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Labor Commissioner Takes Expansive View of ABC

The ABC Test established by Dynamex made it difficult for employers to classify workers as independent contractors for claims “under the wage orders.” But what does that really mean? Which cases are “claims under the wage orders?” Not surprisingly, the Labor Commissioner takes a very broad view of the ABC test’s applicability.

The Labor Commissioner oftentimes issues opinion letters on various topics within their jurisdiction (i.e., wage and hour questions). Courts are not required to follow the Labor Commissioner opinions, particularly when the Labor Commission changes its position on a topic, but most courts will at least afford the opinion some weight.

Earlier this year the Labor Commissioner issued an opinion regarding “Application of the “ABC” Test to Claims Arising Under Wage Orders.” The opinion discusses (or at least mentions) many of the cases interpreting the ABC test since Dynamex. Even if courts don’t follow the opinion letter, the Labor Commissioner will most certainly follow its own decision.

The Labor Commissioner points out that “Dynamex ties application of the ABC test to enforcement of obligations imposed by the wage orders.”

Because wage order provisions are not independently actionable (see Thurman v. Bayshore Transit Management, Inc. (2012) 203 Cal.App.4th 1112, 1132), the “obligations imposed by a wage order” do not appear only in the wage orders themselves. Wage order obligations are also imposed by certain Labor Code provisions, which serve to enforce the wage orders. In such cases, the IWC employer definitions are imported into the Labor Code provision.

[fn4] Some Labor Code provisions expressly reference the substantive standards of the wage orders. (See, e.g., Labor Code section 1197 [”The minimum wage for employees fixed by the [JWC] or by any applicable state or local law, is the minimum wage to be paid to employees .. .”]; section 1198 (”The maximum hours of work and the standard conditions of labor fixed by the [IWC] shall be the maximum hours of work and the standard conditions of labor for employees.”]; section 226.7 [“An employer shall not require an employee to work during a meal or rest or recovery period mandated pursuant to an applicable statute, or applicable regulation, standard, or order of the [IWC] …”].)

The Labor Commissioner then sets out the types of claims that involved enforcement of obligations imposed by the wage orders:

Obligations of employers under the wage orders include those relating to overtime; minimum wages; reporting time pay; recordkeeping (including itemized pay stub obligations); business expense reimbursement for cash shortages, breakage, or loss of equipment; business expense reimbursement for required uniforms, tools, and equipment; meal periods; and rest periods. (See, e.g., Wage Order No. 1-2001, sections 3, 4, 5, 7, 8, 9, 11, 12.)

“But wait,” you may be saying, “didn’t Dynamex specifically exclude expense reimbursement claims from the ABC test?” No, it didn’t. The drivers challenged which test was applicable to their 2802 claim “insofar as that claim seeks reimbursement for business expenses other than business expenses encompassed by the wage order.” The issue of which test applies to expense claims other than those encompassed by the wage order was not before the court. To the extent the expense reimbursement claim is related to expenses encompassed by the wage order, the ABC test still applies.

The following quotes and cites from the opinion letter will hopefully clarify the Labor Commissioner’s view of which tests apply to which claims:

Dynamex and decisions following it have applied the ABC test to Labor Code sections enforcing minimum wage, overtime, meal and rest breaks, and itemized pay stubs.

See, e.g., Garcia v. Border Transportation Group, LLC (20 18) 28 Cal.App.5th 558, 570-71 [Dynamex only applies to “wage-order claims”]; Alvarez v. XPO Logistics Cartage LLC (C.D. Cal. Nov. 15, 2018, No. CV 18-03736) 2018 WL 6271965, at *4 [Dynamex applies “for the purpose of wage orders”]; Karl v. Zimmer Biomet Holdings (N.D.Cal. Nov. 6, 2018, No. C 18-04176) 2018 WL 5809428, at *3 [”ABC test applies only to claims arising under Industrial Welfare Commission Wage Orders”]; Johnson v. Serenity Transportation, Inc. (N.D.Cal. Aug. I, 20 18, No. 15-CV-02004) 2018 WL 3646540, at* 11 [Supreme Court recently adopted the ABC test ‘·for purposes of the wage orders”].

We don’t know whether the ABC Test applies to section 203 claims for waiting time penalties. (see Garcia v. Border Transportation Group, LLC (2018) 28 Cal.App.5th 558,571, fn.11 [stating section 203 claim did
not “arise under the wage order”, and Futrell v. Payday California. Inc. (2010) 190 Cal.App.4th 1419, 1425, 1428-31 [applying “suffer or permit” standard to section 203, which could imply the ABC test applies].)

We will have to wait and see how the court and the legislature refine, limit or expand the ABC test. For now, the conservative approach means that employers in California should treat workers as employees–at least for wage and hour purposes–unless the hiring entity can prove each of the following factors:

  • (A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
  • (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and
  • (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

If you have a question about classifying your workers, or if you believe you were incorrectly classified as an independent contractor, contact the Nuddleman Law Firm, P.C. Robert Nuddleman helps employers and employees comply with and enforce employment laws in California.

Original Article by Robert Nuddleman of the Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Using this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. Using the Internet or this blog to communicate with the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted on this blog.

The Nuddleman Law Firm, P.C. represents employers and employees in a wide range of employment law matters. Much of his practice focuses on wage and hour issues, such as unpaid overtime, meal and rest break violations, designing or enforcing commission plans, and other wage-related claims. He also advises employers on how to avoid harassment and wrongful termination claims, and represents employees who have been victims of unlawful discrimination, retaliation or harassment. The Nuddleman Law Firm, P.C. helps employers develop good employment policies, and helps employers and employees with disability accommodation issues.

Labor Law and Payroll Tax Seminar

Labor Law and Payroll Tax Seminar

The California Employment Development Department (EDD) and the Division of Labor Standards Enforcement (DLSE or Labor Commissioner) are hosting a free seminar regarding labor law issues, wage and hour requirements and payroll tax issues. The presentation will cover:

  • Record keeping requirements
  • Reporting requirements
  • Employer obligations
  • Payment requirements
  • Common wage and hour laws
  • Employer and employee rights and responsibilities
  • How to distinguish between an employee and an independent contractor

The presentation is being held on March 15, 2017, from 9 a.m. to 3:30 p.m. at the Dublin Civic Center.

Although I am not presenting at this seminar, I’ve presented similar topics to various groups in the past, and it is an area that requires attention. Many new or smaller employers, and even some more established and larger employers, make small but costly mistakes. This presentation will help employers understand their obligations, and make corrections to avoid problems in the future.

I doubt the presentation will cover what to do if you’ve already made a mistake without increasing your liability, which is unfortunate. I always prefer to include possible resolutions to common labor law issues when an employer discovers a possible problem.

Register for Labor Law Seminar

Employers interested in attending can register at www.edd.ca.gov/Payroll_Tax_Seminars/ or call 888-745-3886. The agencies conduct these presentations periodically, so if you can’t make the March 15th presentation, check for other available dates.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties

Presentation at EB Low Cost Ed Day

On Saturday, October 29th, I’ll be conducting a presentation at CalCPA’s East Bay Low Cost Ed Day. I’m looking forward to the presentation, where I will discuss Wage & Hour Best Practices – How to Best Advise Your Clients in this Complex Area.

Presentation Topics

  •   Employees v. Independent Contractors
    • Differences
    • Consequences of Misclassification
  •  Applicable laws & Agencies
    •  State v. Federal v. City/County
    • IWC & Wage Orders
    • City/County Ordinances
    • Opinion Letters
    • Enforcement Manual
  • Basic Pay Requirements
    • Minimum Wage
    • Regular “Workdays” and “Workweeks”
    • Regular Rate of Pay
    • Overtime
    • Bonuses & Commissions
  •  Exempt & Non-Exempt Employees
    • Nonexempt Employees
    • Exempt Employees – salary + duties
  • Meal and rest periods
  • How/when to pay employees
    • Time record requirements
    • Pay stub requirements
    • Deductions from pay
    • Payment upon separation
  • Employees In or About the Home
    • Caregivers
    • Other Household Employees
    • Special Rules for Live-Ins

I will be presenting from 1:00 p.m. to 2:40 p.m. at the Crow Canyon Country Club. You can register here and the event is open to members and non-members.

