BILL ANALYSIS                                                                                                                                                                                                    Ó





          SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS
                             Senator Tony Mendoza, Chair
                                2015 - 2016  Regular 

          Bill No:               AB 2535      Hearing Date:    June 8,  
          2016
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          |Author:    |Ridley-Thomas                                        |
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          |Version:   |April 25, 2016                                       |
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          |Urgency:   |No                     |Fiscal:    |Yes              |
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          |Consultant:|Gideon Baum                                          |
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                 Subject:  Employment:  wages:  itemized statements


          KEY ISSUE
          
          Should the Legislature clarify wage stub reporting requirements  
          for exempt employees?


          ANALYSIS
          
           Existing law:

              1)   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. (Labor Code  
               §226)


             2)   Provides that, if an employee suffers injury as a result  








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               of a knowing and intentional failure by an employer to  
               provide a wage stub, the employee is entitled to recover  
               the greater of all actual damages or $50 for the initial  
               pay period in which a violation occurs and $100 per  
               employee for each violation in a subsequent pay period, not  
               to exceed an aggregate penalty of $4,000, and is entitled  
               to an award of costs and reasonable attorney's fees. (Labor  
               Code §226 (e)).


           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.


             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  







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               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.



          COMMENTS
          

          1.  Need for this bill?

             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.


            Proponents note that it has been longstanding practice by  
            employers to not list hours worked for exempt employees, as  
            exempt employees are not paid by the hour or eligible for  
            overtime. For example, a CEO would likely be compensated on a  
            salary basis, perhaps with the addition of a bonus and/or  
            stock options. Since hours worked is not a relevant figure  
            when calculating the CEO's wages, this information would be  
            omitted from paystubs. 


            However, in a recent 2015 federal court case, Garnett v. ADT,  
            LLC, the court weighed in on if outside salespeople must have  
            their total hours worked included. In part because the  
            plaintiff was paid solely by commission, the court found that  
            the exemption in Section 226 for recording total hours worked  
            did not apply.  The judge noted in the decision: "While the  







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            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).


            AB 2535 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.


          2.  Proponent Arguments  :
            
            AB 2535 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 argues that AB 2535 will clarify existing law to reflect  
            long-standing historical practice and ensure that employees  
            are fairly paid and that employers do not face unnecessary  
            litigation.


          3.  Opponent Arguments  :

            None on file.

          4.  Prior Legislation  :







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            AB 1513 (Williams), Chapter 754, Statutes of 2015, among other  
            things, clarifies wage stub requirements for workers who are  
            paid on a piece-rate basis.



          SUPPORT
          
          Associated Builders and Contractors of California 
          Associated General Contractors
          California Alarm Association
          California Asian Pacific Chamber of Commerce
          California Building Industry Association
          California Business Properties Association
          California Chamber of Commerce
          California Construction and Industrial Materials Association
          California Cotton Ginners Association
          California Cotton Growers Association
          California Employment Law Council
          California Farm Bureau Federation
          California Fresh Fruit Association
          California Manufacturers and Technology Association
          California Newspaper Publishers Association
          California Restaurant Association
          California Retailers Association
          California State Council of the Society for Human Resource  
          Management
          Civil Justice Association of California
          Civil Justice Association of California
          Family Business Association of California 
          FarWest Equipment Dealers Association
          League of California Cities
          Nisei Farmers League
          Western Agricultural Processors Association
          Western Plant Health Association


          OPPOSITION
          


                                      -- END --
          








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