PAGA Anyone? What is It and What Can You Do to Avoid Claims?

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1 PAGA Anyone? What is It and What Can You Do to Avoid Claims?

2 Part One What is PAGA Private Attorneys General Act

3 WHAT IS PAGA? P = Private A = Attorneys aka Bounty Hunter Law G = General A = Act #CAHR16 3

4 LIFE BEFORE PAGA Whole host of Labor Code violations could only be enforced by the Labor Commissioner Civil penalties could not be collected by employees Class and collective actions dominated #CAHR16 4

WHAT IS PAGA o Was enacted in 2004 Labor Code Sections 2698-2699.

5 WHAT IS PAGA o Was enacted in 2004 Labor Code Sections o Deputizes employees to act as private attorney generals o Employees may seek civil penalties that previously would have only been available to the State o Employees may seek civil penalties on behalf of themselves and all other current and former similarly aggrieved employees #CAHR16 5

6 PAGA V. CLASS ACTION o Do not have to meet criteria required to obtain class certification o Cases where class certification is denied may still proceed under PAGA o Theory is PAGA is designed to protect the public as opposed to a means to recover damages on behalf of a class (75/25 split) o Statute of limitations o PAGA one year o Class and individual claims up to 4 years #CAHR16 6

7 WHAT DOES PAGA COVER Just about everything. Essentially employees step in shoes of Labor Commissioner to enforce almost any violation of the California Labor Code Three different classes of violations o Specified Labor Code Violations o Unspecified Labor Code Violations o Workplace Health & Safety Violations #CAHR16 7

8 WHAT DOES PAGA COVER Examples of Specified Labor Code Violations Wage & Hour violations (LC 226.7, 510, 512, 513, 1194, 1197 etc.) Pay stub violations (LC 226(a)) Failure to pay wages on regularly scheduled pay days (LC 204) Failure to timely pay wages upon termination (LC 201, 202, 203) #CAHR16 8

9 WHAT DOES PAGA COVER Examples of Specified Labor Code Violations o Issuance of payroll check with insufficient funds (LC 203.1) o Denial of time off for jury duty, crime victim leave, school activities, etc. (LC 230, 230.1, 230.2, 230.8) o Disciplinary action for disclosing amount of wages (LC 232(c)) o Asking about arrests that did not result in conviction (LC 432.7) #CAHR16 9

10 WHAT DOES PAGA COVER Examples of Specified Labor Code Violations o Retaliation for lawful conduct outside of work (LC 96k) o Free speech o Political Activities o Complaining about the boss o Disparaging the company o Moonlighting o Use of marijuana o Other outside activities #CAHR16 10

11 WHAT DOES PAGA COVER Examples of Specified Labor Code Violations (cont.) o Making false statements to induce employee to relocate for work (LC 970) o Terminating employee because of a wage garnishment (LC 2929(b)) o Taking unlawful deductions from a paycheck (LC 221, 222, 224) #CAHR16 11

12 WHAT DOES PAGA COVER Examples of Specified Labor Code Violations (cont.) Failure to reimburse employees for necessary expenditures (LC 2802) An employer shall indemnity his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.. Includes: Personal Cell / Smart Phones (even if unlimited plans) Mileage / Travel Defense / Indemnity Home office expenses Cannot ask employee to waive if not requested by certain time; employees have up to four years from date expense is incurred #CAHR16 12

13 WHAT DOES PAGA COVER Examples of Specified Labor Code Violations (cont.) o Failing to accommodate employees who wishes to voluntarily participate in rehab (25 or more employees) (LC 1025, 1026) o Requiring a release re wages due, or to become due, unless payment of undisputed wages has been made (LC 206, 206.5) o Retaliation for whistleblowing (LC ) #CAHR16 13

14 WHAT DOES PAGA COVER Examples of Specified Labor Code Violations (cont.) o Coercing employee to patronize employer or any other person in purchase of anything of value (LC 450) o Violating right to day of rest (LC 551, 552) o Influencing political views through threat of discharge (LC 1101) #CAHR16 14

