If you own or manage a business with employees in California – or are in an internal counsel, human resources, or another managerial role in which you are responsible for such a business’ compliance with state laws – you likely already know that California state law regarding the treatment of employees is among the most complex and strict in the nation.
With regard to the day-to-day working conditions and payment of employees, California’s set of “wage orders,” which are issued by the Industrial Welfare Commission (IWC), may even surpass your expectations of what is compelled by state authorities. The IWC issues and regularly updates wage orders relating to 17 different industries.
These wage orders not only dictate specific rules that employers must comply with – dealing with issues ranging from overtime pay to meal breaks to elevators – but also provide for civil penalties that can be imposed upon the employer for violation of the provisions of the applicable wage order.
These penalties will be discussed further below, but it should be noted at the outset that employees themselves can pursue actions against the employer based on California’s Private Attorney General’s Act (PAGA), which can include additional penalties for each violation of the order against each employee for every pay period in which a violation occurs. These penalties can add up quickly, especially when an employee pursues an action based on alleged violations affecting many different employees over long periods of time.
In addition, the wage orders must be posted in full in the workplace so that employees are made aware of all of the specific rules that apply to their employers. The posting of the wage order must be done in a place that is easily accessible to and viewable by employees, such as a company break or meal room.
Thus, employers face enormous financial risk for failing to comply with California’s wage orders and are strongly encouraged to obtain particularized and ongoing legal counsel to assist in their compliance with their applicable wage order.
In this article, we focus on Wage Order 4, which applies to Professional, Technical, Clerical, Mechanical and Similar Occupations. You can find a full list of California’s 17 wage orders and explanations of which employers they apply to here.
Again, working with experienced employment law counsel is encouraged in working towards ongoing compliance with California Wage Order 4, not to mention all other applicable state and federal laws and regulations applicable to California employees, and the full text of Wage Order 4 can be found here, but below is an overview of the types of issues addressed by the order.
What Employees Wage Order 4 Does and Does Not Apply To
The order makes clear that its provisions apply to “all persons employed in professional, technical, clerical, mechanical, and similar occupations,” except for those employees who fit into administrative, executive and professional exemptions.
Broadly, an executive is an employee who manages at least two other employees, is able to exercise independent judgment on the job, and makes at least twice the prevailing minimum wage, although the wage order provides additional detail. The order provides detailed explanations for which employees fall under the administrative and executive exemptions.
Notable Definitions Used in Wage Order 4
The wage order – which is approximately 10,000 words long and reaches 11 dense, single-spaced pages – contains 21 specifically defined terms used throughout, and parties responsible for compliance are advised to take special care in understanding the definitions of those 21 terms as explained in Section 2 of the order.
Of particular importance are the definitions for the terms: “alternative workweek schedule;” “employee;” “employer;” “hours worked;” “minor;” “wages;” “workday;” “workweek;” and “professional, technical, clerical, mechanical and similar occupations.”
Hours and Days of Work
Section 3 of the order, “Hours and Days of Work,” provides some of the most litigated and complex provisions of the order. This section alone is approximately 2500 words, comprising a quarter of the length of the order’s entire 22 sections, and should be perused in detail to determine whether worker wages and daily/weekly schedules comply with the order.
This section contains the standard overtime provisions familiar to many employers and employees, namely that hours worked in excess of 8 hours a day or 40 hours a week should be paid at a rate of 1.5 times a worker’s regular wages, and hours in excess of 12 hours a day should be paid at a rate of 2 times the regular wages. In addition, the section provides rules relating to alternative workweeks and for those in specialized workplaces such as hospitals.
Section 4 of the Wage Order provides further information related to wages, specifically the minimum wages that must be paid to workers based on state law, which will depend in part upon the number of employees in the organization. Those employers with more than 25 employees must pay a higher minimum wage. Note that many cities in California impose a higher minimum wage than that mandated by state law, and which are not addressed in Wage Order 4.
