NATIONAL STEEL AND SHIPBUILDING COMPANY v. Robert Godinez et al., Real Parties in Interest. (2006)

The Labor Code requires that an employer pay an employee the equivalent of one hour of pay if the employer fails to provide a meal or rest period as required by applicable orders of the Industrial Welfare Commission (IWC).  (Lab.Code, § 226.7, subd. (b), all further undesignated statutory references are to this code.)   In this case, the primary question presented is what statute of limitations applies to the payment, the one-year statute of limitations for an “action upon a statute for a penalty or forfeiture” (Code Civ. Proc., § 340, subd. (a)), or the three-year statute of limitations for “[a]n action upon a liability created by statute, other than a penalty or forfeiture” (Code Civ. Proc., § 338, subd. (a)).  The answer to this question turns on whether the payment is considered primarily a penalty against employers or a wage to employees.

We conclude that a payment under section 226.7 is an obligation created by statute, other than a penalty, subject to a three-year statute of limitations period (Code Civ. Proc., § 338, subd. (a)), and that this remedy will support a claim for restitution under Business and Professions Code section 17203.

FACTUAL AND PROCEDURAL BACKGROUND

Robert Godinez, Indalecio Parra and John Petersen (collectively plaintiffs) sued their employer, National Steel and Shipbuilding Company (NASSCO), in a putative class action alleging that within the last four years NASSCO violated the Labor Code and certain IWC wage orders by requiring them to work in excess of five hours per day without receiving a meal break of at least 30 minutes and not providing them with a 10-minute rest period every four hours. (§§ 226.7, subd. (a), 512, subd. (a);  Wage Order 1-2001 (Cal.Code Regs., tit. 8, § 11010, subds.   11(A) & 12(A)).)   Plaintiffs assert that these violations constitute unfair competition within the meaning of Business and Professions Code section 17200.   They seek:  (1) compensation of one hour's pay for each day of violation of the meal or rest period law (§ 226.7, subd. (b));  (2) restitution (Bus. & Prof.Code, § 17203);  (3) an injunction enjoining further violations of the meal or rest period laws;  and (4) attorney fees and costs.

NASSCO moved to strike any reference in the complaint to a time period more than one year prior to its filing on the ground that the “one additional hour of pay” required by section 226.7, subdivision (b) was a penalty subjecting plaintiffs to a one-year statute of limitations.  (Code Civ. Proc., § 340, subd. (a).)  It also sought to strike plaintiffs' claim for restitution on the ground the complaint did not support such a cause of action.  (Bus. & Prof.Code, § 17203.)   Plaintiffs opposed the motion, arguing that the “one additional hour of pay” was a wage, not a penalty, for which they could seek restitution up to four years before the filing of the complaint under the Business and Professions Code. (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 177-179, 96 Cal.Rptr.2d 518, 999 P.2d 706.)

 During the proceedings below, both parties requested judicial notice of the legislative and administrative history of section 226.7, and we have considered these documents.   We do not consider, however, the unpublished state trial court and federal court decisions and orders submitted by the real parties in interest.  (Cal. Rules of Court, rule 977(a), (b);  People v. Webster (1991) 54 Cal.3d 411, 428, fn. 4, 285 Cal.Rptr. 31, 814 P.2d 1273.)

The trial court concluded that section 226.7 created a wage and denied the motion to strike all reference to a time period more than one year prior to the filing of the complaint.   NASSCO sought writ review of the trial court's order, requesting (1) that the order be vacated and a new and different order be entered granting the motion and (2) an immediate stay of all proceedings.   We stayed the proceedings pending our review and issued an order to show cause why the relief sought should not be granted.

DISCUSSION

Issue Presented and Standard of Review

Section 226.7 provides:

“(a) No employer shall require any employee to work during any meal or rest period mandated by an applicable order of the [IWC].

“(b) If an employer fails to provide an employee a meal period or rest period in accordance with an applicable order of the [IWC], the employer shall pay the employee one additional hour of pay at the employee's regular rate of compensation for each work day that the meal or rest period is not provided.”

 The primary question presented is what statute of limitations applies to the payment referred to in the statute.   The answer to this question turns on whether the payment is primarily considered a penalty against employers or a wage to employees and therefore involves statutory interpretation, which presents a question of law subject to de novo review on appeal.  (Bialo v. Western Mut. Ins. Co. (2002) 95 Cal.App.4th 68, 76-77, 115 Cal.Rptr.2d 3.)   Our goal is to ascertain and carry out the Legislature's intent (Code Civ. Proc., § 1859), looking first to the words of the statute, giving them their usual and ordinary meaning.  (People v. Garcia (2002) 28 Cal.4th 1166, 1172, 124 Cal.Rptr.2d 464, 52 P.3d 648.)   If the language of the statute is susceptible to more than one reasonable construction, we can look to the legislative history to aid in ascertaining the legislative intent.   (Diamond Multimedia Systems, Inc. v. Superior Court (1999) 19 Cal.4th 1036, 1055, 80 Cal.Rptr.2d 828, 968 P.2d 539.)  “We are guided by the fundamental rule ‘that the objective sought to be achieved by a statute as well as the evil to be prevented is of prime consideration in its interpretation.’ ”  (People v. United National Life Ins. Co. (1967) 66 Cal.2d 577, 596, 58 Cal.Rptr. 599, 427 P.2d 199, quoting Rockcreek etc. Dist. v. County of Calaveras (1946) 29 Cal.2d 7, 9, 172 P.2d 863.)

Analysis

A. The Section 226.7 Payment Is Both a Penalty and a Wage

 “Wages” are defined as “all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation.” (§ 200, subd. (a).)  The term includes benefits to which an employee is entitled as a part of his or her compensation;  such as, money, room, board, clothing, vacation pay and sick pay.  (Department of Industrial Relations v. UI Video Stores, Inc. (1997) 55 Cal.App.4th 1084, 1091, 64 Cal.Rptr.2d 457.)   In contrast, a “penalty” is “one which an individual is allowed to recover against a wrong-doer, as a satisfaction for the wrong or injury suffered, and without reference to the actual damage[s] sustained, or one which is given to the individual and the state as a punishment for some act which is in the nature of a public wrong.”  (County of Los Angeles v. Ballerino (1893) 99 Cal. 593, 596, 32 P. 581 (Ballerino ).)   Stated differently, a “penalty” compels “a defendant to pay a plaintiff other than what is necessary to compensate him [or her] for a legal damage done [ ] by the former.”  (Miller v. Municipal Court (1943) 22 Cal.2d 818, 837, 142 P.2d 297.)

If we turn to the language of the statute, credible arguments exist for interpreting the payment as both a penalty and a wage.   If an employer requires an employee to work during a mandated meal or rest period, the “employer shall pay the employee one additional hour of pay at the employee's regular rate of compensation.” (§ 226.7, subd. (b).)  The payment is in the nature of a penalty because the language of the statute suggests that the payment does not apply if an employee voluntarily chooses to forego a meal or rest period.   Similarly, the payment is not related to the amount of time worked because an employee receives a full hour of pay for a missed 10 minute rest period or half-hour lunch period.   On the other hand, the requirement that the employer make the payment directly to the employee rather than a regulatory authority suggests that the payment is a wage.   Additionally, labeling the remedy as an additional hour of “pay” suggests a wage.  Section 226.7 is also part of the Labor Code's division 2 (Employment Regulation and Supervision), part 1 (Compensation), chapter 1 (Payment of Wages), article 1 (General Occupations).

 Thus, the payment appears to be a penalty against the employer in the form of a wage to the employee.   Because the payment required by the statute can reasonably be interpreted as both a penalty and a wage, and the Legislature did not address what limitations period applied, the statute is ambiguous and we may look to extrinsic sources, including the ostensible objects to be achieved by the statute and the legislative history.  (People v. Coronado (1995) 12 Cal.4th 145, 151, 48 Cal.Rptr.2d 77, 906 P.2d 1232.)

Before reviewing the legislative history of section 226.7, we pause to note that the Division of Labor Standards Enforcement of the Department of Industrial Relations (DLSE) recently issued a precedent decision interpreting the section 226.7 payment as a penalty.  (Hartwig v. Orchard Commercial, Inc. (2005) (Cal. Div. Labor Stds. Enforcement, May 11, 2005, No. 12-56901RB) (Hartwig );  Gov.Code, § 11425.60, subd. (b) [“An agency may designate as a precedent decision a ․ part of a decision that contains a significant legal or policy determination of general application that is likely to recur.”].) Additionally, a federal district court has characterized the payments under section 226.7 as restitutionary, equating them to the payment of overtime wages.  (Tomlinson v. Indymac Bank F.S.B. (C.D.Cal.2005) 359 F.Supp.2d 891, 896;  Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 299, 216 Cal.Rptr. 443, 702 P.2d 601 [federal court decisions interpreting California law are persuasive but not binding].)   More recently, Division One of the First District concluded that the section 226.7 payment was a penalty.  (Murphy v. Kenneth Cole Productions, Inc. (2005) 134 Cal.App.4th 728, 36 Cal.Rptr.3d 418, petition for review filed Jan. 11, 2006 (S14038).)

 As the DLSE aptly notes in its amicus brief, the issue of whether the payment under section 226.7 is a penalty or a wage has become highly politicized because of the potential financial exposure to employers based on the number of lawsuits and class actions pending in the state.   In an effort to clarify its interpretation of section 226.7, the DLSE revoked prior inconsistent attorney opinion letters and adopted Hartwig as a precedent decision.   Our job, however, is to ascertain and carry out the Legislature's intent.  (Code Civ. Proc., § 1859.)   Although the DLSE's construction of the statute is entitled to consideration and respect, it is not binding, and the judiciary is ultimately responsible for the interpretation of this statute.   (Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 7-8, 78 Cal.Rptr.2d 1, 960 P.2d 1031.)

The IWC is the state agency empowered to formulate wage orders governing employment in California and the DLSE is the state agency empowered to enforce California's labor laws, including IWC wage orders.  (Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 561, 59 Cal.Rptr.2d 186, 927 P.2d 296.)   Although the Legislature defunded the IWC effective July 1, 2004, its wage orders remain in effect.  (Huntington Memorial Hosp. v. Superior Court (2005) 131 Cal.App.4th 893, 902, fn. 2, 32 Cal.Rptr.3d 373.)

B. Legislative History of Section 226.7

IWC wage orders require meal and rest periods after specified hours of work and provide that employers who fail to provide a meal or rest period “shall pay the employee one (1) hour of pay at the employee's regular rate of compensation for each work day” that the meal or rest period is not provided.  (Cal.Code Regs., tit. 8, § 11010, subds.   11(A) & 12(A).)

Assembly Member Darrell Steinberg introduced Assembly Bill No. 2509 as a means of enforcing the existing IWC wage order prohibitions against requiring an employee to work during a meal or rest period by providing “penalties” to employers that violate the IWC wage orders and allowing employees to file a civil action or bring a complaint before the Labor Commissioner.  (Assem.  Com. on Labor and Employment, Analysis of Assem.   Bill No. 2509 (1999-2000 Reg. Sess.) Feb. 24, 2000, pp. 3, 5.) Supporters of the bill commented about the “large and growing” problem of employers who are chronic violators of wage and hour laws, including employers that worked their employees for long hours without rest breaks.  (Id. at p. 9.)

As introduced, Assembly Bill No. 2509 provided that employers could not require employees to work during any meal or rest period mandated by an IWC order and subjected employers to a $50 civil penalty for each violation and “[p]ayment to the aggrieved employee of an amount equal to twice his or her average hourly rate of compensation for the full length of the meal or rest periods during which the employee was required to perform any work.”  (Assem.  Bill No. 2509 (1999-2000 Reg. Sess.) Feb. 24, 2000.)   The bill also provided that “[a]n aggrieved employee could bring an administrative action before the Labor Commissioner or could commence a civil action for recovery of these amounts, and if the employee prevails in such a civil action, the employee would be entitled to recover attorney's fees.”  (Ibid.)

In August 2000, the Senate deleted the initial language describing a penalty and payment to an employee and “[p]lace[d] into [the] statute the existing provisions” of the IWC wage order regarding meal and rest periods.  (Sen. Rules Com., Off. of Sen. Floor Analyses, 3rd reading analysis of Assem.   Bill No. 2509 (1999-2000 Reg. Sess.) as amended Aug. 25, 2000, p. 4.) The Senate also deleted the language requiring that an employee aggrieved by a violation file a complaint under section 98 or a civil action.  (Sen. Rules Com., Off. of Sen. Floor Analyses, 3rd reading analysis of Assem.   Bill No. 2509 (1999-2000 Reg. Sess.) as amended Aug. 25, 2000, p. 4.)

The Assembly concurrence in the Senate amendments described the amendment as “[d]elet[ing] the provisions related to penalties for an employer who fails to provide a meal or rest period, and instead codify[ing] the lower penalty amounts adopted by the [IWC].” (Conc. in Sen. Amendments, analysis of Assem.   Bill No. 2509 (1999-2000 Reg. Sess.) as amended Aug. 25, 2000, p. 2.) Consistently, in a post-passage letter sent to the Governor, the author of the bill stated the bill codified the “IWC's penalty level” by imposing a “penalty” on employers that violate the IWC orders regarding meal and rest periods.   The letter further indicated that the bill, as originally introduced, “had higher penalties, but had been amended to conform to the IWC levels.”  (Ibid.;  In re Marriage of Bouquet (1976) 16 Cal.3d 583, 590, 128 Cal.Rptr. 427, 546 P.2d 1371 [a legislator's statement may be considered when it reiterates legislative discussion and events leading to adoption of proposed amendments, rather than merely expressing a personal opinion].)

