California Employee Rights Advocate : California Labor Attorney & Lawyer : Southern CA Employment Law : Los Angeles, Orange County : United Employees Law Group

Given the dismal state of the economy, many California workers are walking around with the possibility of being laid off looming over their heads. Even if they are not laid off, they may see their work schedules and salaries reduced. Many companies are using temporary schedule and salary reductions to cut costs until business conditions improve. The key for affected employees is to know the guidelines for such reductions.

First and foremost is the question of whether affected employees have exempt or non-exempt status. Under California law, all employees are considered to be non-exempt, meaning that they are entitled to overtime pay. The only exception is for those employees that meet all the requirements of an applicable exemption, most commonly the executive, administrative, or professional exemptions. To qualify for these exemptions an employee must pass the salary test and duties test. The salary test requires an employee to earn a monthly salary that is no less than two times the minimum wage for full-time employment. The duties test requires an employee to be primarily engaged in managerial responsibilities.

With respect to non-exempt employees, it has long been established that an employer may temporarily reduce their workers’ schedules and wages. The issue is a bit more complicated for exempt employees. According to the California Department of Labor Standards Enforcement (DLSE), theLabor Code and Industrial Welfare Commission wage order provisions nor federal law prohibits an employer from reducing the work schedules and salaries of exempt employees. Therefore, absent an employment contract or other agreement that states otherwise, an employer can reduce an exempt employee’s salary as long as they continue to earn more than twice the minimum wage and engage in exempt job duties.

One restriction is that the salary reduction cannot be linked to any corresponding change in days and hours worked. For example, an employer could not reduce an employee’s salary by 15% in exchange for giving them Fridays off. According to the California Department of Labor Standards Enforcement (DLSE), this type of salary reduction structure would violate the salary test and destroy the employee’s exempt status and non-exempt labor requirements such as meal and rest breaks would apply. The rationale is that exempt employees are paid for their work product regardless of the amount of time they take to complete their duties. Tying work hours to earnings is not in accord with being a salaried employee. 

Another consideration is that the salary reduction should also apply to all exempt employees or at least everyone with the same job duties. Applying a reduction to only certain exempt employees could violate anti-discrimination laws.

If your employer is attempting to reduce your work hours or salary, contact an experienced California labor law attorney. An attorney can advise you of your rights and evaluate your specific employment situation.
 

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If an employee is pursuing a small to medium company for overtime wages and insolvency or ability to pay a claim is in question, it is imperative to determine if there is individual liability. In addition, even if the employer is large, the exposure to individual liability with a manager or officer, may also pressure the employer into a settlement.

The relevant California Labor Code provisions which establish individual liability are §§18, 558, 1197.1 and 1199. These sections provide as follows:

• California Labor Code §18:  "’Person’ means any person, association, organization, partnership, business trust, limited liability company or corporation."
• California Labor Code §558: (a)  “Any employer or other person acting on behalf of an employer who violates, or causes to be violated, a section of this chapter or any provision regulating hours and days of work in any order of the Industrial Welfare Commission shall be subject to a civil penalty as follows: (1) For any initial violation, fifty dollars ($50) for each
  underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages.(2) For each subsequent violation, one hundred dollars ($100) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages. (3) Wages recovered pursuant to this section shall be paid to the affected employee.
• California Labor Code §1199, 1197.1 :  "Every employer or other person acting either individually or as an officer, agent, or employee of another person is guilty of a misdemeanor and is punishable by a fine of not less that one hundred dollars ($100) or by imprisonment for not less than 30 days, or both, who does any of the following: (a) requires or causes to be paid to any employee a wage less than the minimum fixed by an order of the commission; (b) Pays or causes to be paid to any employee a wage less that the minimum fixed by an order of the commission or (c) Violates or refuses, or neglects to comply with any provision of this chapter of any order or ruling of the commission.”

In addition to the above California Labor Code sections, provisions of the California Industrial Welfare Commission, (IWC) orders,  have a bearing on individual liability. IWC Orders 4-2001 § 2(H) provide the following definition:

"Employer" means any person as defined in Section 18 of the California Labor Code, who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person."

If an employee is seeking overtime wages, it is wise to have as many “arrows in the quiver” i.e. name as many relevant defendants as possible, to perhaps get a higher and sometimes faster settlement.
 

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