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California Court Sets Limits for Reporting Time Pay and Clarifies When Split Shift Pay is Due

  • January 9, 2012

In a case of first impression, the California Court of Appeal has clarified the scope of an employer’s obligation to pay reporting time and split shift premiums under the California Industrial Welfare Commission’s Wage Order No. 4-2001 (“Wage Order”).  The Court ruled that an employee was not entitled to reporting time pay for attending scheduled meetings that ran shorter than expected because he worked at least half the scheduled time, even though the employee worked less than two hours.  This is contrary to the long-held enforcement position of the California Division of Labor Standards Enforcement.  The Court also held an employee was not entitled to split shift pay because the employee’s total compensation exceeded the minimum wages required under the Wage Order.  Aleman v. AirTouch Cellular, No. B231142 (Cal. Ct. App. Dec. 21, 2011).  Finally, the Court dismissed a second employee’s claims as barred by a prior release agreement with the employer.

Background

Michael Aleman, Daniel Krofta, Mary Katz, and 14 others worked for the company as retail sales representatives.  They filed a purported class action against the employer, alleging that it violated the Wage Order by failing to pay: (1) reporting time pay for attending work-related meetings; and (2) split shift compensation for days when they attended meetings in the morning and worked a shift later that same day.

Applicable Law

The Wage Order provides that “[e]ach day an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee’s usual or scheduled day’s work, the employee shall be paid for half the usual or scheduled work, but in no event less than two hours nor more than four hours, at the employee’s regular rate of pay, which shall not be less than minimum wage.”  Cal. Code Regs. tit. 8, § 110404(5)(A).

The Wage Order defines a “split shift” as “a work schedule which is interrupted by non-paid, non-working periods established by the employer, other than bona fide meal or rest periods.”  Cal. Code Regs., tit. 8, § 11040(2)(Q).  Employees who work split shifts must be paid one hour of pay at the minimum wage in addition to the minimum wage for the workday.  Cal. Code Regs., tit. 8, § 11040(4)(C).

Trial Court Ruling

The employer asked for dismissal of the claims of putative class representatives Krofta and Katz.  Presenting detailed records of Krofta’s salary, work schedule, and timesheets, the employer argued that because it paid Krofta for attending all scheduled meetings, it did not owe him any reporting time pay, and that because Krofta’s regular salary far exceeded the minimum wage he was entitled to under the Wage Order, he was not entitled to split shift pay.
 
Further, the employer asked for dismissal of Katz’s claims because she had signed a prior release agreement that released the employer from “any and all claims.”

The trial court agreed with the employer, dismissed the employees’ claims and denied class action certification without prejudice.  The employees appealed.

Appellate Court Affirms Reporting Time Pay Not Required

The Court agreed with the trial court that under the Wage Order Krofta is not entitled to two hours’ reporting time pay for the days that he attended staff meetings.  It concluded there was only “one reasonable interpretation” of the reporting time requirement: “when an employee is scheduled to work, the minimum two-hour pay requirement applies only if the employee is furnished work for less than half the scheduled time.”  Under the Wage Order’s clear language, the Court found Krofta was not entitled to reporting time pay because he worked at least one-half of each scheduled meeting.  The Court distinguished a prior case holding an employee was entitled to pay for half of the usual schedule because that employee was called and asked to report to work on an off day without advance notice.

This decision is significant for California employers because it is contrary to the long-held enforcement position of the California Division of Labor Standards Enforcement (“DLSE”).  The DLSE historically required employers who scheduled employees for meetings on normal days off to pay the employees for one-half of their usual day’s work — at least two hours, but no more than four – even if the meeting was scheduled in advance.  Thus, the DLSE interpretation required that a full-time employee be paid for at least four hours when scheduled for a one-hour meeting on an off day.

Split Shift Premium Also Not Required  

The Court agreed that the employer did not owe Krofta additional compensation because he was paid a total amount that was greater than the minimum wage for all hours worked plus one additional hour.  Although no published California case previously addressed this issue, the Court found that the Wage Order provides “one hour at the minimum wage shall be paid in addition to the minimum wage for that workday, not the regular wage for that workday.”  (Emphasis added.)  Since Krofta’s regular pay was “significantly higher than the minimum amount” required by the Wage Order, the Court held, he was not entitled to additional split shift pay.

Release of Wage Claims was Valid

Katz argued that the release agreement she signed was invalid under California Labor Code Section 206, which requires an employer in a wage dispute to pay, without condition, all amounts conceded to be due.  The Court, however, agreed with the trial court’s reference to a 2009 decision that held, “When a bona fide dispute exists, the disputed amounts are not ‘due,’ and the bona fide dispute can be voluntarily settled with a release and a payment — even if the payment is for an amount less than the total wages claimed by the employee.”

Thus, the Court found the release was enforceable because a bona fide dispute existed regarding whether the employer owed Katz any split shift and reporting time pay.

Implications

Barring review by the California Supreme Court, this employer-friendly interpretation of the Wage Order’s reporting time and split shift requirements indicates that, to avoid potential reporting pay claims, employers should consider scheduling staff meetings for less than two hours in length and notify employees of the meetings as far in advance as possible.  Employers also should consider ensuring that these meetings last at least one-half of the scheduled time and that all employees correctly record their time at such meetings and are compensated appropriately.  Employees who are called in to work with little or no advance notice should continue to receive reporting time pay consistent with the Wage Order’s requirements.  With respect to split shift issues, employees should consider auditing their payroll practices to determine that they are using the proper minimum wage calculations for split shift premiums. 

Jackson Lewis attorneys are available to answer inquiries regarding this and other workplace developments.

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