Reaching a Tipping Point

Employers in California are increasingly coming under attack on just about all fronts; taxes, energy costs, and growing employment liability of mammoth proportions. On the page across (CTN Aug 2014), Pat Whalen, who is part of our legal counsel team drafted a memo to our employer members that I hope all of you take the time and read. There are so many seemingly bad court decisions (in both state and federal court) and new regulations coming out of Sacramento that will have a very challenging effect on our employer members that one has to wonder when the end will come for small businesses here.

For many trucking companies who have invested heavily in new very expensive and questionably reliable trucks (for construction at least), they are now being presented a host of labor challenges beginning with mandatory paid meals and breaks. Further under the state mandated “pay stub protection” regulations, employee record-keeping, access and expanded reporting costs and liabilities, it all virtually paints a target on every employers chest.

On July 9th, the Court of Appeals for the Ninth Circuit definitively concluded in Dilts v. Penske Logistics, LLC, that California’s meal and rest break laws are not preempted by the FAAAA (federal laws), saying that the state laws do no cause motor carriers to “set prices, mandate or prohibit certain routes, or tell motor carriers what services they may or may not provide,” either directly or indirectly. Further adding, “such laws do not create an impermissible ‘patchwork’ of state-specific laws that would defeat Congress’ deregulatory objectives” because, again, citing its own Circuit precedent, “such laws are more analogous to state wage laws, which may differ from the law adopted in neighboring states but nevertheless is permissible.” The court also held that forcing drivers to pull over (not sure where they were thinking that was always possible) to take breaks “was not the sort of route control that Congress sought to preempt” and, in any event, the motor carrier (industry) did not present any evidence that such minor deviations limited drivers to a small set of possible routes.

If the Ninth Circuit’s decision stands, motor carriers (both interstate and intrastate) operating in California will be subject to California’s meal and break laws. As a result, all motor carriers within the state of California and those companies with drivers hired here in the state but located elsewhere should seriously examine their meal and rest break policies, practices and exclusion policies to assess the impact of this case on their operations.

Pay Stub Laws You Should be Aware of!

In 2012, and effective January 2013, two bills were signed into law that all employers here should be aware of. The first was AB 2674 (inspection and copying of personnel records): Previous to the change, California law (Labor Code §1198.5) allowed employees the right to review certain documents associated with their personnel records. AB 2674 amended Labor Code §1198.5 in several key ways:

  1. It makes clear that the inspection right applies to both current and former employees.
  2. It requires employers to maintain personnel records for at least three years after termination of employment.
  3. It requires that the employer must allow the requested inspection within 30 days of the request.
  4. The bill gives current and former employees the right not only to inspect their personnel records but also the right to receive copies, also within 30 days, of all personnel records relating to the employee’s performance and/or to any grievance concerning the employee.
  5. AB 2674 had a damages component as well – if the employer fails to comply with an inspection and/or copying request, then the current or former employee is entitled to a penalty of $750. (Note, however, that if the current or former employee has a lawsuit pending against the employer at the time of the request, the employer is not obligated to comply with these requirements.)

This same year, SB 1255 (pay stub violations) laws also went into effect. Previously, California law (Labor Code §226) required employers to provide employees with an accurate, written statement or “pay stub” at the time wages are paid. That statement must contain an itemization of the gross wages earned, the deductions taken, the net amount paid, the pay period, and other key information. (See Pat’s story) Under the new law, if an employee can show “actual injury” from an employer’s failure or refusal to provide an accurate, written pay stub, then the employee is entitled to a statutory penalty of up to $4,000. SB 1255 amended Labor Code §226 to make it easier for an employee to show “actual injury” and, thus, receive the statutory penalty. The new law states that employees are, by law, “injured” if the employer fails to provide a wage statement. In addition, if the employer provides a wage statement but it is inaccurate and “incomplete” which means that the statement ,the physical pay stub provided does not allow the employee to promptly and easily determine on one single document (it can be two sided) the following:

  • the amount of the gross or net wages paid during the pay period,
  • the deductions taken from the gross wages,
  • the net wages paid to the employee,
  • the name and address of the employer, and
  • the name of the employee and only the last 4 digits of his or her social security number or an employee identification number, then the employee is also considered “injured” under the law.

