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California - unpaid wage and forced furlough? What laws being broken? California

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  • California - unpaid wage and forced furlough? What laws being broken? California

    Howdy!

    In short, these are the circumstances of my situation, for a small software company in Irvine, California:

    1) The company is strapped for cash; this is the ONLY issue - there is plenty of work to do;

    2) We are all considered exempt employees; work week is regular Mon-Fri;

    3) All employees (there are 7 of us) have not been paid approx. half of our wages from June - Dec 2010 (it would dribble through sporadically - a week's wages sometime, then nothing for a month or longer, then a little bit of pay, then nothing...);

    4) Beginning in Sept/Oct 2010, and to incentivize us to continue working, we were all verabally offered a $20k 'bonus' when a particularly lucrative contract came through (expected before Xmas, and it still has not), along with an amount of options in company stock; (I have very little hope of ever seeing this money, though we are all witness to their promise)

    5) Beginning Jan 2010, our employer decided that we would all go on furlough of 70% of the time, with 30% work time (boss decided that we would arrange a schedule so that someone was in every day, but we would each not work more than 12 hours a week), until such time as we had more money and then we would go back to 100%. The 70% that we would not work would be supplemented by the California EDD Work Share Insurance Program. If we did not accept this, we would be laid off;

    6) EDD Work Share has not compensated anybody to date (last I checked a couple of weeks ago, our forms had not yet been processed);

    7) Beginning 1 Feb, I notified my employer that I would not be coming in to work until I was paid, and explicitly stated that I was not resigning or quitting (and I have yet to be fired or laid off by them), and would come back after payment (though I'll probably just quit after they pay me).

    What I would sincerely appreciate feedback, guidance, and advice on is the following: a) what laws have our employer broken (wage, furlough, exempt vs. non-exempt, etc.)? and b) what recourse do we have as employees?

    So far, I believe that we have the following issues:

    1) non-payment of wages/salary - misdemeanor (I submitted a wage claim just last week with the CA DLSE); Are there any damages awarded in wage claims? Anything else I can do?

    2) Inappropriate/incorrect use of furlough - exempt employees are only allowed to be furlough in one-week chunks. The fact that I worked 12 hours each week in Jan should mean that I am owed a full wage for each week (i.e. a full month's wages). What is recourse here?

    3) Inappropriate/incorrect use of EDD Work Share Insurance Program - this is a big concern of mine. EDD Work Share is targeted at non-exempt employees working for an hourly wage. I am worried that by accepting and submitting an application for the EDD, the employees have unknowingly and naively accepted a change from exempt to non-exempt status (it's our fault for not doing more research on the EDD program, though there is responsibility with our employer for not notifying us, if he did this consciously).

    Any and all response to this is DEEPLY appreciated. I'm also just starting to wade through CA labor law and Federal labor law, so any guidance on specific passages and paragraphs for reference to the above issues is also appreciated.

    Kind regards!

  • #2
    I can address your first two questions only. Third question is outside my area of expertise.

    1. Filing the wage claim was the correct thing to do, but for non-terminated employees, the penalties (if any) are paid to the state.

    CLC 225.5. In addition to, and entirely independent and apart from, any other penalty provided in this article, every person who unlawfully withholds wages due any employee in violation of Section 212, 216, 221, 222, or 223 shall be subject to a civil penalty as follows:
    (a) For any initial violation, one hundred dollars ($100) for each failure to pay each employee.
    (b) For each subsequent violation, or any willful or intentional violation, two hundred dollars ($200) for each failure to pay each employee, plus 25 percent of the amount unlawfully withheld.
    The penalty shall be recovered by the Labor Commissioner as part of a hearing held to recover unpaid wages and penalties or in an independent civil action. The action shall be brought in the name of the people of the State of California and the Labor Commissioner and attorneys thereof may proceed and act for and on behalf of the people in bringing the action. Twelve and one-half percent of the penalty recovered shall be paid into a fund within the Labor and Workforce Development Agency dedicated to educating employers about state labor laws, and the remainder shall be paid into the State Treasury to the credit of the General Fund.
    "Furlough" is a word that legally applies to governmental employees only. Employees who are both Exempt and Salaried are subject to the 29 CFR 541.602 Salaried Basis rules. There is a furlough rule (29 CFR 541.710), but that applies to governmental employees only.

    ========

    At some point, the best cure to a bad employer is to find a good employer. Even if you get a judgement, the employer you describe does not necessarily have any funds. What is called "judgement proof".
    "Reality is that which, when you stop believing in it, doesn't go away".
    Philip K. **** (1928-1982)

    Comment


    • #3
      DAW,

      Many thanks for your insight and link to the Fed regulations. I have two follow-up question that I hope you can help me with:

      1.) How are we defining 'terminated' here? Do they have to fire or let me go in order to be 'terminated', or can I exit this position on my own accord? The reason that I ask is that you say that the state gets any penalties unless I am terminated, which leads me to believe that believe that if I am terminated, then I may possibly receive the penalties (or is it damages)?

