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What You Need To Know in 2019 Series: Important Cases of 2019 Part One

What You Need To Know in 2019 Series:
Important Cases of 2019
5 of 6

 

Important Cases of 2019: Part One

A number of recently resolved cases will change how employers do anything from paying overtime to determining independent contractor status. Do you know what you have to do as an employer and when? Read more about these important updates to labor and employment law below.


Troester v. Starbucks (2018): De Minimis Time

In Troester v. Starbucks, an employee filed a class action lawsuit against Starbucks alleging it violated the California Labor Code by failing to pay him and other employees for time spent closing the store.

The case details:

  • Employee alleged that he was required to activate security alarm, lock the store, and occasionally let employees back into the store after clocking out, and that he was not paid for the time
  • Over 17 months of employment, employee’s unpaid time totaled approximately 12 hours and 50 minutes, and he claimed he was owed $102.67 in unpaid wages
  • Starbucks filed summary judgment motion requesting the court to dismiss the claims based on the federal “de minimis” doctrine
    • “De minimis” doctrine provides that working time does not need to be paid if it is trivially small—i.e., a few seconds or minutes of work may be disregarded
    • Other California courts had applied “de minimis” doctrine to claims for unpaid wages
  • Employee opposed motion to dismiss on basis that the de minimis doctrine did not apply under California law
  • In July 2018, California Supreme Court held that federal de minimis doctrine does not apply to California employers
    • Court noted that employee time (even small increments) can be recorded, due to “technical advances that enable employees to track and register their work time via smartphones, tablets, or other devices”
    • Also stated that employers that require employees to work minutes off the clock on a regular basis or as a regular feature of the job may not evade obligation to pay employees for the time using de minimis doctrine
    • Left open the possibility that under some circumstances, time worked may not be compensable because it is “so minute or irregular that it is unreasonable to expect the time to be recorded.”

 

What does the Troester decision mean for employers?

If employees perform some tasks before or after “clocking in,” time will probably be compensable—even if the extra time worked is only a few seconds or minutes

Possible solutions:

  • Structure work so no work is regularly performed before or after clocking in
  • Use timekeeping tools that can accurately track exact time worked—e.g., timekeeping apps that employee can use on cell phone
  • Estimate time it takes employees to perform the tasks required before or after clocking in, and pay them for estimated time
  • Enforce policies prohibiting “off the clock” work—employees must be clocked in when working, no exceptions!



Dynamex v. Superior Court (2018): New Independent Contractor Test

In Dynamex Operations West, Inc. v. Superior Court, the California Supreme Court rejected using a multi-factor balancing test (known as the “Borello” multi-factor test) to determine independent contractor status and established a more stringent three prong test (the “ABC test”).

In order to demonstrate that a worker is properly classified as an independent contractor, the company must establish that all three of the below factors have been met:

  1. 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;
  2. the worker performs work that is outside the usual course of the hiring entity’s business; and
  3. the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

What does the Dynamex decision mean for employers?

  • The second prong—worker performs work outside the usual course of business—may be difficult to meet for many businesses, particularly as Court’s decision did not provide much guidance
    • E.g., the court provided a few examples, but only clear cut examples (e.g., a plumber hired by a retail store to fix plumbing would be an independent contractors)—not helpful for “gray areas”
  • Decision may be retroactive
  • Test may apply in other contexts



Alvarado v. Dart (2018): Calculating Overtime

In March 2018, the California Supreme Court decision in Alvarado v. Dart Container Corp. of California clarified that when a nonexempt employee receives a non-discretionary flat-sum bonus during a single pay period, the overtime rate should be based on the employee’s straight-time hours worked during the pay period in which the bonus is earned.

  • Not the employee’s total hours worked during the pay period.
  • The decision is consistent with one of the two methods for calculating the regular rate of pay that are set forth in the California Labor Commissioner’s Division of Labor Standards Enforcement’s (“DLSE”) Policies and Interpretations Manual (Section 49.4.2.4).
  • Employers who use total hours worked (as permitted under federal law) in their calculations risk underpaying the employees.
  • In Alvarado, the Company had a policy of paying employees an “attendance bonus” of $15.00 per day for working a Saturday or Sunday shift.
    • Bonus amounts be factored into a nonexempt employee’s time and one-half and double time rates of pay (1.5 times or 2 times the regular rate of pay) under both state and federal law.
    • The Company used a formula based on the federal Fair Labor Standards Act, which calculated employees’ regular rate of pay by dividing their total straight-time wages plus bonuses by the total hours worked in the pay period, including overtime hours.
  • The CA Supreme Court held that the proper calculation should account for the fact that the flat-sum bonus is payable even if the employee works no overtime during the pay period, and thus the bonus is properly treated as if it were fully earned by only the straight-time hours in the pay period.
    • I.e., only the straight-time hours should be considered when calculating the bonus’s per-hour value, not the total hours.

What does the Alvarado decision mean for employers?

Employers can use the following information to help calculate overtime in the wake of the Alvarado decision.

  • Divide the amount of the bonus by the number of straight-time hours actually worked during the pay period(s) over which the bonus was earned to get the “regular rate.”
    • For clarity, a flat-sum non-discretionary bonus earned over the entire year would be calculated based on the entire year’s straight-time hours worked.
  • Multiply the employee’s regular rate of pay by 1.5 to get the employee’s overtime rate for time and one-half hours, or by  2 to arrive at the employee’s overtime rate for double time hours.
  • Multiply the employee’s total number of overtime hours worked during the pay period by the applicable overtime rate to arrive at the overtime wages due on the flat-sum bonus.
  • Payment of the bonus does not constitute base compensation for regular or overtime hours worked, such that only an overtime premium would need to be added. Therefore, in addition to the overtime wages due on the flat-sum bonus, employers must also pay employees regular and overtime wages for actual time worked.

Example: Employee receives a bonus amount of $50.00 during the bi-weekly pay period for working weekend shifts. During the pay period, the employee worked 95 regular hours, 10 time and one-half hours and 2 double time hours. Employee’s hourly rate of pay is $16 per hour.

Step 1: $50 bonus ÷ 95 regular hours = $0.5263

Step 2: Overtime rate for time and one-half hours: $0.5263 x 1.5 =   $0.789; Overtime rate for double time hours: $0.5263 x 2 = $1.0526

Step 3: Overtime due on bonus for time and one-half hours: 10 x   $0.789 = $7.89

Overtime due on bonus for double time hours: 2 x $1.0526 = $2.11

Total overtime due on bonus: $7.89 + $2.11 = $10.00




This update is the fifth of six, don’t miss out on the remainder of the What You Need To Know in 2019 Series.

What You Need To Know in 2019 Series: Important Ca...
What You Need To Know in 2019 Series: Federal Empl...

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