Seventh Circuit Articulates Broad View of FLSA Section 7(i) for Commissioned Workers and Service or Retail Establishments in Rejecting Overtime Claims of Window Washers

April 13, 2015 by

On April 1, 2015, the Seventh Circuit, in Alvarado v. Corp. Cleaning Services, Inc., Case No. 13-3818, ruled that high-rise window washers in Chicago were exempt from overtime under Section 7(i) of the Fair Labor Standards Act (FLSA).  Under Section 7(i) of the FLSA, the retail or service establishment exemption, the following three elements must be met in order to qualify:

  1. the employee’s regular rate of pay must exceed one and a half times the federal minimum wage;
  2. the employee must be employed by a retail or service establishment; and
  3. more than half the employee’s total earnings for a representative period must consist of commissions.

The plaintiffs in this case, high-rise window washers, argued that neither the second nor the third element was met and, as such, they were not exempt from overtime under Section 7(i).

The defendant, Corporate Cleaning Services (CCS) is Chicago’s largest provider of window-washing services to high-rise business operators, apartment building owners, and other non-residential buildings.  When CCS receives a window-washing order, it uses a “point system” to calculate the price it will charge for the job. The assessed points are based on the complexity of the job as well as the estimated number of hours to complete it. Each window washer assigned to the job usually gets the same share of points allocated to the job. CCS then pays the window washer the number of points allocated to him multiplied by a rate specified by the company’s collective bargaining agreement. CCS regularly makes price adjustments depending on variable costs, such as permits, equipment rental and competition, which cause the percentage of the price attributable to the window washers’ compensation to vary from job to job. The annual pay for a CCS window washer ranges from $40,000 to $60,000.

On appeal, the plaintiffs argued that their compensation, based on this point system, did not amount to a commission system and that the sale of window-washing services to managers of tall buildings “lacks a retail concept.”  The Seventh Circuit disagreed.  Although CCS called its compensation system a “piece-rate” or “piecework” system from job to job, the Court noted “the nomenclature is not determinative.” Instead, a commission system need only be “proportional and correlated” to the price. More importantly, according to Judge Posner, the irregularity of the work (because of the peculiar conditions of window-washing such as high winds, dive-bombs from peregrine falcons, and the like) makes the window-washers even more like commissioned employees. The fact that a window-washer cannot count on working 40 hours each week for an entire year is precisely “the reason for exempting his employer from the requirement of paying the worker time and a half for overtime.”

As to the last element—being a retail or service establishment—the Court found that CCS is best described as a “retail service establishment” because it sells its window-cleaning services to building owners and managers.  While the plaintiffs’ attempted to characterize this as a wholesale relationship, the Court pointed out that the building owners and managers are the “ultimate customers; they do not resell the window cleaning.” Accordingly, CCS satisfied the third element as well. Interestingly, the Court’s ruling is in direct conflict with the Department of Labor’s (DOL) position on this issue. In July 2014, the DOL filed an amicus brief supporting the plaintiff’s position and arguing that the exemption should not apply to a company like CCS, which failed to present “any evidence that its sales are ‘recognized’ as retail in the window washing industry.”  The Seventh Circuit, however, was not swayed.  Paying extra for overtime “is said to be a boon to low-wage workers,” but, as the Court pointed out, the window washers here are well paid.

Joseph E. Tilson and Jeremy J. Glenn, Meckler Bulger Tilson Marick & Pearson

An Update on the United States Department of Labor’s Agenda

February 26, 2015 by

By: John Ho – Bond, Schoeneck & King

WHDI member, Dennis McClelland served as a moderator for a presentation by Jennifer Brand, Associate Solicitor of Labor, at the American Bar Association’s, Federal Labor Standards Legislation Committee’s Mid-Winter Meeting held this morning. Mr. McClelland is also the Employer Co-Chair of the Committee. Ms. Brand provided an update on important DOL initiatives and activities. In her discussion, Ms. Brand discussed recent litigation involving interns and confirmed that the Department still believes the six factors outlined in USDOL Fact Sheet #71 is the proper test to determine whether an unpaid internship is lawful. Ms. Brand did acknowledge that as the workplace evolves, it may, in unusual situations, be appropriate to consider other factors.

