The year 2001 reflects the Legislature's continued attempts to overcome 16 years of Gubernatorial control over California's wage and hour laws. As occurred in the year 2000, the Democratic Governor has embraced a series of updates to wage and hour law that benefit employees in California. His successors in their appointees, in contrast, vetoed many of the legislative changes enacted and now effective in 2001.

Beginning Jan. 1, 2001, the California minimum wage increases to $6.25/hour. The rate increases to $6.75 in January 2002.

Employers who want to claim an exemption from California's overtime requirements for their executive, administrative and professional employees (e.g., supervisors and managers) must now provide a minimum monthly guaranteed salary. For those employees, the former $1,050 per month “remuneration test” of Wage Order 4 went to a “salary test” equal to at least twice the minimum wage. Under the current minimum wage of $6.25 per hour, the monthly guaranteed salary must be at least $2,167 (rounded) per month. In short, where employers preciously had to guarantee compensation of at least $1,050 per month (under any formula of salary, hourly wages, commissions, etc.) employers must now guarantee at least $2,167 per month in the form of a guaranteed salary.

This minimum salary requirement applies to part time employees. This minimum monthly salary does not replace the requirement that the employer ensure the employee is spending at least 50% of his/her time in exempt, management tasks. When the minimum wage rises to $6.75, the monthly salary guarantee will rise to $2,340 per month.

Under the Fair Labor Standards Act, the employer need only pay a guaranteed weekly (not monthly) salary to maintain the exempt status of its employees. Failure to pay the full weekly salary results in the employer losing the right to claim the exemption. Employers can avoid paying the full weekly salary in the following circumstances, set forth by the Secretary of Labor:

The DLSE, through its former Legal Counsel, Miles Locker, attempted to implement most of the federal standards governing the concept of a “monthly salary.” He prepared an opinion letter to DLSE offices and to the public that outlined the requirements for paying a guaranteed monthly salary on May 30, 2001. His opinion letter adopted all but one of the “exceptions” to the requirement for a monthly full salary. The DLSE has since withdrawn that opinion letter.

Assuming the legislature in California fully intended to implement a requirement for a monthly salary guarantee, similar to the federal weekly salary, the reasoning contained in Miles Locker's letter would still be valid.

Persons who function as corporate officers or managers are now subject to being assessed fines and penalties if they are individually responsible for the non-payment of overtime, minimum wages, etc, regardless of whether the manager did, or did not, intend to violate the law. It is not yet clear whether California law agrees with federal law which allowed employees to bring lawsuits for back pay against managers who controlled the business. California's statute implies that managers are liable for penalties and fines for violations of the new Section 500 series of Codes, but the statute does not make such managers liable for all matters. Those new areas of potential liability are violations in the following sections: Section 510 - Daily overtime; Section 511 - Alternative workweek; Section 512 - Meal periods; Section 513 - Makeup work time; Section 515 - Additional overtime exemption; and Section 515.5 - Software computer exemption.

Employers who have an adverse decision at the California Div. of Labor Standards Enforcement (otherwise known as the Labor Commissioner's office) now must post a bond in the full amount of the DLSE's award, in order to file a Court appeal of that award. Employers are still required to file their appeals within ten (10) days, but they must also post the cash bond along with filing that appeal.

The California legislature at the end of 2000 passed Labor Code 515.5(3) allowing California employers to take the same overtime exemption that federal law allowed for computer software engineers. The catch is that the employer in California must pay a minimum of $41/hour to each such engineer. This amount is higher than the federal software exemption at $27+/hour.

California has a new penalty section, Labor Code § 226.7, for all employers who fail to allow their non-exempt employees to have rest breaks or lunch breaks. For each day in which the employer fails to provide such a break, the employer has to pay the employee an additional one hour of wages for that day. The one hour must be paid at the employee's “regular rate.”

At least one DLSE office has expressed the opinion that the penalty applies to breaks and to meal periods separately. In other words, the DLSE may apply this rule of one hour to the loss of either break, and then apply another one hour penalty to the loss of the lunch period. Assuming that the employee is due multiple lunch periods in a day (i.e., from working more than 12 hours in a day), the DLSE has informally expressed an intention to apply yet another one hour penalty to additional lunch periods lost.

The Legislature has enacted a new “waiting time penalty” provision. Effective in 2001, the Labor Code requires employers to pay a waiting time penalty of one day's pay for each day in which the employer has issued a paycheck via an instrument that is drawn on insufficient funds or invalid. In short, a “bad check” issued to an employee produces an extra day of pay for each day in which the employer has failed to “make good” on that bad check.

This provision has a limit of 30 days during which the penalties can accrue, which is the same time period that waiting time penalties accrue when an employee terminates employment and the employer has not paid wages in full as of the date of termination. Under this new Labor Code section, an employer who has insufficient funds to make payroll is better off not making payment at all to its employees. Failure to make payment does not generate the waiting time penalty, whereas the insufficient paycheck does trigger such penalties.

Any employer who violates Labor Code §226(a) which requires submitting itemized information to each employee on each pay date, is now subject to a penalty of up to $4,000 plus the employee's attorneys fees and costs.

Any employer who accepts gratuities in the form of credit card tips, must credit the full amount to the employee, without deductions for credit card processing costs, and make that payment to the employee by the next pay date following the customer transaction.

Employers with certified nurse midwives, certified nurse anesthetists, and certified nurse practitioners, may now claim an overtime exemption for these 3 categories of employees who also otherwise meet the duties' tests for an exemption. Each type of nurse must be certified under California law.

Labor Code §2802 requires California employers to reimburse their employees for all expenses incurred as a part of the job. Starting in 2001, an employee who sues to recover unreimbursed expenses, may also recover attorneys' fees and court costs along with the expense reimbursement.