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Monday
May212012

California Industrial Welfare Commission

The 15 industries for which the California Industrial Welfare Commission determines the wages, hours, and working conditions are: (1) manufacturing, (2) personal service, (3) canning, freezing and preserving, (4) professional, technical, clerical, mechanical and the like, (5) public housekeeping, (6) laundry, linen supply and dry cleaning, (7) mercantile, (8) product handling after harvest, covering commercial packing sheds, (9) transportation, (10) amusement and recreation, (11) broadcasting, (12) motion picture, (13) preparation of agricultural products for market on the farm, (14) agricultural, and (15) household. Cal. Code Regs. tit. 8, §§ 11008-11500.

Before the California Industrial Welfare Commission (commission) adopts an order fixing the wages, hours, and conditions of employment, the Labor Code generally requires that the commission determine that wages are inadequate or that the hours and working conditions are prejudicial to the health, morals, or welfare of employees; select a wage board to consider such matters in conference; consider the report and recommendations of the wage board; and circulate a proposal, hold public hearings on the proposal, and compile a record of the hearings. A statement of basis will necessarily vary depending on the material supporting an order and the terms of the order. The statement should reflect the factual, legal, and policy foundations for the action taken.

The statement of basis for an order fixing the wages, hours, and conditions of employment must show that the order adopted is reasonably supported by the material gathered by or presented to the California Industrial Welfare Commission -- through its own investigations, the wage board proceedings, and the public hearings -- and is reasonably related to the purposes of the enabling statute. The statement of basis is not the equivalent of the findings of fact that a court may be required to make. A statement of basis is an explanation of how and why the commission did what it did.

Monday
May212012

Do payroll companies have to pay overtime?

A payroll company does not have control over employee wages for purposes of determining liability under California Labor Code wage statutes. Control over wages means that a person or entity has the power or authority to negotiate and set an employee's rate of pay, and not that a person or entity is physically involved in the preparation of an employee's paycheck. The preparation of payroll is largely a ministerial task, albeit a complex task in today's marketplace. The employer, however, is the party who hires the employee and benefits from the employee's work, and thus it is the employer to whom liability should be affixed for any unpaid wages. The extension of personal liability to the agents of an employer is not reasonably derived from the language and purposes of the Labor Code wage statutes. This conclusion applies whether the preparation of payroll is done by an internal division or department of an employer, or by an outside vendor of an employer.

The principal test for determining employment relationships is the right of control over the manner or means of accomplishing the result desired. If control may be exercised only as to the result of the work and not the means by which it is accomplished, an independent contractor relationship is established. Strong evidence of the right to control is shown by the right to discharge the worker.

As to a franchisor's provision of payroll services, these ministerial functions are insufficient to support an argument that the franchisor controls labor relations. Providing a payroll service to a franchisee's employees does not in any manner create an indicia of control over labor relations sufficient to demonstrate that the franchisor is a joint employer. The franchisor generates paychecks merely as a convenience for franchisees who provide all relevant wage and tax information. A franchisor must be permitted to retain such control as is necessary to protect and maintain its trademark, trade name and goodwill, without the risk of creating an agency relationship with its franchisees.

Monday
May212012

Can employees sign away their overtime rights?

An employee's wage rights may be provided for in an employment contract and also are closely regulated by statute. The California Labor Code prescribes such matters as the time and manner of paying wages, minimum wage requirements, and mandatory overtime pay. In addition, the California Industrial Welfare Commission (IWC) is empowered to formulate regulations (known as wage orders) governing employment in the State of California. The IWC has promulgated 18 orders that remain in force, 16 relating to specific industries and occupations, one general minimum wage order that applies to all California employers and employees (excluding public employees and outside salespersons), and one order implementing the Eight-Hour-Day Restoration and Workplace Flexibility 

Pursuant to California's statutory scheme, if an employer fails to pay wages in the amount, time or manner required by contract or by statute, the employee has two principal options. The employee may seek judicial relief by filing an ordinary civil action against the employer for breach of contract and/or for the wages prescribed by statute. Cal. Lab. Code §§ 2181194. Or the employee may seek administrative relief by filing a wage claim with the California Labor Commissioner pursuant to a special statutory scheme codified in Cal. Lab. Code §§ 98 to 98.8. Also, in an action brought pursuant to the California Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq., an employee may recover payment of unlawfully withheld wages as a restitutionary remedy. In addition to the foregoing avenues for the recovery of wages, the Labor Commissioner or the employee may seek certain civil penalties when the employee is not paid statutorily guaranteed wages.

