In a word association game, the term “California wage and hour law” promptly yields utterances that include groans, moans, guttural indicia of disdain and adjectives that my editor would delete before sending this column to print.1 But once the air clears of the moaning and groaning,2 the most common adjectives used to describe the subject would be “boring,” “confusing” and “ridiculously arcane.”3 In an office pool, I’d give even odds to any of those adjectives winning the word association game.4
A simple demonstration proves the point. Wage and hour law is certainly not sexy or racy. If that was your sole area of expertise, you wouldn’t exactly be able to regale partygoers with the types of stories and experiences one obtains from union campaigns or sexual harassment cases. People run for cocktail weenies when you bring up your great new pieces of litigation involving “rest and meal periods.” So, boring is taken care of.
“Ridiculously arcane” is evident from the philosophies underlying much of our wage and hour laws. Many of them are premised on the concept of the factory floor—where “bosses” from the industrial revolution stood over huddled workers and forced work with little regard for hours of work, age, exhaustion or safety. Few have ever been revised to take into account the vast number of employees who now work in climate controlled offices that are only open during “business hours.”
“Confusing” is demonstrated with one simple example: Exempt employees. It’d be way too easy consider an employee paid a significant salary to be “exempt.” But that’s not the case. Rather, the exemption is based on notions of the types (and amount of particular types) of work. As a result, a construction supervisor making $33,600 per year would not be entitled to overtime, while a high-level paralegal making in excess of $75,000 per year in an air conditioned office would. See—it’s confusing.
And it gets even more confusing when you delve into what you can and cannot deduct from an exempt employee’s salary without rendering him or her non-exempt (and, thus, entitled to overtime). Without boring and confusing you about those rules, suffice it to say I don’t get enough column inches to make it any less confusing. But what I can tell you is, at first blush, it seems the rules have become a little less confusing.
This is because, just recently, the Division of Labor Standards Enforcement (DLSE) issued an opinion letter that revised—actually, reversed—a long-standing position regarding the effect of salary reduction on a salaried employee’s exempt status. The last time we had a slight economic blip (the dot-com bust), companies throughout California attempted to save money by lots of methods, including layoffs, furloughs and wage reductions. And one way to do that was to move to a four-day workweek and lower wages (including salaries for exempt employees) commensurately. Unfortunately, however, the DLSE then opined that to reduce a salaried employee’s hours commensurate with giving them a day off was tantamount to making an impermissible deduction to the employee’s salary. The result: The exempt employee would be entitled to overtime, rest and meal periods, and would have to punch a time clock.
So now we find ourselves in another economic morass, with a broad swath of companies (not just the tech sector) looking for any way possible to save money. And again, the concept of pay reductions for salaried employees (with a commensurate day off) gets bandied about. And again, us lawyer types have had to advise that such a move—while making perfect business sense—could result in timekeeping, rest and meal period, and overtime obligations. Even if the employee is paid hundreds of thousands of dollars per year!
This time, however, the DLSE seems to have it right. In an August 19 opinion letter, it indicated its new enforcement position, which is consistent with federal law. Under that opinion, businesses may now offer salaried employees a reduced work schedule (such as a day off per week) with a commensurate reduction in salary, without violating the salary requirement for the exemption.
But of course, there are catches. First, the employee who’s being given the day off and whose salary is reduced must still earn, after the reduction, a minimum of $33,280 per year, paid on a salary basis. That number is an absolute floor, regardless of the number of days or hours an employee is supposed to work.
Second, the opinion letter intimates that, to be valid, the work and salary reduction must be due to economic circumstances and must be intended to be temporary. It doesn’t appear to be authorizing such a reduction for purposes of achieving a four-day workweek among salaried employees.
So, while the debate rages over which adjective is the most descriptive when it comes to wage and hour law, and as our economy continues to chug sluggishly along, California employers appear to have one more alternative to layoffs that can be considered without unintended consequences and liabilities.5
1 I try sending this column in as late as possible to see if I can sneak a good string of vulgarity past her. To date, however, the hangover medicine has kicked in for her early enough in the morning that she’s caught them all.
2 And the guttural stuff! Truly, as topics go, wage and hour stinks.
3 For the linguistic purists, I recognize that the latter descriptor is comprised of an adverb modifying an adjective. Those of you who write me about that stuff need to get a life.
4 Which would explain why I had such a short lived career as a bookie.
5 You can view the DLSE’s opinion letter at http://www.dir.ca.gov/dlse/opinions/2009-08-19.pdf.
