
773-499-7512
Today’s Host

EPAY Systems -- designed to meet the
needs of your complex,
distributed workforce
3
• Reduce your labor
costs by 5% or more
• Keep you in control
and in compliance

4
Today’s Discussion
For better or worse, California is different.
Are you at risk?

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Our Speakers
Chelsea D. Mesa
Associate, Seyfarth Shaw LLP
Labor & Employment
cmesa@seyfarth.com
(213) 270-9725
Colleen M. Regan
Partner, Seyfarth Shaw LLP
Labor & Employment
cregan@seyfarth.com
(310) 201-1556

6
Ask Your Questions
To ask a question, simply type
your question in the “Question”
box on the right side of your
screen.

Polling Question
• In the last six months, have you banged your head
against the wall over a California wage-hour
question?
7

Why California?
• Federal wage-hour law stems from the Fair
Labor Standards Act (FLSA).
• California has its own more extensive
regulation of wages and working conditions.
• The FLSA does not preempt California law.
8
©2014 Seyfarth Shaw LLP

Sources of California Law
• California Labor Code
• California Industrial Welfare Commission
Wage Orders
• Judicial Decisions
• California Division of Labor Standards
Enforcement (DLSE) Interpretations
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Compliance With California Wage & Hour
Law Is Not Easy
• Meal and Rest Periods
• Employment Classification
• California Overtime
• “Off-the-Clock” Work
• Travel Time
• Expense Reimbursement
• Suitable Seating
• Reporting Time Pay
• Vacation
• Pay at Termination
• Itemized Wage Statements
• Wage Theft Notice
• Time Rounding
• Recovery Periods
• Independent Contractors
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Pitfall # 1
Failure to Comply with
California’s
Meal and Rest Period
Requirements
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California Meal Periods:
Legal Requirements
Exceptions
• 5 hrs or less – no meal
period
• A first meal period is
waivable if the
employee works 5 hrs
but not more than 6 hrs
• The second meal period
is waivable if the
employee works less
than 12 hours.
Rules
• Over 6 hrs and up to 10 hrs –
one 30-min unpaid/off duty/
uninterrupted meal period
must be provided before the
6th hour
• More than 10 hrs – two 30-
min unpaid/off
duty/uninterrupted meal
periods must be provided.
• What does “provide” mean?
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• Less than 3.5 hours - not legally
entitled to rest period.
• More than 3.5 hours to 6 hours
- one ten-minute rest period.
• More than 6 hours to 10
hours - two ten-minute rest
periods.
• Over 10 hours – three ten-
minute rest periods.
Rest Periods
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• Compliant written meal and rest period policies
• Written policy requiring accurate recording of meal periods
• Written policy requiring reporting issues with meal and rest
periods
• Training for managers and employees on policies
• Employee acknowledgments
• Electronic or paper attestations
Safeguards
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Penalties
• Employees who fail to provide meal breaks or fail to authorize
or permit rest breaks must pay a penalty to the employees to
the tune of one hour of pay for the missed break
• This does not “forgive” the violation, however. That is, it is not
an option just to pay instead of giving breaks.
• The penalties are capped—one for meal breaks and one for rest
breaks each day, no matter how many of each kind of violation
occurred.