15 WHAT DOES PAGA COVER Examples of Specified Labor Code Violations (cont.) o Failure to provide kin care leave (LC 233) o Taking portion of employee s tips / failure to keep accurate records of gratuities (LC 351, 353) o Requiring employee to take polygraph test (LC 432.2) #CAHR16 15

16 WHAT DOES PAGA COVER Examples of Specified Labor Code Violations (cont.) o Labor Code 1198 Catch-all maximum hours and standard conditions of labor per Wage Orders o Failure to provide suitable seating (LC 1198 / Wage Order) o Failure to provide comfortable temperatures (LC 1198 / Wage Order) o Failure to provide suitable lockers (or equivalent); resting facilities and changing areas (where needed) (LC 1198 / Wage Order) #CAHR16 16

17 WHAT DOES PAGA COVER Examples of Specified Labor Code Violations (cont.) o Discrimination against employee for filing complaint (LC 6310) o Discharging employee for refusing to work in violation of safety standard (LC 6311) o Discontinuing certain medical benefits without properly notifying employees in writing at least 15 days in advance (LC 2806) #CAHR16 17

18 WHAT DOES PAGA COVER Examples of Unspecified Labor Code Violations o Misclassification of independent contractors (LC 226.8; 2753) o Misclassification of employee as exempt from overtime (LC 515) o Failure to provide Notice to Employee Wage Theft Act (LC ) o Failure to provide paid sick leave (LC 245) #CAHR16 18

19 WHAT DOES PAGA COVER Examples of Unspecified Labor Code Violations (cont.) o Failure to provide lactation accommodation (LC 1030) o Failure to provide inspection / copying of personnel records (LC ) o Failure to keep at appropriate location certain payroll records (LC 1174(d) #CAHR16 19

20 WHAT DOES PAGA COVER Examples of Unspecified Labor Code Violations (cont.) o Failure to accommodate enrollment in literacy program (LC 1041) (25 or more employees) o Social media requiring disclosure of password (LC 980) o Violation of rules regarding credit reports (LC ) o Failure to provide notice of termination of continuance and conversion options under employer-sponsored health plan (LC 2808) #CAHR16 20

21 WHAT DOES PAGA COVER Workplace Health & Safety Code Violations (LC 6300 et seq.) o Use of equipment in dangerous condition (LC 6325) o Use of workplace containing friable asbestos (LC ) o Failure to furnish place of employment that is safe and healthful (LC 6400) o Failure to implement injury prevention program (LC ) o Failure to provide safety devices (LC 6403) #CAHR16 21

22 WHAT DOES PAGA COVER The following claims are excluded from PAGA: o Violation of a posting, notice, agency reporting or filing requirement (except if involves mandatory payroll or workplace injury reporting) o No civil penalty where the alleged violation is the failure of the Labor and Workforce Development Agency to act o Does not alter worker s compensation as exclusive remedy #CAHR16 22

23 Part Two How Does PAGA Work

HOW DOES PAGA WORK o Any aggrieved employee can bring on behalf of him/herself and other current and former employees o Good or bad employee can bring claim o

24 HOW DOES PAGA WORK o Any aggrieved employee can bring on behalf of him/herself and other current and former employees o Good or bad employee can bring claim o Aggrieved employee victim of one or more alleged allegations o Applies only to civil penalties (damages and statutory penalties are separately recoverable) #CAHR16 24

25 HOW DOES PAGA WORK o 75% of recovery goes to LWDA; 25% to aggrieved employees o Attorneys fees #CAHR16 25

26 HOW DOES PAGA WORK For specified Labor Code violations: o Employee must first submit detailed notice to LWDA and employer o Employee must pay a filing fee of $75 o LWDA is to notify employer and employee that it does not intend to investigate within 60 days; if fails to do so within 65 days, employee may pursue PAGA claim o If intends to investigate, has 65 days to notify employer and aggrieved employee; has 120 days to investigate (which can be extended by not more than 60 days). If no citation will be issued, LWDA shall notify employer and employee within five business days. If no citation within that timeframe, employee may pursue PAGA claim #CAHR16 26

