California has fee-shifting provision in place for claimants seeking unpaid minimum wages and unpaid overtime pay, by which the prevailing employee is entitled to attorney’s fees. Many employer defendants have sought to scare away a former employee plaintiff by “reminding” them that if the employee loses, the employer will go after them for their fees and costs. Many employees have considered the risk and opted not to pursue legitimate claims based on that fear.

Good news….

Effective January 1, 2014, Labor Code § 218.5 will provide that a prevailing employer can recover its defense costs only if it proves to the court that the employee brought the action “in bad faith.” “In bad faith” is not defined in the statute, but it will probably require that the employer prove that the employee knowingly filed a false claim purely withy the intent to harm their former employer.
The history behind the change reveals California’s long-established “pro-employee” position. Governor Brown signed the legislation, SB 462, making this change on August 26, 2013. The bill’s author, Sen. Bill Monning, D-Carmel, stated that this amendment corrects “an historic injustice” and “brings California into conformity with the overwhelming majority of states in the country.
The amendment was prompted by a 2012 California Supreme Court ruling holding that a prevailing employer in a meal-rest penalties case could not recover attorneys’ fees because such penalties are not “wages” and the Labor Code statutes permit fee recovery only in actions involving wages. Kirby v. Immoos Fire Protection, 53 Cal. 4th 1244 (2012).

Although there was no applicable fee-shifting statute in Kirby, the case implied that if the claims had involved wages instead of penalties, an award of attorneys’ fees to the prevailing employer could have been appropriate. The reaction from SB 462′s sponsor — the California Employment Lawyers Association — was to try to protect plaintiff employees from that eventuality by requiring successful employers to prove bad faith. A true win for employee plaintiffs!

Piece-rate employees must be paid separately for work that does not fall within the scope of the work that is the subject of the piece rate.

So, if you’re a brake mechanic and are paid by the brake job (or other repair), but also clean the shop, make appointments, open/close the shop or any other duties that are not related to the brake jobs themselves, you must be compensated for the extra work. The hours spent working on non-piece rate tasks must be paid at least at minimum wage.

For example, in one case, an auto dealership compensated its auto mechanics based on a “piece rate” system. For repairs, the company would pay the employees based on a standard period of time allowed for a repair (flag hours).  The pay rate was significantly higher than minimum wage.  So, if the job took longer than standard hours, there was enough wages to ensure the mechanic earned more than minimum wage.

But the mechanics spent significant time at work NOT performing repairs, such as in training, cleaning, etc.  The dealership would calculate the total hours worked vs. the compensation it would pay for flag hours.  If the pay rate fell below minimum wage, the dealership would make up the difference.  The dealership did not pay a separate hourly rate for non-repair time that would not have been covered under the piece rate.

The court held that policy was illegal. The main issue is whether the applicable wage order (here Wage Order (Wage Order 4-2001)), requires payment of at least minimum wage for each hour worked, or an average of minimum wage for all hours worked in the work week.  The trial court and Court of Appeal, relying on an earlier case, Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314 agreed with the plaintiffs that the former interpretation was correct.
If you earn a piece rate for tasks completed, but also perform unrelated duties and wonder if you are being paid correctly under California labor law, give us a call. If you would like to read the entire case summarized above, you can find it here.

Tip pools and tip sharing are significant topics for employees in both the food service and hospitality industry. The Second Circuit’s Court of Appeals will soon clarify the the prohibition against participation by an employer’s “agents” in tip pools and sharing arrangements.

The court’s certification order arose out of two class actions against Starbucks involving their “baristas.”  In Barenboim v. Starbucks Corp., employees objected to shift supervisors obtaining a portion of their tips because they assigned baristas to positions during their shifts, administered break periods, directed the flow of customers, and provided feedback on baristas’ performance. As such, they argued, the shift supervisors were “agents” of the Starbucks and ineligible to participate in tip pooling the applicable labor laws.

