It seems as though there is a minefield that employers must navigate to ensure that they fulfill their wage and hour obligations to their employees. Employers must somehow comply with overlapping and seemingly contradictory federal, state, district, county, and local requirements. The wave of civil actions that are filed against employers alleging wage and hour violations is not slowing. And given the potential financial consequences for non-compliance, illustrated in part by a $102 million award for technical paystub violations, meeting these requirements must be a priority for all employers.
The issues discussed briefly below are only the “tip” of the iceberg in terms of complying with the plethora of wage and hour laws created by various legislative, judicial, and regulatory bodies. Also, if you would like a more in-depth discussion of an issue, please click on the title of the relevant article.
New Salary Thresholds for Certain Exempt Employees
Among the criteria an employer must satisfy in order to classify its employees as exempt is paying a minimum amount in salary. That minimum may vary based on where the employee works—that is, in which state, district, territory, county, or city the employee works.
Employers doing business in states where there is no minimum salary threshold for exempt employees must meet the federal minimum. Effective January 1, 2020, the federal minimum will increase from $23,660 annually ($455 per week) to $35,568 annually ($684 per week) for employees classified under the administrative, executive, or professional exemptions. Federal law also recognizes a variant of these exemptions for employees who are “highly compensated”; for these employees, the threshold will change on January 1, 2020, from $100,000 per year to $107,432.
A number of states, including New York, California, and Alaska, have their own salary thresholds that are higher than the federal minimum. And there are legislative proposals in Pennsylvania and Washington that would enact similar requirements. Each of these states has or will have its own unique requirements, with minima changing each year.
As employers prepare for 2020, it is important to remember that in reviewing an employee’s exemption status, the new federal regulations are not the only consideration: state, county, and city salary thresholds may be significantly higher, and increasing over the next several years.
Is Time Rounding Worth the Trouble?
For decades, employers have rounded non-exempt employees’ work time when calculating their compensation. Maybe they have rounded employee work time to the nearest 10 minutes, maybe to the nearest quarter hour, but they have done it, and, generally, the courts have approved of it.
But the question employers with time-rounding policies should ask themselves with today’s modern technology is this: While time rounding may have been practical when employee compensation was calculated by hand, why are we still rounding our employees’ time today?
If your answer to that question is Because we have always done it, or Because someone told us it is lawful, it might be time to rethink the issue.
(And if your answer is Because rounding time saves us money, then you definitely need to rethink the issue because under-compensating employees is not a legitimate reason to have such a policy.)
It may well be true that your company has always rounded employee work time. But times have changed, and the reason you likely did so originally—administrative ease—probably no longer exists.
If a time-rounding practice benefits the employer—that is, over a period of time, employees “lose” time as a result of rounding—that can be problematic, and perhaps unlawful. In California, for instance, the courts continue to acknowledge that time-rounding policies can be lawful. But those same courts have held that not only must the time-rounding policies be neutral on their face—rounding time both up and down in an even-handed manner—but they must also be neutral in practice. In other words, if an employer’s time-rounding policy results in employees being shortchanged with some amount of statistically significant frequency, the employer can be on the hook for underpaying its employees—and, of course, for penalties and attorney’s fees.
Given the desire to avoid a class action and the ease with which time and compensation can be computed without time rounding, it would be wise for employers to consider whether they wish to discontinue the use of time rounding.
If you don’t have a good answer to explain why you are using a time-rounding policy, it might be time to dispose of it and to pay your employees to the minute.
California Meal and Rest Period Requirements
California employers typically have a duty to “provide” meal and rest periods to their employees; there is no duty to ensure they are taken. This obligation is satisfied if an employer relieves its employees of all duty, relinquishes control, and permits them an opportunity to take a break. Generally speaking, employees should not be interrupted during their breaks, nor should they be required or expected to keep communication devices with them or to monitor such devices if they voluntarily keep such devices on them. Notwithstanding the above, however, an employer is not obligated to “police” breaks or ensure that breaks are taking place or that no work is being done.
