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.
A California trucking company faces action by the U.S. Department of Labor (DOL) to recover some $1.4 million in back wages for 80 current and former employees. In addition, the complaint seeks to bar the company and each of its owners from receiving government contracts for three years.
The action charges that Alan Berman Trucking of Woodland Hills, California is in violation of federal regulations that require federal contractors to pay “the prevailing wage and benefits” to their workers. The prevailing wage is a floating amount set in each geographic area, based on the average pay for similar work. The prevailing wage was established so that federal contractors didn’t underpay local workers.
Alan Berman Trucking has approximately $10 million in contracts with the U.S. Postal Service. During the time under investigation, the company provided hauling services for mail between the Los Angeles and San Francisco Bay areas.
“Federal contractors have a responsibility to pay workers in accordance with federal law,” said U.S. Secretary of Labor Elaine L. Chao.
The complaint requires the company to pay $1,369,870 to 80 truck drivers who are current or former employees.
Investigators with the DOL’s Wage and Hour Division found that the company violated the law on eight different contracts, by treating drivers as independent contractors. Drivers were required to use their own trucks and assume all costs. The company paid drivers by the mile or by the trip, but failed to pay fringe benefits as required by law. The company also made illegal deductions to the employee’s pay for fuel, and failed to reimburse the drivers for maintenance, and wear and tear to their trucks.
The company also failed to keep accurate records of the hours the drivers worked, as required by law.
Alan Berman trucking is a repeat offender. The DOL has investigatged the company nine times, and found violations in eight of those investigations. The suit specifically names the owner, Alan Berman of Woodland Hills California, as well as Vice President Osvaldo “Ozzie” Tarditti of Northridge, California, as defendants. The current suit covers violations between June 2004 and February 2007.
While this is the first prevailing wage violation in some time, it is by no means the first violation to federal wage laws.
In August, 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.
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 Divison 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.
Earlier this year, 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 Trans Bay Steel, Inc. of Napa and Los Angeles, California was fined $1 million for slavery and human trafficking. In the suit, the EEOC alleged that 48 Thai welders were exploited and discriminated against due to their national origin. The EEOC took the allegations one step farther, arguing that Trans Bay was actually guilty of slavery and human trafficking. Eventually, the judge agreed.
Sadly, a number of companies have been accused of discrimination recently—but few have been charged with slavery or human trafficking. When the EEOC receives a complaint of discrimination, they launch a full investigation. Only if the investigation turns up evidence of wrongdoing, does the EEOC file a suit. Not surprisingly, most companies choose to settle out of court, rather than fight the lawsuit.
Officials at Trans Bay probably wish that they had settled with the EEOC, but they fought the charges…and lost.
Trans Bay had obtained H2B visas for the employees through a third party agency. The EEOC charged that the employees were held against their will. Their passports were confiscated and their movements were restricted. The employees were forced to work without pay. In addition, some were confined to cramped apartments without electricity, water or gas.
At least 17 of the workers were told that if they attempted to leave, the police and immigration officials would arrest them. The EEOC contends that all the workers were forced to pay enormous fees to the recruiting company, which effectively kept them in involuntary servitude.
Eventually some of the workers escaped the slave-like conditions and were able to alert authorities.
The men were working to retrofit the Bay Bridge under a sub-contract won by Trans Bay, Inc. Trans Bay contracted with Kota Manpower Co. to bring skilled workers from Thailand. Eventually, 9 of the 48 workers were employed by Trans Bay. The remaining workers were forced to work without pay in Los Angles and Long Beach, in Thai restaurants owned by Kota Manpower. Some were also forced to work other menial jobs without pay.
“The issues of human trafficking and slavery are an enforcement priority for the Commission,” said Anna Y. Park, Regional Attorney in EEOC’s Los Angeles District Office, which has jurisdiction for the southern half of California. “The EEOC is committed to the protection of all workers, particularly those most vulnerable in our society. The workers in this case sought out the American dream, but instead faced a nightmare.”
After an extensive investigation, the EEOC won the suit against Trans Bay and was awarded up to $1 million. This award includes a monetary payment to each worker, with guaranteed employment on the Bay Bridge Project. The company also agreed to provide a housing stipend for workers.
In one of the most comprehensive awards in recent history, the company is required to pay the workers relocation expenses to Napa, California. They will also train and certify the workers as welders.
The company will also pay for tuition and books at a local college for the unskilled workers to train as welders. The company agreed to guarantee minimum pay and a base pay once the claimants complete their training period.
The judgment for the U.S. EEOC vs. Trans Bay Steel, Inc. includes continued monitoring by the EEOC, training of Trans Bay employees on anti-discrimination laws, changes to Trans Bay’s policies and procedures, and developing a company-wide complaint procedure.
EEOC Los Angeles District Director Olophius E. Perry said, “Through the cooperative efforts between the federal government and non-profit organizations, a just resolution was reached that is a win/win for the workers and for the employer.”
The EEOC worked closely with non-profit organizations such as the Thai Community Development Center, the Coalition to Abolish Slavery and Trafficking, and the Legal Aid Foundation of Los Angeles.
The state of California is set to have another living wage implemented on the local level there. Remember, a living wage is different than a minimum wage because generally speaking—except for the state wide Maryland living wage—a living wage in passed on the local level in the towns or counties. Also, a living wage is generally based on what an employee would need to make to earn at or more than the federal poverty line. Minimum wages, on the other hand, are generally based on what the rate of inflation is in an area, and adding that to the existing minimum wage.
But enough of the background. I must be boring you to tears, or in the very least, you want to hear which area in the Golden State has passed a new living wage. Should I make you wait any longer? No, I am not a good writer to keep you on your toes any longer! So here it is—the new living wage was passed in Orange County, California.
It will only be specifically for those workers contracting with the city of Irvine, according to the new law that the Irvine City Council passed just this Tuesday. The living wage for these workers will be at least $10 per hour, and that would be on top of benefits. The City Council picked that level for their living wage in particular because that is the minimum wage that city employees make in Orange County.
The new living wage counts immediately for any new contract being dealt in the community, with the city, starting tomorrow. For contracts with the city of Irvine already in place, the new living wage will be phased into existence over the course of the next four years. Contracts that will be affected by the new Irvine living wage law include such contracts as those for the city’s lawn services and landscaping services, as well as those for maintenance and security of city properties. The law does not cover all contracts with the city. Contracts must be worth at least $100,000 in services, and they must last for at least one year, in order for the new law to cover them.
But I get ahead of myself. The law will not actually go into full effect until the Irvine City Council votes and passed the law again. And that could happen, though it could be close again. The first vote went three to two in favor of the new living wage. If and when it is passed, this new law would make Irvine the only city in the whole Orange County with a living wage. Either way, the city has already set aside an additional $300,000 to pay the new living wage to its contractors, so you got to figure that the odds are good that it will be passed.
Some additional features of the new Irvine living wage bill include that there will an additional 4 percent raise added to the $10 come July 1 of this year. This is again because the city’s full time workers will be receiving the same wage on that date. Another feature—these particular workers affected by the new law can also expect that the contractor will have to spend at least $2.02 per hour on their benefits alone. That means that technically the new living wage in Irvine is $12.02 per hour. If a contractor fails to pay a worker this new living wage, by the way, they could be facing in the very least a mandate by the city to even up with their employees—or at worst, the city has the right under the new law to cancel the contract and prohibit the contractor from getting any contracts down the road.