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Commissioned Employees Required to Receive Separate Compensation for Rest Breaks

By Jessica Schoendienst

A California appellate court ruled this week in Vaquero v. Stoneledge Furniture, LLC (No. B269657, filed February 28, 2017) that employees paid on commission are entitled to separate compensation for rest breaks.  In a decision that frustrates employers that view the employment relationship through the lens of contract law, the Vaquero Court held that Stoneledge’s commission plan that paid sales associates a percentage of sales or a guaranteed draw in excess of minimum wage against earned commissions failed to properly compensate sales associates for rest breaks and non-productive time.

In Vaquero, two former sales associates filed a class action complaint challenging Stoneledge’s commission plan. Sales associates were paid on a commission basis.  If the sales associate failed to earn at least $12.01 per hour in commissions for the week Stoneledge paid the sales associate a “draw” against future commissions equal to $12.01 per hour worked (“guaranteed minimum”).  In such circumstances, the commission paid the following week would be reduced by the difference between the commission earned and the draw paid in the prior week.  For example, if a sales associate worked 40 hours and earned $300 in commissions for the week, the sales associate would be paid $480.40 ($12.01 x 40) and would have a $180.40 ($480.40 – $300) draw against any commission earned in the following week. The trial court granted Stoneledge’s motion for summary judgment on the grounds that the commission plan paid at or above minimum wage for all hours worked, including rest breaks.

On appeal, the Vaquero Court reversed the trial court and held that the commission plan failed to adequately compensate sales associates for two reasons.  First, the commission plan did not compensate for rest breaks taken by sales associates who earned commissions instead of the guaranteed minimum because commissions cannot be earned during rest breaks.  Second, for sales associates whose commissions did not exceed the guaranteed minimum, the company clawed back (by deducting from future paychecks) the guaranteed minimum which compensated sales associates for hours worked, including rest breaks which effectively reduced the rest break compensation or the contractual commission rate.  Ultimately, the Vaquero Court rejected the commission plan because it credited the compensation earned during hours in which the sales associates could earn a commission towards rest breaks and other non-productive time, which must be separately compensated.

Employers with commissioned employees are safest providing a guaranteed minimum plus commissions, rather than a draw against commissions.  It is unclear how broadly this decision will be interpreted.  For example, it is unknown whether a commission formula that reduces the earned commissions by the guaranteed minimum would be deemed to result in the non-payment of rest breaks and non-productive time or whether such a formula is permitted when the employer provides supplemental commission compensation.

Time will tell whether this decision will restrict an employer’s ability to factor the amount of a guaranteed minimum into its commission formula.  Employers with commission compensation plans should consult with employment counsel to ensure that the plan properly compensates employees for non-productive time and rest breaks and that the plan does not constitute a forfeiture of previously earned wages.

To read more Labor & Employment articles like this, visit our L&E Blog at http://www.thelelawblog.com/

Hugs and Kisses May Not Spur Affection in the Workplace

In a decision just two weeks after Valentine’s Day, the Ninth U.S. Circuit Court of Appeals (“Ninth Circuit”) has ruled that hugs and kisses may decrease, rather than increase, feelings of affection in the workplace. Specifically, the Ninth Circuit overturned a lower court decision dismissing a lawsuit filed by a county correctional officer who alleged that the county sheriff had sexually harassed her in violation of federal and California law. A copy of the decision in is available at this link.

The plaintiff in that case alleged that the sheriff had, among other things, sexually harassed her by “greeting her with unwelcome hugs on more than one hundred occasions, and a kiss at least once, during a 12-year period.” The district court agreed with the defendants “that such conduct was not objectively severe or pervasive enough to establish a hostile work environment, but merely innocuous, socially acceptable conduct.” However, the Ninth Circuit was not so enamored with that view.

The appellate court said it is wrong to think “that courts do not consider hugs and kisses on the cheek to be outside the realm of common workplace behavior.” Additionally, the Ninth Circuit ruled that the sheriff’s conduct did not have to be both “severe and pervasive’” because, for liability to attach, the conduct only had to be either severe or pervasive.

The appellate court was troubled by evidence indicating that the sheriff “hugged female employees much more often than male employees” and that he may have “hugged female employees exclusively.” Without confirming whether it would be acceptable if the sheriff had hugged men as frequently, the Ninth Circuit said that such evidence could allow “a reasonable juror” to grant a verdict in favor of the plaintiff. According to the opinion, “A reasonable juror could find, for example, from the frequency of the hugs, that [the sheriff]’s conduct was out of proportion to ‘ordinary workplace socializing’ and had, instead, become abusive.”