A New Twist on an Old Penalty
Recovery Periods
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It’s Getting Hot in Here
o California OSHA requires that employees who work outside
must get a recovery period of no less than five minutes to
prevent heat illness if outside temperature is over 85 degrees
o What is a “recovery period?” - “a cool down period afforded an
employee to prevent heat illness”
o Only applies to employers with employees who work outside,
such as construction industry employers, agricultural
employers, and the like
o In October 2013, the meal and rest break penalty provisions
were expanded to provide a new penalty for failure to provide
recovery periods
o Equivalent to one hour of employee’s pay
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Pitfall # 2
Misclassification of
Employees under California’s
More Narrow Overtime
Exemptions
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Employment Classification
Non-Exempt = Entitled to Overtime
Exempt = Not Entitled to Overtime
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Employment Classification ─
Three Tests for Exempt Status
• Salary Level Test – Do you earn enough?
• Salary Basis Test – Are you truly salaried?
• Duties Test – What do you do?
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Salary Level Test
• For most employees, as of July 1, 2014, the minimum salary level required is $720
per week
• The $720 per week may be paid in equivalent amounts for periods longer than one
week:
o Biweekly $1,440
o Semimonthly $1,560
o Monthly $3,120
o Annually $37,440
• The minimum salary level under the federal FLSA is $455 per week, $1,971.66 per
month, or $23,660 per year
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Salary Basis Test
• Regularly receives a predetermined amount of compensation
each pay period (on a weekly or less frequent basis)
• The compensation cannot be reduced because of variations in
the quality or quantity of the work performed
• Must be paid the full salary for any week in which the employee
performs any work (subject to certain limited exceptions)
• Need not be paid for any workweek when no work is performed
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Duties Test
• Primarily engaged in exempt work that requires the
exercise of discretion and independent judgment
• “Primarily” means more than 50% of work time
• California law is more stringent than federal law
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Pitfall # 3
California’s More Stringent
Overtime Requirements
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• Federal / FLSA
• all hours worked over 40 in a
workweek
• California
• all hours worked over 40 in
a workweek
• all hours worked over 8 in a
workday
• all hours worked on the 7th
consecutive day of work in a
single workweek
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Overtime

Payment of Overtime:
What Is the Rate of Pay?
Federal
1.5 times the regular rate
(Includes hourly pay, non-discretionary
bonuses, and shift differentials)
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1.5 times the regular rate for:
• over 8 hrs. in a workday (up to 12 hrs.)
• over 40 hrs. in a workweek
• first 8 hours on 7th consecutive workday in a
workweek
2 times the regular rate for:
• over 12 hrs. in a workday
• any hours over 8 on the 7th consecutive day
worked in a workweek
California
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Pitfall # 4
Employees Working
“Off the Clock”
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“Off-the-Clock” Work
o Pre or Post Shift Work
o Working from Home
o After-Hours Calls
o After-Hours E-mails
o After-Hours Computer Entry
o Overachiever – under
reporter
o Underachiever – under
reporter
29

“Off-the-Clock” Work
• The California Supreme Court endorsed Brinker’s off-the-clock
policy:
o It is your responsibility to clock in and clock out for every shift you
work. ... [Y]ou may not begin working until you have clocked in.
Working 'off the clock' for any reason is considered a violation of
Company policy. If you forget to clock in or out, or if you believe your
time records are not recorded accurately, you must notify a Manager
immediately, so the time can be accurately recorded for payroll
purposes.
• Review timekeeping policies to ensure they are legally
compliant
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Challenges: Mobile Timekeepers
• Some of your non-exempt employees don’t stay in one
place all day. What issues can occur?
o Are they recording all time actually worked?
o Are they taking their meal, rest and/or recovery
breaks?
o Are they keeping accurate track of work mileage
driven?
o Privacy issues if they are required to carry GPS
devices?
31

Pitfall # 5
California’s More Stringent
Travel Time Rules
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Travel Time
o Commute time to and from work
generally is unpaid.
o Travel time is compensable if the
employee is subject to the control of
the employer, even if the employee
is not working.
.
33

Overnight Travel Time
Federal
o Travel time for work during normal
working hours is “hours worked.”
California
o All travel time for work is “hours
worked” – before, during or after
normal working hours
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Pitfall # 6
California’s Expense
Reimbursement
Requirements
35

Expense Reimbursement
• Under California Labor Code section 2802,
California employers must reimburse employees for
necessary employee business expenses.
o Auto Expenses (Other than For Commuting)
o Cell Phone Charges
o Client Entertainment
o Travel
36