      My reason for asking this is that I simply want to know what may (or may not be) coming my way now that I have submitted my wage claim, and I also want to know what liability the company ultimately has (in case they try to pay me before the wage claim is fully processed to wiggle out of any further potential liability). Are there any damages that the company has to pay to the employee for non-payment of wages (completely separate from fines and penalties to the govt for breaking the law)? In addition to not having been paid, there are knock-on effects (lowered credit rating, interest payments, etc.), not to mention interest on the money they owe me, for which I feel there are just reason for damages. And believe me, it's not that I feel entitled - it's just been a rough ride and I need to pay bills! I just want to have all of my bases covered.

      2.) I understand the distinction between govt employees and private sector employees and the use of the word 'furlough'. Forgive me for using it in my previous posting - for brevity sake, it works, but I understand it can be misleading when it comes to semantics. For all intents and purposes, it looks like the law is basically equal with respect to wages and time worked for exempt employees, and therefore my employer was incorrect in making us stop working 70% of the time.

      Thanks again for your reply and guidance, it is appreciated. I look forward to more help, guidance, input, you name it, all with the regard to the above. By the end of this, I hope to be an expert in this vein and help my coworkers and others in similar situations.

      Cheers!

      Comment


      • #4
        Termination means whatever CA-DLSE says it means. I would say that the employer firing you or you quitting are both equally terminated as far as terminated goes. If instead you are trying to argue that on Monday-Thursdays you are terminated, but on Fridays you are not, that is an apple that CA-DLSE is unlikely to bite on.
        http://www.dir.ca.gov/dlse/FAQ_Paydays.htm

        The Salary Basis rules were cited earlier. The employer telling you to "stop working 70%" of the time" is not inherently legal. Or inherently illegal. You can find the docking rules in the regulation, if that is your question. Employees who are both Exempt and Salaried are not paid based on hours worked, so saying that hours were reduced by 70% is legally a "who cares".

        Example. Bob is Exempt, Salaried and gets paid $1,000/week. Bob works 1-1-1-1-1-0-0. Legally Bob must be paid the entire $1K. Instead Bob works 24-24-24-0-0-0-0-0. Legally Bob can be paid $600. How we pay Bob legally has nothing to do with the total number of hours Bob works.

        More Examples. We reduce Bob's salary to $700/week and tell Bob to work (a lot) more hours. Perfectly legal. Hours and salary are not directly related. We reduce Bob's salary to $300. TILT!!! The state of CA has a $640/week minimum for Exempt Salaried employees ($455/week federal). Bob is no longer Exempt. HOWEVER, we could keep the salary the same, tell Bob to work one week in four, and legally not pay Bob anything for those other three weeks.

        If your question is instead that the employer reduced salary by 70%, then if you are no longer paid at $640/week, then you no longer (in CA) qualify as an Exempt Salaried employee. If the duties tests fail (different issue), then you no longer qualify as an Exempt Salaried employee. Of course if you are not working much, the employer should want to flush your Exempt status. Try reading the actual rules. That is why they were cited.

        And "considering" someone to be an Exempt employee legally is not the same thing as them actually being an Exempt employee. People become exempt by actually passing the duties and other tests associated with one of the 100 or so Exempt classifications defined in law.
        "Reality is that which, when you stop believing in it, doesn't go away".
        Philip K. **** (1928-1982)

        Comment


        • #5
          DAW,

          Thanks again for the help. Let me respond to some of your statements one at a time so that I can clarify (and ask some more). And also please let me apology in advance for the length - I seek clarity in my wording, and sometimes it can be verbose. My thanks for your patience and help!

          Originally posted by DAW View Post
          Termination means whatever CA-DLSE says it means. I would say that the employer firing you or you quitting are both equally terminated as far as terminated goes.
          OK, cool. So regardless of whether I quit or they fire, I am considered 'terminated.' What affect does that have on the Wage Claim process - are there damages that I get only if I'm terminated, are there damages at all, etc.? I'm new to this, but I can't seem to find what the typical results of a processed wage claim are when the issues are clear. Most of my issues are pretty cut and dry: for 2010 they were supposed to pay me X and they only paid me half of X, and there weren't any wonky hours/weeks worked/docking/'furlough' mumbo jumbo to mess things up.

          Originally posted by DAW View Post
          If instead you are trying to argue that on Monday-Thursdays you are terminated, but on Fridays you are not, that is an apple that CA-DLSE is unlikely to bite on.
          http://www.dir.ca.gov/dlse/FAQ_Paydays.htm
          No, that is not what I am trying to say at all. This does not really have any bearing, as neither my employer nor myself are trying to use the above in our argument.