The take away from this is not that any hug or kiss in the workplace automatically leads to liability. Instead, the decision holds that courts must “consider whether a reasonable juror would find that hugs, in the kind, number, frequency, and persistence described by [the plaintiff] create a hostile environment.” In issuing that ruling, the Ninth Circuit did not provide any guidance as to what kind of hugs and kisses, or what number of them, or what frequency of them is across the line for purposes of sexual harassment. Thus, employers would be well advised to consult with legal counsel to determine if changes to their policies or workplace practices are recommended.

To read more Labor & Employment articles from our L&E group, visit the our blog at http://www.thelelawblog.com/.

EEOC Harassment Guidance Receives Much-Needed Update

By Michelle L. Covington

The Equal Employment Opportunity Commission (EEOC) recently reported that between fiscal years 2012 and 2015, private sector charges of harassment increased to account for 30% of all charges of discrimination received by the EEOC.  These numbers indicate that harassment liability and prevention continue to be important.  The EEOC’s most recent guidance on harassment focused primarily on sexual harassment and vicarious employer liability for harassment by supervisors, both published in the 1990’s.

Although not yet in its finalized form, the 75-page proposed guidance indicates the enforcement priorities of the EEOC and gives some helpful explanations and examples for employers.

Here are some of the highlights from the proposed guidance: http://blog.hrusa.com/blog/eeoc-harassment-guidance-receives-much-needed-update/

New York Governor Continues To Strengthen Equal Pay Protections

Stressful people waiting for job interview

By Vida L. Thomas

On January 9, 2017, New York Governor Andrew Cuomo announced his new “New York Promise” agenda, a sweeping package of reforms that the Governor promises will “advance principles of social justice, affirm New York’s progressive values, and a set a national standard for protections against all forms of discrimination.” As part of that agenda, the Governor signed two executive orders aimed at eliminating the state’s wage gap affecting women and racial and ethnic minorities. The executive orders preclude state employers from asking job applicants about prior salary information, and mandate that state contractors collect and report certain pay data.

Executive Order No. 161 prohibits “state entities” from asking job applicants about their prior compensation before a conditional offer of employment is made.[1]  If a state entity is already in possession of an applicant’s prior compensation, the entity cannot rely on that information when determining the new employee’s salary, unless required by law or a collective bargaining agreement.  “Compensation” means salary, wages, benefits, and any other forms of payment.  If an applicant volunteers his or her prior compensation information, then no violation of the Executive Order has occurred.  However, where an applicant refuses to provide this information, that refusal cannot be considered in making the decision about whether to hire that individual.

Read the rest of this article at HRUSA: http://blog.hrusa.com/blog/new-york-governor-continues-to-strengthen-equal-pay-protections/

Washington Raises Minimum Wage And Provides Paid Sick Leave

In November 2016, Washington voters approved Initiative Measure No. 1433 (“IM 1433”) which provides for an incremental increase to the state minimum wage as of January 1, 2017 and also provides for paid sick leave benefits beginning January 1, 2018.  The stated intent behind IM 1443 is expressed in the initiative as follows:

BE IT ENACTED BY THE PEOPLE OF THE STATE OF WASHINGTON: …

It is the intent of the people to establish fair labor standards and protect the rights of workers by increasing the hourly minimum wage to $11.00 (2017), $11.50 (2018), $12.00 (2019) and $13.50 (2020), and requiring employers to provide employees with paid sick leave to care for the health of themselves and their families.

Read the rest of this article at http://blog.hrusa.com/blog/washington-raises-minimum-wage-and-provides-paid-sick-leave/.

Increases To New York Minimum Wage And Salary Thresholds

While the Department of Labor may have stayed any national increases to the minimum exemption salary thresholds for the time being, New York employers have not been granted the same reprieve. Effective December 31, 2016, the New York Department of Labor announced incremental increases to its minimum wage laws. With the increased minimum wages, increases were also made to the corresponding salary thresholds applicable to the executive and administrative exemptions to New York’s overtime laws. In New York, the exemption for professional employees has no salary threshold.

Read the rest of the article at http://blog.hrusa.com/blog/increases-to-new-york-minimum-wage-and-salary-thresholds/.