Ms. Brand also discussed the Department’s appeal of the U.S. District Court for the District of Columbia’s order vacating two major provisions in the DOL’s Home Care Rule originally intended to be effective January 1, 2015. The new rule would have excluded third-party employers from relying on the companionship and live-in domestic worker exemptions and would have significantly narrowed the definition of companionship services. The Department believes the case should be heard in the May term. Mr. McClelland specifically asked Ms. Brand why the revocation of the companionship exemption to third-party employers should not a Congressional issue. Ms. Brand responded that significant changes to home care services over several decades including the approximately 2 million hone care workers have dramatically changed the profession and that the United States Supreme Court provided DOL with the authority to define the term “companionship services.”

Finally, Ms. Brand acknowledged that the highly anticipated proposed changes to the white-collar exemptions would not be published this month as DOL had previously suggested. She further stated that they are “not imminent.” Although she would not comment on specifics, she stated that DOL is examining the appropriate salary level test and whether the duties test needs to be reviewed.

Other WHDI members serving on panels at the conference include Lawrence Peikes, Joseph Tilson, Reed Russell, Jeremey Glenn, and John Ho.

New FLSA White Collar Regulations Anticipated Soon

February 23, 2015 by

In 2014, President Obama directed the Secretary of Labor to streamline existing overtime regulations for the “white-collar” exemptions. These exemptions from overtime, which cover the typical executive, administrative and professional employees, were last revised in 2004. When the revisions became effective in 2004, there were significant changes in the application of the exemptions for many employers. It remains to be seen whether these proposed changes will have as sweeping an impact across industry.

In 2014, there was quite a bit of discussion by proponents of change to increase the minimum salary required to be exempt. Some commentators pointed to examples of entry-level management employees who, by and large did the same tasks as their subordinates, but were not entitled to any overtime compensation. This can result in subordinate employees working fewer hours or making more money once the overtime premiums were factored in.

Last fall, the Department of Labor stated that it would delay the publication the proposed final regulations until February 2015. The month is quickly coming to a close and the Department of Labor has yet to publish these proposed new regulations. Of course there will be a comment period prior to final implementation. If it is similar to the 2004 changes, there will be some tweaks from the first version published to the final version that is actually implemented in the Code of Federal Regulations. The Wage & Hour Defense Institute will be closely monitoring the Department of Labor and its proposed rules once they are published for the benefit of its members and their clients. But, suffice to say that all employers should take note of the changes to ensure compliance, especially those with executive employees.

California Court: It’s Okay for Employees to Remain On-Call During Rest Breaks

February 6, 2015 by

On January 29, 2015, a California appellate court modified and published its earlier opinion holding that ten minute rest breaks are not invalidated by the mere possibility the employee(s) may be asked to perform work. While actual work is prohibited during rest breaks, simply remaining available to work is not. The case is Augustus v. ABM Security Services, Inc.

ABM Security Services employs thousands of security guards throughout California. The company’s rest break policy requires security guards to keep their radios and pagers on during rest breaks and to respond to emergency and non-emergency situations should the need arise.

Three security guards filed putative class actions against ABM in which they argued the requirement to stay in contact and to respond to requests for assistance rendered the rest breaks indistinguishable from normal security work, and therefore invalid as a matter of law. The trial court certified the class. The plaintiffs then moved for summary adjudication, offering no evidence that any rest periods had ever been interrupted, but arguing the requirement to remain on call during rest breaks rendered them invalid. The trial court granted the motion, finding the requirement to remain on call during rest breaks meant the security guards were not truly on break, regardless of whether they were actually interrupted and required to perform work. The court awarded $90 million in damages, penalties and interest to the security guards, plus over $31 million in attorneys’ fees.

The appellate court examined Wage Order No. 4 and Labor Code section 226.7 in an effort to determine “the nature of a rest period.” The court found no useful guidance in the wage order, but noted that section 226.7 merely prohibits requiring an employee “to work” during a rest break. The court framed the issue as “whether simply being on-call constitutes performing ‘work.’ We conclude it does not.”

