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.
AB 2535
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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
AB 2535
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None on file.
Analysis Prepared by:Ben Ebbink / L. & E. / (916) 319-2091