California Supreme Court Clarifies Administrative Exemption

The Supreme Court issued a unanimous decision rejecting the lower court's interpretation of the "administrative exemption."

Frances Harris and other claims adjusters sued Liberty Mutual Ins. Co., claiming that claims adjusters were mis-classified as exempt.  The Court of Appeal agreed, holding that claims adjusters are part of an insurance company's "production" and therefore cannot be performing "administrative" functions.  The Court of Appeal also included some disturbing language in its opinion regarding how "important" the administrative work must be, and that only work at a high level would count towards the exemption.

The Supreme Court disagreed.  However, the Court limited its holding to setting out the proper standards for determining whether someone is performing "administrative" work.   It did not rule one way or the other regarding whether the claims adjusters were exempt.

The Supreme Court summarized as follows:

Federal Regulations former part 541.205(a), (b), and (c) must be read together in order to apply the ―directly related‖ test and properly determine whether the work at issue satisfies the administrative exemption. For example, former part 541.205(b) supplied a general description of the types of duties that constitute ―administrative operations of the business. It included work performed by ―white-collar employees engaged in ̳servicing‘ a business as, for example, advising the management, planning, negotiating, [and] representing the company. The dissent below argued, ―That is what claims adjusters do—they negotiate settlements (and conclude some without seeking approval), advise management, and process claims.‖ The incorporation of former part 541.205(b) shows that whether work is part of the ―administrative operations‖ of a business depends, in part, on whether it involves advising management, planning, negotiating, and representing the company. It is not so narrowly limited as the majority below declared. 

In addition to the above regulations, the Supreme Court referred the Court of Appeal to the Wage Order definition of the administrative exemption.

Thus, the "duties test" for the administrative exemption is analyzed using former 29 CFR 541.205 (now 541.201-203) in its entirety. [Because these regulations have been amended, it will be important to find the 2001 version of the federal rules. ]

It remains to be seen how the courts interpret the Supreme Court's guidance. But if the Court of Appeal's test had been affirmed, it would have severely curtailed the exemption.  We at least know that the Supreme Court disagreed with that approach.

The opinion is Harris v. Superior Court (Liberty Mut. Ins. Co.) and the opinion is here.

More on AB 469 Notice "Template"

Per my previous post, the DLSE issued its "template" for compliant AB 469 disclosures.  See the post re DLSE template here.

An impolitic or imprudent employment lawyer might say that the DLSE's waiting until December 29 to issue a template implementing AB 469 disclosures (to begin on 1/1/12) was arrogant, unconscionable, and all but a gift to plaintiff lawyers. But I've never been one of those rash people.  :::whistling::::

What makes this all more galling is that the DLSE has imposed requirements over and above what the statute actually provides for.  DLSE had the right to expand on the law's requirements becuase the statute says that the required disclosure must include "any other information the Labor Commissioner deems material and necessary."

That's all fine, but how about more than 2 work days' notice of what you think is necessary?  Not to mention that 90% of management is on vacation.  Employers likely planned the new notices would include only the items expressly identified in the law, given DLSE's failure to promptly issue its template.  Now they have to re-tool, which may be easier to do in a mom & pop store, but not so easy when there are multiple outlets and hundreds of new hires to process.

Perhaps the DLSE didn't care because the notice provision does not apply to...the DLSE (!) or other government employers.  Go figure.

Oh well, enough whining.  The DLSE model includes a couple of itsems not specified in the actual statute:  1) the name and address of a PEO or other third party that administers the hiring process (but not a payroll processor or recruiting agency) 2) whether the employment agreement is oral or written... there may be more. I just got the thing today and all...


California DLSE Issues Template AB 469 Notice... IMPORTANT

AB 469 requires employers to give new hires, at the time of hire, a notice containing certain information listed in the law. The statute also requires the California Division of Labor Standards Enforcement to issue a model notice.  The DLSE finally did so, and it is here.
Happy New Year!

U.S. Dept of Labor to Cut Overtime Exemption for Home Caregiver Agencies

The Fair Labor Standards Act exempts from minimum wage and overtime law:

domestic service employees employed ``to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves (as 
such terms are defined and delimited by regulations of the

Section 13(b)(21) exempts any employee employed "in domestic service in a household

and who resides in such household."

Under current regulations, an employer such as an agency can employ these caregivers and live-ins and treat them as exempt under the FLSA.  That is, qualifying employees would be paid a certain amount of money to perform the duties without tracking their time or receiving overtime premiums.  Presumably, the agencies markup this rate to add overhead and profit and then charge the patient a fixed amount of money for the service.

The U.S. DOL has issued a proposed regulation (here)  that would prohibit home care agencies from treating caregivers as exempt.  However, individual caregivers not employed by an agency or its individual employer (the patient or patient's family) still may assert the exemption.  (Note - After a humongous analysis and notice of proposed rule making, the proposed regulations are all the way at the very end of the link).  Here is the section that applies to third party agencies:

Sec.  552.109  Third Party Employment.