DON’T THROW OUT YOUR CLASS-ACTION WAIVERS JUST YET

The United States Supreme Court decided last week to resolve a split in the lower courts as to whether the National Labor Relations Act (“Act”) preempts class-action waiver clauses in arbitration agreements between employers and their employees. This is an important development, as the use of such waivers in arbitration agreements (if permissible) can drastically reduce an employer’s exposure to costly class actions alleging overtime violations, missed meal-and-rest periods, and other types of claims. Brenden-Begley-05_web

A number of courts (including the appellate courts that hear appeals from federal courts in California and Illinois) agreed with the National Labor Relations Board (“Board”) that the Act invalidates those waivers. Meanwhile, three other federal appellate courts rejected the Board’s position. Stepping into the fray, the high court last week decided to review two decisions that agreed with the Board and one that disagreed with the Board; namely, Epic Systems Corp. v. Lewis (No. 16-285), Ernst & Young v. Morris (No. 16-300), and NLRB v. Murphy Oil USA, Inc. (No. 16-307).

The Supreme Court currently has just eight justices after the death last year of Justice Scalia, who authored a significant pro-arbitration opinion in 2011. Without a replacement for Justice Scalia being confirmed by the U.S. Senate, the high court may split 4-4 on the resolution of these three cases, which have been consolidated. Such a result most likely would create confusion rather than clarity as to the state of the law. Accordingly, the issue may not be resolved without a ninth justice on the Supreme Court’s bench.

The takeaway here for employers is that it may be too soon to discard those class-action waivers.

To read more Labor & Employment blog articles, visit our L&E Law blog at http://www.thelelawblog.com/

Emotional Distress Damages Allowed Under FLSA

Count the Fifth Circuit among the latest to allow emotional distress damages to employees who successfully sue for retaliation under the Fair Labor Standards Act.  In a December 19, 2016 opinion, the Fifth Circuit held that the district court should have allowed the jury to receive an instruction on emotional distress damages when it was considering an employee’s FLSA retaliation claim.  In the same opinion, however, the Fifth Circuit did clarify that only employees can bring claims under the FLSA.

The Case

Plaintiffs Santiago Pineda and Maria Pena are a married couple who lived together in an apartment owned by the defendant, JTCH Apartments.  Pena leased the apartment from JTCH.  Pineda performed maintenance work around the complex.  As part of Pineda’s compensation, JTCH discounted Pena’s rent.  After Pineda brought a claim seeking unpaid overtime under the FLSA, JTCH served Pena with a notice to vacate for nonpayment of rent in the exact amount that it had discounted for Pineda’s maintenance work.  Upon receiving the notice, Pineda amended his lawsuit to assert a retaliation claim.  Pena joined the lawsuit to assert her own FLSA retaliation claim.

To read the full article, please visit the HRUSA webpage at  http://blog.hrusa.com/blog/emotional-distress-damages-allowed-under-flsa/

New Year, New Laws

Happy New Year!   The new year frequently marks new changes in the law, and this year is no exception.  There are several important changes that went into effect on January 1st.  Here are some of the major changes that went into effect on January 1, 2017:

  • Minimum Wage Change: On January 1st, for employers with 26 or more employees, the California minimum wage will increase to $10.50/hour.   The minimum wage remains at $10.00 for employers with 25 or fewer employees.  Employers with 26 or more employees should use the $10.50 rate to determine the “salary basis” for exempt employees.
  • Arbitration Agreements: Beginning January 1st, California employees cannot be required to enter into agreements (including employment and arbitration agreements) requiring them to apply another state’s laws to their disputes, or agree to litigate in any venue outside of California, unless the employee had advice of counsel.
  • Immigration Verification: Existing law prohibits an employer for engaging in certain actions related to immigration, like refusing to honor immigration documents that appear to be genuine.  Under the new law, it is unlawful for an employer to refuse to honor documents based on the status or term of the person’s work authorization.  Additionally, it is unlawful to reinvestigate or re-verify an incumbent employee’s authorization to work.  For more information on this law, contact one of our attorneys to make sure you are in compliance.
  • Wage Discrimination: Existing law generally prohibits employers from paying an employee lower wages than those paid to employee of the opposite sex for the same job and requires the same skill, effort, and responsibility.  A pay difference can, however, be based on several factors including seniority, merit, quantity/quality of production, or a bona fide factor other than sex (like education, training, or experience).  This new law provides that, effective January 1, an employee’s prior salary alone cannot justify a difference in compensation as a bona fide factor.    Additionally, these requirements were expanded to include differences in race as well as sex.
  • Asking about Juvenile Proceedings on Job Application: The  new law prohibits an employer from asking an applicant for employment to disclose, or from utilizing as a factor in determining any condition of employment, information related to an arrest, detention, adjudication, or court disposition that occurred while the person was subject to juvenile court.  Some exceptions apply for certain employers, like health facilities.

