ACCA - San Diego September 4, 2014 Brown Bag Seminar You Have Exempt Employees But Can You Prove They Are Exempt In Court?
Overview: Similarities and Distinctions Between Federal and California Exemption Law Proving Exemptions at Trial Process of Elimination Use of Surveys Job Shadowing Unique Proof Issues In-house Counsel Perspective Best Practices
Exemptions: Key Similarities Like the FLSA, California law recognizes three basic white collar exemptions: Executive Administrative Professional Tacking Closely Related Work
Key Differences: White Collar Exemptions Salary test: twice the minimum wage Duties test: Employee must be primarily engaged in duties that meet the test (quantitative). Basically means 50.1% Employee must customarily exercise independent judgment and discretion
Key Differences: Salary Test Guaranteed salary must be at least 2x minimum wage Effective July 1, 2014, California s minimum wage increased to $9.00 per hour which means the minimum salary needs to be $720 per week, $3,120 per month, or $37,440 per year. Effective January 1, 2016, California s minimum wage increases to $10.00 per hour which means the minimum salary needs to be $800 per week, $3,466.67 per month or $41,600 per year. FLSA: must earn a minimum salary of $455.00 per week, or $1,972.00 per month for now
Key Differences: Primarily Engaged CA law provides a quantitative test (as opposed to federal qualitative test) An employee must spend more than 50% of his/her time on exempt duties Takes into account actual work, plus employer s realistic expectations of the job
Key Differences: Primarily Engaged Employees cannot attempt to defeat their exempt status by their own sub-standard performance or refusal to perform the exempt tasks the job requires Ramirez v. Yosemite Water Co., Inc., 20 Cal.4th 785, 802 (1999) ( an employee who is supposed to be engaged in sales activities during most of his working hours and falls below the 50% mark due to his own substandard performance should not thereby be able to evade a valid exemption )
Key Differences: Duties Test for Executive Exemption Federal Primary duty is managing the enterprise or department or subdivision thereof Customarily and regularly directs the work of two or more employees Authority to hire/fire California Duties include management of the enterprise or a department or subdivision thereof Customarily and regularly directs the work of two or more employees Authority to hire/fire Primarily engaged in exempt executive duties Customarily and regularly exercises discretion and independent judgment
Key Differences: Duties Test for Administrative Exemption Federal Primary duty is performance of office or non-manual work directly related to the management or general business operations Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance California Duties include performance of office or non-manual work directly related to management policies or general business operations Regularly and directly assists the proprietor or exempt employees Performs work under general supervision along specialized or technical lines requiring special training, experience or knowledge Primarily engaged in exempt administrative duties Customarily exercises independent judgment
Key Differences: Duties Test for Professional Exemption Federal Learned Professional Primary duty is performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction Creative Professional Primary duty is performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor California Work that is predominately intellectual and varied in character Primarily engaged in the performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized instruction or work that is original and creative in character in a recognized field of artistic endeavor Customarily and regularly exercises discretion and independent judgment
Proving Exemptions at Trial: Exemption is an affirmative defense Employer bears the burden of proof Proving the employee is primarily engaged in exempt activity is math Ways to Meet Burden Process of Elimination Admissions Job Analysis Surveys Job Shadowing Unique Proof Issues
Proving Exemptions at Trial: Process of Elimination Plaintiff only performed non-exempt work under certain conditions which were present less than 50% of the time Plaintiff only performed non-exempt work at the restaurant when she was understaffed and she had to fill in Plaintiff was only understaffed when staffing levels reached 5 guests to 1 employee. Levels were 4 or better the vast majority of the workweek
