BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2535


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          Date of Hearing:  April 20, 2016


                     ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT


                               Roger Hernández, Chair


          AB 2535  
          (Ridley-Thomas) - As Proposed to be Amended April 20, 2016


          SUBJECT:  Employment:  wages:  itemized statements


          SUMMARY:  Provides that itemized wage statements required under  
          current law do not need to show total hours worked for specified  
          exempt employees for whom employers are not required to track  
          hours.  Specifically, this bill provides than an itemized wage  
          statement shall not be required to show total hours worked by  
          the employee if:


          1)The employee's compensation is solely based on salary and the  
            employee is exempt from payment of overtime as specified; or


          2)The employee is exempt from the payment of minimum wage and  
            overtime under:


             a)   A specified exemption for executive, administrative, or  
               professional employees.


             b)   A specified "outside sales" exemption.










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             c)   A specified exemption for salaried computer  
               professionals.


             d)   A specified exemption for parents, spouses, children or  
               legally adopted children of the employer provided in  
               applicable orders of the Industrial Welfare Commission.


             e)   A specified exemption for directors, staff and  
               participants of a live-in alternative to incarceration  
               rehabilitation program for substance abuse provided in  
               Section 8002 of the Penal Code.


             f)   A specified exemption for crew members employed on  
               commercial passenger fishing boats provided in applicable  
               orders of the Industrial Welfare Commission.


             g)   A specified exemption for participants in national  
               service programs provided in applicable orders of the  
               Industrial Welfare Commission.


          EXISTING LAW requires an employer to provide his or her employee  
          an accurate itemized statement in writing containing specified  
          information, either semimonthly or at the time the employer pays  
          the employee his or her wages. That specified information  
          includes showing total hours worked by the employee, unless the  
          employee's compensation is solely based on a salary and the  
          employee is exempt from payment of overtime under a specified  
          statute or any applicable order of the Industrial Welfare  
          Commission.


          FISCAL EFFECT:  Unknown










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          COMMENTS:  Under current law, employers are required to provide  
          workers with accurate itemized wage statements at the time of  
          payment of wages.  Labor Code Section 226 lists a number of  
          required elements that must be included on the wage statement,  
          including the total hours worked by the employee.


          However, current law provides that the wage statement does not  
          need to include total hours worked if the employee's  
          compensation is solely based on salary and the employee is  
          exempt from payment of overtime under specified exemptions for  
          executive, administrative, and professional employees.


          This bill is sponsored by the California Employment Law Council  
          (CELC), who argues that, in addition to employees who are exempt  
          and paid "solely based on salary," there are large numbers of  
          employees in California who are completely exempt from overtime  
          but who are not compensated solely by salary. 


          For example, CELC states that certain salespersons exempt from  
          overtime by wage orders of the Industrial Welfare Commission are  
          typically compensated by salary and commissions, and top level  
          management employees may be compensated by salary plus bonus,  
          salary plus stock options or other similar arrangements.  These  
          employees do not record the number of hours they work so  
          employers do not have a tally of the hours worked to include on  
          their pay stubs.  CELC contends that, if hours worked are  
          irrelevant to an exempt employee's compensation, there is no  
          reason to include that information on that employee's paystub. 


          CELC states that this issue was raised in a recent 2015 federal  
          court case, Garnett v. ADT, LLC.  The issue raised in that case  
          was the requirement to include total hours worked for outside  
          salespersons, who are exempt from overtime under existing law.   
          In part because the plaintiff was paid solely by commission, the  
          court found that the exemption in Section 226 for recording  








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          total hours worked did not apply.  The judge noted in the  
          decision: "While the usefulness of reporting total hours worked  
          for employees paid solely by commission is not entirely clear,  
          it is nonetheless required by Labor Code Section 226 (a)"  
          (citations omitted).


          Therefore, this bill amends Labor Code 226 in a comprehensive  
          manner to extend the exemption from listing hours worked to all  
          employees who are exempt under specified provisions of existing  
          law for whom employers are not required to track hours.  In  
          working with committee staff and stakeholders, this bill has  
          been crafted to only apply to exempt employees, and the bill  
          makes no changes to exempt/nonexempt classifications; an  
          employer would remain liable for a Labor Code Section 226  
          violation for an employee misclassified as exempt.


          


          REGISTERED SUPPORT / OPPOSITION:




          Support


          California Alarm Association


          California Employment Law Council




          Opposition









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          None on file.




          Analysis Prepared by:Ben Ebbink / L. & E. / (916) 319-2091