Although the Senate struck certain words and inserted others into Assembly Bill No. 2509, in net effect, it simply lifted the language of the existing IWC orders regarding meal and rest periods and inserted that language into the bill.   Stated differently, the Senate did not remove the language regarding a penalty, leaving the language regarding payments;  rather, it completely rewrote the proposed language so that it matched existing IWC provisions.

The Senate amendments also eliminated the need for an employee to file an enforcement action and instead created an affirmative obligation on the employer to pay the employee the one hour's pay-“the employer shall pay the employee ․ for each work day ․” (§ 226.7, subd. (b), italics added.)   Thus, although section 226.7 penalizes an employer for requiring an employee to work through a mandated rest or meal period, the statute is self-executing in that an employee is immediately entitled to the section 226.7 payment, just like an employee is immediately entitled to payment for overtime.

 The self-executing nature of the payment suggests it is not a penalty because the right to a penalty does not accrue until it has been enforced.   (People v. Durbin (1966) 64 Cal.2d 474, 479, 50 Cal.Rptr. 657, 413 P.2d 433 [“No person has a vested right in an unenforced statutory penalty or forfeiture”];  Anderson v. Byrnes (1898) 122 Cal. 272, 274, 54 P. 821 [“no person has a vested right in an unenforced penalty”].)   Because the hour of pay under section 226.7 is owed when it is incurred, it is similar to earned wages, claims for which are payable under a court's restitutionary power.   (Cortez v. Purolator Air Filtration Products Co., supra, 23 Cal.4th at p. 176, 96 Cal.Rptr.2d 518, 999 P.2d 706 [Bus. & Prof.Code, § 17203 authorizes an order compelling a defendant to pay back wages as a restitutionary remedy];  see also Tomlinson v. Indymac Bank F.S.B., supra, 359 F.Supp.2d at p. 896 [finding that claims under § 226.7 are restitutionary].)

The lingering question is how the Legislature viewed these changes in terms of the applicable statute of limitations.   Unfortunately, the legislative history is bereft of any discussion of what statute of limitations period applies to the payment required by section 226.7, rendering it of limited value.

C. Harmonizing the Statutory Scheme

 Because the legislative history of section 226.7 is not particularly enlightening, we turn to the entire statutory scheme of which section 226.7 is part to ascertain the Legislature's intent.   In doing so, we cannot construe section 226.7 in isolation but must read it “with reference to the entire scheme of law of which it is part so that the whole may be harmonized and retain effectiveness.”  (Clean Air Constituency v. California State Air (1974) 11 Cal.3d 801, 814, 114 Cal.Rptr. 577, 523 P.2d 617.)

In 1999, the Legislature enacted Assembly Bill No. 60, the Eight-Hour-Day Restoration and Workplace Flexibility Act of 1999.  (Stats.1999, ch. 134, § 14.)   Among other things, Assembly Bill No. 60 restored the eight-hour workday (§ 510) and mandated that the IWC conduct public hearings and adopt consistent wage orders (§ 517, subd. (a)), including orders pertaining to meal and rest periods (§ 516).   Assembly Bill No. 60 also added a penalty provision to the Labor Code, enforceable by the Labor Commissioner, subjecting employers to civil penalties for any violation of an IWC wage order regulating hours and days of work. (§ 558;  Assem.   Com. on Appropriations, Assem.   Bill No. 60 (1999-2000 Reg. Sess.) as amended March 22, 1999 pp. 4-5.)   Section 558 requires employers to pay a civil penalty of $50 for initial violations, and $100 for subsequent violations, for each underpaid employee for each pay period for which the employee was underpaid and to pay the wages to the underpaid employee. (§ 558, subd. (a).)

The penalty provision of section 558 indicates that employers owe the civil penalty to “underpaid” employees. (§ 558, subd (a).)   In an interpretative memorandum of Assembly Bill No. 60, the DLSE stated that the civil penalties of section 558 apply to meal period violations, but only to the extent that an employee is actually “underpaid,” i.e., the violation must be coupled with a failure to pay the employee for the time worked during the unlawfully deprived meal period.  (DLSE Memorandum dated December 23, 1999 at pp. 19-20 at < http:// www.dir .ca.gov/dlse/AB6 0update.htm> [as of Dec. 19, 2005] see Addendum A.) Stated differently, if employers pay the required additional hour of pay on the payday for the pay period for which the meal and rest period violations took place, there would be no “underpayment” and thus, no civil penalty under section 558.

Effective March 1, 2000, the IWC issued “Interim Wage Order-2000” that implemented the changes in the law as a result of the Legislature's adoption of Assembly Bill No. 60.  (Summary of Interim Wage Order-2000 at [as of Dec. 19, 2005] see Addendum B.) The interim wage order essentially adopted the civil penalty provisions of section 558 for any violation of the interim wage order.   The IWC later promulgated Wage Order 1-2001 (effective Jan. 1, 2001, as amended), which included the one hour of pay requirement for meal and rest period violations and the penalty provision contained in the interim wage order.  (Cal.Code Regs., tit. 8, § 11010, subds. 11, 12 & 20.)

In turn, Assembly Bill No. 2509 sought to strengthen the enforcement of existing wage and hour standards contained in current statutes and wage orders.  (Assem.  Com. on Labor and Employment, Analysis of Assem.   Bill No. 2509 (1999-2000 Reg. Sess.) as introduced Feb. 24, 2000, p. 7.) In this regard, section 226.7, effective January 1, 2001, adopted the one hour of pay provision of Wage Order 1-2001 for meal and rest period violations.

Sections 558 and 226.7 complement each other.   Under section 226.7, employers must pay their employees the compensatory remedy of one hour of pay for meal and rest period violations.   If employers fail to do so on the payday for the pay period for which the meal and rest period violations took place, they will also be subject to the civil penalty of section 558.   This overall scheme suggests that the payment under section 226.7 is in the nature of a statutory remedy to employees because it is unlikely that the Legislature intended to establish two penalties on employers for meal and rest period violations.

The DLSE contends that section 558 does not apply to meal or rest period violations, citing the enrolled bill report for section 226.7. The enrolled bill report states, without explanation, that the penalties of section 558 are for the underpayment of wages, and not meal or rest period violations.   (Dept. of Industrial Relations, Enrolled Bill Rep. on Assem.   Bill No. 2509 (1999-2000 Reg. Sess.) Sep. 13, 2000, p. 9.) We reject this conclusion as it is not instructive, not reflected in the legislative history of section 226.7 and does not comport with the statutory scheme just described.  (Elsner v. Uveges (2004) 34 Cal.4th 915, 934, fn. 19, 22 Cal.Rptr.3d 530, 102 P.3d 915 [enrolled bill report prepared by DLSE was instructive on matters of legislative intent where it reflected the understanding of the Legislature as a whole].)

D. General Legal Principles and the Object of Section 226.7

 We assume “that the Legislature has in mind existing laws when it passes a statute.”  (Estate of McDill (1975) 14 Cal.3d 831, 837, 122 Cal.Rptr. 754, 537 P.2d 874.)   Existing law creates a one-year statute of limitations for an “action upon a statute for a penalty or forfeiture” (Code Civ. Proc., § 340, subd. (a)) and a three-year statute of limitations for “[a]n action upon a liability created by statute, other than a penalty or forfeiture.”  (Code Civ. Proc., § 338, subd. (a).)  Here, the Legislature could have, but did not, label the statutory payment of section 226.7 as a “penalty.”   Significantly, the Legislature was aware of how use of the word “penalty” impacts the applicable statute of limitations because in enacting section 203, which continues the unpaid wages of a discharged employee as a “penalty” for up to 30 days, it expressly provided that “[s]uit may be filed for these penalties at any time before the expiration of the statute of limitations on an action for the wages from which the penalties arise.” (§ 203.)

 We thus conclude that the payment of section 226.7 is an obligation created by statute, other than a penalty, governed by Code of Civil Procedure section 338, subdivision (a).  (Hensler v. City of Glendale (1994) 8 Cal.4th 1, 22-23, 32 Cal.Rptr.2d 244, 876 P.2d 1043 [the applicable statute of limitations depends on the nature of the right sued upon, not the label of the cause of action pleaded in the complaint].)   General legal principles and the object of section 226.7 support this conclusion.

 First, statutes governing conditions of employment are construed broadly in favor of protecting employees.  (Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 976, 985, 4 Cal.Rptr.2d 837, 824 P.2d 643.)   Applying this principle here suggests that the longer limitation period should apply.   Additionally, the general purposes underlying statutes of limitations do not warrant a one-year limitations period.   Statutes of limitation protect potential defendants from stale claims by affording them an opportunity to gather evidence while facts are still fresh.  (Davies v. Krasna (1975) 14 Cal.3d 502, 512, 121 Cal.Rptr. 705, 535 P.2d 1161.)   Because employers are required to keep all time records for a minimum of three years, they will have all documents necessary to mount their defense to plaintiffs' claims.  (Cal Code Regs, tit. 8, § 11010, subd.   7(A)(3) & (C).)

Section 226.7, subdivision (a) states that “[n]o employer shall require” an employee to work through a rest or meal period but, if the rest or meal periods are not provided, the employer shall pay the one-hour pay. (§ 226.7, subds. (a) & (b).)  Thus, the object of section 226.7 is to pay employees for additional work performed during mandated meal or rest periods and deter employers from requiring employees to work through these periods.   Construing this section in favor of employees, it provides a statutory measure of compensation for what would otherwise be uncompensated labor performed during a meal or rest period.   The fact that the Legislature tied the section 226.7 payment to the employee's regular rate of compensation also suggests that it considered the payment to be compensation for otherwise uncompensated work, compensation that is properly measured by the employee's regular pay rate. (§ 226.7, subd. (b).)  Construing the payment as a penalty illogically results in employers of lower-paid employees being “penalized” less than the employers of higher-paid employees for the exact same offense.

Interestingly, the IWC has characterized overtime payments to employees as both a premium and penalty pay.  (Industrial Welfare Com. v. Superior Court (1980) 27 Cal.3d 690, 713, 166 Cal.Rptr. 331, 613 P.2d 579 [containing IWC statement regarding overtime].)   Despite this, it has long been recognized that an action to recover overtime compensation is governed by the three-year statute of limitations period of Code of Civil Procedure section 338.   (Aubry v. Goldhor (1988) 201 Cal.App.3d 399, 404, 247 Cal.Rptr. 205.)

Use of the word “penalty” in the legislative history is not surprising because the payment is a deterrent device in the form of a wage to the employee.   Significantly, however, the Legislature deleted the word “penalty” from Assembly Bill No. 2509 and never linked its use in the legislative history to the one-year limitations period of Code of Civil Procedure section 340.   Moreover, employers have an affirmative obligation to make the payment or else the employee will be underpaid and the employer subject to a penalty under section 558, suggesting that the payment is remedial in nature.   It appears to us that use of the word “penalty” in the legislative history to describe the section 226.7 payment is simply a way of describing the effect of the payment on an employer, rather than mandating what statute of limitations should apply to the payment.

 We find that the use of the word “penalty” in discussing the section 226.7 payment is not controlling because the Legislature chose not to apply this label, and as NASSCO argues, whether or not the section 226.7 payment is a penalty turns on its function and operation, not on its label.   Here, the payment is clearly remedial to the employee and penal to the employer.  (Prudential Home Mortgage Co. v. Superior Court (1998) 66 Cal.App.4th 1236, 1243, 78 Cal.Rptr.2d 566 [same provision may be penal to the offender and remedial to the victim].)   Nonetheless, in the labor law arena, statutes must be construed in favor of the employee, militating that the payment should be subjected to the longer statute of limitations period.

E. Restitution Under the Business and Professions Code

 Plaintiffs' third cause of action seeks restitution under Business and Professions Code section 17203 for the unpaid one hour of pay.   Employees earn the additional hour of pay when they are denied a meal or rest period;  thus, the payments under section 226.7 are restitutionary and recoverable under California's Unfair Competition Law. (Tomlinson v. Indymac Bank F.S.B., supra, 359 F.Supp.2d at p. 896.)

F. Conclusion

Section 226.7 has the dual function of deterring employers from requiring their employees to work through mandated meal and rest periods and compensating employees required to work through these periods.   The Legislature could have, but did not, label the statutory payment of section 226.7 as a “penalty,” and the entire statutory scheme suggests that the payment under section 226.7 is primarily in the nature of a statutory remedy to employees.   Of course, if this is not what the Legislature intended, then it may amend the statute to clarify its intent.

DISPOSITION

The petition is denied, and the temporary stay of proceedings issued on August 8, 2005, is vacated.   Real Parties in Interest are entitled to costs in this writ proceeding.

I respectfully disagree with my colleagues.   I am persuaded by the reasoning of Murphy v. Kenneth Cole Productions, Inc. (2005) 134 Cal.App.4th 728, 750-756, 36 Cal.Rptr.3d 418, that Labor Code section 226.7 creates a penalty to which the one-year limitations period of Code of Civil Procedure section 340, subdivision (a), applies.

As I read section 226.7, subdivision (a), it unambiguously prohibits an employer from requiring an employee to work during a rest period, stating that “[n]o employer shall require ” such work from an employee.  (Italics added.)   “Payment imposed on the employer due to impermissible conduct is not an employee benefit given for labor performed, but is a sanction or punishment for failure to provide work accommodations such as adequate meal breaks.”   (Murphy, supra, 134 Cal.App.4th at p. 752, 36 Cal.Rptr.3d 418, italics added.)   Accordingly, I am unable to reach any conclusion other than that Labor Code section 226.7 reflects a penalty for statute of limitations purposes.