The court rejected the guards’ argument that on-call time necessarily constitutes work because it is indistinguishable from the rest of a guard’s work day, given that guards are always on call. The court explained: “[S]ection 226.7 does not require that a rest period be distinguishable from the remainder of the workday, it requires only that an employee not be required ‘to work’ during breaks. Even if an employee did nothing but remain on call all day, being equally idle on a rest break does not constitute working.”

The court also rejected the guards’ reliance on case law holding that employees must be relieved of all duty during meal breaks, noting the wage order includes language specifically requiring an employer to relieve an employee of all duty during a meal break, but contains no such requirement with respect to rest breaks. The court concluded: “In sum, although on-call hours constitute ‘hours worked,’ remaining available to work is not the same as performing work. . . . Section 226.7 proscribes only work on a rest break.”

This decision clarifies important distinctions between meal break and rest break requirements, and in the process provides guidance to employers on what they must do to comply.

Aaron BuckleyPaul, Plevin, Sullivan & Connaughton LLP – San Diego, CA

California Supreme Court: On-Call Employees Required to Sleep on Employer’s Premises Must Be Paid

January 13, 2015 by

On January 8 the California Supreme Court held that security guards who spend eight hours of their 24-hour shifts sleeping on their employer’s premises must be paid for that sleep time, disapproving a 2011 appellate court decision holding that eight hours of on-call sleep time during 24-hour shifts need not be compensated. The new case is Mendiola v. CPS Security Solutions, Inc.

CPS Security Solutions employed guards to provide security at construction sites. CPS required the guards to live on-site in residential trailers equipped with beds, bathrooms, kitchens, heating and air conditioning. On weekdays, guards worked 16-hour shifts consisting of eight hours on patrol and eight hours on-call. On weekends, they worked 24-hour shifts consisting of 16 hours on patrol and eight hours of on-call “sleep time.”

During on-call shifts, guards were required to remain on site. They were not allowed to have children, pets, or alcohol on site, and had to obtain prior approval to receive adult visitors. CPS did not pay the guards for any on-call time unless they were asked to perform work.

In 2008 guards filed class action lawsuits, arguing that Industrial Welfare Commission Wage Order 4, which governed their work, required CPS to pay them for all the on-call time, including sleep time. The trial court agreed, finding all the guards’ on-call time was compensable “hours worked.”

CPS appealed, citing previous appellate decisions, including Seymore v. Metson Marine, Inc., a 2011 case approving the exclusion of “sleep time” based in part on a federal regulation (29 CFR 785.22) that authorizes employers to enter into agreements with employees working 24-hour shifts to designate up to eight hours as on-call “sleep time” and exclude it from compensable “hours worked.” The state appellate court agreed with CPS as to the sleep time issue, holding that CPS could exclude the sleep time from compensable hours worked.

The California Supreme Court held that all the guards’ on-call time—including the sleep time—constituted compensable hours worked under California law. The Court noted the absence of any language in Wage Order 4 justifying a sleep time exclusion (unlike Wage Order 9, which provides a sleep time exclusion for ambulance drivers and attendants). The court expressly “disapproved” Seymore v. Metson Marine as wrongly decided, finding no justification for incorporating the federal regulation into California law given California’s broader definition of “hours worked,” which includes not only working time but also time an employee is “subject to the control” of an employer.

This case is yet another reminder that California wage and hour laws differ from federal law in many important respects, and compliance with federal law does not necessarily protect an employer from wage claims brought under California law. Any company employing workers in California, especially companies based outside the state that may be less familiar with California wage laws, should review their wage practices on a regular basis.

Employers that schedule employees for unpaid on-call time should review whether the employees are sufficiently restricted such that they need to be paid, or the employees’ restrictions reduced, to meet the requirements of this new ruling.

