BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2535|
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CONSENT
Bill No: AB 2535
Author: Ridley-Thomas (D)
Amended: 4/25/16 in Assembly
Vote: 21
SENATE LABOR AND IND. REL. COMMITTEE: 4-0, 6/8/16
AYES: Mendoza, Stone, Leno, Mitchell
NO VOTE RECORDED: Jackson
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 76-0, 5/19/16 (Consent) - See last page for
vote
SUBJECT: Employment: wages: itemized statements
SOURCE: Author
DIGEST: This bill clarifies 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)
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2)Provides that, if an employee suffers injury as a result 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
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
Need for this bill? Under current law, employers are required
to provide workers with accurate itemized wage statements at the
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Page 3
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
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.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified6/27/16)
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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: (Verified6/27/16)
None received
ARGUMENTS IN SUPPORT: AB 2535 is supported 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.
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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.
ASSEMBLY FLOOR: 76-0, 5/19/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,
Calderon, Campos, Chau, Chávez, Chiu, Chu, Cooley, Cooper,
Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines,
Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,
Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger
Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey,
Levine, Linder, Lopez, Low, Maienschein, Mayes, Medina,
Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,
Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Wood, Rendon
NO VOTE RECORDED: Chang, Mathis, McCarty, Williams
Prepared by: Gideon L. Baum / L. & I.R. / (916) 651-1556
6/29/16 15:50:48
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