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
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