BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2535


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          Date of Hearing:  May 11, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          AB  
          2535 (Ridley-Thomas) - As Amended April 25, 2016


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          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


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          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


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          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


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            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