You Have Exempt Employees But Can You Prove They Are ...€¦ · You Have Exempt Employees But Can You ... 50/50 exempt non-exempt. Now, if employee is engaged in exempt and nonexempt

ACCA - San Diego

September 4, 2014 Brown Bag Seminar

You Have Exempt Employees But Can YouProve They Are Exempt In Court?

ACCA San Diego ■ September 4, 2014 ■ Brown Bag Seminar

Similarities and Distinctions BetweenFederal and California Exemption Law

Proving Exemptions at Trial

– Process of Elimination

– Use of Surveys

– Job Shadowing

– Unique Proof Issues

In-house Counsel Perspective

Best Practices

Overview:


Like the FLSA, California lawrecognizes three basic “white collar”exemptions:

– Executive

– Administrative

– Professional

Tacking

Closely Related Work

Exemptions: Key Similarities


Key Differences: White CollarExemptions

Salary test: twice the minimum wage

Duties test:

– Employee must be “primarily engaged” induties that meet the test (quantitative).Basically means 50.1%

– Employee must customarily exerciseindependent judgment and discretion


Key Differences: Salary Test

Guaranteed salary must be at least 2x minimum wage

Effective July 1, 2014, California’s minimum wageincreased to $9.00 per hour which means the minimumsalary needs to be $720 per week, $3,120 per month, or$37,440 per year.

Effective January 1, 2016, California’s minimum wageincreases to $10.00 per hour which means the minimumsalary needs to be $800 per week, $3,466.67 per monthor $41,600 per year.

FLSA: must earn a minimum salary of $455.00 perweek, or $1,972.00 per month … for now


Key Differences: “Primarily Engaged”

CA law provides a quantitative test (asopposed to federal qualitative test)

An employee must spend more than50% of his/her time on exempt duties

Takes into account actual work, plusemployer’s realistic expectations ofthe job


Key Differences: “Primarily Engaged”

Employees cannot attempt to defeat theirexempt status by their own sub-standardperformance or refusal to perform theexempt tasks the job requires– Ramirez v. Yosemite Water Co., Inc., 20

Cal.4th 785, 802 (1999) (“an employee who issupposed to be engaged in sales activitiesduring most of his working hours and fallsbelow the 50% mark due to his ownsubstandard performance should not therebybe able to evade a valid exemption”)


Key Differences: Duties Test forExecutive Exemption

Federal

Primary duty is managingthe enterprise ordepartment or subdivisionthereof

Customarily and regularlydirects the work of two ormore employees

Authority to hire/fire

California

Duties include management of theenterprise or a department orsubdivision thereof

Customarily and regularly directs thework of two or more employees

Authority to hire/fire

Primarily engaged in exempt executiveduties

Customarily and regularly exercisesdiscretion and independent judgment


Key Differences: Duties Test forAdministrative Exemption

Federal

Primary duty is performance ofoffice or non-manual work directlyrelated to the management orgeneral business operations

Primary duty includes the exerciseof discretion and independentjudgment with respect to matters ofsignificance

California

Duties include performance ofoffice or non-manual work directlyrelated to management policies orgeneral business operations

Regularly and directly assists theproprietor or exempt employees

Performs work under generalsupervision along specialized ortechnical lines requiring specialtraining, experience or knowledge

Primarily engaged in exemptadministrative duties

Customarily exercises independentjudgment


Key Differences: Duties Test forProfessional Exemption

Federal

“Learned Professional” Primaryduty is performance of workrequiring advanced knowledgein a field of science or learningcustomarily acquired by aprolonged course ofspecialized intellectualinstruction

“Creative Professional”Primary duty is performance ofwork requiring invention,imagination, originality or talentin a recognized field of artisticor creative endeavor

California

Work that is predominatelyintellectual and varied incharacter

Primarily engaged in theperformance of work requiringadvanced knowledge in a fieldof science or learningcustomarily acquired by aprolonged course ofspecialized instruction or workthat is original and creative incharacter in a recognized fieldof artistic endeavor

Customarily and regularlyexercises discretion andindependent judgment


Proving Exemptions at Trial:

Exemption is an affirmative defense

Employer bears the burden of proof

Proving the employee is “primarilyengaged” in exempt activity is math

Ways to Meet Burden

– Process of Elimination

– Admissions

– Job Analysis Surveys

– Job Shadowing

– Unique Proof Issues


Proving Exemptions at Trial: Process ofElimination

Plaintiff only performed non-exemptwork under certain conditions whichwere present less than 50% of the time

Plaintiff only performed non-exemptwork at the restaurant when she wasunderstaffed and she had to fill in

Plaintiff was only understaffed whenstaffing levels reached 5 guests to 1employee. Levels were 4 or better thevast majority of the workweek


Proving Exemptions at Trial:Admissions at Deposition

Task Area Status PlaintiffCustomer Service

Serving Customers Non-Exempt 30.0%

Directing Customer Service and Dining Exempt 20.0%Food Preparation

Preparing and Cooking Food Non-Exempt 5.3%Managing Food Preparation and Safety Exempt 9.8%

Product and SuppliesStocking and Replenishing Non-Exempt 3.0%Ordering and Receiving Inventory Exempt 2.0%

Restaurant OperationsManaging Restaurant Performance Exempt 3.5%Planning and Scheduling Work Exempt 3.5%Controlling Cash and Security Exempt 3.0%