          Originally posted by DAW View Post
          The Salary Basis rules were cited earlier. The employer telling you to "stop working 70%" of the time" is not inherently legal. Or inherently illegal. You can find the docking rules in the regulation, if that is your question. Employees who are both Exempt and Salaried are not paid based on hours worked, so saying that hours were reduced by 70% is legally a "who cares".
          This is only applies for Jan 2011. That said, I completely agree and understand why, and know all the regulations/code to back it up. It seems that my employer does NOT know this though, and that is why he tried to initiate his own form of 'furlough.' In our case, the only reason that this was done was because he knew he couldn't pay us, not because there was any lack of work.

          Originally posted by DAW View Post
          Example. Bob is Exempt, Salaried and gets paid $1,000/week. Bob works 1-1-1-1-1-0-0. Legally Bob must be paid the entire $1K. Instead Bob works 24-24-24-0-0-0-0-0. Legally Bob can be paid $600. How we pay Bob legally has nothing to do with the total number of hours Bob works.
          Understood, and good examples. In the first example, he works every day in the week and so gets the full amount. In the second, he only works 3 days, and the employer could argue (not necessarily successfully) that he doesn't have to pay for the two consecutive days that the employee didn't work. As I have read in one opinion (a response dated 12 March, 2002 from H. Thomas Cadell Jr.), it states that in California a court 'will not lend its aid to accomplish by indirection what the law or clearly defined policy forbids to be done directly." Since an 'an exempt employee must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked' my employer would not be able to get out of paying me a week's wages simply because he requested us to only work 12 hours a week (one full day and a half day) because he always wanted at least one person in the office all day (and we have just enough employees to schedule something that worked). "If the employee is ready, willing and able to work, deductions may not be made for time when work is not available." Basically, there is nothing in there that I have read yet that says they can deduct wages or don't have to pay me just because they don't have the cash to do so. Am I wrong?

          Originally posted by DAW View Post
          More Examples. We reduce Bob's salary to $700/week and tell Bob to work (a lot) more hours. Perfectly legal. Hours and salary are not directly related. We reduce Bob's salary to $300. TILT!!! The state of CA has a $640/week minimum for Exempt Salaried employees ($455/week federal). Bob is no longer Exempt. HOWEVER, we could keep the salary the same, tell Bob to work one week in four, and legally not pay Bob anything for those other three weeks.
          Yep, got it

          Originally posted by DAW View Post
          If your question is instead that the employer reduced salary by 70%, then if you are no longer paid at $640/week, then you no longer (in CA) qualify as an Exempt Salaried employee. If the duties tests fail (different issue), then you no longer qualify as an Exempt Salaried employee. Of course if you are not working much, the employer should want to flush your Exempt status. Try reading the actual rules. That is why they were cited.
          I've read the rules - my challenge is understanding how they are/will be interpreted for my situation. None of the employees were working much for the month of Jan 2011 because our employer requested that we not (we were only allowed to work for 12 hours), NOT because we were not willing to work. Frankly, I don't think my employer even knows that there is an exempt status vs. a non-exempt status (he's an Australian national), so he wouldn't have the knowledge to try and flush our status (if that were the case, which it is not). Now that said, what are the consequences for the employer and the employee if an employee's exemption status changes? (which am I worried may have happened for several of my colleagues, and possibly all of us with the EDD Work Share program)? I understand that there could be consequences with reduced wages, but are there legal or tax consequences? Any others?

          Originally posted by DAW View Post
          And "considering" someone to be an Exempt employee legally is not the same thing as them actually being an Exempt employee. People become exempt by actually passing the duties and other tests associated with one of the 100 or so Exempt classifications defined in law.
          You bet, I totally understand that. My apologies for such a long and verbose response, and my appreciation and gratitude for your help! Very best to you!

          Comment


          • #6
            Just a matter of semantics; from an HR point of view, if you no longer work there, it's a termination. If you quit, it's a voluntary termination. If your employer instigated it, regardless of whether it's a firing, a layoff, an RIF or any other definition, it's an involuntary termination. Terminated is not a synonym for fired.
            The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

            Comment


            • #7
              I cannot answer questions related to EDD Work Share program.

              Past that point, in the 24-24-24-0-0-0-0 example, it depends on why the employee did not work the other two days. Extreme fatigue maybe. If the employee voluntarily does not work a day, then the day is legally not paid (541.602). If the employee does not work the entire workweek, the entire workweek is not paid (541.602). Past that there is a lot more to the 541.602 regulation, and the regulation says what the regulation says.

              Regarding late payment penalties for termination, certainly ask CA-DLSE. However, and this is a big however, this is entirely CA-DLSE's decision. There is never anything automatic about late payment penalties. Past that, if the employer does not have any money to pay wages, then they might equally not have any money to pay late payment penalties.
              "Reality is that which, when you stop believing in it, doesn't go away".
              Philip K. **** (1928-1982)

              Comment


              • #8
                Thanks for the help DAW and cbg - it'll be a long process, but hopefully I can keep this one going and fill in with the conclusion and resolution (positively - fingers crossed) so others can have a better understanding as well.

                Cheers!

                Comment

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