Wage and Hour Update, Parts 1 & 2
February 17 & March 29, 2011
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On February 17 and March 29, 2011, Miller Law Group presented a series of webinars exploring the latest wage and hour trends and developments under California and federal law. The following are answers to frequently asked questions by webinar attendees.
Q: I UNDERSTAND THAT USE-IT-OR-LOSE-IT VACATION POLICIES ARE INVALID IN CALIFORNIA BUT THAT EMPLOYERS MAY PLACE A CAP ON THE AMOUNT OF VACATION AN EMPLOYEE MAY ACCRUE. HOW MUCH VACATION MUST WE ALLOW EMPLOYEES TO ACCRUE BEFORE THE CAP IS IMPOSED?
A: The California Division of Labor Standards Enforcement (DLSE) maintains that employer policies requiring that all vacation be taken in the year it is earned -- i.e., use-it-or-lose-it policies -- or in a very limited time after the accrual period are improper and will not be enforced. However, a vacation policy that places a "cap" or "ceiling" on vacation pay accruals is permissible. In this type of policy, once a certain level or amount of accrued vacation is earned but not taken, no further vacation accrues until the balance falls below the cap.
In an opinion letter that was withdrawn several years ago, the DLSE took the position that accrual caps could be no less than 1.75 times an employee's annual vacation rate. Now, the DLSE’s position is that the time periods involved for taking vacation must be “reasonable,” although the agency has not published a definitive guideline as to the minimum cap that would be considered reasonable. Using a cap of 1.75 or more is the most conservative approach, but it is possible that a cap of 1.50 would also survive DLSE scrutiny. These same principles apply to PTO policies.
Q: OUR VACATION POLICY PROVIDES THAT ONCE AN EMPLOYEE REACHES HIS OR HER ANNUAL ACCRUAL OF PTO HOURS, NO MORE PTO HOURS MAY BE ACCRUED UNTIL THE BALANCE FALLS BELOW THAT LEVEL. IS THIS LEGAL?
A: Probably not, in light of current DLSE policy, discussed above, that accrual caps must be reasonable and provide employees with more than a very limited time following accrual to actually use the vacation/PTO. A cap that only permits an employee to accrue up to one year’s worth of vacation/PTO would likely not be reasonable in the DLSE’s view.
Q: ARE “USE IT OR LOSE IT POLICIES” PERMISSIBLE WITH REGARD TO SICK TIME?
A: In general, yes. However, this may be limited by local law, such as the San Francisco Paid Sick Leave Ordinance that requires that accrued paid sick leave be carried over from year to year up to the maximum accrual under the ordinance.
Q: WE OFFER TWO PERSONAL HOLIDAYS THAT CAN BE USED AT AN EMPLOYEE’S DISCRETION. AN EMPLOYEE WHO RECENTLY TERMINATED TOLD US THAT WE HAD TO PAY HER OUT ON TERMINATION FOR THOSE UNUSED DAYS. IS THAT CORRECT?
A: In California, vacation and PTO are treated like wages, and accrued and unused vacation/PTO must be paid out upon termination. The same holds for “personal” or “floating” holidays that can be used at the employee’s discretion and that are not tied to a specific condition or event (such as a birthday or company anniversary date). Such unused personal days must be paid out on termination. Moreover, they cannot be subject to a use-it-or-lose-it policy.
Q: DO EMPLOYERS HAVE TO PROVIDE VACATION OR PTO TO EMPLOYEES, OR IS IT CONSIDERED A COMPANY BENEFIT?
A: Generally, whether an employer offers PTO or vacation benefits is a decision that is at the company’s discretion, and it is not required by law. Keep in mind, however, that some cities may have ordinances requiring paid time off, such as San Francisco’s Paid Sick Leave Ordinance.
Q: WE DO NOT DISTRIBUTE HARD COPIES OF PAY STUBS BUT INSTEAD GIVE EMPLOYEES ACCESS TO OUR AUTOMATED PAYROLL SYSTEM SO THEY CAN VIEW AND PRINT THEIR PAY STUBS IF THEY CHOOSE. IS THIS SUFFICIENT TO MEET THE CALIFORNIA REQUIREMENT THAT EMPLOYERS MUST PROVIDE A WAGE STATEMENT WITH EACH PAYCHECK?
A: It depends. The DLSE permits employers to provide electronic wage statements if the system incorporates these features: the employee can elect to receive paper wage statements at any time; the electronic statement contains all information required by Labor Code section 226(a) and is available on a secure website no later than pay day; access to the website is by unique employee identification number and confidential personal identification numbers (PINs); the website is protected by a firewall and is available at all times with the exception of downtime caused by system errors or maintenance requirements; employees can access their records through their own personal computers or via company computers, and computer terminals are available for accessing these records at work; employees are able to print copies of the electronic wage statements at work on printers in close proximity to the computer terminal.; there is no charge for accessing or printing out the wage statements; employees may also access their records over the Internet and save them electronically or print them on their own printer; wage statements are maintained electronically for at least three years and are available to active employees for that entire time; and, former employees will be provided paper copies at no charge upon request.
