Unlike Safety Violations, Wage and Hour Exposure Often Involves All Your California Employees (Part 2 of 5)
This is the second part of our five-part series on Why You Should Treat Wage and Hour Compliance Like Safety in California. Part 1 | Part 2 (this is it!) | Part 3 | Part 4 | Part 5 (Coming Soon!).
In the dynamic landscape of California workplaces, the commitment to regulatory compliance is paramount. Employers must navigate many challenges to ensure a harmonious and lawful working environment. While safety and OSHA compliance have traditionally been at the forefront of organizational priorities in California, especially for industries like manufacturing and construction, a closer inspection reveals a more nuanced picture, where wage and hour violations have become a more significant threat to employers.
Unlike most safety violations, which are individual incidents involving one employee or a small group of employees, wage and hour lawsuits often involve all your hourly (non-exempt) workforce. California’s liberal class action laws and the Private Attorneys General Act (PAGA) allow one employee to sue on behalf of all other employees. For class actions, this covers every current and former employee for a period of four years or more. PAGA claims, meanwhile, only go back around a year, but they have a higher penalty structure. The law also allows class and PAGA claims to be filed simultaneously, meaning your business can get hit twice for the same conduct! While there are some defenses to narrowing or defeating a class or PAGA action, California law heavily favors these procedures, which means most wage and hour claims brought by one individual encompass a large percentage of your workforce. This substantially raises the stakes and the cost of defending these lawsuits.
Although California’s wage and hour laws don’t threaten employees’ physical health and well-being like safety issues do, they still threaten the health and well-being of businesses.
The Nature of Wage and Hour Violations
To fully understand the danger of wage and hour lawsuits and how they can include all California employees, we must develop a deeper understanding of how they affect California employers.
Wage and hour violations are at the heart of these lawsuits and present a critical challenge for employers to navigate. Understanding the nature of these violations is essential for fostering a workplace culture that prioritizes fair and legal employment practices while avoiding costly legal battles.
Wage and Hour Violations in a Nutshell
Wage and hour violations include various infractions related to employee compensation and working hours. From miscalculations in overtime pay to misclassification of employees, these violations touch upon fundamental aspects of the employer-employee relationship. Central to this issue are state and federal regulations, including the Fair Labor Standards Act (FLSA), the California Labor Code, and various regulations from California state agencies, such as the Department of Industrial regulations. This patchwork set of laws and regulations prescribe the standards for minimum wage, overtime pay, and other critical employment aspects.
The California Employment Law Landscape
California, known for its stringent employment laws, adds a layer of complexity to the wage and hour landscape. The state has set robust regulations to protect workers’ rights, emphasizing fair pay, proper classification, and mandatory breaks. Employers operating in California must be well-versed in these laws to ensure compliance and avoid legal repercussions.
Common Types of Wage and Hour Violations
Here are a few common types of wage and hour violations:
Overtime pay Miscalculations: Instances where employers fail to accurately calculate and compensate employees for overtime hours, often leading to claims of unpaid wages. Many businesses think they’re in compliance because they pay “time and a half.” But that is not the proper rate to pay overtime (or sick leave or meal or rest period premiums) if you give any other type of compensation, such as bonuses.
Misclassification of Employees: The improper classification of workers as exempt or non-exempt from overtime pay eligibility, resulting in underpayment or non-payment of overtime wages. If even one employee is misclassified, that means she should have been treated as hourly and hence should have tracked all her time and taken all her breaks over the entire period. That can lead to a 100% violation rate over the relevant time period, which can translate to mega-exposure.
Failure to Provide Lawful Meal and Rest Breaks: Meal and rest period violations are the most common wage and hour cases today. Just because you allow them is not enough. As we shared last time, you must police them and if you can’t ensure 100% compliance, the burden is on you to prove the violations were not your fault.
Off-the-Clock Work Issues: Cases where employees engage in work-related activities off the clock, without proper compensation, in violation of wage and hour laws. Many businesses think they don’t have an issue here, but off-the-clock work can be sneaky. Do employees have to put on or take off safety equipment before they clock in or while on break? Is there a long walk from the parking lot to the time clock? Do you have a security requirement before or after shifts? Do some employees need to stick around after clocking out to make sure the lights are off, the doors are locked, the alarm is set, and the other employees are out the door? Do your managers contact employees after hours even if just a few minutes here and there? Does your time clock round time up or down, even by a minute? These are all examples of off-the-clock work that can lead to major liability.
By exploring these common violations, employers can gain a deeper understanding of the pitfalls to avoid, fostering an environment where legal compliance and employee well-being are prioritized.
Let’s consider a real-life example.
Case Study: Failure to Pay for Meal and Rest Periods at CEVA Logistics
CEVA Logistics is a global logistics and supply chain company in both freight management and contract logistics. In November 2018, a wage and hour class action lawsuit was filed against CEVA Logistics, alleging failure to provide all paid rest and second meal breaks, failure to pay all seventh-day overtime wages, and failure to provide “accurate itemized wage statements.”
In addition to the wage and hour allegations, the lead plaintiff accused the defendant of unfair business practices and violations of California labor laws. The complaint referenced Section 203, which requires workers to be paid all wages due when terminated or within 72 hours of resigning, and Section 2699, the “bounty hunter” law, which allows employees to bring legal action against employers who violate state labor codes. Lead plaintiff Clarence B. claimed that he and other employees were prohibited from leaving the workplace during their rest breaks. He also claimed that CEVA Logistics did not provide a second meal break to employees who worked more than 10 hours in a single shift.
A settlement was reached in December 2019 in which CEVA Logistics paid $1.5 million in fees and penalties.
Embrace Comprehensive Workplace Compliance
This is a call to action for California employers. A nuanced understanding of the full scope of wage and hour violations versus safety lapses is vital for effective risk management and organizational sustainability, but it’s not enough. Employers must prioritize compliance with wage and hour laws alongside safety regulations. They must also develop comprehensive, balanced compliance strategies to mitigate the heightened risks associated with wage and hour violations—like implementing a plan for California compliance and rolling out wage and hour training. The financial realities and reputational implications of wage and hour cases carry too much weight, creating enduring challenges beyond mere regulatory compliance.
Without the proper mindset and reinforcing action, employers will be vulnerable to the substantial penalties assessed by California’s regulatory environment, which is the subject of the next article in our series, Beware of California’s Wage and Hour Penalty Multiplier.