Proving Exemptions at Trial: Admissions at Deposition Task Area Status Plaintiff Customer Service Serving Customers Non-Exempt 30.0% Directing Customer Service and Dining Exempt 20.0% Food Preparation Preparing and Cooking Food Non-Exempt 5.3% Managing Food Preparation and Safety Exempt 9.8% Product and Supplies Stocking and Replenishing Non-Exempt 3.0% Ordering and Receiving Inventory Exempt 2.0% Restaurant Operations Managing Restaurant Performance Exempt 3.5% Planning and Scheduling Work Exempt 3.5% Controlling Cash and Security Exempt 3.0% Employee Relations Training and Coaching Exempt 7.5% Managing Human Resources Exempt 2.5% Restaurant Maintenance Cleaning and Maintaining Restaurant Non-Exempt 7.0% Overseeing Cleaning and Restaurant Maintenance Exempt 3.0% TOTAL EXEMPT TIME 54.8% TOTAL NON-EXEMPT TIME 45.2%
Proving Exemptions at Trial: Job Analysis Surveys Task Area Status Avg % Customer Service Serving Customers Non-Exempt 11.8% Directing Customer Service and Dining Exempt 18.9% Food Preparation Preparing and Cooking Food Non-Exempt 3.6% Managing Food Preparation and Safety Exempt 8.2% Product and Supplies Stocking and Replenishing Non-Exempt 3.2% Ordering and Receiving Inventory Exempt 7.0% Restaurant Operations Managing Restaurant Performance Exempt 12.1% Planning and Scheduling Work Exempt 5.8% Controlling Cash and Security Exempt 5.9% Employee Relations Training and Coaching Exempt 8.2% Managing Human Resources Exempt 4.2% Restaurant Maintenance Cleaning and Maintaining Restaurant Non-Exempt 3.9% Overseeing Cleaning and Restaurant Maintenance Exempt 7.3% TOTAL PERCENT EXEMPT 77.6% TOTAL PERCENT NON-EXEMPT 22.4%
Proving Exemptions at Trial: Job Shadowing
Proving Exemptions at Trial: Job Shadowing Task Start Task End Period Time Sub- Activity Allocated Time 6:03:10 6:03:20 0:00:10 0:00:10 Unlock door. 10 6:03:20 6:12:30 0:09:10 0:09:10 Talk to observer. 0 6:12:30 6:20:00 0:07:30 0:07:30 Check company email. 9 6:20:00 6:22:50 0:02:50 0:02:50 Review notes in ShiftNote from previous 9 shifts. 6:22:50 6:25:40 0:02:50 0:02:40 Review restaurant sales numbers from last night. 9 0:00:10 0:00:10 Concurrent Activity: Create daily sales goals for morning shift today. 9 6:25:40 6:28:40 0:03:00 0:03:00 Prepare transaction report and receipt 9 packet from yesterday to send to corporate. 6:28:40 6:30:20 0:01:40 0:01:40 Take personal break. 0 6:30:20 6:32:10 0:01:50 0:01:50 Check storage room [to see what needs to 4 be prepped]. 6:32:10 6:32:40 0:00:30 0:00:30 Turn on lights in restaurant. 12 6:32:40 6:34:00 0:01:20 0:01:20 Distribute prep list to kitchen stations. 4 Task Task Area
Proving Exemptions at Trial: Unique Proof Issues Multi-Tasking Evidence Heyen v. Safeway Previously ER could split multi-tasking time 50/50 exempt non-exempt. Now, if employee is engaged in exempt and nonexempt work at same time, 100% of that time has to be allocated as exempt or nonexempt depending on the primary purpose for which the employee undertook the activity.
In House Counsel Perspective: Surveys Costs Compensated time off work Expert fees Potential of educating workforce and creating additional claims Benefits Provides potential defense to existing and future litigation Provides feedback on job duties versus performance Helps with organizational decisions
In House Counsel Perspective: Job Shadowing Costs No compensated time off Plaintiffs who know they are being shadowed might try to create evidence Statistically reliable sampling might require shadowing numerous employees Benefits Provides potential defense to existing and future litigation Provides feedback on job duties versus performance Helps with organizational decisions Limited potential of educating workforce and creating additional claims
Best Practices: Video? Limited usefulness. Need proof of decisionmaking. Payroll Certifications? Limited usefulness. Administrative nightmare.
Best Practices: Effective staffing and scheduling Too much staff on hand is a waste of labor Too little leads to exemption issues Operations Focus Exempt employees must be focused on overall performance of company or unit Performance Focus Exempt employees must ensure everyone does his/her job well Accountability is key
Best Practices: Performance Management What you measure is what you ll get Grade performance of exempt tasks Compensation and Incentive Programs What you reward is what you ll get Compensate performance of exempt tasks Work Environment Managers should lead, not be one of the gang
Best Practices: Select Qualified Managers or Administrators Training Teach them the position requires exercise of discretion and independent judgment Provide them with the skills to exercise independent judgment and discretion Tools Provide them with the tools to exercise independent judgment and discretion
Best Practices: Train the Supervisors of Exempt Employees Micromanaging exempt employees can defeat exempt status Train supervisors that they must allow and encourage exercise of independent judgment discretion by exempt employees
ACCA - San Diego September 4, 2014 Brown Bag Seminar QUESTIONS?