Why You Should Treat Wage and Hour Compliance Like Safety in California (Part 1 of 5)
This is the first article of our five-part series on Why You Should Treat Wage and Hour Compliance Like Safety in California. Part 1 (you’re reading it!) | Part 2 | Part 3 | Part 4 | Part 5 (Coming Soon!).
You have probably known for a long time that California employers must comply with the state’s workplace health and safety laws. The California Division of Occupational Safety and Health (Cal/OSHA) oversees and enforces these laws and regulations, which came about in the 1970s. Failing to adhere to these laws can result in considerable penalties. General violations can be over $12,000 per violation, serious violations over $25,000 per violation, and willful or repeat violations over $100,000 per violation.
To increase worker safety and avoid such crushing penalties, businesses all over the state have created elaborate safety programs and injury and illness prevention programs. These programs often involve extensive safety training and written policies for employees; weekly or daily check-in meetings; inspection and monitoring; clever accountability systems and incentive programs to encourage safety; prominently displayed posters, signs, and creatively written reminders; and elaborate record keeping. Thanks to years of adoption, development, and faithful implementation by most California businesses, these programs have significantly reduced the threat of legal action for most employers. While there will always be a degree of risk in the safety arena, the risk is well managed through these prevention programs. For that reason, most employers can sleep easy knowing safety lawsuits are unlikely to threaten the existence of their business.
Wage and Hour Issues Are an Equal or Greater Threat
Contrast this with the risk wage and hour lawsuits pose to California businesses. 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. Simply put, wage and hour lawsuits are a far greater legal and financial threat to employers in California than safety issues.
When did you last hear of a business paying millions to resolve a safety issue? While multi-million-dollar judgments and settlements are rare in the safety context, they are routine in the wage and hour context. In 2022 alone, the top ten class and collective action settlements in the wage and hour space nationally totaled $574.55 million, with half of the top 10 settlements approved by federal or state courts in California. The significance of wage and hour issues (such as missed, late, or incomplete meal and rest periods, incomplete paystubs, improper overtime pay rate, etc.) is often overlooked because they don’t directly affect worker health; nonetheless, California’s wage and hour laws are structured to make penalties more severe than they are for safety violations.
The Supreme Court Changes the Game
2021 was a watershed year for wage and hour cases. The California Supreme Court announced in Donohue v. AMN Services, LLC that companies must treat wage and hour compliance like a health and safety issue. If that wasn’t enough, the Supreme Court changed the burden of proof on wage and hour cases from employees to employers—meaning that any evidence (like a timecard) showing a meal break violation is now legally presumed to be the fault of the employer unless there is direct and specific evidence to the contrary.
Think about that for a second. With virtually every other type of lawsuit, the plaintiff has the burden of proof but now employers are essentially guilty until proven innocent!
It’s apparent that California employers must police wage and hour issues like safety issues and suffer more severe consequences if they don’t police effectively.
Fast forward to January 2024, and the California Supreme Court made life even harder for employers with its decision in Estrada v. Royalty Carpet Mills, Inc. The Supreme Court in Estrada rejected the argument that courts have inherent authority to strike PAGA claims if the court finds that they cannot be tried in a manageable way. This means employers cannot argue that a case is unmanageable and have it dismissed, making compliance improvements one of the only tools employers have left to fight off and/or reduce the scope of PAGA claims. The court also reiterated its holding in Donohue, sending a clear message to employers that compliance efforts are of paramount importance.
The Cost of Wage and Hour Lawsuits Far Exceeds Safety
Putting the insanity of that notion aside (that wage and hour compliance is more important to California than worker safety), it is reality. If you are skeptical, here are a few examples.
In the last few years alone:
Major League Baseball entered a $185 million settlement for violating state and federal wage laws.
ABM Industries settled for $140 million for inaccurate time records.
Wal-Mart suffered a $101 million judgment for paystub violations.
Equinox Holdings settled multiple cases in both Federal and California State Court for $36 million.
McDonald’s settled a wage and hour class action for $26 million.
Kaiser Permanente? $20 million. Target? $14 million. Safeway? $12 million. Abercrombie & Fitch? $9.6 million. And Allstate? $5.5 million.
The list continues, and this is just the tip of the iceberg. Small and large businesses have paid out thousands of high six-figure or seven-figure settlements in wage and hour cases in recent years, plus their own attorneys’ fees, which are often in the six figures in these cases. It is safe to say that these companies spent exponentially more on wage and hour issues than on safety.
How can it be that potential liability caused by, for example, unintentional errors on employees’ paystubs or employees’ failures to take compliant breaks can dwarf the liability from serious safety violations? There are at least four reasons, which we will discuss in the following article of our five-part series: Unlike Safety Violations, Wage and Hour Exposure Often Involves All Your California Employees (Part 2 of 5).
