Recently, the California Labor Commissioner cited a residential care provider for multiple wage theft violations, including for failure to pay minimum wage and overtime.
As a result of the Labor Commissioner’s investigation the company was found to owe approximately $192,000 in pay. However, in addition to back wages, this particular employer will have to pay nearly $450,000 because of penalties, interest, liquidated damages and other fees.
The lesson for all employers is this:
Ensure proper payment of all wages now, or double (or perhaps triple) the costs later.
So what can employers do to stay compliant and reduce the risk of wage claims? Here’s a Q&A regarding some of the bigger pitfalls in timekeeping and payroll.
Payroll & Timekeeping FAQs
Q: When should an employer change an employee’s time entries?
A: An employer should change an employee’s time records when the employee forgets to record his or her start or end time or meal period on a timesheet or time clock. Further, an employer can record an employee’s work time if the employee is out sick, on vacation, or absent on some other form of time off.
If the employee forgets to clock in or out, or record a meal period, the employer may enter the actual in or out time to ensure the employee is paid correctly. If an employee is out sick or out for some other form of time off, the employer can change the time record to show the reason for the time off.
Important: Employees should initial any changes to their timecards to confirm they are accurate.
Q: What are some of the common mistakes employers make when tracking time?
A: Don’t assume an employee only works 8 hours a day or 40 hours in the week or takes a 30-minute or 1-hour meal break each day, regardless of the hours the employee was scheduled to work or the Company’s meal break policy or practice.
An employer may not change a time record to show fewer hours than actually worked. For example, an employer may not reduce an employee’s time record from 10 hours in a work day to 8 hours to avoid overtime payment. This is true even if the employee consents to the change.
If an employee wants to take personal time off during a particular day and make up the time later in the same week, consider whether the “makeup” rules can apply. If done correctly these rules can allow an employee to work up to 11 hours in a workday (3 hours of makeup time) without triggering overtime, as long as the employee does not work more than 40 hours in a workweek).
Q: What are some of the potential claims if the employer fails to accurately pay an employee?
A: Under California law, if an employer does not pay an employee correctly, they can expect to see some or all of the following claims:
Failure to pay minimum wage (for off the clock work/hours that may not have been recorded on time records)
Failure to pay wages for hours worked
Waiting time penalties (up to 30 days wages)
Paystub violations (up to $4,000 in penalties or damages)
Failure to keep accurate records
Penalty claims under the Private Attorneys General Act (PAGA)
Missed Meal Break Penalties (one additional hour of pay per day missed)
Missed Rest Break Penalties (one additional hour of pay per day missed)
Violation of Business & Professions Code Section 17200 (restitution and injunctive relief)
There is risk of both civil and statutory penalties under various Labor Code provisions.
Not only is the employer potentially liable, there is a recent move to try and hold individuals liable for penalties (against those who caused the violations to occur).
Q: What is the statute of limitations on these claims?
A: Under California Business & Professions Code Section 17200, employees can assert various wage claims going back up to four years. This includes claims for wages, meal breaks, rest breaks, overtime, minimum wage, failure to pay all wages, etc. Some claims go back one – three years, depending on the particular statute at issue.
Q: How can an employer avoid (or at least reduce the risk of) claims?
A: Strict compliance is critical. Employers should minimize unnecessary changes to time records, including requiring all employees to accurately record and maintain their own time records. Employers should prohibit changes to time records unless pre-approved and signed off by the employee.
Employers should develop policies prohibiting off-the-clock work, ensure employees are authorized and permitted to take all rest periods and meal periods as required by law, and have employees review, sign and date their own time records each pay period.
All work hours must be recorded, even if the work is performed remotely or before or after regular work hours.
Employers who may be exposed to litigation risk because of previous violations should consider a payroll audit (under the attorney-client privilege) to determine the scope of potential liability. Ensure you have non-retaliation policies in place and inform employees there will be no retaliation if they complain about errors or “wage theft” or raise questions about timekeeping, breaks or pay.
It is also important to analyze classification of workers as independent contractors vs. employees and exempt vs. non-exempt. Non-exempt employees are entitled to overtime premiums. Exempt employees must be paid at least two times minimum wage on a salaried basis. Recent minimum wage increases must be complied with and there are many local minimum wage ordinances to be aware of as well.
Pay stubs must be reviewed to ensure accuracy and compliance with the law.
Q: What documentation would be important when changes are made to time records?
A: When changes are made to a time record, employers should keep the original and create a modified record, or line through the error on the original, make the correction, and have both the employer and employee sign and date the corrected record. The reason for any changes should be noted and signed.
If engaging in a wage audit, enlist the help of an experienced employment attorney.
Paying Employees in California
Don’t forget the new laws that went into effect in various metro areas like Los Angeles, as well as new state laws affecting pay, including:
The Fair Pay Act, ensuring equal pay for all genders.
Senate Bill 3, signed by Governor Jerry Brown earlier this month, SB3 amends the Healthy Workplaces, Healthy Families Act and provides an increase in minimum wage as of January 1, 2017.
The Los Angeles Minimum Wage Ordinance also mandates a minimum wage increase as of July 1, 2016.
Remember, in cases where a city or county law conflicts with state or federal law, employers should always pay the higher standard.