BILL ANALYSIS                                                                                                                                                                                                    Ó




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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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          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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