Reporting Time Pay
Section 5 of the order addresses how much workers must be paid when they report to work, but there is no work to be done or less work than was expected. Essentially, workers must be paid for at least half of the scheduled day of work, which cannot be less than 2 hours of pay.
Licenses for Disabled Workers
California encourages employment of workers with physical or mental disabilities, and, in some cases will allow employers to pay less than the minimum wage to those workers. A license must be obtained from the state to do this, however, and Section 6 of the order outlines the process for obtaining such a license.
Section 7 of the order provides guidance on the records that must be kept by the employer on all covered employees so as to, among other things, demonstrate compliance with the provisions of the wage orders. These record requirements include:
- The full name, address, occupation, and SSN of employees;
- The birthdate of employees and designation of minor employees if they are under 18 years of age;
- Time records including meal periods and split shifts;
- Total wages paid each payroll period including board, lodging, or other compensation paid;
- Total hours worked in payroll period and applicable rates; and
- Information relating to piece rates or incentive plan, if in place.
Uniforms and Equipment
Pursuant to the order, California employers must provide employers with uniforms and certain types of equipment essential to the job, when such uniforms (which include apparel of a distinctive design or color) and equipment are required. The order provides for certain exemptions from this requirement and allows for security deposits to be required by the employer.
Meals and Lodging
The Meals and Lodging section of the order allows for employers to deduct costs of meals and lodging supplied to employees (although the employer cannot charge employees for meals and lodging not used), but provides for specific monetary limits for the charges that can be imposed based on the type of lodging and meal provided, as well as based on the size of the company.
Another commonly litigated matter is meal periods, and Section 11 of the Wage Order addresses these requirements. In essence, an employer must provide a 30-minute meal period where a worker works at least 5 hours (although this can be waived by mutual consent of employer and employee if only 6 hours are worked.
In addition, if the worker is considered “on duty” during the lunch period – which means the worker has not been relieved of all duties during the lunch period – then the worker must be paid for the lunch period. If the employer fails to furnish a meal period to the employer, then the employer must pay the employer one hour of pay at the employee’s regular rate of pay.
California covered employees must also receive rest periods, pursuant to Section 12 of the order. This rest period should be at least 10 minutes for every 4 hours worked or major fraction thereof, although there is no requirement for a rest period if the worker works less than 3.5 hours. As with the meal period, the employer must be paid one hour of pay at the regular rate of pay if no rest period is provided.
Other Safety Issues
Sections 13 through 16 of the Wage Order provide mandates for safety and facility requirements that employers must also comply with, including change rooms and resting facilities (Section 13); seats provided for employees (Section 14); the temperature to be maintained in working facilities (Section 15); and elevators/escalators to be provided for use by employees (Section 16).
Penalties for Noncompliance With Wage Order 4
Section 20 of the Wage Order discusses the penalties to be imposed on employers who do not comply with the provisions of the order. The penalty for an initial violation of the order is $50 for each instance of noncompliance per pay period per employee. The penalty for a subsequent violation is $100 for each instance per pay period per employee.
In addition to these penalties – which again can be quite steep when there are multiple employee violations over multiple periods – an employer can be liable for the cost of attorney fees to recover the penalties, as well as for any underpayments that occurred.
While state authorities may act on their own to address employer violations of Work Order 4, as stated above, employees are empowered under the California Private Attorney General Act (PAGA) to unilaterally commence an action against the employer as well. Under state law, an employee who successfully pursues a PAGA action will have the ability to personally retain 25% of all penalties imposed against the employer (See Home Depot U.S.A., Inc. v. Superior Court, 191 Cal.App.4th 210 (2010)).
It should go without saying that plaintiff-side employment law firms eager to recover a portion of the 25% that employees can recover in a large wage/hour case actively seek out clients with evidence of employer violations of any applicable California wage orders.
For more information regarding your company’s compliance with state and federal employment requirements, contact Straggas Law Group, APC today.