Aaron BuckleyPaul, Plevin, Sullivan & Connaughton LLP – San Diego, CA

Sixth Circuit Affirms Limits on Employees’ Ability to be Paid for Minor Impositions Made During Meal Breaks

January 11, 2015 by

This past week, the Sixth Circuit Court of Appeals decided two cases affirming that under the Fair Labor Standards Act, employees seeking compensation for work related activities performed during lunch breaks have the burden to show that they spent their meal time predominantly for the employer’s benefit, and that employees are precluded from recovering when they do not follow an established reporting procedure.  These cases clearly establish that minor burdens during meal breaks, such as monitoring radios or being available for emergencies, are not significant enough to convert the breaks to compensable work time.  Consequently, the Sixth Circuit further clarified its stance that, so long as the break is still primarily for the employees’ benefit, the time need not be counted for overtime pay calculation purposes.

Case  No. 1: EMTs Need Not be Compensated for Breaks On-Call or for Breaks Missed But Not Reported

In the first case, Jones-Turner v. Yellow Enterprise Systems, LLC, EMTs were allowed to request a lunch break whenever their schedules permitted, but they were required to stay within a mile of their assigned location and to promptly answer their radios if called.  Dispatch was supposed to record in their logs whether the EMTs took a lunch break, but did not do so consistently.  The employer automatically deducted a 30-minute lunch break from each employee’s shift unless the employee submitted a “missed-lunch slip.”  The plaintiffs claimed that they often missed lunch breaks but did not always fill out missed lunch slips.

The Sixth Circuit confirmed its “predominant benefit” test, articulated in its 1964 Hill v. United States decision, under which an “employee bears the burden of establishing that she performs substantial duties and spends her meal time predominantly for the employer’s benefit” in order for the break to be compensable.  Applying this test, the Sixth Circuit found that the EMTs did not meet their burden because they were not required to perform any duties beyond responding to radio calls and were not frequently interrupted.

The Sixth Circuit also applied its 2012 holding in White v. Baptist Memorial and found that plaintiffs were precluded from recovering pay for missed meal periods for which they did not submit a missed-lunch slip, as the employer had established a reasonable process to report missed lunches, and there was no evidence that the employer had actual knowledge that the employees were not being compensated for time worked.  The court specifically rejected the employees’ argument that the employer should have known about the missed lunches based on dispatch logs, as there was no evidence that the managers regularly reviewed them, since they relied on the missed-lunch slips.

Case No. 2: Security Guards’ Meal Breaks are not Compensable Even Though They Must Monitor Radios During Those Breaks

Two days later after issuing its Jones-Turner decision, the Sixth Circuit decided Ruffin v. MotorCity Casino, a case in which security guards were required during their meal breaks to remain on the property, monitor their radios, and respond to emergencies, and were not permitted to receive visitors or have food delivered, but otherwise  they were able to spend their mealtimes as they pleased.  The guards claimed that, though emergencies rarely interrupted their meal breaks, monitoring the radios exposed them to constant, work-related chatter that they had to pay attention to in order to know if an emergency required their attention.  Nonetheless, they testified that they were able to eat, socialize, make phone calls, surf the internet, and watch television during their meal periods.

Moreover, plaintiffs claimed that they were entitled to overtime.  The employees worked five eight-hour shifts every week, including 30 minute daily meal breaks.  However, the employer also required the guards to attend an unpaid fifteen-minute meeting before every shift began, and thus the employees claimed that they were required to work 41.25 hours every week.

As to the meal break issue, the court applied the Hill three-factor test to determine whether the employees’ meal times were spent predominantly for the employer’s or employee’s benefit: (1) whether the employee was engaged in the performance of substantial duties; (2) whether the employer’s business regularly interrupted the employee’s meal period; and (3) the employee’s inability to leave the employer’s property.  The Sixth Circuit held that the mealtimes were not compensable because they did not primarily benefit the employer, and specifically found that merely monitoring a radio and being able to respond if called is not a substantial duty; that interruptions were rare; and that although the employees were not free to leave the casino, the employer did not take advantage of their presence by making them work.

Because the mealtimes were paid but not compensable under the FLSA, the court ruled that the employer could off-set the time paid for those meal periods against the compensable meetings, such the plaintiffs only actually worked 38.75 hours per week.  As a result, the unpaid meal breaks did not serve to trigger an overtime obligations, and therefore plaintiffs were not entitled to any relief.

