labor lawAdivision of labor law center

The California Labor Agency recently issued an opinion allowing employers to reduce an exempt employee’s salary and hours worked, at the same time, without endangering the worker’s status as a salaried exempt employee.

In the example used, the state labor agency permitted an employer faced with economic difficulties to reduce the work schedule of exempt employees from five days to four days. The state DLSE or Department of Labor Standards Enforcement ruled in a recent opinion letter that simultaneously reducing the employee’s salary by 20%  “did not violate the ‘salary basis’ for the workers’ overtime exemption under the state Labor code and wage orders” as long as the employer’s action is a temporary measure.

This is a radical change, since the DLSE took the opposite position in 2002. In an opinion letter issued in that year, the California agency ruled that the employer could reduce an employee’s salary. However, if the employee’s work hours were also reduced, that change the employee from exempt to non-exempt status.

This is a primary concern for California employers, since non-exempt employees are entitled to overtime under state law. California has the strictest (more…)

Employers who neglect to pay court-ordered restitution face hefty fines and penalties under both California and federal law.

In a recent California case involving Southern California Cleaning Service, a federal judge ordered the company to pay an additional penalty of $2,400 per day, for each day that the payment is delayed.

Even worse, the court also found the two owners of the company in contempt, and ordered them each to pay an additional $200 per day penalty. Further violations could result in them being jailed for contempt of court.

Both the fines will continue on a daily basis until the employees are paid in full.

In addition, the company was ordered to pay $227,701 in interest – 4.4% — on unpaid back wages of almost $3.5 million, plus $1 million in liquidated damages to workers.

The company’s troubles began in 2007 when the U.S. Department of Labor won a lawsuit against the southern California employer.

The judge in that case determined that Southern California Maid Services and Carpet Cleaning had improperly classified nearly every employee (more…)

With the current economic crisis, many employers are considering giving workers additional unpaid time off during the holidays. This includes giving workers Friday, November 28 (the day after Thanksgiving) and/or Friday, December 26 (the day after Christmas) off without pay.

Other employers are considering closing for an entire week between Christmas and New Years.

However, these tactics raise issues around the payment of exempt salaried employees that every employer needs to be aware of. (more…)

A U.S. district court judge has ordered Gardena, Calif.-based Southern California Maid Services and Carpet Cleaning to pay $3,467,789 in back wages, plus $1,058,973 in liquidated damages, to 385 current and former low-wage domestic workers.  This case was reported in the most recent issue of the Labor Advocate, the labor law newsletter published by the U.S. Department of Labor.

This action resolves a lawsuit filed by the U.S. Department of Labor alleging that the workers were misclassified as independent contractors in violation of the Federal Fair Labor Standards Act (FLSA).

The FLSA requires that covered employees be paid at least the federal minimum wage and receive overtime at one and one-half times their regular rates of pay for hours worked beyond 40 per week. Employers must also maintain accurate time and payroll records.

“One of the highest priorities of this department is making sure workers are paid all of the wages they have earned,” said U.S. Secretary of Labor Elaine L. Chao. “In this case, we are recovering more than $4.5 million for nearly 400 workers.”

Investigators from the Labor Department’s Wage and Hour Division found that Southern California Maid Services and Carpet Cleaning misclassified the home and carpet cleaners as independent contractors, resulting in minimum wage and overtime violations. The company also failed to keep accurate records of the employees and the hours that they worked.

The East Los Angeles District Office Wage and Hour Division learned of the employer’s practices through participation in the Employment Education and Outreach (EMPLEO) partnership. EMPLEO is an alliance of organizations and government agencies that assist Spanish-speaking workers and employers with work-related concerns. EMPLEO has a local, toll-free helpline: (877) 55-AYUDA (552-9832). Volunteers help refer callers to the appropriate EMPLEO partner for assistance.

The Mexican Consulate of Los Angeles, a member of EMPLEO, provided assistance in locating Spanish-speaking witnesses to pursue this litigation.

This is just the most recent in a series of minimum wage violations uncovered by the U.S. Department of Labor’s Wage and Hour Division.

In August 2007, five jointly-operated restaurants in Long Island, New York were ordered to pay almost $1 million to 191 low-wage workers. The employees had been forced to work long hours for wages less than the minimum wage, without overtime pay.  The court ordered that if the employers did not pay up, their restaurants could be sold and the proceeds used to pay the employees.