If you have any questions about whether your particular business practices are compliant with these laws, or need assistance updating your employment and arbitration agreements, please contact one of our labor and employment attorneys.

Things You Hope You Will Never Need to Know: Liability Arising from Serious Workplace Injury

Liability arising from serious workplace injury can be divided into four general categories: (1) worker’s compensation; (2) administrative agency (OSHA); (3) criminal liability; and (4) other civil liabilities.

  1. Worker’s Compensation

    Worker’s compensation is, for the most part, a strict liability system -any bona fide workplace injury, regardless of cause – is covered.

The worker’s compensation system provides medical treatment, wage replacement and, in some cases, vocational rehabilitation.  Civil claims against an employer as a result of a workplace injury are, with only a few narrow exceptions, prohibited. Those civil claims (negligence, etc.) are barred by the worker’s compensation exclusivity preemption rule, which makes the worker’s compensation system the exclusive forum for all claims resulting from worker injury – including serious injury and death.

In certain cases, an employee may seek an enhancement of these benefits by claiming that the injury resulted from the employer’s serious and willful violation of worker safety (“S&W claim”). If successful, the injured worker’s benefits will be enhanced up to 150 percent of the underlying worker’s compensation award. For example, three million in medical and wage replacement could result in up to $1.5 million in S&W liability. There is also a corollary provision allowing for some reduction in worker’s compensation benefits in cases where the injured worker engaged in serious and willful misconduct causing the injury.

Your worker’s compensation carrier will process and administer the claim and, if necessary, defend the company (and appoint counsel) in the event that its claim decisions are appealed or if there are other claim proceedings before the Worker’s Compensation Appeals Board (“WCAB”).

Worker’s Compensation Insurance Carriers are barred by law from defending employers in S&W claims or indemnifying them for any S&W award. This is like the rule that punitive damages and fines are not insurable.

If an S&W claim is brought against your company, the company will be required to defend itself (by retaining counsel) and cover any penalty from its own resources and revenues.

  1. Administrative Agency Liability (Cal-OSHA).

Cal-OSHA is responsible for worker safety regulation and enforcement.  Cal-OSHA is required to investigate all employer reports of workplace injury or death.

Cal-OSHA has specific regulations and permitting requirements for industries and hazardous activities. For an overview, see: https://www.dir.ca.gov.

Noncompliance with OSHA regulations can result in civil and criminal penalties. An explanation of the citation levels and civil and criminal penalties can be found on page ten of the following OSHA pamphlet: http://www.dir.ca.gov/dosh/dosh_publications/osha_userguide.pdf.

In sum, violations of OSHA regulations can result in issuance of a citation. These citations range from” regulatory” violation (least serious) through “general”, “serious”, “accident related serious, “willful” and “repeat” violations.  The last types of citation are the most serious.   If a citation is issued there is an opportunity to discuss the citation with the investigator and OSHA staff. Following citation issuance, the citation (and associated fines/penalties) may be appealed to a hearing before an administrative law judge within OSHA. In turn, those decisions may further appealed and reviewed on the record by the Cal-OSHA appeals board.

  1. Criminal Liability

A willful violation that results in death or permanent or prolonged impairment of the body of an employee may result in criminal liability. (This liability is also discussed on page ten of the OSHA pamphlet linked above.)  Both fines and imprisonment are possible.

There are also separate criminal liabilities for making false statements in the course of a workplace accident investigation.

  1. Civil Claims.

As stated above, almost all civil claims against an employer (for workplace injury) are preempted by the worker’s compensation remedy. This includes actions for negligence/wrongful death by a worker’s family against the employer.  Workers may sue non employer third parties for injuries. These non-employer parties can include manufactures of products that caused (or may have caused) the injury or (non workplace) operators of vehicles that cause injury.

The attorneys in Weintraub Tobin’s Employment Law Group assist employers in all areas of employment law.  To read more articles like this, visit the Labor and Employment blog at http://www.thelelawblog.com/