Indeed, my colleagues recognize that Labor Code section 226.7, subdivision (b), is a penalty, albeit in the form of a wage.   In my view, as long as the liability created by Labor Code section 226.7 represents a penalty, it is irrelevant whether that penalty takes the form of a wage.   Any liability constituting a penalty is unambiguously excepted from the three-year statute of limitations period of Code of Civil Procedure section 338, subdivision (a), which applies to “[a]n action upon a liability created by statute, other than a penalty or forfeiture.”  (Italics added.)   Because the liability created by Labor Code section 226.7 is a penalty, I would conclude that it is controlled by the one-year statute of limitations for an “action upon a statute for a penalty or forfeiture.”  (Code Civ. Proc., § 340, subd. (a).)

[ADDENDUM A]

MEMORANDUM

Date  December 23, 1999

From:  Miles E. Locker

Chief Counsel for the Labor Commissioner

Marcy V. Saunders

State Labor Commissioner

To:  All DLSE Professional Staff

Andrew Baron, IWC Executive Secretary

Subject:  Understanding AB 60:  An In Depth Look at the Provisions of the “Eight Hour Day Restoration and Workplace Flexibility Act of 1999”

This Memo was drafted prior to the IWC's adoption of the Interim Wage Order, and as such, this Memo does not purport to interpret the Interim Wage Order.   To the extent that any provisions of the Interim Wage Order may be inconsistent with this Memo, the Wage Order provisions would prevail.

AB 60, which was enacted by the Legislature and signed by Governor Davis earlier this year, will take effect on January 1, 2000.   It is therefore critically important that all DLSE professional staff take some time to learn about the provisions of this law, and to understand some of the questions that will arise in its interpretation and enforcement.   This memo will summarize each section of the bill, with a focus on whether and how it changes existing law.   We will also discuss commonly asked questions about AB 60, and by summarizing from recently issued or pending opinion letters, provide the answers to these questions.

AB 60 ---- An Introduction to the Substantive Provisions

The Legislature named AB 60 the “Eight Hour Day Restoration and Workplace Flexibility Act of 1999.   That name tells us the two primary purposes behind the legislation --- first, to restore daily overtime in California;  that is, to bring back the general requirement for overtime pay after eight hours of work in a day, a requirement that the Industrial Welfare Commission (“IWC”) had eliminated from Wage Orders 1 (manufacturing industry), 4 (professional, technical, clerical, and mechanical occupations), 5 (public housekeeping industry), 7 (mercantile industry), and 9 (transportation industry), with the adoption of the 1998 wage orders.   Section 21 of AB 60 provides that these 1998 wage orders (1-98, 4-98, 5-98, 7-98, and 9-98) shall be null and void;  and that in their place, the pre-1998 wage orders (1-89, 4-89 as amended in 1993, 5-89 as amended in 1993, 7-80, and 9-90, are reinstated from January 1, 2000 until no later than July 1, 2000, at which point the IWC is required, pursuant to section 11 of the bill (which adds section 517 to the Labor Code) to adopt new wage orders.

It is very important to understand, however, that although only 5 of the 15 IWC wage orders that are currently in effect will become null and void on January 1, 2000, AB 60 as a whole applies to all California workers except for those who are expressly exempted by the bill itself, or those who were expressly exempted from a pre-1998 wage order.Section 9 of AB 60 adds section 515 to the Labor Code, which provides, at subsection (b)(2), that except for AB 60's new test for the administrative, executive and professional exemption found at section 515(a), “nothing in this section requires [the IWC] to alter any exemption from provisions regulating hours of work that was contained in any valid wage order in effect in 1997,” and that “except as otherwise provided in [AB 60], the [IWC] may review, retain or eliminate any exemption from provisions regulating hours of work that was contained in any valid wage order in effect in 1997.”

With these general principles in mind, we can answer the most commonly asked questions about AB 60 coverage. 13 of the pre-1998 wage orders expressly exempt public employees from their coverage.   These public employees, who would otherwise be covered by a wage order but for the exemption “contained in” the wage order, are therefore exempt from AB 60.   Likewise, truck drivers whose hours of service are regulated by the United States Department of Transportation (under 49 C.F.R. § 395.1, et seq.) or by the California Highway Patrol or the State Public Utilities Commission (under 13 C.C.R. § 1200, et seq.) are expressly exempt from the overtime provisions of the pre-1998 IWC orders.   These workers are therefore exempted from the overtime provisions of AB 60.   On the other hand, workers who were not expressly exempted from any pre-1998 wage order, such as on-site construction, drilling, mining and logging employees, are covered by AB 60.   We should note, however, that Labor Code § 515(b)(1) provides that until January 1, 2005, the IWC may establish additional exemptions from the overtime provisions of AB 60.   Thus, employees engaged in on-site construction, drilling, mining and logging will be covered by AB 60 unless and until the IWC chooses to expressly exempt any of them from its provisions.

The statutory provisions of AB 60, or any other state law, will prevail over any inconsistent provision in the pre-1998 wage orders.   For example, the current $5.75 an hour state minimum wage, which was established by the electorate with the passage of the Living Wage Act of 1996, now codified at Labor Code section 1182.11, prevails over the lower minimum wage rates contained in the pre-1998 wage orders.   Likewise, AB 60's salary basis test, which requires a monthly salary equivalent of at least twice the minimum wage, currently $1,993.33 per month, as a prerequisite for the administrative, executive and professional exemptions from overtime, prevails over the remuneration test (and lower monthly amounts) for the administrative and executive exemptions in the pre-1998 wage orders.   Therefore, starting on January 1, 2000, employers must comply with the pre-1998 wage orders, to the extent they are not inconsistent with AB 60 or any other controlling statutes, in which case the requirements of the statute will apply.

The second important purpose behind AB 60 is the intent to provide more options for work schedule flexibility than had been available in the pre-1998 wage orders.   AB 60 maintains, with some changes, two of the mechanisms under the pre-1998 wage orders which permitted work schedules of more than eight hours per day without payment of daily overtime--namely, the provisions for secret ballot elections to implement an “alternative workweek schedule,” and the collective bargaining agreement opt-out provision.   In addition to these mechanisms, there are two new provisions in AB 60 that permit individual employees to work more than eight hours in a day (but not more than the alternative number of hours-either ten or eleven-permitted by the statute), at the employee's request and under clearly specified conditions, without payment of overtime.   The first of these new provisions allows for individual “make-up time” under which an employee can take time off for personal reasons and during the same workweek, make up that time by working up to eleven hours in a day without the payment of overtime.   The second of these new provisions allows individual employees who were working on July 1, 1999 under a schedule that provided for up to 10 hours in a day to continue working this schedule without payment of daily overtime, even if this schedule was not established by an alternative workweek election.   We will return to these flexible work schedule arrangements later in this memo.   For now, we will simply note that although AB 60 allows for increased flexibility in work schedules, the statute imposes limits on the total hours that can be worked in a day under most flexible arrangements, and sets out strict procedures that must be followed in order to work more than eight hours in a day without the payment of daily overtime.

Finally, before embarking on a detailed review of AB 60, we should note that for DLSE, in its function as an enforcement agency, perhaps the most important change brought about by this new law is creation of a new method for enforcing overtime obligations.   Under section 14 of the bill, section 558 is added to the Labor Code, under which the DLSE may issue a civil penalty citation to an employer that violates the provisions of AB 60 or any provision regulating hours and days of work in any IWC order.   These penalties are set at the amount of $50 for an initial violation (or $100 for any subsequent violation) per underpaid employee for each pay period in which the employee was underpaid.   In addition, the civil penalty citation may include the amount owed to employees for underpaid overtime wages.

A Section by Section Look at AB 60

Definitions:  Section 3 of AB 60 adds section 500 to the Labor Code, defining certain words that are used in the statute.   The word “workday” is defined as “any consecutive 24 hour period commencing at the same time each calendar day.”   The word “workweek” is defined as “any seven consecutive days, starting with the same calendar day each week,” and as “a fixed and regularly recurring period of 168 hours” made up of “seven consecutive 24-hour periods.”   Finally, the term “alternative workweek schedule” is defined as “any regularly scheduled workweek requiring an employee to work more than eight hours in a 24-hour period.”   These definitions are unchanged from the pre-1998 wage orders.   An employer may designate the period of the workday and the workweek.   Absent pre-designation by the employer, DLSE will treat each workday as starting at midnight, and each workweek as starting at midnight on Sunday, so that Sunday is the first day of the workweek and Saturday the last.

The Basic Overtime Law:  Section 4 of AB 60 amends Labor Code § 510, to set out California's new basic overtime law.   First, it requires overtime compensation at the rate of no less than one and one-half the employee's regular rate of pay for all hours worked in excess of eight in one workday, and for all hours worked in excess of 40 in one workweek, and for “the first eight hours worked on the seventh day of work in any one workweek”.   Second, it requires overtime compensation at the rate of double the employee's regular rate of pay for all hours worked in excess of 12 hours in one day, and “for any work in excess of eight hours on any seventh day of a workweek.”

This basic overtime law is the heart of AB 60.   It restores daily overtime, and takes the basic overtime provisions found in almost all of the pre-1998 wage orders-- time and a half for all hours worked in a workday in excess of 8 and up to 12;  double time for all hours worked in a workday in excess of 12;  time and a half for all hours worked in excess of 40 in a workweek;  and seventh day premium pay--and enshrines these provisions as statutory requirements.

We have received many inquiries concerning the provision for seventh day premium pay.   The time and a half provision reads slightly differently than the double time provision:  time and a half for “the first eight hours worked on the seventh day of work in any one workweek,” and double time for “any work in excess of eight hours on any seventh day of a workweek.”   This raises the question whether AB 60 requires double time for any work performed in excess of eight hours on the seventh day of the workweek, even if the employee has not worked all seven days of that workweek.   We do not believe this would be a logical reading of the statute;  rather, both the time and a half and double time provisions for seventh day premium pay must be harmonized to require that the employee work all seven days of the workweek in order to qualify for this type of premium pay.   The purpose of seventh day premium pay is to provide extra compensation to workers who are denied the opportunity to have a day off during the workweek;  not to reward someone who may only be scheduled to work one day a week for having fortuitously been scheduled to work on what is the seventh day of the employer's workweek.   This reading of AB 60 is consistent with the provisions for seventh day premium pay contained in the pre-1998 wage orders, and we are unable to discern any intent on the part of the Legislature to modify those provisions.

Example:  An employer has no pre-designated workweek.   An employee of that employer works the following schedule:  Sunday-off;  Monday-off;  Tuesday-8 hours;  Wednesday-8 hours;  Thursday-8 hours;  Friday-8 hours;  Saturday-8 hours;  Sunday-8 hours;  Monday-8 hours;  Tuesday-8 hours;  Wednesday-8 hours;  Thursday-8 hours;  Friday-off;  Saturday-off.   Is the employee entitled to any overtime pay or seventh day premium pay?   Answer-NO.   There is no daily overtime, because the employee never worked more than eight hours in a day.   There is no weekly overtime, because the employee did not work more than 40 hours during each of the two workweeks (running from Sunday to Saturday).   And even though the employee worked ten days in a row, there is no seventh day premium pay, because the employee did not work seven consecutive days in any one workweek.

The statute also provides that “nothing in this section requires an employer to combine more than one rate of overtime compensation in order to calculate the amount to be paid to an employee for any hour of overtime work.”   This is consistent with DLSE's enforcement of the pre-1998 wage orders.   It simply means that there is no “pyramiding” of separate forms of overtime pay for the same hours worked.   Once an hour is counted as an overtime hour under some form of overtime, it cannot be counted as an hour worked for the purpose of another form of overtime.   When an employee works ten hours in one day, the two daily overtime hours cannot also be counted as hours worked for the purpose of weekly overtime.

Example:  An employee works 12 hours on Monday, Tuesday, Wednesday, and Thursday.   How many non-overtime and overtime hours did the employee work that week?   Answer-The employee is credited with 4 hours of daily overtime each day worked, for a total of 16 daily overtime hours, and these daily overtime hours cannot be counted for the purpose of determining when to start paying time and a half for hours worked in excess of 40 in a week.   Because pyramiding is not allowed, there are no weekly overtime hours, even though the employee worked 48 total hours during the workweek.   Only 32 of these hours were regular, non-daily overtime hours, and they are the only hours that count towards weekly overtime computations.

Labor Code § 510 provides for certain exceptions from the basic overtime law.   The overtime requirements of section 510 do not apply to an employee working pursuant to:

1. an alternative workweek schedule adopted pursuant to Labor Code § 511, discussed below, or

2. an alternative workweek schedule adopted by a collective bargaining agreement pursuant to Labor Code § 514, discussed below, or

3. an alternative workweek schedule for any person employed in an agricultural occupation, as defined in IWC Order 14.  (Section 9 of AB 60 amends section 554 of the Labor Code to exclude persons employed in agricultural occupations from all of AB 60, except for section 558, the section that sets out civil penalties for violations of the overtime provisions contained in AB 60 or in any IWC order.   Thus, the basic overtime law, now found at Labor Code § 510, does not apply to workers covered by IWC Order 14.   However, an agricultural employer that violates the special overtime provisions of Order 14 will be subject to a penalty citation just like any other employer.)

