BILL ANALYSIS Ó AB 2535 Page 1 Date of Hearing: May 11, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 2535 (Ridley-Thomas) - As Amended April 25, 2016 ----------------------------------------------------------------- |Policy |Labor and Employment |Vote:|7 - 0 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill specifies that itemized wage statements do not need to show total hours worked for employees for whom compensation is solely based on salary and the employee is exempt from payment of overtime or if the employee is exempt from the payment of minimum wage and overtime under existing law. Specifically, this bill: AB 2535 Page 2 1)Specifies an itemized wage statement is not required to show total hours worked by the employee if: a) The employee's compensation is solely based on salary and the employee is exempt from payment of overtime as specified; or b) The employee is exempt from the payment of minimum wage and overtime under: i) An existing IWC order applicable to the following workers: executive, administrative, and professional employees; outside salespersons; parents, spouses, children or legally adopted children of the employer; crew members employed on commercial passenger fishing boats; and participants in national service programs. ii) Salaried computer professionals pursuant to existing labor code. iii) Directors, staff and participants of a live-in alternative to incarceration rehabilitation program for substance abuse exempt pursuant to existing Penal Code. FISCAL EFFECT: The Department of Industrial Relations does not anticipate any significant fiscal impact to the Division of Labor Standards Enforcement. COMMENTS: AB 2535 Page 3 1)Purpose. Under current law, employers are required to provide workers with accurate itemized wage statements at the time of payment of wages. Current law also lists a number of required elements that must be included on the wage statement, including the total hours worked by the employee. Wage statements do 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 note there are large numbers of employees in California who are exempt from overtime but are not compensated solely by salary. 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. 2)Background. According to the sponsor, this issue in response to a 2015 federal court case, Garnett v. ADT, LLC. The plantiff, a former salesperson for ADT LLC, filed a class action lawsuit against the company in 2014, alleging it failed to reimburse salespeople for work-related expenses or provide itemized wage statements listing the number of hours worked. The plaintiff sold ADT alarm systems to homeowners for two years and was paid solely on commission, according to the opinion. According to the opinion, ADT said it did not have to include total hours worked on the statements because the plaintiff was an outside salesperson under one of the state's wage orders and was exempt from the Labor Code's wage statement requirements. The judge rejected the company's argument and AB 2535 Page 4 denied its motion. 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)". This bill amends Labor Code 226 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. According to the sponsors, 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. Analysis Prepared by:Misty Feusahrens / APPR. / (916) 319-2081