LABOR COMMISSIONER TAKES POSITION ON KEY ISSUES
By Cynthia Elkins

The Division of Labor Standards Enforcement (DLSE) or commonly known at the Labor Commissioner, a division of the Industrial Welfare Commission (IWC) of the State of California, is responsible for interpreting and implementing the wage and hour laws in California. During 2002, the Office of the Labor Commissioner has issued numerous opinion letters on key issues affecting California employers. Below are some of the more significant opinions.

Individuals Liable for Wages: The DLSE issued an opinion concluding that an individual can be an “employer” within the meaning of the laws dealing with the payment of wages so that the managers, officers, directors and possibly even venture capitalists of a corporate employer, who are directly involved in the hiring, firing and compensation of employees, could be liable for employee wages.1

While the term “employer” is not specifically defined in the portion of the Labor Code dealing with wages, hours and working conditions, the DLSE looked to the IWC wage orders which defined “employer” as “any person as defined in Section 18 of the Labor Code 2who 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.”3 It appears from the opinion letter that the DLSE will now look to who has the power to control the employees in question taking into consideration who: a) has the power to hire and fire; b) supervise and control work schedules or conditions of employment; c) rate and method of payment of wages and d) who maintained the employment records.

DLSE Expands Interpretation of Non Discrimination provisions in Labor Code Section 98.6:

Labor Code §98.6 provides that an employee cannot be disciplined, discharged or discriminated against because the employee a) engaged in lawful off duty conduct, b) filed a bona fide complaint or claim, c) instituted any proceeding relating to their rights under the jurisdiction of the Labor Commissioner, d) testified or participated in any proceeding before the Labor Commissioner or e) exercised any other rights afforded the employee.

The DLSE recent opinion provides that an employer cannot discrimination nor engage in a retaliatory discharge against an employee who merely complains to the employer regarding a potential violation of the Labor Code - without actually having to have filed a complaint or claim with the Labor Commissioner.

Use of Personal Time Off (PTO) and Vacation Time May be Mandated by Employer:

Employers may require employees to use their accrued vacation and/or PTO time during specific times during the year only if NINE MONTHS advance notice is provided to the Employee.4 Therefore, if an employer wishes for an employee to use their PTO or vacation accrual during any period of shut down the employees must be notified of this at least 9 months prior to the week off.

Compensation for Exempt Employees Performing “Work” while on Vacation: If an exempt employee performs any work during time designated as “vacation” such as checking and responding to emails or voice mails, the Labor Commissioner stated that there is no exception to the rule that any work performed during any workday would entitle the exempt employee to the salary for that day.5

The Labor Commissioner’s opinion further stated that unless the employer “requires” the exempt employee to perform the work on a day the employee is absent, there is no reason that the employer may not dock the pro rata amount of the employee’s salary (or vacation balance) for the full day absence. However, if the employer does either directly or indirectly require that the employee perform work (as minor as checking voice and/or emails may be), on any day when the employee is out for Vacation or PTO, the employees salary may not be docked.

Deductions from Exempt Employee’s salary for Time Off Clarified: In one of the most confusing areas of wage and hour laws is the issue of what deductions can be taken from an “exempt” employees’ salary without affecting or altering their “exempt” status. In the August 30, 2002 opinion letter authored by Arthur Lujan of the Labor Commissioner’s office, the DLSE has clarified the uncertainty surrounding the issue of whether deductions may be taken from an exempt employee’s salary or accrued leave time such as accrued paid vacation or personal paid time off because of a partial day absence.6

The opinion stated that a deduction cannot be taken from salary or accrued leave time for a partial day absence resulting from personal reasons or because no work is available. Only deductions for full day absences due to personal reasons are permitted. If the absence is due to illness, the time may be deducted from the employee’s sick leave accrual; however, if the employee has no sick leave accrued, no deduction from the salary of the employee may be made. If the absence is due to a lack of available work, the salary may be deducted only if the absence is for an entire work week, but no deductions can be made for partial week absences.

Conclusion: In light of these recent opinion letters, news laws, amendments to existing Labor Code sections and recent Court decisions relating to employment law matters, employers must continue to be vigilant in their personnel practices including payroll practices. Even a minor or otherwise “insignificant” error in the minds of an employer may violate the Labor Code or the DLSE’s position on any number of issues which may lead to significant liability. Employers should review their personnel and payroll practices and their employee handbooks to ensure compliance with these recent changes to the implementation of wage and hour laws.

1. Miles E. Locker letter to Orange County Superior Court, “Re: Grounds for Imposition of Individual Liability for Unpaid Wages and Penalties Against Corporate Officers”, June 18, 2002.
2. “Person” is defined to include “any person, association, organization, partnership, business trust, limited liability company or corporation.”
3. 8 Cal. Code Reg §11040(2)(H).
4. Arthur S. Lujan Opinion Letter “Re: Salary Requirements for Exempt Employees” August 30, 2002.
5. DLSE Opinion Letter dated July 8, 2002 by H. Thomas Cadell, Jr. Attorney for the Labor Commissioner
6. Arthur S. Lujan Opinion Letter “Re: Salary Requirements for Exempt Employees” August 30, 2002.

DLSE CHANGES - 10-02 (UPDATED)