Finally, section 510 retains the existing provision regarding “ridesharing,” which states that time spent commuting to and from the first place at which an employee's presence is required by the employer shall not be considered to be part of a day's work, when the employee commutes in a vehicle that is owned, leased or subsidized by the employer, and is used for the purpose of ridesharing.   Of course, once the employee reaches the first place at which his or her presence is required by the employer, all time spent subject to the control of the employer (whether or not the employee is then engaged in physical or mental labor), and all time during which the employee is suffered or permitted to work, must count as hours worked under the various IWC orders.

Non-Collectively Bargained Alternative Workweek Schedules:  Section 5 of AB 60 adds section 511 to the Labor Code, which permits certain non-collectively bargained alternative workweek schedules.   Under subsection (a), an employer may propose a “regularly scheduled alternative workweek” authorizing work by the affected employees “for no longer than 10 hours per day within a 40-hour workweek” without payment of overtime compensation.   The proposed “regularly scheduled alternative workweek” may be “a single work schedule that would become the standard schedule” for all of the workers in the work unit, or “a menu of work schedule options, from which each employee in the unit would be entitled to choose.”

Whether it is the only work schedule for an entire work unit or one of several options on a menu available to the workers in the unit, the “regularly scheduled alternative workweek” must provide for specified workdays and specified work hours, and these workdays and work hours must be fixed and regularly recurring.

Adoption of an alternative workweek schedule under section 511(a) requires a secret ballot election with approval by at least two-thirds of the affected employees.   We have received many inquiries concerning the procedures to be followed in holding such an election.   Section 11 of AB 60 adds section 517 to the Labor Code, which requires the IWC, no later than July 1, 2000, to adopt wage orders which must include procedures for conducting elections to establish or repeal alternative workweek schedules, procedures for implementing such alternative schedules, the procedures for petitioning to repeal an alternative workweek schedule, the conditions under which an employer can unilaterally repeal such a schedule, the contents of any required notices or disclosures to employees, and the factors in designating a work unit for purposes of an election.   Until such new wage orders are adopted by the IWC, employers must comply with the procedures dealing with alternative workweek elections that are found in the applicable pre-1998 IWC wage order, to the extent that those procedures are not inconsistent with AB 60.

Each worker eligible to vote in an election must be informed, prior to the election, of the precise work schedule-that is, the precise workdays and work hours-that he or she will be assigned to work (or, in the case of an election to establish a “menu of work schedule options”, allowed to choose from) if the alternative work schedule is adopted.   We have been asked whether an employer can establish a menu of work schedule options through an election, and then, if too many or too few workers choose to work one of the alternative schedules, assign workers to work schedules on some basis other than the workers' choice.   The answer to this is no, as the statute clearly provides that “each employee in the unit would be entitled to choose” among the various work schedule options on the “menu.”   If the employer's business needs preclude allowing its employees to freely choose among work schedule options, the employer should not propose a “menu of work schedule options”.   Instead, the employer may be able to propose more than one alternative work schedule by dividing the workforce into separate work units, and proposing a different alternative work schedule for each unit, so that each worker knows exactly what schedule he or she is voting for.

A “regularly scheduled alternative workweek” permitted by section 511(a) cannot provide for regularly scheduled workdays in excess of 10 hours or regularly scheduled workweeks in excess of 40 hours.   Thus, regularly scheduled workdays for longer than 10 hours (except within the health care industry, which is discussed below) are not permitted under a non-collectively bargained alternative workweek schedule, and if an employer whose employees are working pursuant to an alternative workweek schedule regularly scheduled workdays in excess of 10 hours, DLSE will conclude that these employees are not working an alternative workweek schedule permitted under section 511(a), and thus, the employer will be required to pay overtime compensation for all hours worked in excess of eight in a day or 40 in a week, as required by section 510.

Example:  An employer covered by Wage Order 7, whose employees have voted to adopt a 4/10 alternative workweek schedule (4 workdays a week, 10 hours per workday, for a total of 40 hours worked each workweek) pursuant to section 511(a), seeks to have its employees regularly work 12 hours each workday, and asks whether it can do this by paying two hours overtime, at time and a half, for the extra two hours each workday.   The answer is NO. A regularly scheduled 12 hour workday is not permitted under section 511(a), so this is not a valid regularly scheduled alternative workweek.   As such, section 510 will apply to require time and a half for all hours worked in excess of eight in a workday.   The employer must pay time and a half for 4 overtime hours each workday.

However, it is expected that there will be occasions, not regularly recurring, when an employee working under an alternative workweek schedule adopted pursuant to section 511 will be required to work extra hours beyond those that are regularly scheduled.   These occasions are addressed by subsection (b) of section 511, which provides that an employee working under an alternative workweek schedule adopted pursuant to subsection (a) shall be paid overtime compensation at the rate of no less than one and one-half times the employee's regular rate of pay for any work in excess of the regularly scheduled hours established by the alternative workweek agreement and for all hours worked in excess of 40 per week, and at the rate of no less than double the employee's regular rate of pay for all hours worked in excess of 12 hours per day and for any work in excess of 8 hours on days worked other than workdays that are regularly scheduled under the alternative workweek.   The same prohibition of “pyramiding” different types of overtime pay, found at section 510, is contained in section 511.

Example:  A secret ballot election results in the adoption of an alternative workweek schedule under which the affected workers are to work four ten hour days (Monday-Thursday), for a total of 40 hours work each workweek.   No overtime compensation is required when the employees work the hours that are authorized by this alternative workweek schedule.   On occasion, the employer assigns extra work to these employees.   This extra work is not assigned on a regular or recurring basis.   One workweek, an employee working under this alternative workweek schedule works the following hours:  Monday-10 hours, Tuesday-12 hours, Wednesday-14 hours, Thursday-10 hours, Friday-10 hours, Saturday-off, Sunday-off.   There is no overtime for Monday or Thursday (since the employee did not work any extra hours, outside his or her regularly scheduled hours, on those days);  the extra two hours worked on Tuesday must be paid at time and a half;  the extra four hours worked on Wednesday are paid at time and a half for the first two hours and at double time for the next two hours (since those final two hours were beyond 12 hours in a day);  the extra 10 hours worked on Friday must be paid at time and a half for the first eight hours (since those hours were not regularly scheduled, as Friday is not a regularly scheduled workday) and at double time for the final two hours (since these two hours exceeded eight hours on a non-regularly scheduled workday).

We have been asked whether AB 60 permits alternative workweek schedules of less than 40 hours per week.  Section 511(a) permits the adoption of a regularly scheduled alternative workweek “that authorizes work by the affected employees for no longer than 10 hours per day within a 40 hour workweek.”   The word “within” means any workweek of no more than 40 hours, and would include workweeks of less than 40 hours.   However, paragraph 3(B) of Order 1-89 (manufacturing) contains a unique provision, not found in any other wage order, that requires an alternative work schedule to provide for “not more than ten hours per day within a workweek of not less than 40 hours.”   Thus, employers covered by Order 1-89 are prohibited from establishing an alternative schedule of less than 40 hours per workweek.   All other employers, under AB 60, can establish alternative schedules that provide for up to 40 hours in a workweek.   The IWC, of course, may consider amending the language in Order 1 to conform to the more liberal provisions of the statute.

We have received many inquiries as to whether AB 60 prohibits the adoption or retention of a so-called “9/80” alternative work schedule that does not provide for the payment of overtime.   Under a 9/80 schedule, employees will work 9 hours a day from Monday through Thursday, 8 hours on Friday, followed by a week of 9 hours worked each day on Monday through Thursday, and no hours worked on Friday.   If the employer has not pre-designated a workday and workweek, the standard midnight to midnight workday (based on the calendar day) used by DLSE for enforcement purposes will result in 44 hours worked the first workweek of this schedule, followed by 36 hours worked the second workweek.   And since a regularly scheduled alternative workweek adopted by a secret ballot election cannot provide for more than 40 hours regularly scheduled within a workweek, the fact that every other workweek is regularly scheduled to exceed 40 hours would defeat the alternative workweek, and mandate payment of overtime for all hours worked in excess of 8 in a day or 40 in a week.   But by predesignating the workday to run from noon to noon, and by predesignating the workweek to run from Friday noon to next Friday at noon, the employer can establish a 9/80 schedule that does not exceed 40 hours in a workweek, in that the eight hours worked every other Friday are split in half, with the 4 hours worked before noon falling into the first workweek, and the 4 Friday hours worked after noon falling into the second workweek.

Of course, as with any other alternative workweek schedule under section 511, the 9/80 schedule cannot be unilaterally imposed by the employer but must be (or have been) adopted by the requisite two-thirds vote in a secret ballot election to allow for this schedule without the payment of daily overtime.

Prohibited Reduction of Regular Rate of Pay:  Subsection (c) of section 511 provides that “an employer shall not reduce an employee's regular rate of hourly pay as a result of the adoption, repeal or nullification of an alternative workweek schedule.”   This is a new protection, that never before existed in the Labor Code or any IWC order.   This prohibition only applies to reductions in the regular rate of pay that are implemented on or after January 1, 2000;  it does not apply to any reduction implemented prior to January 1, 2000.   The prohibition applies to repeals resulting either from an election or from an employer's unilateral decision, and to the nullification of any alternative workweek schedule by operation of AB 60.   The prohibition would be enforceable by filing an individual wage claim or a civil action to recover unpaid wages owed to a worker or group of workers based on the wage rates that were in effect prior to the unlawful reduction, and through injunctive relief.

Reasonable Accommodation:  Under subsection (d), an employer must make a reasonable effort to find a work schedule of no more than eight hours in a workday to accommodate any employee who was eligible to vote in the election that established the alternative workweek schedule, if such employee is unable to work the hours established by the election.   Employers do not have a duty to make such an effort on behalf of any employee who is hired after the election was held, except for a duty to explore any available alternative means of accommodating the religious beliefs of those employees whose religious observances conflict with an adopted alternative workweek schedule.   However, the statute permits the employer to provide a work schedule of no more than eight hours in a workday to any employee who is hired after the adoption of an alternative workweek schedule if that employee is unable to work the alternative schedule.

Reporting the Results of the Election:  Subsection (e) requires the employer to report the results of any such election (regardless of the outcome of the election) to the Division of Labor Statistics and Research (DLSR) within 30 days after the results are final.   AB 60 does not indicate whether the failure to comply with this reporting requirement could invalidate the result of the election.   We would expect the IWC to address this issue in its post-AB 60 regulations.   Any employer covered by reinstated Order 1-89 (manufacturing industry) is subject to an additional requirement, unique to that Order, that no agreement for an alternative workweek shall be valid until it is filed with DLSE. Thus, employers under Order 1 must report election results to both DLSR and DLSE, and such employers cannot implement an alternative workweek schedule without first reporting the election results to DLSE.

Presently Existing Non-Collectively Bargained Alternative Work Schedules:

Subsection (f) of section 511 provides that any presently existing alternative workweek schedule that was adopted pursuant to IWC Wage Orders 1, 4, 5, 7, or 9 shall be null and void, except for an alternative workweek that meets all of the following conditions:

1. it provides for no more than 10 hours of work in a workday (except for 12 hour workdays that are allowed in the health care industry, as specified in subsection (g), discussed below).

2. it was adopted by a two-thirds vote of the affected employees in a secret ballot election.

3. the election was held “pursuant to wage orders of the Industrial Welfare Commission in effect prior to 1998.

AB 60 thus puts an end to any alternative workweek schedules that were unilaterally established by employers pursuant to the 1998 wage orders, except for certain voluntary arrangements as specified in subsection (h) of section 511, discussed below.   Alternative workweek schedules that were adopted under wage orders that were not amended in 1998 (those that left daily overtime undisturbed) should meet the prerequisites for a regularly scheduled alternative workweek under AB 60, so they are not nullified by operation of statute.   These prerequisites are a maximum of ten hours work in a workday, a maximum of 40 hours in a workweek, adoption by a secret ballot election with a 2/3 vote of approval by the affected employees, with the election conducted pursuant to the procedures specified in the applicable wage order.

We have received many inquiries from employers that unilaterally adopted an alternative workweek under the 1998 wage orders, and that now wish to establish alternative workweek schedules that will not be nullified upon the effective date of AB 60.   Of course, those employers could wait until January 1, 2000, to propose alternative workweek schedules that may then be adopted by a two-thirds vote in secret ballot elections conducted pursuant to the procedures specified in the applicable reinstated pre-1998 wage order.   But many employers would like to establish a “nullification-proof” alternative workweek schedule in advance of January 1, 2000, so as to allow for a seamless transition.   These employers have focused on the requirement that the election have been held “pursuant to wage orders ․ that were in effect prior to 1998,” and have asked whether this means that to be valid and not subject to nullification, the election must:  (1) have been held or be held on a date when the applicable pre-1998 wage order was or will be in effect (that is, prior to January 1, 1998, or after January 1, 2000), or (2) have been held or be held at any time until the IWC adopts the post-AB 60 wage orders, including the period until December 31, 1999 while the 1998 wage orders remain in effect, as long as the employer complied with the election procedures (including requirements for employee notification, etc.) contained in the applicable pre-1998 wage order.   We believe that the intent of AB 60 is best effectuated by construing this ambiguous provision in accordance with the latter interpretation, so as to allow employers who are presently subject to a 1998 wage order to conduct an election by following all of the procedures provided in the applicable pre-1998 wage order.