Pitfall # 7
California’s Reporting Time
Pay Requirements
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Reporting Time Pay
• The Company must pay an employee for half of the employee’s
usual scheduled day’s work (no less than 2 hrs and no more than
4 hrs) when the employee:
o is required to report to work, and
o reports to work, and
o is not put to work OR is
furnished less than half of
the usual scheduled day’s work.
• The Company must also pay an employee
for a minimum of two hours if the employee
is required to return to work a second time
in any workday
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• In Aleman v. AirTouch Cellular (Cal. App. 2011), the
California Court of Appeal held that no reporting time pay
is due for training meetings that were scheduled in
advance, even though the meetings were scheduled for
less than half the amount of time an employee typically
worked.
• Reporting time pay only would apply if the employee is
furnished work for less than half the scheduled meeting
time.
Time Pay Requirements
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Polling Question
• Do you offer “personal days” or “floating holidays” that
may be used for any purpose (or almost any purpose)? If
yes, do you pay out California employees for their
unused days?
40

Pitfall # 8
California’s “No Use It Or
Lose It” Vacation Rules
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Vacation
• No use it or lose it
• Employers can place reasonable cap on
vacation accrual (1.5 times annual accrual
is minimum)
• Employers can “cash out” accrued
vacation time each year
• Must pay out accrued, unused at
termination
• Floating Holidays
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Personal Time Off (PTO)
• In California, it is the equivalent of
vacation, subject to the same rules
• Can be used to satisfy mandatory paid
sick leave ordinances (e.g., San
Francisco)
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Pitfall # 9
California’s Final Paycheck
Requirements
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Pay at Termination:
The Rules
o Voluntary Resignation
o Involuntary Termination
o Lay Off
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Pay at Termination:
Waiting Time Penalties
• Exiting employees not paid all wages owed at termination
can get “waiting time penalties.”
• Requires “willful” failure to pay, but that is a broad concept
under California law.
• Unless you have reasonable defense to paying the wages,
you generally owe the penalties.
• Ignorance of the law is no excuse!
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Pitfall # 10
California’s Itemized Wage
Statement Requirements
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Itemized Wage Statements ─
Required Information
• Gross wages earned
• Total hours worked (not for
salaried exempt employees)
• Number of piece-rate units earned
and any applicable piece rate
• All deductions
• Net wages earned
• Dates of the pay period
• Employee name and last four
digits of SSN or other employee
ID.
• Name and address of the
employer
• All applicable hourly rates for the
pay period with number of hours
worked at each rate
48©2014 Seyfarth Shaw LLP

49
Polling Question
• Does your company round time entries for hourly
employees (e.g., to the nearest 5 minutes, 10 minutes, or
15 minutes)?

Pitfall # 11
Rounding Time Entries
50 |

Rockin' Around the Clock
o Trial court judge in class action against See’s Candy Shops
said rounding of any kind violates California law
o Good News for Employers: The Cal Court of Appeal adopts
the DOL and DLSE position: unbiased rounding is ok as long
as it does not works to the disadvantage of the employee over
a period of time
o But Beware: Do you know how your rounding policy works
over a period of time?
51

Pitfall # 12
Failure to Abide by Suitable
Seating Requirements
52

Take a Load Off
o Almost every wage order includes a requirement that
employees be permitted to sit and provided “suitable seating”
in order to do so
 What is suitable?
 What is an adequate number?
o Where must these seats be placed?
o Regardless of whether an employee requests a seat
o Must be in addition to any employees who require a seat as a
reasonable accommodation.
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Pitfall # 13
Misclassifying Independent
Contractors
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To Contract or Not to Contract…
• When determining whether to classify as independent
contractor or employee, consider the level of control you intend
to exert
o Is it on the results of the contract, or the details of how they get
to those results?
• Both the California EDD and federal IRS have several factor
tests they use to make determinations, focusing mostly on
control, oversight and supervision, and the importance of the
tasks performed by the worker to the business itself
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You Can’t Control Me!
o New laws significantly increase penalties for misclassification
 already paying back employment taxes and overtime wages
o Now civil penalties for “willful misclassification”
 voluntarily and knowingly misclassifying
 $5,000 to $15,000 per violation
 if a pattern or practice, $10,000 to $25,000
o Anyone who, for money or other valuable consideration (such
as an outside accountant), advises an employer to treat an
individual as an independent contractor to avoid employee
status is jointly and severally liable with the employer if the
individual is found not to be an independent contractor.
 excludes those giving advice to their employers or attorneys
providing legal advice
56

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Presenter
John Gaudiuso
Sales Engineer
EPAY Systems, Inc.
Contact John at:
jgaudiuso@EPAYsystems.com
312-291-2032

58
EPAY—In Time with You
Uniquely flexible
Mobile workforce,
union contracts,
multiple job assignments?
Complex pay rules?
No problem!