(a) Third party employers of employees engaged in companionship services within the meaning of Sec. 552.6 may not avail themselves of the minimum wage and overtimeexemption provided by section 13(a)(15) of the Act, even if the employee is jointly employed by the individual or member of the family or household using the services. However, the individual or member of the family or household, even if considered a
joint employer, is still entitled to assert the exemption, if the employee meets all of the requirements of Sec. 552.6.
(b) * * *
(c) Third party employers of household workers engaged in live-in domestic services within the meaning of Sec. 552.102 may not avail themselves of the overtime exemption provided by section 13(b)(21) of the Act, even if the employee is jointly employed by the individual or member of the family or household using the services. However, the individual or member of the family or household, even if considered a
joint employer, is still entitled to assert the exemption.

This is one cryptic draft regulation. Even if the individual's family is a joint employer with whom?? The public can comment until Feb. 27, 2012.  Maybe they'll clear it up.

The proposed regulation also revises the definition of "companionship services" and "live-in domestic services.  To see those, click the link above and scroll way down to the draft regulation at 552.6.  Employees who do not pass the duties tests in these regulations also must be treated as non-exempt - by individual employers and agencies alike.

California employers will be affected by this, because the federal rule will apply even if California would extend the exemption to home agencies.  If federal law says no exemption, that controls.   Also, this change would not affect most employers. But it sure will affect people who count on home care agencies to deliver services.  Who is going to pay for the overtime and other obligations (like record keeping) that the lost exemption will cause?   


Court of Appeal Makes Christmas Come Early for Employers re Reporting Time and Split Shifts

The Court of Appeal issued a ruling that may change the way us employment lawyers advise clients. But WARNING, this decision is not yet final and cannot be relied upon just yet.
Anyway the first issue deals with "reporting time" pay.  California's IWC Wage Orders require "reporting time pay," viz:
Each workday an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee‘s usual or scheduled day‘s work, the employee shall be paid for half the usual or scheduled day‘s work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee‘s regular rate of pay, which shall not be less than the minimum wage.‖ (Cal. Code Regs., tit. 8, § 11040, subd. 5(A).)
It has been long understood (not just by me) that if an employee has to come in for a scheduled meeting on a day off, the employer must pay at least 1/2 the employee's regular scheduled shift (up to 4 hours).Don't take my word for it, here's what the Division of Labor Standards Enforcement has written about it:

Required "Training" Or "Staff" Meeting Attendance. DLSE has been asked on a number of occasions how the Reporting Time provisions of the Orders affect a situation where the employer requires employees to attend a short training meeting, staff meeting or similar gathering under a variety of circumstances. Most common are:
Required meeting is scheduled for a day when the worker is not usually scheduled to work. The employer tells all of the workers that attendance at the meeting is mandatory and a one- or two-hour shift is "scheduled" for this meeting. For those workers not "regularly scheduled" to work, the employee must be paid at least one-half of that employee’s usual or scheduled day’s work. * * *
Well, the Court of Appeal disagreed with the DLSE's analysis.  AirTouch Cellular scheduled meetings lasting two hours or less. Some employees came in specially for the meeting and claimed they were owed up to 4 hours' pay (1/2 the regular shift). The court said:

To simplify, the issue may be framed by the following question: If an employee‘s only scheduled work for the day is a mandatory meeting of one and a half hours, and the employee works a total of one hour because the meeting ends a half hour early, is the employer required to pay reporting time pay pursuant to subdivision 5(A) of Wage Order 4 in addition to the one hour of wages?

The answer to this question is no, because the employee was furnished work for more than half the scheduled time. The employee would be entitled to receive one hour of wages for the actual time worked, but would not be entitled to receive additional compensation as reporting time pay.

If that wasn't enough, the Court then resolved another mystery that has vexed employers and their lawyers for years:  When, if ever, is a "split shift" premium due to an employee who earns more than minimum wage for the day?   See, the wage order requires split shift premiums, but the provision is expressed in terms of "minimum" wage.  The court of appeal agreed with a district court when it held that "The plain language of the split shift regulation reflects an intent to ensure that an employee who works a split shift must be compensated highly enough so that he or she receives more than the minimum wage for the time actually worked plus one hour."

Therefore, an employee who earns more than $72 for an 8 hour day (assuming an $8 minimum wage) does not receive a  split shift premium, even if he works a split shift.  The court unfortunately did not say what happens when the day is shorter than 8 hours. ... must the employee still earn $72 for the day even if he only works 6 hours? 

Anyway, this wage and hour obscurity is probably dry as dirt for some of you. For others, though, this case could result in significant payroll savings. 

And DLSE, remember when I asked you the split shift question in a request for opinion letter like 3 years ago?  Remember?   Never mind. 

The opinion is Aleman v. Airtouch Cellular and the opinion is here.


NLRB Giving and Taking Away

Two items from your friends at the National Labor Relations Board.

