Labor Employment Law Blog

On February 1, 2006, a California Court of Appeal issued a published decision in Overton v. Walt Disney Company. The Court of Appeal held that Disney did not need to compensate its employees for the time they spent riding on a shuttle from the employee parking lot to the employee entrance because the employees were not required to park in the employee parking lot.

On November 23, 2005, a California Court of Appeal issued the first appellate court decision regarding application of the Labor Code Private Attorney General Act of 2004 ("PAGA"), Cal. Labor Code §§ 2698 et. seq., in Caliber Bodyworks, Inc. v. Superior Court, Case No. B184120, ___ Cal.App.4th ____. PAGA, also not so fondly known by employers as the "Sue Your Boss Law," permits a current or former employee to initiate private civil actions on behalf of himself or herself and other current or former employees to recover civil penalties.

In the recent unanimous decision of IBP, Inc. v. Alvarez (November 8, 2005), the U.S. Supreme Court clarified what constitutes compensable time under the Fair Labor Standards Act ("FLSA"). Specifically, the United States Supreme Court addressed a split between the circuits as to whether time spent walking to the worksite after donning special protective equipment is compensable. The Supreme Court affirmed a Ninth Circuit opinion holding that such time is compensable.

On September 8, 2005, Governor Schwarzenegger signed Assembly Bill No. 1093 into law, making it easier for employers to remit payment of final wages to employees upon discharge or termination, and also expanding one of the exemption requirements for employees in the computer software field. AB 1093 will take effect on January 1, 2006.

In 2004, the U.S. Department of Labor ("DOL") issued new regulations regarding the federal overtime exemptions applicable to "white collar employees," such as executive, administrative and professional employees (29 C.F.R. Part 541). Many observers questioned the significance of the updated federal regulations in California because of the differences between federal and California regulations. In an August 2, 2005 opinion to Attorney Richard J. Simmons of Sheppard, Mullin, Richter & Hampton LLP, the DOL confirmed that several critical provisions of the 2004 regulations were clarifications and not substantive changes, thereby making them pertinent to an analysis of California's white collar overtime exemptions.

In June 2005, two trial Courts denied class certification on the grounds that common issues did not predominate. In Dunbar v. Albertson's, plaintiff alleged misclassification of Albertson's Grocery Managers as exempt employees. While the Court determined that the plaintiff satisfied the acertainability, numerosity, typicality and adequacy requirements of a class action, the Court determined that the plaintiff did not satisfy the commonality or superiority requirements.

In a key victory for employers and their corporate officers, directors, and management, on August 11, 2005, the California Supreme Court ruled in Steven Reynolds v. Christian Bement that corporate directors and officers cannot be held personally liable for the Company's failure to pay wages to its employees. Plaintiff Steven Reynolds sued his former employer and eight officers and directors alleging that he and other "shop managers" and "assistant shop managers" of the Earl Scheib automotive painting chain were improperly classified as exempt from overtime. Plaintiff also alleged a number of other wage-related claims under the Labor Code and wage orders.

Q. Should I look at paying my computer professionals hourly?

A. Yes, especially if you think $24 million is a lot of money. A $24 million overtime pay settlement was tentatively approved on April 21, 2005 for approximately 30,000 employees at Computer Sciences Corporation (“CSC”). Giannetto v. Computer Sciences Corporation, 03-CV-8201 (C.D. Cal.). It appears the plaintiffs were employees who generally provided off-site service to CSC’s clients. It also appears that this involved maintaining and upgrading CSC’s customers’ software systems with patches designed and engineered by other employees.

CSC is not alone. Many companies commonly believe their computer field employees are exempt from overtime regulations, but companies need to be beware. Companies should understand that for an employee to be exempt, “[t]he regulations provide that an employee’s primary duty must require ‘theoretical and practical application of highly-specialized knowledge in computer systems analysis, programming, and software engineering’ not merely ‘highly-specialized knowledge of computers and software.’ This is an important difference. The former is a narrower class of jobs that requires a different level of knowledge and training than the latter.” Martin v. Indiana Michigan Power Co., 381 F. 3d 574, 580 (2004).

The lesson from Martin and Giannetto: Your employee is not exempt from overtime just because that employee is a computer professional.

Finally, meal and rest period regulations for California employees are just around the corner. On April 6, 2005, the California Division of Labor Standards Enforcement ("DLSE") posted notice of modifications to its proposed meal and rest period regulations and, by way of that notice, commenced the 15 day public comment period on the regulations. The public comment period will be open until April 22, 2005, after which the DLSE will adopt final regulations.

In Steinhebel v. Los Angeles Times Communications, a California Court of Appeal recently held that an employer may legally charge back advanced commissions in the event agreed upon conditions are not satisfied.

Q. What are some of the business culture/organizational behavior issues about which I need to be aware when implementing an exempt/nonexempt (salary/hourly wage) reclassification and how can I deal with them?

A. In July 2001, a jury awarded more than $90 million to 2,400 current and former Farmers Insurance Exchange adjusters because Farmers incorrectly classified their positions as exempt. Bell v. Farmers Insurance Exchange, Cal. Superior Court, No. 7774013-0, jury verdict 7/10/01. Suddenly, companies realized the huge liability associated with compensation policies that treated nonexempt (generally "hourly" employees) as exempt (generally "salaried" employees).

Unfortunately coming into compliance may require changing years, and sometimes decades, of ingrained compensation policies, creating serious organizational issues. My experience as a General Counsel for nearly 11 years, taught me that the method of compensation can affect the employees' perceptions of how they are valued. Salaried positions are more prestigious and higher in the company's hierarchy. Therefore, employees may react very negatively to the putative benefit of being reclassified as nonexempt, causing tremendous upheaval.

To limit this upheaval, you should ensure:

(A) The CEO's "buy in" – reclassification cannot be viewed as simply a Human Resources issue. The CEO needs to fully support it. Failure to obtain the CEO's support will sink the best reclassification program.

(B) Effective communication of the reclassification – the message must be effectively communicated that the reclassification is not about the prestige or importance of the affected positions.

(C) Proper structuring of the compensation method – there needs to be an analysis to ensure compliance is done with as minimal modification as possible.

(D) Proper reclassification implementation – sometimes a graduated implementation process can minimize the upheaval.