Employee RelationsTraining and Coaching Exempt 7.5%Managing Human Resources Exempt 2.5%

Restaurant Maintenance

Cleaning and Maintaining Restaurant Non-Exempt 7.0%Overseeing Cleaning and Restaurant Maintenance Exempt 3.0%

TOTAL EXEMPT TIME 54.8%TOTAL NON-EXEMPT TIME 45.2%


Proving Exemptions at Trial:Job Analysis Surveys

Task Area Status Avg %Customer Service

Serving Customers Non-Exempt 11.8%Directing Customer Service and Dining Exempt 18.9%

Food PreparationPreparing and Cooking Food Non-Exempt 3.6%Managing Food Preparation and Safety Exempt 8.2%

Product and SuppliesStocking and Replenishing Non-Exempt 3.2%Ordering and Receiving Inventory Exempt 7.0%

Restaurant OperationsManaging Restaurant Performance Exempt 12.1%Planning and Scheduling Work Exempt 5.8%Controlling Cash and Security Exempt 5.9%

Employee RelationsTraining and Coaching Exempt 8.2%Managing Human Resources Exempt 4.2%

Restaurant MaintenanceCleaning and Maintaining Restaurant Non-Exempt 3.9%Overseeing Cleaning and Restaurant Maintenance Exempt 7.3%

TOTAL PERCENT EXEMPT 77.6%

TOTAL PERCENT NON-EXEMPT 22.4%


Proving Exemptions at Trial: JobShadowing


Proving Exemptions at Trial: JobShadowing

Task

Start

Task

End

Period

Time

Sub-

Activity

Allocated

Time TaskTask

Area

6:03:10 6:03:20 0:00:10 0:00:10 Unlock door. 10

6:03:20 6:12:30 0:09:10 0:09:10 Talk to observer. 0

6:12:30 6:20:00 0:07:30 0:07:30 Check company email. 9

6:20:00 6:22:50 0:02:50 0:02:50 Review notes in ShiftNote from previous

shifts.

9

6:22:50 6:25:40 0:02:50 0:02:40 Review restaurant sales numbers from

last night.

9

0:00:10 0:00:10 Concurrent Activity: Create daily sales

goals for morning shift today.

9

6:25:40 6:28:40 0:03:00 0:03:00 Prepare transaction report and receipt

packet from yesterday to send to

corporate.

9

6:28:40 6:30:20 0:01:40 0:01:40 Take personal break. 0

6:30:20 6:32:10 0:01:50 0:01:50 Check storage room [to see what needs to

be prepped].

4

6:32:10 6:32:40 0:00:30 0:00:30 Turn on lights in restaurant. 12

6:32:40 6:34:00 0:01:20 0:01:20 Distribute prep list to kitchen stations. 4


Proving Exemptions at Trial: UniqueProof Issues

Multi-Tasking Evidence

– Heyen v. Safeway

– Previously ER could split multi-tasking time50/50 exempt non-exempt. Now, ifemployee is engaged in exempt andnonexempt work at same time, 100% ofthat time has to be allocated as exempt ornonexempt depending on the primarypurpose for which the employee undertookthe activity.


In House Counsel Perspective:Surveys

Costs

– Compensated time off work

– Expert fees

– Potential of educating workforce andcreating additional claims

Benefits

– Provides potential defense to existing andfuture litigation

– Provides feedback on job duties versusperformance

– Helps with organizational decisions


In House Counsel Perspective:Job Shadowing

Costs

– No compensated time off

– Plaintiffs who know they are being shadowed mighttry to create evidence

– Statistically reliable sampling might requireshadowing numerous employees

Benefits

– Provides potential defense to existing and futurelitigation

– Provides feedback on job duties versus performance

– Helps with organizational decisions

– Limited potential of educating workforce and creatingadditional claims


Best Practices:

Video?

– Limited usefulness. Need proof of decision-making.

Payroll Certifications?

– Limited usefulness.

– Administrative nightmare.


Best Practices:

Effective staffing and scheduling

– Too much staff on hand is a waste of labor

– Too little leads to exemption issues

Operations Focus

– Exempt employees must be focused onoverall performance of company or unit

Performance Focus

– Exempt employees must ensure everyonedoes his/her job well

– Accountability is key


Best Practices:

Performance Management

– What you measure is what you’ll get

– Grade performance of exempt tasks

Compensation and Incentive Programs

– What you reward is what you’ll get

– Compensate performance of exempt tasks

Work Environment

– Managers should lead, not be one of the“gang”


Best Practices:

Select Qualified Managers orAdministrators

Training

– Teach them the position requires exerciseof discretion and independent judgment

– Provide them with the skills to exerciseindependent judgment and discretion

Tools

– Provide them with the tools to exerciseindependent judgment and discretion


Best Practices:

Train the Supervisors of ExemptEmployees

– Micromanaging exempt employees candefeat exempt status

– Train supervisors that they must allow andencourage exercise of independentjudgment discretion by exempt employees

ACCA - San Diego

September 4, 2014 Brown Bag Seminar

QUESTIONS?

Documents

You Have Exempt Employees But Can You Prove They Are ...€¦ · You Have Exempt Employees But Can You ... 50/50 exempt non-exempt. Now, if employee is engaged in exempt and nonexempt