Articles: New California Labor Laws

In order to clarify the new regulation, the CAO Board authorized the contracting of a labor law attorney to develop a legal opinion explaining the new laws. The document below is the result of that effort.

Current California Compensation Conundrums

A Wage and Hour Law Primer for Orthodontists

1. What's happened?

New legislation, known as AB 60, became effective January 1, 2000 and a new Industrial Welfare Commission Interim Wage Order 2000 became effective March 1, 2000.

The Industrial Welfare Commission (IWC) is responsible for regulating wage, hours and working conditions in California industries and occupations.

Orthodontists’ offices have historically been regulated by IWC Order 4. This is one of the orders which eliminated the requirement for daily overtime pay in 1998.

AB 60 voids the 1998 Order and reinstates the previous version (Order 4- 89 as amended in 1993) to the extent it is consistent with AB 60 and the Interim Order.

Sound confusing? It is, but read on, help is here.

If you are interested in the original texts, you can find AB 60 at the California Legislation web site: www.leginfo.ca.gov.

IWC Interim Order 2000 and other Wage Orders can be reached from the IWC Home Page: www.dir.ca.gov/IWC/iwc.html.

2. Are overtime-exempt employees affected by the new rules?

Yes. There is now a minimum salary of just under $2,000 per month which must be paid. Hourly paid employees can no longer be overtime exempt in California.

Compensation on a salary basis now requires following some basic rules on reductions and deductions from salaries.

• A salaried exempt employee who absents himself or herself from work for a day or more for personal reasons, other than sickness or accident, need not be paid for workdays in which no work is performed.
  
  
• When a salaried exempt employee is absent from work for a day or more because of sickness or disability and the employer has a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by both sickness and disability and the employee is not yet eligible for paid leave or has exhausted available paid leave, deductions from salaries for a full day in which no work is performed may be made.
  
  
• When an employee is absent because of work-related illness or injury and is compensated for loss of salary in accordance with applicable workers’ compensation law or a benefit plan adopted by the employer and the employer also has a plan, policy or practice of providing compensation for nonwork related sickness and disability, deductions for full days in which no work is performed may be made.
  
  
• No reductions or deductions from salary may be made for full days of absence occasioned by jury duty, witness appearance or military leave if any work is done in the work week.
  
  
• No reductions or deductions in salary may be made for any lost work time occasioned by the lack of work or for partial days of absence by an otherwise exempt employee for any reason other than intermittent Family and Medical Leave.

Compliance with the salary basis rules is necessary, but not sufficient, for proper classification of an employee as overtime exempt. (Improper classification leads to overtime claims.)

Employees must also meet duties tests for overtime exemption. The duties tests in California have not yet changed. They will be reviewed this year by the Industrial Welfare Commission.

Note that the general requirement for overtime exemption as a "professional" employee is a specialized four-year degree beyond high school and work of a type which requires such specialized training.

Dental Assistants do not generally qualify as overtime-exempt professionals.

3. How are nonexempt employees affected by the new rules?

Greatly! Nonexempt employees are now generally entitled to be paid overtime for hours worked over 8 in a workday and for hours worked over 40 in a workweek which are not paid as daily overtime. No overtime hour need be paid for twice.

The general rules are as follows for nonexempt employees paid either on a salary or hourly and not covered by a collective bargaining agreement:

Daily Overtime

• Work performed during the 9th through the 12th hour in one workday is paid at 1.5 times the employee's regular rate.
  
  
• Work performed in the 13th and following hours in one workday is paid at twice the employee's regular rate.
  
  
• The regular rate is the hourly rate for hourly employees, or 1/40th of the weekly salary for salaried nonexempt employees.
  
  
• A workday is a consecutive 24-hour period which begins at the same time each calendar day (e.g. 12:01 a.m. to midnight).

Seventh Day Overtime

• The first 8 hours of work performed on seventh consecutive day of work in one workweek is paid at 1.5 times the employee's regular rate.
  