The second case, Winans v. Starbucks Corp., presented nearly the reverse issue: assistant store managers claimed that they are not agents of the employer and thus are entitled to participate in the stores’ tip pools.

The DIstrict Court certified the following questions to the New York Court of Appeals:

    1. “What factors determine whether an employee is an ‘agent’ of his employer for purposes of N.Y. Lab. Law § 196-d and, thus, ineligible to receive distributions from an employer-mandated tip pool?,” and
    2. “Does [the Labor Law] permit an employer to exclude an otherwise eligible tip-earning employee under § 196-d from receiving distributions from an employer-mandated tip pool?”

While this may be an issue pending before the Second Circuit, employees in Santa Barbara, San Luis Obispo and Ventura who have tip pooling questions are encouraged to contact Adams Law for answers.

If you are an “App User,” the U.S. Department of labor launched its first smartphone application – the DOL-Timesheet that may be useful to you in tracking your hours worked. This timesheet application, which is available in English and Spanish versions, provides a record keeping system that enables you to keep track of your work hours and determine the wages your employer owes you.

Users can track regular work hours, break time, and overtime hours. Users can also add notes or comments (project name, work site, etc) and view summaries of their work time (and wages owed) in daily, weekly, and monthly formats. Even better? You can email the summary as an attachment to ensure your record – and your paycheck – is accurate.

This application is a huge boon to employees who no longer have to rely on their employer’s records. In the event of a wage and hour dispute, the employee’s records could assist in winning a wage claim, particularly where the employer has failed to maintain accurate records as required by law.

If you do not have a smartphone, you can download a timesheet calendar that will help you maintain the same information. Both  can be downloaded from the DOL’s Wage and Hour Division homepage.

A recent California Appellate decision expanded the definition of “commissions” and found that no overtime was owed to a car salesperson, despite the long hours she worked. In Areso v. CarMax, Inc., the Court held that CarMax’s commission plan qualified as “commission wages” under Labor Code section 204.1, for purposes of the exemption, because it pays a uniform or standard amount to each salesperson for each vehicle sold, regardless of price.

Are you a commissioned salesperson? Are you owed overtime? The Areso case may be of interest to you. If you have any questions regarding this case, or a possible claim, give us a call. A summary of the case follows:

Areso was a car salesperson for CarMax, Inc. She filed a putative class action lawsuit, alleging misclassification and failure to pay overtime wages. Under the law, an employer’s commission plan must be “based proportionately on the amount or value” of the sale of the employer’s property or services.  CarMax won on a motion for summary judgment because the Court found that its compensation arrangement is a “performance-based incentive system and thus fairly understood to be a
commission structure” based on the statutory language that commissions may be based on the “amount” rather than “value” of vehicles sold, where the “amount” is
interpreted to mean the number of vehicles sold.

To qualify for the commissioned salesperson exemption, the employee: (1) must be involved principally in selling a product or service (not making a product or rendering a service); and (2) the amount of their compensation must be based proportionately on the amount or value of the product or service.  However, the Areso Court distinguished this case from other cases where the employer’s commission plan was held not to constitute commission wages because those cases interpreted whether the commissions were based on the “value” of the product or service.

The Court also noted no other court has construed the word “amount” in the statute, and that CarMax’s payment of a standard amount of earnings for each vehicle sold satisfies the statutory requirement. The Court found that a standard – or uniform, fee for each vehicle satisfies the law and is “proportionate” because it is a one-to-one proportion based on the number of vehicles sold.

While this case appears good for employers who pay salespersons by commissions, there are strict requirements before the compensation plan will pass muster and qualify under the law. The case is also a relatively new interpretation of law and it remains to be seen if other courts will follow. You can find a full copy of the case at

If you are an employee paid under a commission plan who wonders if that plan is legal, or if you are an employer seeking to establish a compensation plan in compliance with the law, feel free to give us a call.

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