New Law Prohibits Agreements That Pay Nonexempt Employees A Fixed Salary For Fixed Regular And Overtime Hours

by Manatt, Phelps & Phillips, LLP
Contact

On January 1, 2013, AB 2103 went into effect, explicitly overturning the case of Arechiga v. Delores Press, Inc., 192 Cal. App. 4th 567 (2011), and prohibiting compensation agreements that guarantee nonexempt employees a fixed salary for a guaranteed number of regular and overtime hours per week.  The new law amends California Labor Code Section 515(d).

Under existing California law, employers are generally required to pay nonexempt employees overtime for all hours worked in excess of 8 hours per day and 40 hours per week.  The former language of Labor Code Section 515(d) stated that, if a nonexempt employee was paid on a salary basis, the employee's regular hourly rate should be calculated at 1/40th of the employee's weekly salary.  The overtime rate would then be calculated based on that regular rate.  To provide certainty in overtime amounts, some employers entered into agreements to pay nonexempt employees a fixed salary for a predetermined, fixed number of hours per week, which was intended to compensate employees for both regular and overtime hours.

In the Arechiga case, which the new law overturns, the California Court of Appeal affirmed the enforceability of such fixed salary agreements that compensate for regular and overtime pay in one lump sum amount.  The trial court found that a written agreement that provided a fixed weekly salary of $880.00 lawfully compensated the employee for both a regular hourly wage of $11.14 and an overtime wage of $16.71, which covered 66 fixed hours of work a week.  The appellate court agreed, despite the fact that the agreement did not state the hourly rate, the number of hours per day, the number of hours per week, or even that the salary was meant to cover both the regular rate and overtime.  The trial court adduced all of this information from other evidence that it allowed in, to interpret the agreement.

The new law states that it is the intent of the Legislature to overturn the decision in Arechiga  and adds a new subsection to Labor Code Section 515(d), which states that " Payment of a fixed salary to a nonexempt employee shall be deemed to provide compensation only for the employee's regular, nonovertime hours, notwithstanding any private agreement to the contrary."  Cal. Lab. Code § 515(d)(2).

Employers should review their compensation arrangements with nonexempt employees to ensure that they do not run afoul of the new law.  It is advisable to consult with counsel to make certain that employees are being properly compensated for all regular and overtime hours.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Manatt, Phelps & Phillips, LLP | Attorney Advertising

Written by:

Manatt, Phelps & Phillips, LLP
Contact
more
less

Manatt, Phelps & Phillips, LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.