Finally, turning to those alternative workweek schedules that will not be nullified by operation of AB 60 on January 1, 2000, subsection (f) provides that “any type of alternative workweek schedule that is authorized by this code and that was in effect on January 1, 2000, may be repealed by the affected employees.”   Procedures for repeal will be contained in the IWC's post-AB 60 wage orders.   Until those orders are adopted, procedures for repeal are governed by the applicable pre-1998 wage order.   Under long-standing DLSE enforcement policy, an employer that wants to terminate an alternative workweek schedule can do so unilaterally, without holding a repeal election, after providing reasonable advance notice to its employees.   If the IWC wishes to prohibit such unilateral repeals, it may do so through its post-AB 60 regulations.

Two Important Exceptions to Subsection (f) of Labor Code § 511:

- The first exception to subsection (f) is found at subsection(g), which deals with the health care industry.   It provides that an alternative workweek schedule in the health care industry adopted by a two-thirds vote of affected employees in a secret ballot election pursuant to Wage Order 4-89 as amended in 1993, or Wage Order 5-89 as amended in 1993, that provided for workdays exceeding 10 hours but not exceeding 12 hours in a day without the payment of overtime compensation, shall be valid until July 1, 2000.   Of course, if the alternative workweek schedule adopted pursuant to such an election provided for a workday that does not exceed 10 hours, it would meet the criteria set out in subsection (f), and it would therefore remain valid indefinitely.

Several health industry employers have asked whether there is any possibility, under AB 60, for extending alternative workweek schedules that provide for 12 hour workdays past July 1, 2000.   At present, it would appear that any regularly scheduled non-collectively bargained alternative workweek in the health care industry that provides for workdays that exceed 10 hours will be nullified by operation of the statute following July 1, 2000;  and unless the affected employees adopt an alternative workweek schedule that comports with AB 60's limits and any provisions that may be adopted by the IWC, the basic overtime requirements of section 510 will apply.

- The second exception to subsection (f) of Labor Code § 511 is found at subsection (h), which permits an individual employee to continue to work an alternative workweek schedule without the payment of daily overtime compensation, even if the schedule was established by the employer unilaterally, without an election, under the 1998 wage orders, if all of the following conditions exist:

1. the employee was employed on July 1, 1999, and

2. the employee was then voluntarily working an alternative workweek schedule, and

3. this schedule did not provide for work in excess of 10 hours of work in a workday, and

4. this employee makes a written request to the employer to continue working this schedule, and

5. the employer approves the written request.

Employees hired after July 1, 1999 will not be eligible for this non-collectively bargained, non-secret ballot approved, individual alternative workweek schedule.   If the employee, as of July 1, 1999, was working an alternative workweek with regularly scheduled workdays of more than 10 hours, this option is unavailable, even if the employee and employer are now willing to limit the workday to 10 hours.   A written request to continue working this individual alternative workweek without payment of daily overtime will only be effective as to work performed after the date of the request;  the employer must pay the applicable daily overtime compensation for any work performed prior to the date that the written request is executed and approved.   Finally, because this exception allows for individual voluntary agreements, DLSE has determined that the employee can, at anytime, revoke his or her written request to continue working this sort of alternative workweek schedule, in which case the employer must henceforth pay daily overtime in accordance with the provisions of AB 60.

Individual “Make-Up Time” and the Flexible Workweek:  The most significant new aspect of work time flexibility is found at section 7 of AB 60, which adds section 513 to the Labor Code, to provide a mechanism for individual employees to take time off to attend to their personal needs, and to then make up that time within the same workweek, without the payment of overtime compensation except for hours worked in excess of 11 in one workday or 40 in one workweek.   The employee benefits by not losing any pay, or incurring any loss of sick or vacation time, for the time off;  and the employer benefits by not having to pay daily overtime to the employee who is working more than eight hours (but not more than 11 hours) in a day in order to make up the missed time.

Make-up time will not count in computing the total number of hours worked in a day for the purposes of the overtime requirements specified in section 510 (the basic overtime law) and section 511 (the provisions for regularly scheduled alternative workweeks) only if the make-up hours are worked in the same workweek in which the work time was lost.   Also, the employer will not have to pay overtime compensation for the make-up work only to the extent that the employee performing the make-up work does not exceed 11 hours of work in a workday or 40 hours of work in a workweek.   In other words, when an employee works more than eight hours in a workday because the employee is performing make-up work that day, any work performed in excess of 11 hours that day must be paid at the appropriate overtime rate.   Likewise, any work performed in excess of 40 hours during the workweek must be paid as overtime.

Under section 513, make up time is permitted if the employer approves the employee's signed written request to make up time that has been or that will be lost as a result of the employee's personal needs.   The employer may choose to grant or deny any request to work make up time.   A separate written request is needed each time the employee asks to make up work time pursuant to this section.   The request need not be made prior to the employee taking off the time, but must be made prior to the performance of the make up work in order to ensure that the employer is not liable for daily overtime for the make up hours.   Any daily overtime hours worked prior to a request to perform make up work cannot be credited as make up time, but rather, will constitute time for which overtime compensation must be paid.   And most importantly, time that is taken off in one workweek can only be made up during that same workweek;  if it is worked in a different workweek than the when it was taken, the daily overtime hours worked must be paid as overtime.

The statute expressly prohibits employers from “encouraging or otherwise soliciting an employee to request an employer's approval to take personal time off and make up the work hours within the same week pursuant to this section.”   This does not prohibit employers from merely informing workers of the provisions of this statute;  however, it clearly does prohibit employers from suggesting, recommending (or certainly, ordering) that workers “request” make up time.

We have been asked whether make-up time can be worked in advance of the date that the time being made up is lost.   There is nothing in the statute that would prohibit this, so long as the make-up work is performed during the same workweek in which the time is lost.   Thus, if an employee knows that he or she will need to take time off to attend to personal needs on the last day of the workweek, the employee can make-up this time in advance, during the preceding days of that workweek.   The question that then follows is:  does the employer have any overtime exposure if that worker, after working the make-up time, decides not to take the time off, and works the time that he or she had planned on taking off?   The answer to this would depend on whether the employee ended up working more than 40 hours in that workweek.   If so, section 513 requires payment of overtime for all hours worked in excess of 40 in a workweek.   If the employee did not end up working more than 40 hours that workweek, the employer would not be liable for any daily overtime (provided that the employee did not work more than 11 hours in any workday, and that any hours worked in excess of eight in any one workday were worked as make-up time).   The reason the employer would not be liable for any daily overtime under this scenario is because the employer agreed to allow the employee to work these extra daily hours without payment of daily overtime in order to make-up time that the employee asserted would be lost later in the workweek due to the employee's personal obligations, and the employer relied on the employee's assertion in granting this request.   On the other hand, if an employer revokes its previously granted permission to allow an employee to perform make-up work after the make-up work is performed, but before the time off is taken, the employer will be liable for all daily overtime, and the extra daily hours worked will not be treated as make-up time.

Finally, we have been asked whether these make-up time provisions apply to employees working under regularly scheduled alternative workweeks.   The answer is yes, section 513's make-up time provisions expressly apply to workers covered by section 510, the basic overtime law, and to workers covered by section 511, which authorizes alternative workweek schedules.   Of course, a worker employed under a valid alternative workweek schedule which provides for 10 hours of work in a workday without payment of overtime will only be able to work one extra hour of make-up time during such a workday before exceeding the 11 hour per day cap that triggers overtime for all subsequent make-up time worked that day.   Because make-up time applies to workers employed under an alternative workweek schedule, such workers may perform up to 11 hours of make-up work on a day that they are not regularly scheduled to work without the payment of overtime compensation that would otherwise be required, pursuant to section 511(b), for working on a day other than a regularly scheduled workday.

Examples:  An employee scheduled to work an eight hour workday can work an additional three hours that day as make-up time without the payment of daily overtime.   An employee scheduled to work a six hour workday can work an additional five hours that day as make-up time without the payment of daily overtime.   An employee scheduled to not work at all on a specific day can work up to 11 hours of make-up time that day without the payment of overtime, whether the worker is covered by the basic overtime law or is working under an alternative workweek schedule pursuant to section 511.   On the other hand, an employee not covered by a regularly scheduled alternative workweek pursuant to section 511, who is nonetheless scheduled to work nine hours in a workday, can work two hours of make-up time that day without payment of overtime for the make-up time, but must be paid overtime for the one overtime hour of scheduled, nonmake-up work.   If this same employee works three hours of make-up time, resulting in 12 hours of work that workday, the employee must be paid two hours of overtime at the rate of one and one-half times the regular rate (one hour for the ninth hour of scheduled work, and another hour for the make-up time that exceeded the eleventh hour of work that day).   Finally, if this same employee works four hours of make-up time, resulting in 13 hours of work that workday, the employee must be paid 2 hours of overtime at time and a half, and one hour of overtime at twice the regular rate of pay.

The Collective Bargaining Agreement Opt-Out Provision:  Section 8 of AB 60 adds section 514 to the Labor Code, which makes AB 60's overtime and meal period provisions inapplicable to employees who are covered by a collective bargaining agreement (“CBA”), if the CBA expressly provides for the wages, hours and working conditions of the employees, and provides a regular hourly wage rate for those employees of not less than 30 percent more than the state minimum wage, and “provides premium wage rates for all overtime hours worked.”   If a CBA meets these provisions for the opt-out, the workers covered by the CBA are not entitled to statutory overtime;  rather, they will receive premium pay for all overtime hours worked, as provided by the CBA. This is somewhat different from prior law, in that the opt-out under the IWC orders had required payment of a regular rate of at least $1 an hour more than the state minimum wage;  and under the new “30 percent above” formula, the required regular rate would now be seven dollars and 47 and a half cents ($7.475) per hour.   And of course, future increases in the state minimum wage will automatically result in increases in the regular rate required for the opt-out.   If the opt-out requirements are met, workers are paid for all hours worked in accordance with the provisions of the CBA. It should be remembered, however, that there is no CBA opt out under the Fair Labor Standards Act, which requires payment of overtime at the rate of one and one half the regular rate of pay for all hours worked in excess of 40 in a workweek.

The term “premium wage rates” are not defined in AB 60 or in the IWC orders.   The term has always been interpreted to mean any wage rate in excess of the applicable straight time regular hourly rate of pay.   There is no indication that the Legislature intended this term to be interpreted in any other manner.   Indeed, it would make no sense to interpret the term as synonymous with a statutory overtime rate such as one and a half times the regular rate, since the very purpose of an opt-out provision is to allow for an alternative to the minimum standard that would otherwise be required by statute.   The amount by which the premium exceeds the regular rate is left to the parties to negotiate;  we will recognize any rate higher than the regular rate as a premium.

We have received several inquiries regarding the meaning, within section 514, of the term “all overtime hours.”   The one thing it cannot mean is all hours worked in excess of eight in a day without regard to any definition of overtime that might be contained in the CBA, since such a meaning would prohibit unions from collectively bargaining for the very same alternative workweek schedules that non-unionized workers could adopt under AB 60-that is, work schedules of up to 10 hours a day (and 12 hours a day in the health care industry) without the payment of daily overtime or premium pay.   There is nothing to indicate that the Legislature intended such a peculiar result.   The IWC's post-AB 60 regulations may provide further guidance on the parameters of the CBA opt-out.

As with any other wage claims that are filed with DLSE by employees covered by a CBA, any claims for overtime where a CBA is involved must be reviewed by DLSE Legal in accordance with the consent decree in Livadas v. Bradshaw.

Administrative, Executive and Professional Exemption:  Section 9 of AB 60 adds section 515 to the Labor Code. This is the section that codifies, with some very significant changes from prior law, the administrative, executive, and professional exemptions from overtime.   First, there are two ways in which AB 60 merely codifies pre-existing California law.   As was the case under the IWC orders, there is no exemption, no matter how highly the employee may be paid, unless the employee is “primarily engaged” in exempt work, and the term “primarily” is defined as more than one-half the employee's work time.   Thus, state law continues to differ from federal law, which is less protective of workers;  in that under federal law, the focus is on the employee's “primary duty,” and an employee may be found to have a “primary duty” as a manager even if the worker spends most of his or her work time performing non-exempt tasks.   In contrast, state law looks to what the worker is “engaged in,” that is, what is the worker physically doing.

AB 60 also codifies California's pre-existing fixed workweek method for calculating overtime compensation owed to a non-exempt salaried employee, a method that was approved by the courts 15 years ago in the Skyline Homes case.   Under this method, the salary paid to a non-exempt salaried employee only covers the 40 non-overtime hours of the workweek;  it does not serve to compensate the worker for any overtime hours worked.   This weekly salary must be divided by 40 to establish a regular hourly rate of pay, which is then the basis for all overtime calculations.   Overtime hours worked are then paid at either one and one half times the regular rate, or double the regular rate, as required.   This contrasts with the less protective federal fluctuating workweek method, under which a salary paid to a non-exempt employee is deemed to cover all hours worked (including overtime hours);  so the more overtime hours worked, the lower the regular rate of pay, and so that overtime hours worked are only paid at one-half the employee's regular rate of pay.   AB 60 does not change the method of computing overtime compensation for employees who are paid on a commission or piece rate basis;  which under both state and federal law is based on a fluctuating workweek whereby total weekly commission or piece rate earnings are divided by the total number of hours (including overtime hours) worked in the week to compute the regular rate of pay;  and overtime hours are then compensated at one-half this regular rate of pay.