59
Reduce Your Labor Costs
Eliminate erroneous
pay calculations,
time rounding,
and management
inconsistencies
Eliminate buddy
punching
Biometric time clocks
with camera and
finger print reader
Reduce costs
associated with
paper checks. Save
an average of $2.87
per pay period/per
employee.
or more!

60
• Audit Trails
• Overtime
• Meal Breaks
• Pay Differentials
• Privacy and Security
• Reduce Workers
Comp Claims
• Did you have an
accident free day?
Minimize Compliance Risk

Meal & Rest Period Requirements
• Meal Breaks can be setup to be in monitor mode
o Identify if the employee has taken their lunch after X amount of
hours after the start of their shift (when they clock in)
• Meal breaks can be identified as Missing, Late, Short, or Long
o Initiate an ALERT to management or produce reports for
analysis
o Views & reports can be produced to highlight meal break
exceptions so appropriate action can be taken (i.e., adjust time,
make comments)

Misclassification of Employees
Exempt vs. Non-Exempt
• Employee Audit reports in Blueforce can reflect the role
(e.g., service work versus supervisor) an employee has
performed over a period of time
• Use data to monitor for improper compensation according
to employee’s roles and responsibilities
• Watch for employees that are alternating between
exempt and non-exempt roles regularly

Stringent Overtime Requirements
• Different OT rules can be setup in Blueforce
o Daily OT
o Daily DOT
o Weekly or Bi-Weekly
o Consecutive Days Worked

Off the Clock Work
• Mix or match collection devices
o For example, use punch in on an EPAY time clock, punch
out on a smartphone using Blueforce Mobile Punch if that
eliminates “travel” time to the clock
• Use Blueforce auto append feature
o For example, automatically add 30 minutes to the daily
timecard for every 8 hours worked

Travel Time
• Track travel time as employees move from location to
location throughout the work day
o Punch in and out at each location
o Blueforce can total the travel time throughout the day
• Or, employees can track travel time by entering the time
into EPAY’s mobile, web or telephony collection devices
when they punch out

Reporting Time Pay
• Ensure employees are always paid for showing up to
work with Blueforce’s minimum hours worked rule

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Upcoming Education
Compliance Webinar Series with Seyfarth Shaw LLP
• Understanding the Affordable Care Act: Should You
Pay or Play? Recorded Webinar
• Mobile GPS Webinar: Time Tracking & Mobile Apps.
July 3rd:10:00 am cst
• Public Demonstration Webinar: Time Tracking &
Mobile Apps. July 10th:10:00 am cst
Register at www.EPAYsystems.com

68
Thank You!
Chelsea D. Mesa
Associate, Seyfarth Shaw LLP
Labor & Employment
cmesa@seyfarth.com
(213) 270-9725
Colleen M. Regan
Partner, Seyfarth Shaw LLP
Labor & Employment
cregan@seyfarth.com
(310) 201-1556

69
Seyfarth Shaw’s 2014 Cal-Peculiarities: How California
Employment Law Is Different
Connect with EPAY on:
o LinkedIn – follow our company page at EPAY Systems
o Twitter -- @EPAYsystems
o Sign up for our e- newsletter at EPAYsystems.com
Connect with Seyfarth Shaw LLP:
o Wage & Hour Litigation Blog
http://www.wagehourlitigation.com/
o California Peculiarities Blog
http://www.calpeculiarities.com
o Twitter - @SeyfarthShawLLP
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Don't Sweat California Labor Law

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