New Fed Regulations Make Workers Eligible for Overtime Pay

Overtime PayUnder California law, pay to employees whose positions are considered to be executive, administrative, or professional are exempt from overtime pay if their salaries are at least twice the full-time minimum wage. With the current minimum wage in California being $10 per hour, the necessary overtime pay salary level is $41,600 a year. This is a significantly higher level than the overtime pay exemption level under federal law, which is currently $23,660 a year.

However, new federal regulations recently announced by the U.S. Department of Labor will greatly decrease the number of workers who are exempt from overtime pay. Beginning December 1, 2016, the Fair Labor Standards Act will stipulate that full-time workers are not eligible for this exemption unless they make $47,476 per year or more. Thus, many California executive, administrative and professional workers will become eligible for overtime under federal law, even though California law does not currently require it. (As the California minimum wage increases to $15 an hour, however, California’s exemption level will once again become higher than the federal level.)

The regulations also make several other significant changes, including the following:

A New Definition of “Highly Compensated” Employees

The FLSA establishes a salary level at which an employee is considered “highly compensated.” If an employee has a salary that is at this level or higher, and the employee performs at least one duty of “an executive, administrative or professional employee,” then he or she will be considered a highly compensated employee who is exempt from the overtime requirements. (The FLSA clarifies that an employee’s primary duty must include office or non-manual work in order to be exempt as a highly compensated employee.)

This salary level is currently specified as $100,000 per year. However, starting on December 1, that number will increase to $134,004. According to the White House, this change is being made because employees at this salary level are more likely to perform the kinds of job duties that would make them exempt.

Inclusion of Bonuses

One change that will likely please employers is that non-discretionary bonuses, incentive payments, and commissions can now be included when determining whether an employee meets the salary level requirement. If an employer is tabulating an employer’s salary to determine his or her exemption status, these types of income can account for up to 10 percent of the total salary.

For example, if an employee has a salary of $45,000, and also earns $6,000 in bonuses, then the employee’s salary would be tabulated as $50,000. (The full $6,000 would not be counted, because only 10%  of the employee’s income can consist of bonuses, incentive payments, or commissions.) The employee would thus be exempt, so long as he or she meets the other requirements. [Read more…]

Forever 21 Arbitration Agreement Upheld by California Supreme Court

Arbitration AgreementCalifornia Supreme Court clarifies what counts as an “unconscionable” Arbitration Agreement. When Maribel Baltazar took a job with the clothing retailer Forever 21, she signed an employment application that contained an arbitration agreement. The agreement stated that any employment-related disputes she might become involved in would be resolved via arbitration. It also included specific examples of disputes that would be subject to arbitration, such as wage claims, breach of contract claims, and discrimination claims.

In 2011, Baltazar quit her job, and filed a claim against Forever 21 in superior court, alleging discrimination based on sex and race, verbal and physical harassment, and retaliation. Forever 21 moved to compel arbitration, as specified by the arbitration agreement. Baltazar argued that the arbitration agreement was unconscionable, and thus could not be enforced.

The case made its way to the California Supreme Court, and on March 28, 2016, the Court ruled in favor of Forever 21. The decision,  Maribel Baltazar v. Forever 21 Inc. et al., sets important precedents regarding when an arbitration agreement should be considered unconscionable.

The Court’s Arbitration Agreement Reasoning

Baltazar initially won at trial. The trial court ruled that the arbitration agreement in the contract was an unconscionable contract of adhesion, being as it was written on a preprinted form and offered on a take-it-or-leave-it basis. However, both an appeals court and the California Supreme Court disagreed on the issue of unconscionability. The Supreme Court pointed out that while it was a contract of adhesion, it was not unconscionable because there was no element of surprise involved in the agreement, and that Baltazar was not lied to, place under duress, or manipulated into signing it.

One of Baltazar’s arguments was that the arbitration agreement should be considered invalid because it allowed the parties to seek temporary restraining orders or preliminary injunctions. She claimed that this clause was unfair because her employer was more likely than an employee to seek a restraining order or a preliminary injunction. The Supreme Court held that the clause did not confer an advantage on either party because it simply confirmed rights that the parties hold under California law.

Another argument Baltazar made in favor of the agreement being unconscionable was that it listed examples of what kinds of claims are subject to arbitration, and the only examples cited were employee claims. The Supreme Court held that it is acceptable for an employer to list only these types of claims as examples, so long as the wording of the contract makes it clear that all employment-related claims are subject to arbitration. The Court pointed out that the arbitration agreement stated that the claims subject to arbitration “include but are not limited to” the examples given. [Read more…]


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