Employers Beware!

We presently are opposing AB 1522​ legislation that is currently in hearings (Gonzalez; D-Sherman Heights) because it applies to business of all sizes to pay sick leave – it further increases employer mandates by requiring all employers, especially small start-ups, to provide all employees in California with paid sick leave, and also threatens employers with statutory penalties and litigation under the Private Attorney General Act (PAGA) for alleged violations.

Russian Roulette Anyone?

In 2005, CalCIMA and its members negotiated a settlement agreement, called the “Westside Settlement” concerning mandatory lunch breaks with the DIR and Teamsters for employee mixer truck drivers (hot and wet cargo). Drivers agreed to be paid and would work through their lunch due to the nature, timing and pot-life associated with pouring concrete. Presently we are not sure how the Court of Appeals for the Ninth Circuit decision will effect or apply to mixer drivers or this agreement, but suspect it can’t be good.

Since 2008, CCTA has floated the idea and documentation that if the “Westside” settlement agreement was fair for mixer drivers, it should apply to almost all construction material delivery. The fact patterns are substantially similar between all types of construction trucking and the materials they haul and the jobsite areas to which they haul these materials. We have encouraged our members to adopt such a scheme in lieu of the liability of doing nothing or worse, doing it wrong.

We reached out again to Pat our legal counsel, and asked him his opinion of whether or not this “Construction Truck Agreement” would continue to work, now with the Dilts decision hanging over trucking employers heads here.

Here was his response:

“We believe that the ‘on-duty meal break’ agreement that you forwarded is not directly impacted by the recent cases we have been discussing (Dilts v. Penske and Pac Anchor). Both of those cases held that the F4A provided no preemption of California’s labor laws. The agreement you sent was not premised on the F4A, so there is no change in that respect.

Be aware, however, that according to DIR, the availability of the on-duty meal break option is very limited. Specifically, an ‘on duty’ meal period shall be permitted only when the nature of the work prevents an employee from being relieved of all duty to take a meal break.

An employer and employee may not agree to an on-duty meal period unless, based on objective criteria, any employee would be prevented from being relieved of all duty based on the necessary job duties. Some examples of jobs that fit this category are a sole worker in a coffee kiosk, a sole worker in an all-night convenience store, and a security guard stationed alone at a remote site. Being a commercial driver may or may not satisfy the DIR’s narrow view of the types of jobs and duties for which an on-duty meal break is appropriate.”

He concluded that, “In short, the agreement you forwarded is as valid as it ever was; we are simply cautioning that it may not be a silver bullet, especially if it could be shown that the drivers could have easily pulled over and taken an unpaid meal break.”

Within California DIR Wage Order 9-2001 (7-14) – Transportation, Section 11 – Meal Periods, (C) still states that, “Unless the employee is relieved of all duty during a 30 minute meal period, the meal period shall be considered an on duty meal period and counted as time worked. An on duty meal period shall be permitted only when the nature of the work prevents an employee from being relieved of all duty and when by written agreement between the parties an on-the-job paid meal period is agreed to. The written agreement shall state that the employee may, in writing, revoke the agreement at any time.

It is extremely important that transportation companies understand their liabilities concerning all these issues and make sure they implement a company policy and agreements that addresses all these issues as well as implement an “On-duty Meal Period Agreement” which needs to be signed for each subject employee.

Who Wants to Bet?

As we reflect on businesses like Toyota leaving the state along with 3,000 high-paying jobs, you have to wonder if anyone in Sacramento gets it. So, staying with the auto theme, I’m making a prediction and guessing that Tesla Motors (along with Panasonic) and their planned battery giga-plant slated to employ 6,500, will not being built in California. For all the reasons noted here and far more than most politicians and regulators want to understand.