California Wage and Wage Statement Laws for 2013
A host of new employment laws go into effect beginning January 1, 2013. They range from anti-discrimination protections to social media safeguards and wage statement changes.
Ericksen Arbuthnot will inform you of these changes in a series of three emails.
Unless specified, the following list of new legislation goes into effect on January 1, 2013.
Fixed Salaries and Overtime AB 2103
AB 2103 amends the Labor Code to state that payment of a fixed salary to a non-exempt employee will be deemed to be payment only for the employee's regular non-overtime hours, notwithstanding any private agreement or “explicit mutual wage agreement” to the contrary.
Labor Code Section 510 establishes an 8-hour workday and a 40-hour workweek and requires payment of overtime (as specified) for non-exempt employees who work beyond these timeframes. This calculation is simple for non-exempt employees paid an hourly wage, but not for non-exempt employees paid a fixed salary. Existing law therefore specifies, for purposes of computing the overtime rate of compensation, that a non-exempt full-time salaried employee's regular “hourly” rate of pay is 1/40th of the employee's weekly salary.
In Arechiga v Delores Press, Inc. (2011) 192 Cal.App.4th 567, a California court of appeal upheld an explicit written mutual wage agreement that pre-determined a non-exempt employee's overtime compensation and included it as part of the employee's salary. The Arechiga court concluded Labor Code Section 515 did not specifically invalidate such agreements and declined to enforce the Department of Labor Standards Enforcement's (DLSE) Enforcement Manual that held such agreements were impermissible following the enactment of Labor Code Section 515 in 2000.
In Arechiga, plaintiff and employer entered into a written agreement that plaintiff would receive a salary of $880 a week as a janitor. Plaintiff worked 66 hours per week (11 hours per day, six days per week). Upon termination, plaintiff sought unpaid overtime. The trial court found that plaintiff's regular hourly wage was $11.14 and his overtime wage was $16.71. The trial court credited some testimony that this hourly wage was communicated to plaintiff and found that plaintiff was adequately paid.
This bill provides that payment of a fixed salary to a non-exempt employee includes compensation only for the employee's regular, non-overtime hours. The bill effectively invalidates any private agreement to the contrary. In other words, parties who enter into “explicit mutual wage agreements” may only, through those agreements, provide for regular compensation, not overtime compensation.
The stated intent of the bill is to overturn Arechiga, in which the Court of Appeal held an “explicit mutual wage agreement,” between an employer and employee that provided a fixed salary for 66 hours of work each week, complied with California overtime laws and that no further overtime compensation was owed to the employee. Therefore, AB 2103 will only impact employers who pay non-exempt employees a fixed salary instead of an hourly wage and have tried to include overtime in that fixed salary.
Wage Garnishment AB 1775
AB 1775 provides a modest increase on the amount of wages that are exempt from wage garnishment. Current law only protects $217.50 per week. That amount is not even considered a living wage for a single adult with no spouse or children. Currently, the IRS can garnish up to 25% of an employee's “disposable income.” AB1775 finally gives definition to the term “disposable income” and further restricts the amount taken, so that the remaining wages are at least the equivalent of 40 hours a week at minimum wage.
“Disposable earnings” is defined as the portion of an employee's earnings that remains after deducting all amounts required to be withheld by law. The bill limits the amount of an individual's weekly disposable earnings subject to garnishment to the lesser of 25 percent of the individual's weekly disposable earnings or the amount by which the individual's disposable earnings for the week exceeds 40 times the state minimum hourly wage (currently, $8.00 per hour). The bill raises the amount of wages protected from garnishment from $217.50 a week to $320 a week.
This amendment takes effect on July 1, 2013.
Prevailing Wage AB 2677
Under AB 2677, increased employer payment contributions that result in a lower hourly straight time or overtime wage do not constitute a violation of the applicable prevailing wage determination as long as certain specified conditions are met.
Currently, employer payments provided as part of per diem wages paid to employees working on public works projects do not reduce the employer's obligation to pay the prevailing hourly straight time and overtime wages. Under this new law, an employer payment that results in a lower hourly straight time or overtime wage will count toward satisfaction of the prevailing wage requirement so long as:
- The payment is made under a collective bargaining agreement;
- The basic hourly rate and employer payment are at least equal to the general prevailing rate; and
- The payment is irrevocable unless made in error.