To be sure, AB 60 brings about some very significant changes in the administrative, executive and professional exemptions.   Under prior law, there was no minimum remuneration or salary requirement for the professional exemption.   Under Labor Code section 515, the professional exemption is subject to the same minimum salary requirement as the administrative and executive exemption.   The so-called “remuneration” requirement under prior law is now changed to a requirement of a monthly salary, equivalent to no less than twice the minimum wage for full time work (defined as employment for 40 hours per week), which would now require a salary of at least $1,993.33 per month.   Since the required salary is set as a multiple of the minimum wage, future increases in the state minimum wage will result in corresponding increases in the threshold salary for the exemption.   The value of any payments in kind, or other forms of remuneration (such as employer provided meals or lodging) cannot be used as a credit against this required minimum salary.   The legislative intent in switching from remuneration to salary was to explicitly adopt the federal salary basis test, to the extent that it is consistent with California wage and hour law.   Thus, employees who are paid on the basis of an hourly wage, or commissions, or piece rates, cannot be exempt from payment of overtime under the administrative, executive or professional exemptions.

We have been asked whether a part-time employee working in a bona fide executive, administrative, or professional capacity (that is, one who is “primarily engaged” in such exempt work) can be exempt if he or she is paid a monthly salary that is less than the full-time salary equivalent of twice the minimum wage, but not less than the applicable percentage of the minimum monthly required salary, based on the proportion of time that the part-time employee works in relation to a full time, forty hour week.   For example, can an attorney employed by a law firm on a part-time 20 hour per week basis, be exempt if paid a monthly salary of $1,000?   The answer to that question is no;  we do not believe that this monthly minimum required salary can be reduced, even if the ostensibly exempt employee is scheduled to work less than 40 hours per week.   An exempt employee is expected to exercise discretion and independent judgment in order to decide the number of hours to devote to a particular task, and cannot be expected to confine his or her work hours to a set schedule, as any such employer-imposed limitation on hours worked would be inconsistent with the discretion and independent judgment that is the hallmark of exempt work.  Section 515(a)'s requirement of “a monthly salary equivalent to no less than two times the state minimum wage for full-time employment,” simply serves to set the amount of the required monthly salary as a multiple of the minimum wage;  and not to permit reductions of this monthly threshold salary for employees who work less than 40 hours per workweek.

As was the case under the IWC orders, section 515(f) provides that the professional exemption shall not apply to registered nurses. Another bill that was passed and signed by the Governor this year, AB 651, provides that the professional exemption shall not apply to pharmacists, a category of workers who formerly were expressly exempted, under the IWC orders, as licensed professionals.

AB 60 does not define the duties that characterize exempt work.  Section 515(a) gives the IWC the task of “reviewing the duties which meet the test of the exemption,” and then, if the IWC chooses, it may convene public hearings to adopt or modify regulations pertaining to these duties.   Under the existing IWC orders, the duties are spelled out only in the broadest terms --- “work which is primarily intellectual, managerial or creative, and which requires the exercise of discretion and independent judgment.”   In enforcing the IWC orders, DLSE has out of necessity come to rely upon the federal regulations, and federal case law, which define the terms “executive”, “administrative” and “professional” for purposes of the exemptions, to the extent that these federal definitions are not inconsistent with state law.   We do not know yet whether the IWC will decide whether to adopt specific definitions for these terms.   Absent the adoption of such definitions, we will continue to follow existing DLSE interpretations, as set out in our opinion letters, of these terms.  (See, for example, opinion letters dated 1/7/93 and 10/5/98.)

Meal Period Requirements:  Section 6 of AB 60 adds section 512 to the Labor Code, which codifies the requirements for meal periods during the workday.   These provisions are somewhat confusing, and there have been many questions as to whether AB 60 puts an end to “on-duty meal periods.”   That term is used in the IWC orders to describe a meal period during which the employee is not relieved of all duty regardless of the length of time of the meal period, or that is less than 30 minutes long regardless of whether the employee is relieved of all duty.   Under the IWC orders, an “on-duty meal period” is permitted only (1) when the nature of the work prevents the employee from being relieved of all duty, and (2) when the employee and employer have entered into a written agreement permitting an on-duty meal period.   An employee must be paid for the entire on-duty meal period;  that is, it constitutes time worked.

We believe that AB 60 does not prohibit “on-duty meal periods”.   Had the Legislature intended to accomplish that, the bill would have expressly done so.   Instead, the term “on-duty meal period” is not found anywhere in the text of AB 60.  Section 512 provides that a meal period of no less than 30 minutes must be provided to any employee who is employed for a work period of more than five hours per day.   However, this meal period can be waived by mutual consent of the employee and the employer if the total daily work period does not exceed six hours.   A second meal period of no less than 30 minutes must be provided to any employee who is employed for a work period of more than 10 hours in a day, however, this second meal period can be waived by mutual consent if the worker does not work more than 12 hours that day, and if the first meal period was not waived.   Of course, since the first meal period cannot be waived if there were more than 6 work hours in a day, it would seem that no employee working more than 10 hours in a day could have waived the first meal period.   In any event, whenever a worker is employed for more than 12 hours in a day, the second meal period cannot be waived.

The confusion over whether AB 60 ends “on-duty meal periods” stems from a misunderstanding of the term “meal period” and the meaning of the provisions that limit the ability to mutually agree to a waiver of the meal period.   The term “meal period” includes both the on-duty paid and off-duty unpaid variety.   If the prerequisites (as defined in the IWC orders) for an on-duty meal period are met, then an on-duty meal period may be established.   Even though the employee is required to work during the on-duty meal period, the employee must be given the opportunity, while working if necessary, to eat his or her meal.   That is what cannot be waived, if the work period exceeds six hours, and if an on-duty meal period has been properly established.   On the other hand, if the prerequisites for an on-duty meal period have not been met, the limits on waiver of the meal period apply to the employee's right to take an off-duty meal period.

The IWC will continue to have an important role in defining meal period requirements, as section 10 of AB 60 adds section 516 to the Labor Code, which provides that notwithstanding any other provision of law, the IWC may adopt or amend regulations regarding meal periods, break periods, and days of rest.

Day of Rest Requirement:  AB 60 does not amend existing Labor Code sections 551 and 552, which provide that every employee is entitled to one day's rest in seven, and that no employer shall cause its employees to work more than six days in seven.

Section 12 of AB 60 makes some minor changes to Labor Code § 554, which, among other things, permits an accumulation of days of rest when the nature of the employment reasonably requires that the employee work seven or more consecutive days, providing that in each calendar month the employee receives days of rest equivalent to one day's rest in seven.   The most significant change to section 554 is that it now specifies that employees covered by IWC Order 14 (agricultural occupations) are not covered by this chapter of the Labor Code (starting with Labor Code § 500), except for Labor Code section 558, so that employers of such employees will be subject to civil citations for violations of the overtime provisions of Order 14.

Section 13 of AB 60 makes some minor changes to Labor Code § 556, which provides that sections 551 and 552, the sections which mandate one day's rest in seven, shall not apply to any employer or employee when the total hours of employment do not exceed 30 hours in a week or six hours in any one day of that week.   We have been asked whether an employee who works such a part-time schedule would be entitled to seventh day premium pay, pursuant to section 510.   The answer is yes, seventh day premium pay is required under section 510 if the worker works seven consecutive days in a workweek, regardless of the total number of hours worked during that workweek or during any of the days during that workweek.  Section 556 does not exempt part-time workers from the requirements of seventh day premium pay.

Enforcement:  As discussed earlier in this memo, section 14 of AB 60 adds section 558 to the Labor Code, which establishes a civil penalty citation system as a mechanism for enforcing the overtime provisions of both AB 60 and the IWC orders.   The citation may include:  1) a civil penalty that is payable to the State (set for an initial violation, which we interpret as a first citation, at $50 per employee per pay period for which the employee was underpaid;  and for a subsequent violation, at $100 per employee per pay period in which the employee was underpaid), and 2) an additional amount representing the unpaid overtime wages owed to the employees, with any such wages that are recovered to be paid by DLSE to the affected employees.   By allowing for inclusion of unpaid wages as a component of the amount assessed, overtime citations differ from minimum wage civil penalty citations under Labor Code § 1197.1, which do not include an unpaid wage component.

This unpaid overtime wage component of the assessment provides DLSE with a significant enforcement mechanism, and a means of expeditiously pursuing the collection of unpaid overtime wages.

Employer Appeal Rights:  Section 558(b) provides that the procedures for issuing, contesting and enforcing judgments for civil penalty citations for overtime violations shall be the same as the procedures governing minimum wage citations under Labor Code § 1197.1. Thus, an employer will have 15 business days from the date the citation is issued to request an appeal hearing.   The hearing must then be held within 30 days of a timely request.   The decision of the Labor Commissioner's hearing officer, either affirming, dismissing or modifying the proposed assessment, must be served on the parties within 15 days of the conclusion of the hearing.   The employer then has 45 days from the date the decision is served to file a petition for a writ of administrative mandate.   If no writ petition is timely filed, then the Labor Commissioner's decision becomes due and payable, and is entered as a clerk's judgement.   If a writ petition is filed, the court will review the administrative record to determine whether the evidence presented at the hearing before the Labor Commissioner supports the findings and whether the Labor Commissioner's decision correctly applies the law.   Since court review is by way of writ, rather than de novo trial, it is critical to present the necessary evidence at the administrative hearing to establish an adequate administrative record.

Of course, the civil penalty provision of section 558 is not the only means available to DLSE for enforcing a worker's right to overtime compensation.   DLSE can still prosecute overtime violations as it has in the past, by filing a civil action pursuant to Labor Code § 1193.6. DLSE also can, of course, continue to adjudicate individual employee wage claims through the section 98 Berman hearing process.

We have received several inquiries as to whether “willfulness” is a required element for the issuance of a civil penalty for overtime violations.   The answer is no, there is no requirement of “willful” underpayments.   The word “willful” or “intentional” does not appear in section 558.   Had the Legislature intended to make “willfulness” a requirement, they would have do so expressly, as in Labor Code section 203.   It is therefore our conclusion that purported absence of willfulness is not a defense to the imposition of penalties under section 558.

We have also been asked whether meal period violations will be subject to civil penalty citations under section 558.   At first blush, the statute authorizes the issuance of a citation for a violation of “a section of this chapter or any provision regulating hours and days of work in any [IWC] order,” so that violations of the meal period requirements of section 512 would appear to be subject to civil penalty citations.   But the manner in which civil penalties are calculated-$50 or $100 per underpaid employee per pay period in which the employee was underpaid, plus the amount of the underpaid wages-makes it clear that a violation of meal period requirements will not result in the imposition of a civil penalty under section 558, unless the meal period violation is coupled with a failure to pay the employee for the time worked during the unlawfully deprived meal period.   In other words, as long as the employee was paid at the appropriate regular or overtime rate for the time worked during what should have been his or her meal period, the employer is not subject to a penalty.   However, if an employee is not given a meal period as required by section 512, and is not paid for such time worked (either at the regular rate or at the overtime rate, whatever may be required), a penalty citation may be issued in accordance with section 558.

We have also received inquiries as to whether penalties will be assessed against an employer's payroll clerk, payroll supervisor, or a payroll processing service for failure to issue checks that contain required overtime compensation.   This question is prompted by the expansive language of section 558, which makes “any employer or other person acting on behalf of an employer” subject to a penalty citation.   Regardless of the expansive sweep of this language, DLSE does not intend to issue penalty citations to any individual persons who do not formulate policies that lead to non-payment of required overtime compensation.   In general, penalties will be issued against the legal entity that is the employer.   To the extent that DLSE may, on appropriate occasions, decide to go beyond this legal entity in imposing liability, we would not anticipate going beyond the definition of employer found in each of the IWC orders.   That definition includes any person “who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person.”   Thus, in appropriate instances, corporate officers or managers may be included as defendants in a penalty citation pursuant to section 558.

Labor Code section 553, which was not amended by AB 60, offers another method of enforcing AB 60's provisions.  Section 553 provides that “any person who violates this chapter,” which now includes the overtime provisions of AB 60, “is guilty of a misdemeanor.”

Special Industries:  Existing provisions of the Labor Code contain special workday or workweek requirements or exemptions relating to employees of ski establishments (section 1182.2), commercial fishing boats (section 1182.3), licensed hospitals (section 1182.9), and stable employees engaged in the raising, feeding or training of racehorses (section 1182.10).   Sections 16 to 19 of AB 60 amends these statutes to provide for their repeal effective July 1, 2000, unless the Legislature enacts a statute prior to that date extending these special provisions.   Of course, the IWC may choose to maintain, or modify, the exemptions for these industries pursuant to Labor Code section 515(b).

[ADDENDUM B]

OFFICIAL NOTICE INDUSTRIAL WELFARE COMMISSIONSummary of Interim Wage Order-2000

To employers and representatives of persons working in industries and occupations in the State of California:

The Industrial Welfare Commission (hereinafter the “IWC”), having proceeded according to its authority in the Labor Code and the Constitution of California, has promulgated an Interim Wage Order-2000, to implement amendments to Wage Orders 1 through 15, in effect in 1998, as the result of the Legislature's enactment of the “Eight-Hour-Day Restoration and Workplace Flexibility Act,” Stats.1999, ch. 134 (commonly referred to as AB 60).   The Interim Wage Order covers all industries and occupations not specifically exempted herein, by Wage Orders 1 through 15, or by governing law.

Interim Wage Order-2000 Summary

This summary must be made available to employees in accordance with Section 12 of the Interim Wage Order.

This is a summary.   Copies of the full text of the Interim Wage Order may be obtained at www.dir.ca.gov/ IWC or by mail from the IWC.

