10 California Wage and Hour Myths Debunked

California wage and hour law is an "unbelievably active" area that is drawing a lot of attention from plaintiffs' lawyers, according to Alexander Chemers, an attorney with Ogletree Deakins in Los Angeles.

With more than 9,000 provisions in the California Labor Code, the complexity of the state's wage and hour law has led to confusion and many misconceptions. Chemers attempted to debunk some of these myths on Jan. 28 during the Professionals in Human Resources Association (PIHRA) 2020 Legal Update in Anaheim, Calif.

Here are his top 10 wage and hour myths:

1. "We provide all of the information required by California law. We buy the posters each year!"

Chemers said buying posters is a good place to start but employers should do more than that. Many companies don't have the applicable wage orders on display in the workplace, and they should also post those. Valuable resources can be found on the California Department of Industrial Relations website.

If an employer has remote workers, it should also distribute relevant information in other ways, such as including it with new-hire packets or posting it online.

2. "Our meal-period and rest-break policy complies with California law. I'm sure of it!"

California strictly regulates employee meal and rest breaks. For instance, nonexempt employees in general aren't permitted to work for more than five hours without a 30-minute meal period.

[SHRM members-only toolkit: Complying with U.S. Wage and Hour Laws and Wage Payment Laws]

Businesses' workplace policies sometimes contain incorrect information or omit important details. Chemers said these documents should be updated regularly and reviewed by attorneys.

3. "Our employees can always take meals and breaks, so we don't need to worry about paying premiums."

Chemers noted the benefits of having a system to identify meal-period exceptions. If an employer uses an electronic time-keeping system, the technology can show whether an employee fails to record a compliant meal period. For example, it can show if the worker is taking late meal periods or if those meal breaks are too short. Businesses can use these time-keeping systems to monitor compliance and counsel employees as needed.

4. "Our rounding policy is neutral, so we're complying with California law."

Chemers said neutral payroll rounding is allowed, but only if it's neutral both "facially" and "as applied." An employer can round employee work hours to the nearest five minutes, one-tenth of an hour or one-quarter of an hour, so long as employees are fully compensated for all the time they actually worked.

Chemers said he handles a lot of rounding cases and urged employers to be cautious. Practically speaking, payroll rounding practices can be risky, he said.

5. "We pay all overtime that is owed. It's 1 1/2 times an employee's normal hourly rate."

In reality, figuring out overtime pay is much more complicated than that. For instance, companies should know how certain bonus payments affect overtime calculations. Chemers described this area of the law as a "compliance nightmare" and said employers should try to understand all the complexities.

6. "We hired a reputable payroll vendor. It's the vendor's job to make sure our wage statements are accurate."

There are many legal requirements related to wage statements, and violations can be extremely costly for businesses. Under the California Labor Code, employers that knowingly and intentionally fail to comply with the requirements face penalties. One common problem is failing to include the correct legal name of the employer. Payroll vendors aren't liable to workers for alleged errors—employers ultimately bear responsibility for compliance, Chemers said.

7. "We don't have to worry about temp workers because they are not our employees."

Employers actually can be held liable in legal cases involving temporary workers. Chemers cited the 2018 decision by a California Court of Appeal in Serrano v. Aerotek, in which a temporary employee sued over alleged violations of meal-period requirements. Because the temporary staffing agency had contractually made the employer responsible for complying with the legal requirements, the company—rather than the staffing agency—was held liable.

8. "We have independent contractors, not employees, so we're fine when it comes to wage and hour laws."

The California law AB 5 took effect this year, making it more difficult for businesses to designate workers as contractors. The controversial law is facing legal challenges, including one involving the California Trucking Association, represented by Chemers. In this case, a federal judge has exempted truckers from AB 5. Still, the legal battle is ongoing, and employers should stay up-to-date with the latest developments.

9. "We have an arbitration agreement, so we're good" or "We don't need an arbitration agreement."

Businesses are encountering confusion and uncertainty related to workplace arbitration agreements. AB 51 was scheduled to take effect this year to restrict the use of arbitration contracts, but a federal judge temporarily halted it as a legal battle continues. According to Chemers, arbitration agreements must meet very specific requirements to ensure they're enforceable. Failing to use arbitration contracts also has risks, though, including a greater chance of class-action suits.

10. "We have unlimited PTO and/or sick leave, so we don't need to include it on wage statements."

In reality, employees must be informed in writing about their accrued paid sick leave every pay period. Paid sick leave—or paid time off (PTO), if vacation and sick leave are lumped together—needs to be itemized on the wage statement unless another type of written communication is provided.

Toni Vranjes is a freelance business writer in San Pedro, Calif.