Impact of Holdings

These cases are another blow to claims for overtime pay relating to meal breaks.  If an employee is on a meal break, minor interruptions or other burdens will not convert the break from non-work to work time, and de minimis interruptions can be disregarded.  The cases also teach that well written time recording policies can be particularly helpful in defeating these claims, but employers must also review the extent they impose conditions on otherwise non-compensable break time.  Most circuits adhere to the views of the Sixth Circuit on these points, but these decisions are particularly clean and to the point.  Further, for those employers providing paid meal periods, Ruffin provides an additional defense to FLSA overtime claims (at least within the Sixth Circuit) by allowing employers to offset the meal periods against additional time worked by employees.

By Robert A. Boonin and Elisa Lindemuth, Dykema Gossett, PLLC

The Ninth Circuit Applies Twombly and Iqbal to FLSA Actions

December 11, 2014 by

December 11, 2014 by Malani L. Kotchka

On November 12, 2014, the Ninth Circuit Court of Appeals reviewed Landers’ Fair Labor Standards Act complaint alleging that Quality Communications, Inc. failed to pay Landers and other similarly situated employees minimum wage and overtime. Landers was employed by Quality as a cable services installer. In his complaint he alleged that he was not paid at the minimum wage and he was subjected to a “piecework no overtime” wage system. Landers also alleged that Quality failed to compensate him for all of the overtime hours he worked.

Quality had moved to dismiss the complaint and the district court had granted the motion because the complaint did not make any factual allegations providing an approximation of the overtime hours worked, plaintiff’s hourly wage or the amount of unpaid overtime wages. The district court found that the allegations in the complaint fell “short of the line between possibility and plausibility of entitlement to relief,” under Rule 8, as construed in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009).

The Ninth Circuit addressed the First Circuit’s Pruell decision, a trilogy of cases decided by the Second Circuit, an unpublished Eleventh Circuit decision and a Third Circuit decision. The Ninth Circuit concluded, “We are persuaded by the rationale espoused in the First, Second and Third Circuit cases. Although we agree with the Eleventh Circuit that detailed factual allegations regarding the number of overtime hours worked are not required to state a plausible claim, we do not agree that conclusory allegations that merely recite the statutory language are adequate.” The Court adopted the standard that in order to survive a motion to dismiss, a plaintiff asserting a claim to overtime payments must allege that she worked more than 40 hours in a given workweek without being compensated for the overtime hours worked during that workweek. Landers did not allege facts showing that there was a specific week in which he was entitled to, but denied, minimum wage or overtime.

Unanimous Supreme Court Finds Time Spent for Security Screenings is Not Compensable

December 9, 2014 by

On Tuesday, December 9, 2014, the U.S. Supreme Court issued a unanimous decision providing clear guidance as to what constitutes compensable work under the Fair Labor Standards Act, as amended by the Portal-to-Portal Act.

The case, Integrity Solutions, Inc. v. Busk, involved a contractor to Amazon.com whose employees retrieved products from the shelves in Amazon’s warehouses and packaged them for delivery to Amazon’s customers.  At the end of each shift the employees were required to undergo a security screening before leaving the warehouses.  The employees claimed that the time spent waiting for and undergoing the screenings entailed about 25 minutes per day, and through the lawsuit, they were seeking overtime compensation for that time.  They also claimed that the time could have been significantly shortened to a de minimis period if the shifts were staggered or more screening stations were available.  Consequently, they claimed, the time devoted to the screening was for the benefit of the employer or its customer Amazon.com, and therefore should have counted as part of their compensable workweeks.

The Supreme Court disagreed.  Reversing the holding of the Ninth Circuit Court of Appeals, the Supreme Court held that the time spent for the screening was not compensable time.  Applying precedent, the Court noted that the compensable period during a workday stops once the last activity that is “integral and indispensable” to the job’s “principal activity” is performed.  In this case, the principal activity for which the employees were employed were retrieving and packaging goods in the warehouse.