Except for the section pertaining to penalties, the Interim Wage Order does not apply to any person employed in an agricultural occupation as defined in Wage Order 14-80, Agricultural Occupations.   Wage Orders 1-98, 4-98, 5-98, 7-98, and 9-98 are null and void.   The following Wage Orders are reinstated, as modified in the Interim Wage Order, until the effective date of wage orders promulgated by the Commission pursuant to Labor Code § 517:  1-89, Manufacturing Industry;  4-89, Professional, Technical, Clerical, Mechanical, and Similar Occupations, as amended in 1993;  5-89, Public Housekeeping Industry, as amended in 1993;  7-80, Mercantile Industry;  and 9-90, Transportation Industry.   The provisions of the following Wage Orders remain in full force and effect except to the extent that they are modified by the Interim Wage Order:  2-80, Personal Service Industry;  3-80, Canning, Freezing, and Preserving Industry;  6-80, Laundry, Linen Supply, Dry Cleaning, and Dyeing Industry;  8-80, Industries Handling Products after Harvest;  10-89, Amusement and Recreation Industry;  11-80, Broadcasting Industry;  12-80, Motion Picture Industry;  13-80, Industries Preparing Agricultural Products for Market, on the Farm;  and 15-86, Household Occupations.

Minimum Wage

The terms of Minimum Wage Order 98 (MW-98) continue to be in effect for all industries and occupations.   Every employer shall pay to each employee wages not less than $5.75 per hour for all hours worked, effective March 1, 1998.

Covered Employees

Any industry or occupation not previously covered by, and all employees not specifically exempted in, the Commission's Wage orders in effect in 1997, or otherwise exempted by law, are covered by this Interim Wage Order.   In particular, the following employee work activities are now covered by the provisions of this order:  on-site construction, drilling, logging, and mining of non-metallic minerals. Sections 4, 5, 7, 8 and 9 of this Order shall not apply to persons employed in administrative, executive, or professional capacities.   Please note that pharmacists and registered nurses are no longer eligible for the professional exemption.   See the full text of the Interim Wage Order for definitions of these categories.

Hours and Days of Work

The number of hours worked in a day by covered employees without overtime compensation is 8 hours.   The number of hours worked in a week by covered employees without overtime compensation is 40 hours.   The number of days worked consecutively by covered employees in any workweek without overtime compensation is 6 days.

Daily Overtime Pay

Overtime is paid at the rate of 1 1/212 times the regular rate of pay for every hour worked after the completion of 8 hours worked at the regular rate of pay in 1 workday.   Overtime is paid at the rate of double the regular rate of pay for every hour worked after the completion of 12 hours worked in 1 workday.

Weekly Overtime Pay

Overtime is paid at the rate of 1 1/212 times the regular rate of pay for every hour worked after the completion of 40 hours worked at the regular rate of pay in 1 workweek.

Seventh Consecutive Workday Overtime Pay

Overtime is paid at the rate of 1 1/212 times the regular rate of pay for the first 8 hours worked on the seventh consecutive workday in any workweek, without regard to the total number of hours worked in the previous 6 days.   Overtime is paid at the rate of double the regular rate of pay for every hour worked after the completion of 8 hours worked on the seventh consecutive workday in any workweek.

Workweeks

An alternative workweek schedule means any regularly scheduled workweek requiring an employee to work more than 8 hours in a 24-hour period, but no more than 40 hours in a workweek.   Alternative workweek schedules in effect in wage orders that remain in full force under the Interim Wage Order shall remain operative until the effective date of wage orders promulgated under Labor Code § 517 by the IWC, subject to the restrictions below.

Alternative Workweeks-Non Health Care Industry.

Pursuant to a voluntary written agreement proposed by the employer and ratified in a secret ballot election by at least a 2/3 vote of the affected employees in the work unit before the performance of work, a regularly scheduled alternative workweek schedule of not more than 10 hours at the regular rate of pay per day within a 40-hour workweek is permitted.   Regarding such a schedule, overtime is paid at the rate of 1 1/212 times the regular rate of pay for all hours worked after the regularly scheduled hours in a day have been completed, through the twelfth hour of work.   Overtime is paid at the rate of double the regular rate of pay for every hour worked after the completion of 12 hours worked in 1 workday.   Weekly and seventh consecutive day overtime pay provisions apply accordingly.

Alternative Workweeks-Health Care Industry

Pursuant to a voluntary written agreement proposed by the employer and ratified in a secret ballot election by at least a 2/3 vote of the affected employees in the work unit before the performance of work, a regularly scheduled alternative workweek schedule of not more than 12 hours at the regular rate of pay per day within a 40-hour workweek is valid until July 1, 2000, and/or until the effective date of a wage order promulgated by the Commission.   Overtime is paid at the rate of double the regular rate of pay for every hour worked after the completion of 12 hours in 1 workday.   Weekly and seventh consecutive day overtime pay provisions apply accordingly.

An employer engaged in the operation of a licensed hospital or in providing personnel for the operation of a licensed hospital, who properly institutes a regularly scheduled workweek that includes no more than three 12-hour workdays, shall make a reasonable effort to find an alternative work assignment for any employee who participated in the vote that authorized the schedule, and is unable to work the 12-hour shifts.   The employer shall not be required to offer such an alternative work assignment if the employee was hired after the vote and adoption of the alternative workweek.   The regularly scheduled 12-hour workday/3-day alternative workweek shall be valid until July 1, 2000, unless the IWC extends that date.

Alternative Workweeks-Ski Industry

An employer engaged in the operation of a ski establishment shall not be in violation of overtime provisions set forth in the Interim Wage Order by instituting a regularly scheduled workweek of 56 hours or less during any month of the year when Alpine or Nordic skiing activities are conducted.   Such shall be valid until July 1, 2000, unless the Legislature or the Commission extends that date.   Overtime is paid at the rate of 1 1/212 times the regular rate of pay for every hour worked after the completion of 56 hours in 1 workweek.

Stable and Commercial Fishing Employees

Stable employees and those employees licensed pursuant to the California Fish and Game Codes §§ 7850 et seq. and 7920 et seq. should refer to the full text of the Interim Wage Order.

Minors

VIOLATIONS OF CHILD LABOR LAWS are subject to civil and criminal penalties.   Refer to California Labor Code §§ 1285 to 1312 and 1390 to 1399.

Collective Bargaining Agreements

Sections 3, 4, 5, 8 and 9 of the Interim Wage Order shall not apply to any employee covered by a valid collective bargaining agreement if the agreement expressly provides for the wages, hours of work, and working conditions of the employees, and if the agreement provides premium wage rates for all overtime hours worked and a regular hourly rate of pay for those employees of not less than 30 percent more than the state minimum wage, except that the requirement regarding the equivalent of 1 day's rest in 7 (see Interim Wage Order, Section 5(H)) shall apply, unless the agreement expressly provides otherwise.

Make Up Time

If an employer approves a written request of an employee to make up work time that is or would be lost as a result of a personal obligation of the employee, the hours of that make up work time, if performed in the same workweek in which the work time was lost, may not be counted toward computing the total number of hours worked in a day for purposes of the overtime requirements, except for hours in excess of 11 hours of work in 1 day or 40 hours of work in 1 workweek.

Meal Periods

An employee must receive a thirty-minute meal period for every 5 hours of work.   Pursuant to mutual consent by the employer and the employee:  (1) an employee may waive a thirty-minute meal period if the day's work will be completed in no more than 6 hours;  (2) an employee may waive the second of 2 thirty-minute meal periods when the day's work will be completed in no more than 12 hours and the first thirty-minute meal period was not waived.

Meals and Lodging

Meals or lodging may not be credited against the minimum wage without a voluntary written agreement between the employer and the employee.   When credit for meals or lodging is used to meet part of the employer's minimum wage obligation, the amounts so credited may not be more than what is listed in MW-98.

Reporting Time, Pay Records, Cash Shortages and Breakage, Uniforms and Equipment, Rest Periods and Seats

Please refer to the applicable wage order for instruction regarding these subjects.

Violations and Penalties

Any employer or any other person acting on behalf of the employer who violates or causes to be violated the provisions of the Interim Wage Order shall be subject to a civil penalty in addition to any other civil or criminal penalties provided by law.   Questions about enforcement and reports of violations should be directed to the Division of Labor Standards Enforcement.

The Interim Wage Order shall be in effect as of March 1, 2000.

Questions about enforcement of the Interim Wage Order and reports of violations should be directed to the Division of Labor Standards Enforcement.   Consult the white pages of your telephone directory under CALIFORNIA, State of, Industrial Relations for the address and telephone number of the office nearest you.   The Division has offices in the following cities:  Bakersfield, Eureka, Fresno, Long Beach, Los Angeles, Marysville, Oakland, Redding, Sacramento, Salinas, San Bernardino, San Diego, San Francisco, San Jose, Santa Ana, Santa Barbara, Santa Rosa, Stockton, and Van Nuys.

Interim Wage Order-2000

1. APPLICABILITY OF ORDER

This Wage Order implements changes in the law as a result of the Legislature's enactment of the “Eight-Hour-Day Restoration and Workplace Flexibility Act,” Stats.1999, ch. 134 (commonly referred to as AB 60).   Pursuant to that legislation, the Industrial Welfare Commission's Wage Orders 1 through 15, in effect in 1998, have been amended as set forth below.

Any industry or occupation not previously covered by, and all employees not specifically exempted in, the Commission's Wage Orders in effect in 1997, or otherwise exempted by law, are covered by this order.   In particular, the following employee work activities are now covered by the provisions of this order:  construction, including, but not limited to, alteration, demolition, building, renovation, remodeling, improvement and repair work as defined in the California Business and Professions Code Division 3, Chapter 9, Sections 7025 et seq.;   drilling, including but not limited to, all work required to drill, establish, repair, and rework wells for the exploration or extraction of oil, gas, or water resources;  logging work for which a timber operator's license is required pursuant to California Public Resources Code Sections 4571 through 4586;  and, mining (not covered by Labor Code § 750 et seq.), including all work required to mine and/or establish pits, quarries, and surface or underground mines for the purposes of exploration or extraction of nonmetallic minerals, metallic ores, coal, and building materials such as stone and gravel.

Except for Section 10 below pertaining to penalties, this Order does not apply to any person employed in an agricultural occupation as defined in Wage Order 14-80, Section 2(C).  Wage Orders 1-98, 4-98, 5-98, 7-98, and 9-98 are null and void.   Wage Orders 1-89, 4-89 as amended in 1993, 5-89 as amended in 1993, 7-80, and 9-90 are reinstated, as modified herein, until the effective date of wage orders promulgated by the Commission pursuant to Labor Code § 517.   The provisions of Wage Orders 2-80, 3-80, 6-80, 8-80, 10-89, 11-80, 12-80, 13-80, and 15-86 remain in full force and effect except to the extent that they are modified by this Order.   However, pursuant to Labor Code § 515(b)(2) the alternative workweek schedules in effect in these wage orders shall remain operative until the effective date of wage orders promulgated by the Commission pursuant to Labor Code § 517.

2. DEFINITIONS

(A) “Workday” and “day” mean any consecutive 24-hour period beginning at the same time each calendar day.

(B) “Workweek” and “week” mean any seven (7) consecutive days, starting with the same calendar day each week.  “Workweek” is a fixed and regularly recurring period of 168 hours, seven (7) consecutive 24-hour periods.

(C) An “alternative workweek schedule” means any regularly scheduled workweek requiring an employee to work more than eight (8) hours in a 24-hour period.

3. ADMINISTRATIVE, EXECUTIVE, AND PROFESSIONAL EMPLOYEES

Sections 4, 5, 7, 8 and 9 of this Order shall not apply to persons employed in administrative, executive, or professional capacities.   However, no person shall be considered to be employed in an administrative, executive, or professional capacity unless the person is primarily engaged in the duties which meet the test of the exemption and earns a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.  Labor Code § 515(a) mandates that the Commission conducts a review of the duties which meet the test of the exemption and that any hearing conducted pursuant to that subsection be conducted no later than July 1, 2000.   Until further order of the Commission, the duties which meet the tests of the exemption are one of the following set of conditions:

(A) The employee is engaged in work which is primarily intellectual, managerial, or creative, and which requires exercise of discretion and independent judgment, or

(B) The employee is licensed or certified by the State of California and is engaged in the practice of one of the following recognized professions:  law, medicine, dentistry, optometry, architecture, engineering, teaching, or accounting, or is engaged in an occupation commonly recognized as a learned or artistic profession;  provided, however, that pharmacists employed to engage in the practice of pharmacy, and registered nurses employed to engage in the practice of nursing, shall not be considered exempt professional employees, nor shall they be considered exempt from coverage for the purposes of this subsection unless they individually meet the criteria established for exemption as executive or administrative employees.

(C) For the purposes of this section, “Full-time employment” means employment in which an employee is employed for forty (40) hours per week.

(D) For the purposes of this section, “primarily” means more than one-half (1/2) of the employee's work time.

4. DAILY OVERTIME-GENERAL PROVISIONS

The following overtime provisions are applicable to employees eighteen (18) years of age or over and to employees sixteen (16) or seventeen (17) years of age who are not required by law to attend school, and are not otherwise prohibited by law from engaging in the subject work.   Such employees shall not be employed more than eight (8) hours in any workday or more than forty (40) hours in any workweek unless the employee receives one and one-half (1 1/212) times such employee's regular rate of pay for all hours worked over forty (40) hours in the workweek.   Eight (8) hours of labor constitutes a day's work.   Employment beyond eight (8) hours in any workday or more than six (6) days in any workweek is permissible provided the employee is compensated for such overtime at not less than:

(A) One and one-half (1 1/212) times the employee's regular rate of pay for all hours worked in excess of eight (8) hours up to and including twelve (12) hours in any workday, and for the first eight (8) hours worked on the seventh (7th) consecutive day of work in a workweek;  and

(B) Double the employee's regular rate of pay for all hours worked in excess of twelve (12) hours in any workday and for all hours worked in excess of eight (8) hours on the seventh (7th) consecutive day of work in a workweek.