  
• Hours worked over 8 on the seventh consecutive day in one workweek are paid at twice the employee's regular rate.
  
  
• A workweek is seven consecutive 24-hour periods starting with the same calendar day each week (e.g. 12:01 a.m. on Monday to Midnight on Sunday.)

Weekly Overtime

• Hours worked over 40 in one workweek which have not been paid as daily or seventh day overtime are paid at 1.5 times the employee's regular rate.

4. Is there any lawful way not to pay overtime to nonexempt employees who work more than eight hours in a workday or 40 hours in a workweek?

Not exactly. All nonexempt employees must be paid overtime after 40 hours of work in a workweek. This is both a state and federal law requirement.

However, there are several lawful ways to extend daily work hours beyond eight without overtime obligations.

• Historic Unit Agreements - A work schedule of no more than 10 hours per workday and 40 hours per workweek which was adopted prior to January 1, 1998 after a secret ballot election with a 2/3s majority and a written agreement signed by employees at the time and has been continuously in effect since the election may be continued without overtime pay requirements during the regular hours adopted unless the employees vote to rescind it.
  
  Schedules of up to 12 hours per workday adopted by the same procedures will be valid until July 1, 2000 only.
  
  Note, however, that you may be required to prove that the election was held, the necessary 2/3s majority was obtained and the appropriate agreement(s) were signed. If the documentation is lost, so are you for purposes of using a historic agreement.
  
  

Individual Historic Agreement – If an employee was voluntarily working a regular Schedule of no more than ten hours per workday and 40 hours per workweek as of July 1, 1999 pursuant to an agreement with the employer made after January 1, 1998, the employee may continue on that schedule without overtime pay by making a voluntary request in writing within 90 days of March 1, 2000 if the request is approved by the employed.

The employee may revoke the request with 30 days written notice to the employer.

• New Election/Agreement(s): - Implementation steps are as follows:
• • Prepare Alternative Work Schedule Proposal document.

• Determine work unit (employees in a location, department, shift, job classification, etc).

• Determine hours/days of work (no more than 10 in a workday), two consecutive days off per workweek.

• Set and record workdays and workweeks.

• Add information re benefits, discussion meetings, election dates.

• Determine and add the effective date of the proposal if approved.

A separate request for each instance of make-up work is required unless the personal obligation will recur at fixed times over a succession of weeks (then request can be for up to four weeks in advance).

While an employer may inform an employee of this make up time option, the employer is prohibited from encouraging or otherwise soliciting an employee to request the employer's approval to take personal time off and make up the work hours.

• Make-Up Time - Time worked to make up for work time lost as a result of an employee’s personal obligations is NOT counted as overtime and can be paid at regular rates when:
  
• • make-up hours are worked in the same workweek as time lost.
  • no more than 11 hours are worked in any one workday.
  • no more than 40 hours are worked in any one workweek.

5. What happens if I don't pay overtime correctly to nonexempt employees?

You pay the employee and the State big time.

Overtime pay claims in California can go back for three years. Back wage awards can mount up, especially if you have neglected to keep accurate records of the hours the employee actually worked.

If you have no records, the employee’s account will be believed unless you have some other way (and there are very few) of establishing how many hours were worked.

Interest is routinely awarded on back wage claims.

If the employee quits or is fired before bringing a claim for unpaid overtime, you may also be required to pay him/her waiting time penalties of up to 30 times the employee’s daily wage.

The State of California, through the Division of Labor Standards Enforcement, can also collect penalties from you:

• For any initial violation of pay requirements, fifty dollars for each underpaid employee for each payperiod in which the employee was underpaid.
  
  
• For each subsequent violation of pay requirements, one hundred dollars for each underpaid employee for each pay period in which the employee was underpaid.

Given the potential cost of making mistakes, overtime pay issues are worth studying up on or getting reliable expert advice on.

And, don’t forget, the IWC is charged with reviewing all kinds of exemption and compensation issues this year. There may be a whole new set of issues before 2001.

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