Q: IF A NON-EXEMPT EMPLOYEE REQUESTS TO MAKE UP HOURS – FOR EXAMPLE, THE EMPLOYEE TOOK TIME OFF ON MONDAY TO ATTEND A CHILD’S SOCCER GAME AND WANTS TO MAKE UP THOSE HOURS ON TUESDAY -- DOES AN EMPLOYER HAVE TO HONOR THE REQUEST?
A: No, employers do not have to permit an employee to make up missed hours. The problem with requests by non-exempt employees to make up work time is that if the employee is already scheduled for eight hours on a given day, and then puts in a few make up hours on top of that, the employer will be on the hook for overtime pay. The California Labor Code and Wage Orders, however, provide a simple mechanism that permits employees to make up lost work time without incurring overtime. In particular, the rules allow an employee who takes time off for a personal obligation to make up the lost time in the same workweek, at straight-time pay, provided: 1) the employee submits a signed written request for make-up time without overtime; and 2) the total hours worked do not exceed 11 on the make-up day or 40 for the week. It is important to note that you are prohibited from soliciting or encouraging employees to work make-up time, but you can inform them about the make-up time option. Also, employers cannot condition approval of the time off on the employee's agreement to work make-up time without overtime pay.
Q: IT CAME TO OUR ATTENTION THAT SOME NON-EXEMPT EMPLOYEES HAVE BEEN RESPONDING TO WORK EMAILS AFTER HOURS USING THEIR OWN ELECTRONIC DEVICES, SUCH AS IPHONES. DO WE HAVE TO PAY FOR THAT TIME?
A: Yes, an employer is required to pay for all hours worked by a non-exempt employee. The best way to limit your liability is to have a policy stating that nonexempt employees are subject to discipline if they check work email after hours unless they have specific approval to do so. At the same time, it is critical to educate managers that they should not send work emails after hours or expect employees to check or respond to emails after hours. Additionally, employers can avoid problems by ensuring that nonexempt employees who do not have a need to check email on their off hours do not have access on their phones or computer devices to the company’s mail server.
Q: OUR COMPANY IS CONSIDERING THE BENEFITS OF HAVING AN ALTERNATIVE WORKWEEK SCHEDULE, SUCH AS A 4/10 WORKWEEK. CAN WE TAKE THE INITIATIVE TO PUT THIS IN PLACE, OR DO EMPLOYEES FIRST HAVE TO REQUEST ONE?
A: Employers may take the initiative to propose an Alternative Workweek Schedule (AWS) to "work units" within the employer's business. Some basic points to keep in mind, to ensure that the AWS is valid: the proposed schedule options must be presented in writing to employees; the AWS must be approved by a two-thirds secret-ballot vote of the affected employees in the work unit; the employer must disclose in writing, and hold a meeting regarding effects of, the AWS at least 14 days prior to the vote; and the employer must report the results of the secret-ballot election to the California Division of Labor Statistics and Research within 30 days after the results are final.
Q: CAN WE FORCE AN EXEMPT EMPLOYEE TO USE PTO TO COVER A SHORT PERIOD OF TIME DURING THE DAY FOR A DOCTOR'S APPOINTMENT?
A: Yes, provided you have a policy notifying exempt employees that personal time off will be deducted from accrued vacation/PTO/sick time (as applicable). Generally, exempt employees must be paid on a “salary basis,” which means they must receive their full, predetermined salary for any week in which they perform any work (with a few exceptions). As a result, salary deductions for partial day absences are not permitted. However, a November 2009 Opinion Letter from the DLSE approved of partial day deductions from accrued vacation or sick leave banks (on an hour-for-hour basis) without jeopardizing the employee’s exempt status.
Q: CAN AN EMPLOYER MAKE DISCIPLINARY DEDUCTIONS FROM AN EXEMPT EMPLOYEE’S SALARY?
A: Generally no, because doing so may violate the salary basis rule (discussed above). However, California law does permit employers to deduct for time off due to a disciplinary suspension of a full week or more. Federal law, on the other hand, allows unpaid disciplinary suspensions of one or more full days for infractions of workplace conduct rules, as well as deductions for infractions of safety rules of major significance.
Miller Law Group exclusively represents business in all aspects of California employment law, specializing in litigation, risk management, wage and hour class actions, ERISA litigation, and appellate law. If you have questions about your workplace obligations, please contact Michele Ballard Miller (mbm@millerlawgroup.com) or Carolyn Rashby (cr@millerlawgroup.com), or call 415-464-4300.
This webinar and Question and Answer Summary are presented by Miller Law Group to review recent developments in employment law. This material is designed to provide informative and current information as of the date of the webinar and should not be considered legal advice.
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