(C) The overtime rate of compensation required to be paid to a nonexempt full-time salaried employee shall be computed by using the employee's regular hourly salary as one fortieth (1/40) of the employee's weekly salary.

5. ALTERNATIVE WORKWEEKS

(A) No employer shall be deemed to have violated the daily overtime provisions by instituting, pursuant to a voluntary written agreement proposed by the employer and ratified in a secret ballot election by at least a two-thirds (2/3) vote of the affected employees in the work unit before the performance of work, a regularly scheduled alternative workweek schedule of not more than ten (10) hours per day within a forty (40) hour workweek without the payment of an overtime rate of compensation.   All work performed in any workday beyond the schedule established by the agreement up to twelve (12) hours a day or beyond forty (40) hours per week shall be paid at one and one-half (1 1/212) times the employee's regular rate of pay.   All work performed in excess of twelve (12) hours per day and any work in excess of eight (8) hours on those days worked beyond the regularly scheduled workdays established by the alternative workweek agreement shall be paid at double the employee's regular rate of pay.   No hours paid at either one and one-half (1 1/212) or double the regular rate of pay shall be included in determining when forty (40) hours have been worked for the purpose of computing overtime compensation.   The regularly scheduled alternative workweek proposed by an employer for adoption by employees may be a single work schedule that would become the standard schedule for workers in the work unit, or a menu of work schedule options, from which each employee in the unit would be entitled to choose.   If the employer proposes a menu of work schedule options, the employee may, with the approval of the employer, move from one menu option to another.

(B) If an employer, whose employees have adopted an alternative workweek agreement permitted by this Order requires an employee to work fewer hours than those that are regularly scheduled by the agreement, the employer shall pay the employee overtime compensation at a rate of one and one-half (1 1/212) times the employee's regular rate of pay for all hours worked in excess of eight (8) hours, and double the employee's regular rate of pay for all hours worked in excess of twelve (12) hours for the day the employee is required to work the reduced hours.

(C) An employer shall not reduce an employee's regular rate of hourly pay as a result of the adoption, repeal or nullification of an alternative workweek schedule.

(D) An employer shall explore any available reasonable alternative means of accommodating the religious belief or observance of an affected employee that conflicts with an adopted alternative workweek schedule, in the manner provided by subdivision (j) of Section 12940 of the Government Code.

(E) An employer shall make a reasonable effort to find a work schedule not to exceed eight (8) hours in a workday, in order to accommodate any affected employee who was eligible to vote in an election authorized by this Section and who is unable to work the alternative workweek schedule established as the result of that election.

(F) An employer shall be permitted, but not required, to provide a work schedule not to exceed eight (8) hours in a workday to accommodate any employee who is hired after the date of the election and who is unable to work the alternative workweek schedule established by the election.

(G) The results of any election conducted pursuant to this Section shall be reported by the employer to the Division of Labor Statistics and Research within thirty (30) days after the results are final.

(H) Any type of alternative workweek schedule that is authorized by the Labor Code and that was in effect on January 1, 2000, may be repealed by the affected employees.   Upon a petition of one-third (1/3) of the affected employees, a new secret ballot election shall be held and a two-thirds (2/3) vote of the affected employees shall be required to reverse the alternative workweek schedule.   If the alternative workweek schedule is revoked, the employer shall comply within sixty (60) days.   Upon proper showing of undue hardship, the Division of Labor Standards Enforcement may grant an extension of time for compliance.

However, if an employee covered by Wage Orders 1, 4, 5, 7, or 9 was voluntarily working an alternative workweek schedule as of July 1, 1999, that was an individual agreement made after January 1, 1998 between the employee and employer, and that agreement provides for a workday of not more than ten (10) hours, that employee may continue to work that alternative workweek schedule without payment of an overtime rate of compensation for the hours provided in that schedule if the employee submits, and the employer approves, a written request to do so.   Such a written request and approval shall be made within ninety (90) days of the effective date of this Order.   An employee may revoke his or her voluntary authorization to continue such a schedule with thirty (30) days written notice to the employer.

(I) The provisions of Labor Code §§ 551 and 552 regarding one (1) day's rest in seven (7) shall not be construed to prevent an accumulation of days of rest when the nature of the employment reasonably requires the employee to work seven (7) or more consecutive days;  provided, however, that in each calendar month, the employee shall receive the equivalent of one (1) day's rest in seven (7).

(J) Notwithstanding the above provisions regarding alternative workweek schedules, employees in the health care industry may continue to work days exceeding ten (10) hours but not more than twelve (12) hours without the payment of overtime compensation, as long as the employer and at least two-thirds (2/3) of the affected employees in a work unit agreed to this alternative workweek arrangement, in a secret ballot election held pursuant to Wage Orders 4 and 5 prior to 1998, and before the performance of work.   Such alternative workweek schedules shall be valid until July 1, 2000, and/or until the effective date of a wage order promulgated by the Industrial Welfare Commission pursuant to Labor Code § 517, provided:

(1) An employee who works beyond twelve (12) hours in a workday shall be compensated at double the employee's regular rate of pay for all hours in excess of twelve (12);

(2) An employee who works in excess of forty (40) hours in a workweek shall be compensated at one and one-half (1 1/212) times the employee's regular rate of pay for all hours over forty (40) hours in the workweek;

(3) Prior to the secret ballot vote, any employer who proposed to institute an alternative workweek schedule shall have made a disclosure in writing to the affected employees, including the effects of the proposed arrangement on the employees' wages, hours, and benefits.   Such a disclosure shall include meeting(s), duly noticed, held at least fourteen (14) days prior to voting, for the specific purpose of discussing the effects of the alternative workweek schedule.   Failure to comply with this Section shall make the election null and void;

(4) The same overtime standards shall apply to employees who are temporarily assigned to a work unit covered by this subsection;

(5) Any employer who instituted an alternative workweek schedule pursuant to this subsection shall make a reasonable effort to find another work assignment for any employee who participated in a valid election prior to 1998 pursuant to the provisions of Wage Orders 4 and 5 and who is unable to work the alternative workweek schedule established.

(6) For purposes of this subsection, affected employees may include all employees in a readily identifiable work unit, such as a division, a department, a job classification, a shift, a separate physical location, or a recognized subdivision of any such work unit. A work unit may consist of an individual employee as long as the criteria for an identifiable work unit in this subsection is met.

(K) An employer engaged in the operation of a ski establishment shall not be in violation of overtime provisions set forth in this order by instituting a regularly scheduled workweek of fifty-six (56) hours or less during any month of the year when Alpine or Nordic skiing activities are conducted, provided that any employee shall be compensated at a rate of not less than one and one-half (1 1/212) times the employee's regular rate of pay for all work in excess of fifty-six (56) hours in any one (1) workweek.   A ski establishment within the meaning of this Section is a geographically limited recreational area comprising basic skiing and related facilities.   Such alternative workweek schedules shall be valid until July 1, 2000, unless the Industrial Welfare Commission extends that date.

(L) An employer engaged in the operation of a licensed hospital or in providing personnel for the operation of a licensed hospital who institutes, pursuant to a valid order of the Commission, a regularly scheduled alternative workweek that includes no more than three (3) 12-hour workdays, shall make a reasonable effort to find another work assignment for any employee who participated in the vote which authorized the schedule and is unable to work the 12-hour shifts.   An employer shall not be required to offer a different work assignment to an employee if such a work assignment is not available or if the employee was hired after the adoption of the 12-hour, 3-day alternative workweek schedule.   Such alternative workweek schedules shall be valid until July 1, 2000, unless the Industrial Welfare Commission extends that date.

(M) Notwithstanding the above overtime provisions, stable employees as defined in Labor Code § 1182.10 who are involved in the raising, feeding and management of racehorses by a trainer, as defined in the Food and Agriculture Code § 24001, shall be subject to the same standards governing the wages, hours, and working conditions as established for employees in agricultural occupations engaged in the raising, feeding, and management of other livestock;  provided that stable employees shall be paid an overtime rate of compensation of one and one-half (1 1/212) times the employee's regular rate of pay for all work in excess of ten (10) hours in any workday, or fifty-six (56) hours during seven (7) days in any workweek without the payment of overtime compensation.  “Workday” and “workweek” have the same definition as in the Commission's wage order for agricultural occupations.   A “regular rate of pay” does not include amounts excluded from regular pay by the Fair Labor Standards Act (29 U.S.C. § 207(E)), as well as payment of the stable employee's share, if any, of the purse of a race.   This subsection is valid until July 1, 2000 unless the Industrial Welfare Commission extends that date.

(N) The minimum wage or maximum hour orders of the Commission shall not apply to employees licensed pursuant to the California Fish and Game Code § -7850 et seq., or employed on a commercial passenger fishing boat licensed pursuant to California Fish and Game Code § 7920 et seq.   This exemption shall remain in effect until July 1, 2000, unless the Industrial Welfare Commission extends that date.

6. MINORS

VIOLATIONS OF CHILD LABOR LAWS are subject to civil penalties of from $500 to $10,000 as well as to criminal penalties.   Refer to California Labor Code §§ 1285 to 1312 and 1390 to 1399 for additional restrictions on the employment of minors and for descriptions of criminal and civil penalties for violation of the child labor laws.   Employers should ask school districts about any required work permits.

7. COLLECTIVE BARGAINING AGREEMENTS

(A) Sections 3, 4, 5, 8 and 9 of this Order shall not apply to any employee covered by a valid collective bargaining agreement if the agreement expressly provides for the wages, hours of work, and working conditions of the employees, and if the agreement provides premium wage rates for all overtime hours worked and a regular hourly rate of pay for those employees of not less than thirty (30) percent more than the state minimum wage.

(B) Notwithstanding Section 7(A), where the employer and a labor organization representing employees of the employer have entered into a valid collective bargaining agreement pertaining to the hours of work of the employees, the requirement regarding the equivalent of one (1) day's rest in seven (7) (see Section 5(H) above) shall apply, unless the agreement expressly provides otherwise.

8. MAKE UP TIME

If an employer approves a written request of an employee to make up work time that is or would be lost as a result of a personal obligation of the employee, the hours of that make up work time, if performed in the same workweek in which the work time was lost, may not be counted toward computing the total number of hours worked in a day for purposes of the overtime requirements, except for hours in excess of eleven (11) hours of work in one (1) day or forty (40) hours of work in one (1) workweek.   If an employee knows in advance that he or she will be requesting make up time for a personal obligation that will recur at a fixed time over a succession of weeks, the employee may request to make up work time for up to four (4) weeks in advance;  provided, however, that the make up work must be performed in the same week that the work time was lost.   An employee shall provide a signed written request for each occasion that the employee makes a request to make up work time pursuant to this Section.   While an employer may inform an employee of this make up time option, the employer is prohibited from encouraging or otherwise soliciting an employee to request the employer's approval to take personal time off and make up the work hours within the same workweek pursuant to this Section.

9. MEAL PERIODS

(A) No employer shall employ any person for a work period of more than five (5) hours without a meal period of not less than thirty (30) minutes, except that when a work period of not more than six (6) hours will complete the day's work the meal period may be waived by mutual consent of employer and employee.

(B) An employer may not employ an employee for a work period of more than ten (10) hours per day without providing the employee with a second meal period of not less than thirty (30) minutes, except that if the total hours worked is no more than twelve (12) hours, the second meal period may be waived by mutual consent of the employer and the employee only if the first meal period was not waived.

10. PENALTIES

In addition to any other civil or criminal penalty provided by law, any employer or any other person acting on behalf of the employer who violates, or causes to be violated, the provisions of this order, shall be subject to a civil penalty of:

(A) Initial Violation-$50.00 for each underpaid employee for each pay period during which the employee was underpaid in addition to an amount which is sufficient to recover underpaid wages.

(B) Subsequent Violations-$100.00 for each underpaid employee for each pay period during which the employee was underpaid in addition to an amount which is sufficient recover underpaid wages.

(C) The affected employee shall receive payment of all wages recovered.

The Labor Commissioner may also issue citations pursuant to Labor Code § 1197.1 for payment of wages for overtime work in violation of this order.

11. SEPARABILITY

If the application of any provision of this Order, or any section, subsection, subdivision, sentence, clause, phrase, word, or portion of this Order should be held invalid or unconstitutional or unauthorized or prohibited by statute, the remaining provisions thereof shall not be affected thereby, but shall continue to be given full force and effect as if the part so held invalid or unconstitutional had not been included herein.

12. POSTING OF ORDER

Every employer shall keep a copy of this Order posted in an area frequented by employees where it may easily be read during the workday.   Where the location of work or other conditions make this impractical, every employer shall keep a copy of this Order and make it available to every employee upon request.   For industries previously covered under wage orders, this Order shall be posted immediately adjacent to Wage Orders 1-89, 2-80, 3-80, 4-89 as amended in 1993, 5-89 as amended in 1993, 6-80, 7-80, 8-80, 9-90, 10-89, 11-80, 12-80, 13-80, and 15-86.   Section 10 of this Order shall be posted immediately adjacent to Wage Order 14-80.

This Order Becomes effective on March 1, 2000.

McINTYRE, J.

I CONCUR:  McCONNELL, P.J.