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