27 HOW DOES PAGA WORK For unspecified Labor Code violations: o Employee must first send detailed notice to LWDA and employer, and pay $75 fee o Employer may CURE alleged violation within 33 days o If fail to cure within 33 days, employee may file PAGA claim o Employer may only avail itself of cure three times in a 12-month period for same violation(s); only once for curable pay stub claim o Employee may dispute cure and still file absent finding by agency that violation was cured #CAHR16 27

28 HOW DOES PAGA WORK For unspecified workplace health & safety violations: o Employee must first send detailed notice to LWDA and Cal OSHA, and pay $75 fee o If OSHA issues citation, employee cannot file PAGA claim o If OSHA fails to issue citation and employee disputes decision, employee may challenge decision in court. o If OSHA fails to investigate, employee may bring PAGA claim #CAHR16 28

29 HOW DOES PAGA WORK New legislation: o Increased filing fee from $3 to $75 o Extended time for LWDA to investigate from 30 days to 60 days o Extended time for LWDA to advise employer if choose to investigate from 33 to 65 days o Must provide file-stamped copy of complaint, with the case #, to LWDA o Requires court approval of settlements of any civil action filed under PAGA (previously only required approval of penalties sought as part of settlement). Also, proposed settlement must be electronically submitted to the LWDA at the same time it is filed with the Court. o May make it more difficult to settle claims without payment of penalties. #CAHR16 29

30 HOW DOES PAGA WORK Most PAGA violations are not curable. Most common PAGA claims: o Meal breaks o Rest Breaks o Overtime o Pay Stub Violations #CAHR16 30

31 HOW DOES PAGA WORK However, some claims are subject to CURE, including: o Misclassification of employee as exempt from overtime o Misclassification of employee as independent contractor o Failure to provide personnel records o Failure to adopt injury and illness prevention program #CAHR16 31

HOW DOES PAGA WORK Emergency legislation was recently passed to add a violation that can be cured for purposes of PAGA: Can now CURE two pay stub violations: o Start and end dates for

32 HOW DOES PAGA WORK Emergency legislation was recently passed to add a violation that can be cured for purposes of PAGA: Can now CURE two pay stub violations: o Start and end dates for the pay period o Legal name and address of the employer o Remainder of pay stub violations still not curable o Employees can still recover statutory penalty up to $4,000 each #CAHR16 32

33 Part Three What are the Penalties

34 WHAT ARE THE PENALTIES Unless specified, civil penalty = $100 for each aggrieved employee per pay period for initial violation $200 for each aggrieved employee per pay period for each subsequent violation Ex: bi-weekly = $5,100 per aggrieved employee per violation #CAHR16 34

35 WHAT ARE THE PENALTIES Penalties are sometimes specified For example, for Independent Contractor Misclassification: o $5,000 to $15,000 per violation for willful misclassification o $10,000 to $25,000 per violation if pattern or practice Pay Stub Violation $250 per employee per violation for initial citation; $1,000 for each subsequent citation #CAHR16 35

36 WHAT ARE THE PENALTIES Penalties are sometimes specified o Retaliation for lawful work during non-working hours = Lost wages o Failure to timely provide personnel file = $750 o Failure to timely pay wages = $100 for initial violation; $200 for each subsequent violation + 25% of the amount unlawfully withheld o Retaliation under LC up to $10,000 (plus damages) #CAHR16 36