As predicted, the new NLRB rights poster (discussed here) is postponed again - this time until April 2012.  Announcement here.  H/T Ross Runkel.

For the bad news, the Board just finalized revisions to election rules.  (Announcement is here).  Here is a redline of the changes to the election procedures.  The new rules severely curtail pre-election hearings on such matters as whether the voting unit is appropriate and who is eligible to vote.  Little things like that.  As a result, elections will occur much more quickly after a petition is filed, and there will be shorter "campaign" periods.

Look for the Union label!  There probably will be a few more of them starting next year!

San Francisco Update

Employers operating in SF - couple of things to note.

First, a new poster!  This one must be posted by employers with more than 20 employees who are covered by San Francisco's health care program.   Under that program, employers must spend a certain amount per hour on health care coverage for San Francisco based employees. That amount starts at $1.46 per hour for employers of 20-100 employees.  Read the poster and download it here.

Second, the San Francisco minimum wage, is going up!  San Francisco employers must start paying $10.24 minimum starting 1/1/12. That's a big jump from this year's minimum of $9.92, because the minimum wage is indexed to inflation.  Prices have been going up too, except for home prices of course!  And employers have to post the updated poster, which is here.

San Francisco employers- here's wishing you an enjoyable winter celebration of pointy sustainably grown trees, except for those of you who are enjoyment-challenged or hypofuniacs.


Brinker delayed

The Supreme Court is considering even more briefing in the Brinker case re meal and rest periods. So, they are going to delay the opinion past the normal 90 days from argument. Here is the order:

Pursuant to California Rules of Court, rule 8.520(f)(7) and this court's December 2, 2011, order, the parties' answers to the amicus curiae brief of the California Employment Law Council, addressing the grounds for prospectively applying portions of this court's eventual decision on the merits, are due Tuesday, January 3, 2012. Each party may file a simultaneous reply to the other party's answer within 10 days thereafter. Submission of the cause is vacated. (See Cal. Rules of Court, rule 8.524(h)(1) [submission runs from expiration of the time in which to file briefs, including supplemental briefs].) The cause will be resubmitted on January 13, 2012.

IRS Standard Mileage Rates for 2012 - Business Rate Unchanged

The IRS announced its 2012 Standard Mileage Rates here.  Employers rely on this rate when reimbursing the use of personal vehicles.  However, the business rate is unchanged from the mid-2011 adjustment.  From the IRS announcement:

Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 55.5 cents per mile for business miles driven
  • 23 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

Happy holidays!


Ninth Circuit: No Duty to Accommodate Unqualified Applicant With Disability

Trish Johnson was a special education teacher. She was required to maintain a teacher certification. To do so, she had to satisfy certain continuing education requirements, including having 3 hours of college credit over a five year period.  Johnson failed to complete the college credit on time and told her bosses she would lose her certification. Her school district could have petitioned the state for an exemption, but declined to do so. Johnson lost her certification and was fired.
She sued under the ADA, claiming the school district had to apply for and obtain the exemption as a form of accommodation of her depression and other mental impairments.
Agreeing with the district court, the Ninth Circuit upheld summary judgment. The court held that a plaintiff under the ADA must establish she is a "qualified individual with a disability" or no accommodation is due.
The court noted EEOC regulations provide "that a 'qualified individual with a disability' is one 'who satisfies the requisite skills, experience, education and other job related requirements of the employment position such individual holds or desires, and who, with or without reasonable accommodation, can perform the essential functions of such position.” 29 C.F.R. § 1630.2(m) (emphasis added).
So, the court reasoned, Johnson was required to hold the "requisite" job related requirements of the job without accommodation. She did not maintain the requisite continuing education requirements and, therefore, lost her certification.
So, by way of example given in the opinion, an employer hiring a CPA can require the CPA to be licensed and need not provide "accommodation" that helps the applicant obtain the license (like tutoring).  A law firm does not have to help a law clerk pass the bar, etc.
The case is Johnson v. Bd. of Trustees and the opinion is here.

Court of Appeal: Church-owned School Exempt from Marital Status Discrimination Claims

Sara Henry divorced and began living with a boyfriend, with whom she had a child.  She worked for the Red Hill Evangelical Lutheran Church of Tustin as a teacher and administrator for a church-owned and operated preschool.  After the church discovered Henry's living situation, it discharged her. She sued for marital status discrimination.
Henry argued the church fired her because of her "marital status" in that she was unmarried and living with her boyfriend. The church contended it was concerned with her living with her boyfriend while unmarried.  Regardless, the church won the case because it is not considered an "employer" under the Fair Employment and Housing Act.  As the court of appeal found, the definition of "employer" in FEHA ‟does not include a religious association or corporation not organized for private profit." Govt Code § 12926, subd (d).  The court also found that Henry was not covered by Title VII of the Civil Rights Act of 1964.  Therefore, without a statutory basis, her claim for wrongful termination in violation of public policy failed as well.
The case is Henry v. Red Hill Evangelical Lutheran Church of Tustin and the opinion is here.