California is infamous for its hostility towards employers. On May 23, the California Supreme Court continued on its unwavering mission to solidify that well-earned reputation by issuing a 45-page decision in Naranjo et al. v. Spectrum Security Services, Inc., a case we have been closely monitoring at Blank Rome.
For context, the failure to pay wages in California triggers not only an award of those unpaid wages, but potentially steep and costly statutory and civil penalties as well, including so-called: (1) “waiting time penalties”—up to 30 days’ wages for former employees; and (2) “wage statement penalties” when the unpaid wages render the employee’s pay stub inaccurate. Wage statement penalties start at $50 for the first violation and rise to $100 for subsequent violations. When claims are brought on a classwide basis, these penalties can become astronomical, as they are all assessed on a per-employee, per-pay-period basis.
Meal and Rest Period Premiums Must Include All “Non-Discretionary Payments” and Not Just Hourly Wages
Michael L. Ludwig
If an employer does not provide an employee with a compliant meal or rest period, Labor Code section 226.7(c) requires the employer to “pay the employee one additional hour of pay at the employee’s regular rate of compensation.” In Ferra v. Loews Hollywood Hotel, LLC, the California Supreme Court held that the “additional hour of pay” for meal or rest period violations must encompass all non-discretionary payments, as well as hourly wages. Thus, if an employer pays an employee non-discretionary incentive pay or bonuses, or commissions, those amounts must be included in determining the “hour of pay” the employer owes to the employee for a meal or rest period violation. (Note: The same rule applies to a “recovery” period, which is less common and refers to a cooldown period afforded an employee to prevent heat illness.)
Many employers have initiated practices of monitoring time records for apparent meal period violations and automatically paying an hour of pay accordingly. If the hour of pay was paid at an employee’s base hourly rate that did not include non-discretionary payments, then additional amounts may now be owed to the employee. Also, given the increased cost to an employer of a meal period premium, employers who provide employees flexibility regarding the scheduling of their meal periods may want to reconsider that flexibility and instead insist on strict meal period scheduling and reporting to avoid potential exposure.
Last week, in a significant blow to claims that gig economy workers are entitled to pursue disputes on a class or collective basis, and possibly whether those workers will be able to establish that they are employees and not independent contractors, a three-judge panel of the Ninth Circuit Court of Appeals unanimously decertified a class of 240,000 Uber drivers. The decision in O’Conner v. Uber is a victory for the ride-share company, which will now be able to defend claims that it misclassified employees as independent contractors on an individual basis—one arbitration at a time.
For the past five years, there has been an ongoing and contentious dispute over whether Uber drivers (and similarly, Lyft and other ride-share drivers) are independent contractors or employees. If the workers are deemed to be employees, Uber could face hundreds of millions of dollars in alleged California labor code violations and business expense claims. To combat the possibility of having to litigate this issue on a class-wide basis, Uber entered into arbitration agreements with each driver, requiring that any driver’s claims be arbitrated and that each case had to be arbitrated individually (rather than as a class action). Continue reading “Goodbye Uber Class Action, Hello Individual Arbitration”