37 WHAT ARE THE PENALTIES Company pays bi-weekly, on the 10 th day after the close of the pay period? Any issue? Pay Day Violation (LC 204) Weekly, biweekly (every two weeks) or semimonthly (twice per month) wage dues within 7 calendar days of end of payroll period If pay within 1 st and 15 th, wages due no later than 26 th ; pay between 16 th and last day of month due by 10 th of the following month PAGA - $100 for first pay period; $200 for each subsequent #CAHR16 37

38 WHAT ARE THE PENALTIES Stacking Penalties #CAHR16 38

39 WHAT ARE THE PENALTIES Joey is a non-exempt employee. For the past two years, he routinely took short lunch breaks. Employees are not required to clock in and out for lunch because they generally take lunch from 12:30 to 1 p.m. After starting a fist fight with a co-worker at work, he is fired. What potential claims does he have? #CAHR16 39

40 WHAT ARE THE PENALTIES Meal break claim can potentially include: o Meal break = One hour of premium pay + PAGA Penalty o Overtime = wages + PAGA penalty o Pay Stub violation = Statutory penalty (up to $4,000) + PAGA penalty o Failure to maintain records = PAGA penalty o Pay Day violation o Waiting time penalties PAGA claim includes all similarly aggrieved current and former employees. #CAHR16 40

41 WHAT ARE THE PENALTIES After a stringent selection process, Suzie was hired as a driver for I-DriveYou, an internet transportation company, as an independent contractor. She is given specific guidelines and rated by customers. She can set her own hours, but will be taken off the list if she doesn t work a minimum number per month. The fare is set by I-DriveYou and she cannot book future rides outside of the I-DriveYou app. What potential claims does she have? #CAHR16 41

42 WHAT ARE THE PENALTIES Potential claims include: o Misclassification PAGA penalty o Overtime wages + PAGA penalty o Meal Breaks premium pay + PAGA penalty o Rest Breaks premium pay + PAGA penalty o Unpaid Minimum Wage liquidated damages + PAGA penalty o Failure to keep records PAGA penalty o Failure to timely pay PAGA penalty o Pay Stub violations statutory penalty + PAGA penalty o Pay Day violation PAGA penalty o Waiting time penalties statutory penalty + PAGA penalty o Failure to reimburse expenses damages + PAGA penalty o Failure to provide required leaves damages + PAGA penalty o Attorneys fees, costs and interest Plus, tax and other issues. #CAHR16 42

43 WHAT ARE THE PENALTIES If change hypo so Suzie was hired as an employee, paid twice the minimum wage, received reimbursement for expenses and paid sick leave. She also occasionally worked more than eight hours in a day. However, she was misclassified as exempt. What potential claims does she have? #CAHR16 43

44 WHAT ARE THE PENALTIES Potential claims include: o Misclassification PAGA penalty o Overtime wages + PAGA penalty o Meal Breaks premium pay + PAGA penalty o Rest Breaks premium pay + PAGA penalty o Unpaid Minimum Wage liquidated damages + PAGA penalty o Failure to keep records PAGA penalty o Failure to timely pay PAGA penalty o Pay Stub violations statutory penalty + PAGA penalty o Pay Day violation PAGA penalty o Waiting time penalties statutory penalty + PAGA penalty o Failure to reimburse expenses damages + PAGA penalty o Failure to provide required leaves damages + PAGA penalty o Attorneys fees, costs and interest #CAHR16 44

45 WHAT ARE THE PENALTIES If change hypo so Suzie misclassified as an I/C but would have been exempt if hired, what happens? #CAHR16 45

46 WHAT ARE THE PENALTIES Potential claims include: o Misclassification PAGA penalty o Overtime wages + PAGA penalty o Meal Breaks premium pay + PAGA penalty o Rest Breaks premium pay + PAGA penalty o Unpaid Minimum Wage liquidated damages + PAGA penalty o Failure to keep records PAGA penalty o Failure to timely pay PAGA penalty o Pay Stub violations statutory penalty + PAGA penalty o Waiting time penalties statutory penalty + PAGA penalty o Failure to reimburse expenses damages + PAGA penalty o Failure to provide required leaves damages + PAGA penalty o Attorneys fees, costs and interest #CAHR16 46