I hope to see you there.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

California Court Rejects Unconscionable Arbitration Agreement

Martha Carbajal sued her former employer, CW Painting, for unpaid wages.  The employer moved to compel arbitration pursuant to the employment agreement Carvajal signed.  The trial court denied the motion and refused to enforce the unconscionable arbitration agreement. CW appealed, but the Fourth Appellate District agreed with the trial court.  You can read the full opinion here.

Procedurally Unconscionable Arbitration Agreement

The appellate court held the arbitration agreement was procedurally unconscionable because it was part of an adhesion contract CW Painting imposed on Carbajal as a term of her employment.  The court took particular issue with the fact that, although the arbitration provision required the parties to arbitrate their disputes under the American Arbitration Association’s (AAA) rules, the agreement did not identify which of AAA’s many different rules would apply, CW Painting did not provide Carbajal with a copy of the rules it believed applied, and CW Painting required Carbajal to sign the agreement without telling her where she could find the governing rules or giving her an opportunity to determine which rules would apply.

Substantively Unconscionable Arbitration Agreement

The court went on to find the arbitration agreement substantively unconscionable because it allowed CW Painting to obtain injunctive relief in court while requiring Carbajal to seek relief through arbitration.  The agreement also waived the statutory requirement that CW Painting post a bond or undertaking to obtain injunctive relief, and it effectively waived Carbajal’s statutory right to recover her attorney fees if she prevailed on her Labor Code claims.

The court refused to sever these unconscionable terms and enforce the remainder of the arbitration provision,and instead declared the whole contract void because multiple unconscionable terms permeated the entire agreement.

The court rejected CW Painting’s contention the Federal Arbitration Act (9 U.S.C. § 1 et seq.; FAA) governed the dispute because CW Painting failed to timely present  evidence that the contract with the arbitration provision had a substantial relationship to interstate commerce.

Although many courts will enforce arbitration agreements, California courts will not rubber-stamp an employer-mandated arbitration clause.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

On-Duty Meal Agreement in Care Homes

 

Most employees in California are entitled to a 30-minute uninterrupted meal break when the employee works at least 5 hours in a day. Employers that fail to provide the required meal break may be subject to a penalty equal to one hour at the employee’s regular rate of pay.  When “the nature of the work prevents an employee from being relieved of all duty,” and when the employer and employee enter into a written on-duty meal agreement, the employer may be able to avoid the penalty.  The on-duty meal agreement, however, must “state that the employee may, in writing, revoke the agreement at any time.”

In Palacio v. Jan & Gail’s Care Homes, Inc., an employee brought a class action alleging the employer failed to inform the employees that they had a right to revoke the company’s on-duty meal agreement.  The court not only denied class certification, but also held the care homes do not have to tell employees they can revoke an on-duty meal agreement.

Care Homes do not have to tell employees they can revoke an on-duty meal agreement

But, why?  If the regulations require on-duty meal agreements to contain a provision that the employee may revoke the agreement in writing, how come the court said the employer did not have to have such a provision in the agreement?  Because a different part of the regulations specifically state:

Employees with direct responsibility for children who are under 18 years of age or who are not emancipated from the foster care system and who, in either case, are receiving 24-hour residential care, and employees of 24-hour residential care facilities for the elderly, blind or developmentally disabled individuals may be required to work on-duty meal periods without penalty when necessary to meet regulatory or approved program standards and one of the following two conditions is met:

(1) (a) The residential care employees eats with residents during residents’ meals and the employer provides the same meal at no charge to the employee; or

(b) The employee is in sole charge of the resident(s) and, on the day shift, the employer provides a meal at no charge to the employee.

So, while most employers that can use on-duty meal agreements must inform employees of the right to revoke the on-duty meal agreement at any time, Care Homes do not have to tell employees they can revoke an on-duty meal agreement.  Employers should also be aware that not ever employer can use an on-duty meal agreement.

If you have a question about your on-duty meal agreement, or whether such an agreement is appropriate in your workplace, contact an attorney familiar with on-duty meal agreements.