Earlier in 2007, under a voluntary agreement to prevent a federal suit, Wal-Mart, Inc. agreed to pay $33 million in unpaid overtime wages to 86,680 employees throughout the nation. An internal audit revealed that the company had incorrectly classified some employees as “salary-exempt” when in fact they were entitled to overtime pay. In other cases, the company admitted that it had based overtime pay on the employee’s base hourly rate, not including incentives and bonuses in the employee’s average rate as required by law.

The Fair Labor Standard Act requires that most U.S. employees be paid at least the federal minimum wage, which is currently $5.85 per hour. The FLSA also mandates that employees must be paid 1.5 times their usual hourly rate for each hour over 40 in a single work week.

Many employers mistakenly believe that any worker paid by salary is exempt from overtime. The FLSA does provide a number of exemptions to the overtime law for bona fide executive, administrative, professional and outside sales jobs. In general, employees must meet job duty and salary tests, to be exempt from overtime.

The U. S. Department of Labor Wage and Hour Division collected more than $171 in back wages for some 246,000 employees in 2006. Thos wages were a result of 31,987 “compliance actions” in 2006.

The California Industrial Welfare Commission sets the state’s minimum wage, and as of January 1, 2008, California’s state minimum wage jumped 50 cents to $8.00 per hour.

The increase is the result of a two-step process that began in 2006.

 Under pressure from the Democrats to raise the state minimum wage, Governor Arnold Schwarzenegger agreed to bump the minimum by 75 cents from $6.75 to $7.50 on January 1, 2007, and to add an additional bump of 50 cents to $8.00 on January 1, 2008.

The increase in 2007 was the first raise in the California minimum wage since 2002.

In February of 1998, the California minimum wage was on par with the federal minimum of $5.15. In March of 1998, the rate rose to $5.75, then to $6.25 in 2001, and then to $6.75 in 2002.

A minimum wage of $8.00 per hour may seem generous, but California has the highest cost of living and some of the highest real estate prices in the country.

As a matter of fact, California’s minimum wage is not the highest in the nation. Previous to the January 1, 2008 increase, both Oregon and Washington had higher state minimum wages at $7.80 and $7.93 per hour, respectively. These two states also raised their minimums on January 1, 2008. Oregon’s rate jumped 15 cents to $7.95 per hour, and Washington’s increase of 14 cents brought its rate to $8.07 per hour.

Washington now holds the questionable honor of having the highest state minimum wage in the United States.

Like Washington and Oregon, several states have established their own state-mandated minimum wage rates. Other states enacted rates to echo the federal minimum wage. On July 24, 2008, the federal minimum wage will increase, meaning that several more states will raise their minimum wage rates as well.

These increases, both in California’s minimum wage and in the federal minimum wage, will require California employers to update their labor law posters. Legally, an employer who doesn’t display the updated posters can be fined.

The year 2008 has already experienced several changes in state minimum wage laws, and is slated to see several more.

On New Years Day, 2008, Arizona, California, Colorado, Delaware, Florida, Iowa, Massachusetts, Missouri, Montana, New Mexico, Ohio, Oregon, Vermont and Washington, fourteen states in all, enacted raises in their state minimum wage rate.

On July 1, 2008, five more states will follow suit. Michigan and Illinois will each raise its state minimum wage by twenty-five cents. Michigan’s will go from $7.15 to $7.40 per hour. Illinois’s will rise from $7.50to $7.75.

Kentucky and West Virginia, will add seventy cents to their minimum wage rates, resulting in new rates of $6.55 per hour and $7.25 per hour, respectively. Pennsylvania workers will enjoy a 90 cent per hour raise to their minimum wage rate, giving them a new minimum of $7.15 per hour.

Later in July, Utah, Oklahoma and a number of other states will establish higher minimum wage rates, too. These states have enacted laws which tie their minimum wage raises to the federal minimum wage.

On July 24, 2008, the federal minimum wage rate will increase from $5.85 to $6.55 per hour.

President George W. Bush signed the increase into law on May 24, 2006 as part of the Fair Minimum Wage Act of 2007. This Act established a three-tier system to increase the federal minimum wage. The bump on July 24, 2008 is the second step of the system.

Whenever a change occurs in any labor law, employers must update their labor law posters or face the possibility of a fine. Companies are required to display these posters in prominent spots in the employee work area, and to update for both state and federal law changes. Businesses seeking up to date information can visit www.laborlawcenter.com.