47 WHAT ARE THE PENALTIES Employee Handbook contains rest break policy as follows: Every employee is permitted to take rest periods, which insofar as practicable shall be in the middle of each work period. The authorized rest period time shall be based on the total hours worked daily at the rate of ten minutes of rest time for every four hours worked. However, a rest period need not be authorized for employees whose total daily work time is less than three and one-half hours. Is there anything wrong with this policy? If so, is there PAGA exposure? #CAHR16 47

48 WHY ARE PAGA CLAIMS RISING o PAGA claims cannot be waived o Class action waivers may be enforceable o Arbitration and PAGA o Can be extremely costly defense costs, potential penalties & fees o Leverage settlement #CAHR16 48

49 Part Four Tips to Avoid PAGA Claims

50 TIPS TO AVOID PAGA CLAIMS o Make sure employee handbook is compliant o Have detailed timekeeping, overtime and break policies in handbook o Issue reminders to staff o Train and retrain supervisors o Disciplinary action for violators #CAHR16 50

51 TIPS TO AVOID PAGA CLAIMS How would you improve / change this policy: Overtime: Non-exempt employees are entitled to overtime. Employees will be notified of their eligibility for overtime pay at their time of hire and/or at the time their job duties and position change. From time to time, employees may be required to work beyond their usual work hours. If an employee entitled to overtime is required to work in excess of his or her normal work hours, the employee will be paid overtime pay in accordance with the requirements of state and federal laws. Employees must have the prior approval of their manager before they may work overtime except in an emergency. ADD: No off-the-clock work is permitted (including after-hours s, etc) If work performed after hours, must be recorded. If work OT without authorization, may be subject to disciplinary action All OT worked will be paid, whether authorized or not #CAHR16 51

52 TIPS TO AVOID PAGA CLAIMS How would you improve / change this policy: Timekeeping: Non-exempt employees are required to record the time they work each day, as well as all absences. Failing to accurately record your time can lead to disciplinary action up to and including termination. ADD: Accurately record the time begins shift, begins and ends a meal period, and leave for the end of each work shift. All off-the-clock time must be recorded. Non-exempt employees are required to verify that all hours of work recorded are accurate each pay period. Any errors on your time records must be reported on a Manual Time Entry form and submitted promptly to supervisor. Failing to accurately record the time that you began and ended work and your meal periods, working off-the-clock, falsifying or altering time records, completing the time record of another employee or allowing another employee to record your time are serious violations of company policy, which can lead to disciplinary action up to and including termination. #CAHR16 52

53 TIPS TO AVOID PAGA CLAIMS o Conduct self-audits o Time cards and payroll practices o Classifications (I/C v. employee; exempt v. non-exempt) o On-Call vs. Uncontrolled Standby o Call-Back procedures o Meal Breaks o Overtime off-the-clock o Use of smart phones by non-exempt employees o Reporting Time o Policies regarding off-duty conduct #CAHR16 53

54 TIPS TO AVOID PAGA CLAIMS Check information on pay stub MUST have: o Gross wages earned o Total hours worked (unless exempt) o Number of piece-rate units earned and applicable rate o All deductions o Net wages earned o Inclusive dates of pay period o Name of employee and last 4 of SSN or employee ID o Name & address of legal entity that is the employer o All applicable hourly rates & corresponding # of hours at each rate And, effective July 1, 2015: paid sick leave (unless other notice) #CAHR16 54

55 TIPS TO AVOID PAGA CLAIMS Check / Implement procedures for handling, to name a few: o Requests for personnel files and payroll records o Make-Up time o Lactation accommodation o Rehab accommodation (25 or more employees) o Heat Illness Prevention and cool down period o Sick leave o Wage Theft Protection Act Notice to Employee o Consider changing from weekly to twice a month #CAHR16 55