In the opinion written by Justice Thomas, the Court concluded that the screenings at issue did not relate to that principal activity, rather they were only incidental to the job.  Under the Act, such activities – i.e., preliminary or postliminary activities – are not compensable.  Thus, the Court held that the court of appeals applied the wrong test, i.e., whether the screenings were required by and for the benefit of the employer to prevent theft, and instead it should have inquired as to whether the activity was tied to the productive work that the employees were employed to perform.

Consequently, the Court rejected any notion that all time spent for the employer’s benefit is compensable, and specifically held that such a construct is overly broad and improper.  The Court also rejected the argument that the time spent in the screenings could have been lessened and thereby a source of liability since that fact did not alter the finding that the time was unrelated to the principal activity at issue.

Explaining that the time spent on security screenings in this context was postliminary and therefore not compensable, the Court noted that “Integrity Staffing did not employ its workers to undergo security screenings, but to retrieve products from warehouse shelves and package those products for shipment to Amazon customers.”  The screenings were not “integral and indispensable” to that work, the Court continued, because they were not “an intrinsic element of those [principal] activities and one with which the employee cannot dispense if he is to perform those activities.”  In this regard, the Court noted, the employer  “could have eliminated the screenings altogether without impairing the employees’ ability to complete their work.”

With this elaboration on the definition of what is a compensable activity, one can only hope that courts will be able to evaluate pre- and post-shift activity cases with more confidence and avoid the recent trend of conflicting holdings on this issue.  Such clear guidance is also of value to employers as they try to make sure that all time that is legally compensable is paid.  Importantly, though, and as expressed by Justices Kagan in her concurring opinion joined by Justice Sotomayer, some pre- and post-shift activities remain compensable since they are integral and indispensable to the job, such donning and doffing certain protective gear for the performance of an employee’s job.

Robert Boonin

Dykema Gossett PLLC

rboonin@dykema.com

Avoid Being the Next Unpaid Intern Headline

November 21, 2014 by

We have all been reading the countless headlines of companies being sued for the failure to pay their so-called interns.  This list includes the LA Clippers, student athletes, and suits against many large companies across the country.  In fact, NBC Universal recently settled a case with its unpaid interns for $6.4 million.

If your company has unpaid interns or is thinking ahead to summer plans for such interns, you should reevaluate those plans.  As always, that pesky Fair Labor Standards Act is likely standing in your way.  There is NO FLSA exception for students or interns.  In fact, the term “intern” appears only once in the FLSA itself, in section 203(e)(2)(a), which exempts Congressional interns from the definition of employee, and only once in the regulations, in 29 C.F.R. Section 541.304(c), where it is explained that medical interns do not have to be paid on any particular basis.

Recently, as part of the increasing trend of FLSA collective actions, unpaid interns have been striking back.  Interns are striking back in alarming numbers claiming to have worked significant hours without any compensation at all.  Companies are claiming that they fall within the narrow “trainee” exception.  But beware, that exception is quite narrow.

if you want to avoid liability for unpaid interns, you must meet all six of the DOL’s criteria for student trainees.

1.The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school.

The closer it is to a classroom or educational setting, the easier it will be to consider the individuals to be trainees. The arrangement might also result in a training certificate that could be listed as a job qualification on subsequent job applications. It would also help if the individual and the entity providing the training could first develop an individualized training plan that would be tailored to help the individual qualify for a specific job or range of jobs with a variety of companies via the training course.

2. The training is for the benefit of the trainees.

This would be an easy argument to make in the case of individuals participating in welfare-to-work programs, but also in any training or internship programs that tend to increase their “hireability” in the open job market.

3. The trainees do not displace regular employees, but work under close observation.

This would also be an easy argument to make, especially in the case of a training “academy” run by a company, but also for a work experience program sponsored by a governmental entity. In the latter case, the government agency would be able to show that were it not for the work experience program, the activities in question would not be taking place. In a true training environment, the trainees are not going to be trusted to do much actual work for the company; the actual production would presumably be done by regular employees, who of course are already trained and are paid for the production work.

4.  The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion his operations may actually be impeded.

This goes hand-in-hand with item # 3 above. It would be important here to document the training process and the before and after figures for comparison. Again, the actual productive work will be done by regular employees; any productive work done by trainees would have to be insubstantial in nature and amount and secondary to the training process.

