Tim Plewe of Lobb and Cliff wrote this brief and to the point discussion of some problems that businesses face when classifying employees as salaried and hourly employees.
I advise many of my business clients on employment issues and have found over the years that many of the same issues keep coming up over and over with employers. I am seeing a wave of wage and hour claims, that start with threats of claims (often at termination), move on to Labor Commissioner complaints, and often even result in lawsuits. These claims generally revolve around two issues: 1) misclassification of employees as exempt or non-exempt, and 2) meal and rest break periods.
All employees are classified as either exempt or non-exempt for purposes of determining how they should be treated with respect to various wage and hour issues, with overtime being the most prevalent. Many employers believe that salaried employees are exempt and therefore not entitled to overtime, while hourly employees are non-exempt and entitled to receive overtime compensation. Although generally an employee must be salaried to be considered exempt, this is far from the only criteria, and salary is never sufficient on its own to create an exempt employee classification. Many employers also mistakenly believe that as long as an employee is a manager or assistant manager they can be considered exempt. Regardless of the title of the employee, an employer must consider whether or not the majority of the work (more than 50%) the employee performs is managerial or supervisory. If an employee has the title of a manager, yet 75% of their work is non-managerial or similar to other employees, they may be considered a non-exempt employee. Ultimately, each circumstance is unique, and one must generally review each exempt employee on a case by case basis to know if the employee is properly classified.
With respect to meal and rest break periods, in California an employer must provide an unpaid thirty minute meal period to all non-exempt employees (the classification issue discussed above arises again) who work more than five hours in a given day. Also, you must provide two meal periods if the employee works more than ten hours. A paid ten minute break period must be given during every four hour increment of work performed by an employee. During these meal and rest periods, the employee must be relieved from all of their work duties. As a result, an employer should require that the meal and rest periods are taken away from an employees work area. For example, you should never let an employee take their breaks at their desk. It is too easy for them to claim later that they were actually working during their breaks. Failure to provide any meal or rest break requires the employer to pay one hour of additional compensation to the employee at their regular rate of pay for each break period missed. Over the last several years class action law suits have become very common against employers for violation of these laws, and the cost can be tremendous.
There is currently a case before the California Supreme Court that could affect the interpretation of the meal and rest period laws (Brinker Restaurant Corp v. Superior Court). There are differences amongst the lower courts in California as to whether or not an employer must “ensure” that their employees have their breaks or merely “provide” the opportunity to take the breaks. In Brinker, the court of appeal determined that employers were required to “provide” the time for such meal and break periods, but they were not required to “ensure” that they were taken. As the California Supreme Court has taken the ruling under review, the Brinker court’s ruling is essentially on hold and is difficult for any employer to rely upon at this stage. The lower courts have made various rulings on similar cases while waiting for the Supreme Court, and have ruled in both directions. Regardless, I think employers should play it safe and “ensure” that their employees take breaks and meal periods at this time until the final decision is made in Brinker. Otherwise, they are leaving themselves open to significant problems in the event the Brinker case is overturned.
Dispatches From The Front 