56 TIPS TO AVOID PAGA CLAIMS Wage Theft Notice (LC ) MUST include: o Rates of pay, including overtime rate and how paid (hourly, weekly, shift, salary, etc.) o Allowances, if claimed as part of minimum wage o Regular payday o Name of employer (including dba s ), physical address, mailing address if different, and telephone number o Name, address and telephone number of w/c carrier o Sick leave rights o Other information Labor Commissioner deems material/necessary Must update within 7 days of changes #CAHR16 56

57 TIPS TO AVOID PAGA CLAIMS Personnel Records o Law expanded employee access to personnel files (1/1/13) o Former employees now have same rights as present employees o Employers must develop and provide written form to employees upon request o Deadline: 30 calendar days from request by employee or representative o May redact certain information (e.g., names of non-supervisory employees) o Not just right to inspect; entitled to copies provided pay actual cost o PAGA Penalty: $750 Payroll records - 21 days from request #CAHR16 57

58 Part Five You ve Been Served Now What

59 YOU VE BEEN SERVED! INVESTIGATE EVALUATE MERITS #CAHR16 59

60 YOU VE BEEN SERVED! To CURE OR NOT TO CURE It depends.. PROS CONS #CAHR16 60

61 TO CURE OR NOT TO CURE? Back to Suzie, the independent contractor. o Misclassification PAGA penalty o Overtime wages + PAGA penalty o Meal Breaks premium pay + PAGA penalty o Rest Breaks premium pay + PAGA penalty o Unpaid Minimum Wage liquidated damages + PAGA penalty o Failure to keep records PAGA penalty o Failure to timely pay PAGA penalty o Pay Stub violations statutory penalty + PAGA penalty o Waiting time penalties statutory penalty + PAGA penalty o Failure to reimburse expenses damages + PAGA penalty o Failure to provide required leaves damages + PAGA penalty o Attorneys fees, costs and interest Plus, tax and other issues. #CAHR16 61

TO CURE OR NOT TO CURE.. Evaluate merits independent contractor v. employee The most significant consideration is the putative employer s right to control work details.

62 TO CURE OR NOT TO CURE.. Evaluate merits independent contractor v. employee The most significant consideration is the putative employer s right to control work details. The right to control does not need to extend to every possible detail of the work being performed. The pertinent question is whether the putative employer retains all necessary control over the worker s performance. Relevant inquiry is not how much control a hirer exercises, but how much control the hirer retains the right to exercise. Right to discharge at will, without cause is strong evidence in support of an employment relationship. #CAHR16 62

63 TO CURE OR NOT TO CURE.. Evaluate merits Secondary indicia includes: Whether the worker is engaged in a distinct occupation or business; The kind of occupation with reference to whether, in the locality, the work is normally done under the direction of a principal or specialist without supervision; The skill required in the particular occupation; Whether the principal or worker supplies the instrumentalities, tool and place of work; The length of time for which the services are to be performed; The method of payment (whether by time or the job); Whether or not the work is part of the regular business of the principal; Whether the parties believe there relationship is one of employer/employee. #CAHR16 63

64 YOU VE BEEN SERVED! SETTLE vs. LITIGATE #CAHR16 64

65 QUESTIONS #CAHR16 65

66 CONTACT US Please feel free to contact us with any questions: Eve H. Wagner Sauer & Wagner LLP 1801 Century Park East, Suite 1150 Los Angeles, CA Direct Phone: (310) ; Fax: (310) #CAHR16 66

67 THANK YOU We hope you enjoyed our seminar and look forward to working with you in the future Of course, please note that the information provided herein is for informational purposes only and does not constitute legal advice Note: our seminar and these materials may be considered attorney advertising. #CAHR16 67

68 #CAHR16 Eve H. Wagner Attorney at Law Partner Sauer & Wagner LLP

January 23, Top 10 Wage and Hour Compliance Tips

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