5. The trainees are not necessarily entitled to a job at the completion of the training period.

Again, this is related to #3 above. The work would not be done at all, or at least certainly not on the schedule that exists, were it not for the existence of the training school or program under which the individuals receive training. The courts find it important to have a written agreement to the effect that trainees have no expectation or guarantee of employment upon completion of the training.

6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.

The courts find it important that there be a written agreement to the effect that payment for the services is neither intended nor expected.

In applying these criteria, courts focus on who primarily benefits from the arrangement.  If the employer is the primary beneficiary, the individuals will be considered employees, but if the individuals are the ones who primarily benefit from the work experience, they will be considered trainees.

If you plan to use unpaid interns, you need to review your program in light of these criteria and determine whether you are obligated to pay the interns.

 

Northern California Voters Approve Minimum Wage and Paid Sick Leave Measures; San Diego Ordinance on Hold

November 12, 2014 by

In September we posted a discussion of the new California paid sick leave law, which takes effect on July 1, 2015. In last week’s general election, Oakland voters signaled they think the state’s paid sick leave mandate does not go far enough. They overwhelmingly approved a paid sick leave initiative modeled on one passed by San Francisco voters in 2006, and that goes well beyond the new state law’s requirements. And voters in both cities approved minimum wage increases that will raise their local minimum wages far higher than either the current federal minimum of $7.25 per hour, or the California state minimum of $9 per hour (scheduled to rise to $10 in 2016).

The Oakland initiative, Measure FF, requires employers to provide their Oakland employees with one hour of paid sick leave for every 30 hours worked beginning in March 2015. Employers with fewer than 10 workers can cap the amount of paid sick leave at 40 hours per year, but employers with 10 or more workers must provide up to 72 hours per year. This is three times the state paid sick leave minimum of three days or 24 hours per year.

That same initiative will increase the minimum wage for employees working in Oakland to $12.25 per hour beginning in March 2015, followed thereafter by annual cost of living increases. The Oakland measure prohibits employers from funding required wage increases by reducing any non-management employee’s benefits. The initiative also requires hospitality employers that collect service charges from customers, including room service delivery chargers or baggage carrying charges, to pass those fees on to their hospitality workers.

San Francisco has long had a minimum wage higher than the state minimum. But in November that city’s voters approved Proposition J, which will raise the current city minimum wage still higher, from its current level of $10.74 per hour to $12.25 per hour on May 1, 2015; $13 per hour on July 1, 2016; $14 per hour on July 1, 2017; and $15 per hour on July 1, 2018, followed thereafter by annual cost of living increases.

Voters in nearby Berkeley approved Measure Q, which calls on the City Council to adopt an ordinance similar to the Family Friendly Workplace Ordinance that San Francisco adopted in October 2013, which allows employees to seek changes to their working arrangements to care for family members with serious health conditions. Measure Q also authorizes the Berkeley City Council to send letters to federal and state officials asking for government employees to have the right to shorter work hours if doing so would not cause operational problems.

Meanwhile, in southern California the San Diego City Council’s minimum wage and paid sick leave ordinance, which we discussed in a July post, has hit a roadblock. In July the council voted to establish a city minimum wage of $9.75 per hour in January 2015, $10.50 per hour in January 2016, and $11.50 per hour in January 2017. The ordinance would also have required employers to provide up to five days or 40 hours of paid sick leave per year beginning in July 2015. The measure met with stiff opposition in the business community, which launched a petition drive to require the council to either rescind the ordinance or to allow the city’s voters to decide its fate. In October the measure’s opponents submitted more than enough signatures, and shortly thereafter the council voted to submit the issue to the voters. The measure is now on hold, and will take effect only if approved by the voters in the June 2016 primary election.

Municipal governments enacting their own minimum wage, paid sick leave and other measures is a relatively new trend that creates headaches for employers by requiring them to apply different rules to different groups of employees based on where they work. But the trend is likely to continue for the foreseeable future, so employers should take all necessary steps to stay abreast of, and comply with, these new local mandates.


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