In addition, employer payments meeting these criteria that result in a lower taxable wage will not violate the prevailing wage determination.
Minimum Wage Laws for San Francisco and San Jose
Employers with employees in the cities of San Francisco and San Jose are faced with minimum wage increases in 2013. San Francisco passed its minimum wage ordinance a few years ago, but the minimum wage is subject to adjustment each year based on the cost of living. Effective January 1, 2013, the minimum wage for employees who perform at least two hours of work per week in the City of San Francisco is $10.55 per hour, up from $10.24 per hour in 2012.
San Jose voters approved a local minimum wage for the City. With the passage of Measure D, the minimum wage for employees working in San Jose will be $10.00 per hour. The new San Jose minimum wage takes effect 90 days after the election results are certified, which means approximately March 2013.
The state minimum wage otherwise remains at $8.00 per hour.
Overtime Exemption for Computer Professionals and Licensed Physicians/Surgeons
California Labor Code sections 515.5 and 515.6 provide an overtime exemption for certain computer professionals and licensed physicians/surgeons who meet specified criteria for exemption. One of those criteria is that they earn specified minimum pay, the amount of which is subject to annual adjustment by California's Department of Industrial Relations (DIR). If they do not meet these requirements they are entitled to overtime pay.
The DIR has announced increases to the minimum pay for these workers as follows:
- The DIR has increased the computer software employee's minimum hourly rate of pay for exempt status from $38.89 to $39.90, the minimum monthly salary from $6,752.19 to $6,927.75, and the minimum annual salary from $81,026.25 to $83,132.93, effective January 1, 2013; and
- The DIR has increased the licensed physicians and surgeons employee's minimum hourly rate of pay for exempt status from $70.86 to $72.70, effective January 1,2013.
It's important to note that they still must meet the exemption requirement outlined by the state. These requirements cover the job duties and function of the employee. Simply calling an employee a computer professional is not sufficient.
An employee in the computer software field shall be exempt from the requirement that an overtime rate of compensation be paid if all of the following apply:
- The employee is primarily engaged in work that is intellectual or creative and requires the exercise of discretion and independent judgment;
- The employee is primarily engaged in duties that consist of one or more of the following:
- The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
- The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; or
- The documentation, testing, creation or modification of computer programs related to the design of software or hardware for computer operating systems; and
- The employee is highly skilled and is proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, or software engineering.
Commission Agreements AB 2675
AB 2675 amends the written commission agreement law, which takes effect on January 1, 2013, to exempt certain types of wage payments from the written agreement requirement.
Existing law requires that whenever an employer enters into a contract of employment with an employee for services to be rendered within California, and the contemplated method of payment of the employee involves commissions, the contract must be in writing and must set forth the method by which the commissions are to be computed and paid.
AB 2675 clarifies that the following types of payments are not considered commissions for purposes of this requirement:
- Short-term productivity bonuses such as are paid to retail clerks;
- Temporary, variable incentive payments that increase, but do not decrease, payment under the written contract; and
- Bonus and profit-sharing plans, unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed.
Overall, AB 2675 will not change much for most employers. Employees paid commissions still need to have a signed written commission agreement on file.
Inspection of Personnel Records AB 2674
AB 2674 makes significant changes to the inspection and retention of personnel records, in the following areas: (1) who has the right to inspect or request copies of personnel files; (2) any deadlines for providing access to files; (3) where and how records must be made available; (4) an employer's obligations to retain files; and (5) penalties for failure to comply.
AB 2674 has been signed into law, amending the recordkeeping and inspection provisions under Labor Code § 226 and reducing the violations of these provisions from a misdemeanor to an infraction.
Existing law requires that every employer, semimonthly or at the time of each payment of wages, furnish to each of his or her employees, either as a detachable part of the check, draft or voucher paying the employee's wages or separately when wages are paid by personal check or cash, an accurate itemized statement in writing showing specified items. Existing law requires an employer to keep a copy of the statement and the record of deductions on file for at least three years at the place of employment or at a central location within the State of California. This bill would provide that the term “copy,” for purposes of these provisions, includes a duplicate of the itemized statement provided to an employee or a computer-generated record that accurately shows all of the information that existing law requires to be included in the itemized statement.
Under existing law, an employee has the right to inspect the personnel records that his or her employer maintains relating to the employee's performance or to any grievance concerning the employee. This bill would require an employer to maintain personnel records for a specified period of time and to provide a current or former employee, or his or her representative, an opportunity to inspect and receive a copy of those records within a specified period of time, except during the pendency of a lawsuit filed by the employee or former employer relating to a personnel matter.
The bill states that an employer is not required to comply with more than 50 requests for a copy of the above-described records filed by an employee, representative or representatives of an employee in one calendar month. The bill provides that the above provisions shall not apply with respect to an employee covered by a valid collective bargaining agreement if the agreement provides, among other things, for a procedure for inspection and copying of personnel records.
The new law also requires employers to develop employee request forms, provide these to employees upon their verbal requests for access, and comply with any written requests within 30 days (with limited exceptions). Also, employers must provide copies of files, but may charge employees for copying costs.
In the event an employer violates these provisions, the bill would permit a current or former employee or the Labor Commissioner to recover a penalty of $750 from the employer and would further permit a current or former employee to obtain injunctive relief and attorney's fees.
Itemized Wage Statements/Temporary Service Employers AB 1744
AB 1744 takes effect on July 1, 2013. It relates to itemized wage statements and wage notice requirements and requires specified information from temporary service employers.
Current law under Labor Code § 226 requires every employer, semimonthly or at the time of each payment of wages, to furnish each employee with an accurate itemized statement in writing showing certain information including hours worked, pay rates, deductions and similar information. AB 1744 will amend the Code to require that temporary services employers (with the exception of certain security services companies) include additional information on employee wage statements. Specifically, AB 1744 adds a requirement for temporary services employers to include the rate of pay and the total hours worked for each assignment with certain specified exceptions. Temporary services employers must also include the physical address of the main office, the mailing address if different from the physical address of the main office and the telephone number of the legal entity for whom the employee will perform work. These new requirements for temporary services employers will take effect July 1, 2013.
Knowing and intentional violations of the itemized wage statement requirement can result in penalty claims by aggrieved employees. The statute requiring written notification at the time of hire of pay/wage information does not contain a specific enforcement provision, but violations could result in claims for penalties under the California Labor Code Private Attorney General Act (PAGA).
Penalties for Wage Statement Violations SB 1255
SB 1255 amends the Labor Code to specifically define an “injury” as it relates to a violation of the itemized wage statement statute. Employers are required to provide specific information to employees on a wage statement each time wages are paid. An employee who “suffers an injury” as a result of an employer knowingly or intentionally failing to comply with the statute is entitled to recover damages against the employer.
Existing law requires every employer, semimonthly or at the time of each payment of wages, to furnish each employee an accurate itemized statement in writing showing specified information, including, among other things, the name of the employee and the last four digits of his or her social security number or an employee identification number, the gross wages earned, all deductions, net wages earned, the inclusive dates of the period for which the employee is paid and the name and address of the legal entity that is the employer and, if the employer is a farm labor contractor, as defined, the name and address of the legal entity that secured the services of the employer.
Previously, an employee had to show some injury in order for the employer to have monetary liability for violation of the requirement. Under the new law, an employee will be deemed to suffer injury if an employer fails to provide a wage statement or if the employer provides inaccurate or incomplete information in any of the nine categories and the employee cannot “promptly and easily determine” from the wage statement one or more of the following:
- For the pay period, the amount of gross or net wages paid to the employee, total hours worked, piece-rate units earned, deductions taken, inclusive dates and all applicable hourly rates in effect and the corresponding number of hours worked at each rate;
- The specific deductions that were taken from gross wages to generate the net wages paid during the pay period;
- The name and address of the employer; and
- The name of the employee and the employee identification number or the last four digits of his or her social security number.
Penalties for violation of a knowing and intentional failure by an employer remain the greater of actual damages or $50 for the initial pay period and $100 for each pay period thereafter, up to $4,000.