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MARCH
2002
UPDATE
ON COMPUTER SOFTWARE EMPLOYEE EXEMPTION: California
law provides several ways for certain employees to be exempt.
One of those, the Computer Software Employee exemption,
provides that certain computer software employees are exempt
from overtime requirements if specific criteria are met.
One of the criteria in the original statute authorizing
this exemption is that the employee be paid an hourly rate
not less than $41 per hour. That rate has been increased
as of January 1, 2002 by 4% and is now $42.64 per hour.
Note that a computer software employee is not restricted
to this form of exempt status. For example, a computer
software employee who meets the criteria for some other
exemption (for example, if the employee is a bona fide
manager) would only need to be paid a monthly salary of
at least twice minimum wage (now $2,340 per month).
MORE
EMPLOYERS HIT WITH MISCLASSIFICATION DISASTER: Many
employers are having increasing difficulty in determining
when an employee can legitimately be classified as exempt
from California and federal overtime pay requirements.
As a result, the likelihood of an employer facing an expensive
wage-and-hour claim has vastly increased. Meanwhile, employees
are making sure that they become better educated on the
subject. Employers should review their pay practices
and the correctness of the exempt/non-exempt classification
of all positions before they are next. Following on
the heels of the misclassification cases against Farmer's
Insurance Exchange, 21st Century Insurance Group, Starbucks
Co., and Taco Bell is the $35 million settlement by Pacific
Bell to resolve claims by approximately 1,500 engineers,
who earn as much as $60,000 per year, who claimed they
worked an average of 50 hours per week without overtime
pay. The back overtime pay to each engineer will range
from about $100 to $450 for each week worked since 1993!
The risk of lawsuits due to misclassifying hourly workers
as exempt managers or administrators is now one of the
greatest litigation risks faced by employers. Give the
current notoriety of these awards, employers should carefully
examine whether or not each "exempt" employee
is properly classified. Advice of qualified counsel
is highly recommended in this analysis, given the current
high stakes.
INJURED
WORKERS' BENEFITS INCREASED: Agreeing that California's
benefits for injured workers are inadequate, the Legislature
passed AB 749 (see www.assembly.ca.gov for
details on AB 749), which raises weekly payments by more
than $300 over four years. After vetoing three previous
benefits increases in the last three years as being too
costly, Governor Gray Davis indicated he will sign the
measure in this election year. The bill raises California
from 49th to 40th in the country in the level of benefits
provided to injured workers. The bill raises maximum benefits
from $490 per week to $602 in 2003 and $840 in 2006. After
2006, yearly hikes will be equivalent to the state's average
wage increase. The bill also doubles death benefits to
a maximum of $320,000. The increases begin January 1, 2003,
and are the first increases since 1996. State officials
estimated that 900,000 claims are filed each year for on-the-job
accidents or deaths; under the system, employees are entitled
to compensation in exchange for not suing their employers.
The increase is expected to cost employers billions of
dollars, without providing much in the way of reform or
improved cost-effectiveness.
REPORTING
TIME PAY CLARIFICATION: The DLSE recently provided
Waag and Co. with an analysis of obligation to pay reporting
time pay when employee is called in, works for less than
half his / her scheduled shift, is sent home, and is then
called back in again the same day to work a full shift.
The following 2 examples demonstrate the importance of
planning ahead. Example 1. If an employee reports
for work expecting to work an 8 hour shift, works only
1 hour and is sent home, and then is asked to return later
in the workday to work a different 8 hour shift, the employer
is required to pay the employee a total of four hours pay
at the employee's regular rate of pay (one-half of the
employee's regularly scheduled or usual shift) for the
first show-up. In addition, the employee is entitled to
recover an additional seven hours at straight time and
one hour at time and one-half at the employee's regular
rate of pay as a result of the eight hours worked at the
second show-up; a grand total of 12 hours. To summarize,
the employee would be entitled to eleven hours at the regular
rate of pay and one hour at the premium rate of time and
one-half. It is noted that three of the four hours paid
to the employee for the first show-up would not be counted
toward the employer's overtime obligation but would, instead,
be considered in the same vein as a penalty. Example
2. If an employee reports for work expecting to work
an 8 hour shift, is not put to work and is asked to return
later in the day to work a different 8 hour shift, the
employer is required to pay the employee twelve hours of
pay: four hours for the first show-up when he or she was
not put to work and eight hours for the second shift when
the employee actually was provided with a full shift; a
grand total of 12 hours. (source: DLSE Info 907).
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