While meal periods should be at least 30 minutes of uninterrupted time, rest periods should be at least 10 minutes of uninterrupted time. If an employer interrupts an employee’s meal or rest period, the employee should be provided another break so that the employee is then afforded a full, uninterrupted break.
Meal periods should be off the clock and unpaid; however, rest periods must be paid and on the clock. Additionally, employees must be permitted to leave the employer’s premises during meal periods. Whether they must also be allowed to leave the premises during rest periods remains a matter of dispute.
The following chart sets forth the number of meal and rest periods that should be provided to employees depending on the number of hours worked in a single workday.
|
Hours Worked |
10-Minute Paid |
30-Minute Unpaid |
|
0:00:00 – 3:29:59 hours |
0 |
0 |
|
3:30:00 – 5:00:00 hours |
1 |
0 |
|
5:00:01 – 6:00:00 hours |
1 |
1* |
|
6:00:01 – 10:00:00 hours |
2 |
1 |
|
10:00:01 – 12:00:00 hours |
3 |
2* |
|
12:00:01 – 14:00:00 hours |
3 |
2 |
|
14:01 hours – 18:00 hours |
4 |
2 |
*Under certain circumstances, an employee may waive one meal period. It is a best practice to have any meal period waivers in writing, signed, and placed in the employee’s personnel file.
If an employer does not provide an employee with a meal or rest period in accordance with the above requirements, a penalty is owed. Penalties are calculated as one hour of pay at the employee’s base rate of pay, and an employee may recover only one meal period premium and one rest period premium per day.
Navigating Travel Time Pay Under Federal Law
What is considered compensable travel time under federal law is not always clear or intuitive to employers, even for those who usually have a good understanding of wage and hour laws. Whether the time is compensable will depend on a few different considerations, including the purpose, the length, and even the method of travel.
Employees are not entitled to pay for time that they normally spend commuting between their homes and the workplace. This applies to employees who report to the same or different work sites. But if a particular work site is well beyond the employee’s typical home-to-work commuting time, the employer should consider, for both legal and employee relations reasons, paying for such significantly longer commuting time.
Federal law provides for a different rule for out-of-town travel—even if all of the travel and work is accomplished in one day. The U.S. Department of Labor (“DOL”) takes the position that time spent traveling that causes an employee to exceed a typical workday cannot be considered normal (and non-compensable) home-to-work commuting, even if it is accomplished in one day. Rather, the DOL provides that such travel must be compensated. But employers may deduct the time it took the employee to travel from his or her home to the train station, airport, or bus depot, which is treated as the equivalent of normal home-to-work commuting time.
These circumstances only summarize, and are not exhaustive of, the considerations at issue for whether travel time must be compensated. Also note that it is important to determine whether the state or locality within which your traveling employees work has travel pay requirements that are different from, i.e., more rigorous than, what federal law requires.
The Quirks in Paying Wages to Discharged Employees in California
Employers doing in business California must take caution in ensuring the timely payment of wages to employees who quit or are terminated. Unlike most other states that allow for a discharged employee to be paid on the next regular payday, California is much stricter.
Generally, California law requires an employer that discharges an employee to pay the employee’s final wages immediately—i.e., the same day as termination. This includes not only involuntary terminations but also an employee’s release at the end of a specified duration or project-based job assignment. An involuntarily terminated employee must be paid “at the place of discharge,” or by direct deposit if the employee has already so agreed.
Also generally, for employees who quit, final wages are due within 72 hours of resignation, or on the employee’s final day of employment if the employee gives more than 72-hours’ notice. Quitting employees must be paid “at the office or agency of the employer in the county where the employee has been performing labor,” or by direct deposit if the employee already agreed to that form.
Regardless of timing, in addition to all regular and overtime wages owed, any accrued vacation must also be paid to the employee within the time specified above. Any calculable bonuses or commissions are also due within this time.
A willful—that is, a knowing—failure to comply with California’s final pay requirements will subject an employer to significant penalties, calculated at a maximum of 30 days of pay at the employee’s daily pay rate.
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