Monday
May212012

Minimum Wages in California

In actions under Lab. Code, § 1194, to recover unpaid minimum wages, the Industrial Welfare Commission's wage orders do generally define the employment relationship, and thus who may be liable. An examination of the wage orders' language, history and place in the context of California wage law, moreover, makes clear that those orders do not incorporate the federal definition of employment.

Under Lab. Code, § 1197, the minimum wage for employees fixed by the Industrial Welfare Commission is the minimum wage to be paid to employees, and the payment of a less wage than the minimum so fixed is unlawful. Under Lab. Code, § 1194, any employee receiving less than the legal minimum wage applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage. § 1194, subd. (a)). Accordingly, specific employers and employees become subject to the minimum wage only under the terms of an applicable wage order, and an employee who sues to recover unpaid minimum wages actually and necessarily sues to enforce the wage order. 

The scope of the Industrial Welfare Commission's (IWC) delegated authority is, and has always been, over wages, hours and working conditions. Lab. Code, §§ 11731178.5. For the IWC to adopt a definition of "employer" that brings within its regulatory jurisdiction an entity that controls any one of these aspects of the employment relationship makes eminently good sense. Phrased as it is in the alternative (i.e., "wages, hours, or working conditions"), Cal. Code Regs., tit. 8, § 11140, subd. 2(F),the language of the IWC's "employer" definition has the obvious utility of reaching situations in which multiple entities control different aspects of the employment relationship, as when one entity, which hires and pays workers, places them with other entities that supervise the work. Consistently with this observation, the IWC has explained its decision to include the language in one modern wage order as specifically intended to include both temporary employment agencies and employers who contract with such agencies to obtain employees within the of "employer." The IWC's "employer" definition belongs to a set of revisions intended to distinguish state wage law from its federal analogue, the Fair Labor Standards Act of 1938, 29 U.S.C. § 201 et seq. 

Concerning the specific terms of wage orders, the power to fix the minimum wage does not confine the Industrial Welfare Commission (IWC) to that single act. It may adopt rules to make it effective. The power to provide safeguards to ensure the receipt of the minimum wage and prevent evasion and subterfuge, is necessarily an implied power flowing from the power to fix a minimum wage delegated to the commission. It is true that an administrative agency may not, under the guise of its rule-making power, abridge or enlarge its authority or exceed the powers given to it by the statute, the source of its power. However, the authority of an administrative board or officer to adopt reasonable rules and regulations that are deemed necessary to the due and efficient exercise of the powers expressly granted cannot be questioned. This authority is implied from the power granted.

An examination of Lab. Code, § 1194, in its full historical and statutory context shows unmistakably that the legislature intended to defer to the Industrial Welfare Commission's (IWC) definition of the employment relationship in actions under the statute. The legislature has delegated to the IWC broad authority over wages, hours and working conditions, Lab. Code, § 1173 et seq., the voters have repeatedly ratified that delegation, Cal. Const., art. XIV, § 1, former art. XX, § 17 1/2, and the California Supreme Court has confirmed that the power to fix the minimum wage does not confine the IWC to that single act. It may adopt rules to make it effective. The power to adopt rules to make the minimum wage effective includes the power to define the employment relationship as necessary to insure the receipt of the minimum wage and to prevent evasion and subterfuge. Finally, a worker who sues under § 1194 for unpaid minimum wages actually sues to enforce the applicable wage order. This is because the "legal minimum wage" recoverable under § 1194 is the minimum wage fixed by the commission, Lab. Code, § 1197, in the applicable wage order, even if that order merely incorporates the amount currently set by statute, and because employers and employees become subject to the minimum wage only through the applicable wage order and according to its terms. § 1197

Monday
May212012

Employee or Independent Contractor?

The determination of employee or independent-contractor status is one of fact if dependent upon the resolution of disputed evidence or inferences, and the Division of Labor Standards Enforcement of the Department of Industrial Relations' decision must be upheld if substantially supported. If the evidence is undisputed, the question becomes one of law, but deference to the agency's view is appropriate. The label placed by the parties on their relationship is not dispositive, and subterfuges are not countenanced. The Workers' Compensation Act must be liberally construed to extend benefits to persons injured in their employment. Cal. Lab. Code § 3202. One seeking to avoid liability has the burden of proving that persons whose services he has retained are independent contractors rather than employees.

The principal test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.

Strong evidence in support of an employment relationship is the right to discharge at will, without cause. Additional factors include (a) whether the one performing services is engaged in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (c) the skill required in the particular occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee.