Wage & Hour Violations

Even the most ethical employers can inadvertently run afoul of California’s wage and hour laws.  The top six offenses (in no particular order): 

  1. Misclassifying an employee as an “independent contractor”.  There are a series of specific tests that a person must pass in order to meet the legal definition of an independent contractor.  The leading case is Borello & Sons v. DIR, 48 Cal. 3d 341 (1989).  The mere fact that the worker and the employer mutually agree on independent contractor status will mean little to the enforcing authorities.
  2. Misclassifying non-exempt workers as “salaried”.   California does not recognize the difference between “hourly” and “salary”.  Instead, the proper distinction is between “exempt” and “non-exempt”.  To qualify as exempt (as in exempt from most wage and hour laws), an employee is usually required to be: a) a licensed professional (doctor but not a nurse; attorney but not paralegal); or b) a supervisor who makes more than twice the minimum wage and spends over half their time performing supervisory tasks; or c) an administrator who exercises a high degree of independent, autonomous decision making authority (an executive assistant to a CEO may qualify, but the receptionist would not).
  3. Failure to accurately award and time pay vacation time.   There is no requirement for the employer to offer vacation time, but if it does, it must follow specific rules.  The three big ones are: a) the time must be accrued evenly over time (no “lump sum” awards each year); b) once earned, vacation time becomes wages (cannot be forfeited); and c) because they are wages, all unused vacation time must be paid upon termination.
  4. Failure to pay all wages due at termination.  If the employee quits, the employer has 72 hours (excluding weekends) to pay all wages due the departing employee.  If the employee is terminated, all wages must be paid immediately upon termination (read: you better have their final paycheck ready).  If you terminate an employee when they first arrive at work, the employer must also include “reporting pay” (between 2 and 4 hours of pay, depending on circumstances).
  5. Failure to pay overtime.  Unless exempt (see #2 above), any work performed that exceeds 8 hours per day, or 40 hours per week, must be paid at a rate 1.5 times the employee’s regular hourly rate.  The overtime rate can jump to double time in some circumstances, such as work exceeding 12 hours per day or a seventh consecutive day worked.  Remember, there is no defense to overtime because the employee is on “salary” (overtime must be paid unless they are exempt).
  6. Failure to provide meal periods.  Each employee who works more than 5 hours per day (or up to 6 with a waiver) must be provided with an uninterrupted, 30 minute meal period.  During this time, the employee must be relieved of all duties, and be free to leave the premises.  For example, telling your receptionist to eat at their desk and answer the phones during lunch is a labor code violation (even if you buy the lunch)!

So, what can happen if your business violates these laws (including the ones you don’t even know about)?  Your business can be fined, or in some cases, shut down (see DLSE Citations).  In an extreme case, the owners of a So Cal maid service were taken into custody for failing to comply with a federal court order to pay $3.5 million in back wages to more than 300 workers.  The owners had misclassified their home and carpet cleaning workers as independent contractors, and thus were found liable for substantial minimum wage and overtime violations.  Even if a business classifies a person as an independent contractor in good faith, if that person is actually an employee under the law, the employer can be held responsible for enormous sums of money.

Before you become a victim of fines (or worse), please contact our office for a review and risk assessment.  If you have been cited, the clock is ticking fast, so call us immediately.

Please note that we only represent employers in disputes with their employees.  If you are an employee with a potential dispute, please contact your local bar association for a referral to an employee rights attorney.

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