Creative Duties Test: California
Repercussions for employers mis-classifying their employees in California, as exempt by misrepresenting or mistaken their primary duties, are back-pay for unpaid hours, meal and rest breaks, possibility of double damages (or liquidated damages), waiting time penalty, court and attorney fees, among others.
- To be considered exempt in California, a creative professional must be primarily engaged in an occupation commonly recognized as artistic, meaning “Work that is original and creative in character in a recognized field of artistic endeavor (as opposed to work which can be produced by a person endowed with general manual or intellectual ability and training), and the result of which depends primarily on the invention, imagination, or talent of the employee or work that is an essential part of or necessarily incident to any of the above work”.
- They also must produce work that is "predominantly intellectual and varied in character (as opposed to routine mental, manual, mechanical, or physical work) and is of such character that the output produced or the result accomplished cannot be standardized in relation to a given period of time".
- Overtime in California is defined as any hours worked over 8 hours per day and 40 per week.
- State law requires employers to track the start and end time from the beginning of the shift, meal break start and end, to end of the shift for nonexempt employees; From these time records, the employer will then count the hours worked each workday and workweek.
- Under California law, overtime is paid at a rate of one and one-half times the employee's regular rate of pay for all hours worked in excess of 8 hours, up to and including 12 hours in any workday, and for the first 8 hours worked on the seventh consecutive day of work in a workweek.
- They must double the employee's regular pay rate for all extra hours worked of 12 hours in any workday and for all extra hours worked of 8 hours on the seventh consecutive day of work in a workweek. For instance, if an employee worked all seven days of the workweek and worked 10 hours on the seventh day, the first 8 hours are paid at a 1.5x rate and the remaining are paid at the 2x rate.
- California law requires that overtime wages be paid no later than the regularly scheduled payday of the payroll period following that in which overtime was earned. While the law permits the delay of overtime pay by one payroll cycle, any straight time hours worked must be paid on the regular payday of the payroll period in which they were earned.
- Exempt employees may be required to work more than 40-hours per week without overtime, rest, or meal breaks. To be classified as exempt, the employee must be primarily engaged in the creative activity (generally, this means dedicate about 50% or more of their time to creative duties), regularly and customarily exercise discretion and independent judgment on the job and earn a salary equivalent to at least twice the state minimum age for full-time work ($49,920 as of January, 2019 for most, for employers with 25 or fewer employees, $45,760).
- Regarding commissions, employees who earn more than 1.5 times the minimum age and earn more than half of their compensation from commissions may be exempt from overtime as well.
- California’s criteria for exempt employees are similar to those in the Fair Labor Standards Act (FLSA), with additional requirements and unique exceptions. For example, a professional that would otherwise be exempt under the FLSA, may not be exempt if they are subject to frequent docking of pay for productivity or performance issues.
- Employers who mis-classified employees as exempt may have to pay damages including unpaid overtime, minimum wage violations, missed rest breaks, missed meal breaks, interest, legal fees, and court costs. By federal law, the employee may seek double damages.
- The most common penalties are unpaid overtime and legal costs and attorney fees the employee incurred while pursuing legal action. The employer may also suffer penalties of $100 or $200 per pay period in which the law was violated, payable to the State of California. In some situations, the employee can recover up to 25% of it.
- If meal breaks and rest periods were not provided, the employer has to pay one extra hour of pay at the employee’s regular hourly rate. If the employee misses multiple rest or meal breaks, they can reclaim up to one extra hour per workday for their missed rest periods and an additional one hour per workday for their missed deal breaks. In 2007, the California Supreme Court classified this as a premium, not penalty, meaning that the claim can be made for a period of up to three years.
- If the employer failed to keep proper records of the employee journey, they may have to pay a penalty pay stub, depending on the number of pay periods the violation lasted. "For the first pay stub violation, the employee is entitled to a $50 penalty and then $100 per pay period for every violation after that, up to $4,000". This is penalty is enforced when the employee is not sure how much back pay they are entitled due to the employer’s mistake.
- If the employer willfully fails to pay wages on time, they can be subject to a waiting time penalty. If an employee has been deprived of their full pay due to being mis-classified as exempt, they may be entitled to receive this penalty as well, up to 30 days of the employee’s wage.
- Cause of action accrued on each payday and employees generally have three years to make a wage claim under California law, starting from the first wage legally due.
- Some claims may face a shorter deadline, such as a claim for the breach of an oral contract must be filed within two years. Meanwhile, a claim based on a breach of a written contract may be pursued as late as four years after it began to accrue.
- To move to a class action in California, the plaintiffs’ burden is not to merely show that some common issues exist, but to show that common issues predominate. Class actions are more common with executive and administrative exemptions.
STATUTE OF LIMITATIONS FOR WAGE AND HOUR CLAIMS IN CALIFORNIA
- Waiting time penalties: 3 years
- Wage statement penalties: 1 year
- Meal and rest premium pay: 3 years
- Penalties for Violation of Wage Order and Certain Labor Code Sections: 1 year
- Penalty for Failure to Provide Timely Records and Inspection: 1 year
- PAGA penalties: 1 year
- Reimbursement of Employee Business Expenses: 3 years or 4 years under the Unfair Competition Law (UCL).
- Unpaid wages: 3 years or 4 years under the UCL
- Unpaid overtime: 3 years or 4 years under the UCL
- Unfair competition: 4 years
- In 2006, Dani Hoenemier, a technical writer for Sun Microsystem sued the company claiming that he was due overtime. In 2008, the case was certified as a class action, meaning that Hoenemier could now pursue the lawsuit on behalf of all salaried technical writers who worked for sun since 2002.
- Sun argued that it was typical to classify technical writers as exempt, saying that writers are well-paid, professional employees who are legally exempt from overtime rules because they are highly skilled, work independently and meet other criteria spelled out in the law.
- Part of the case rested on the argument that technical writers do not exercise discretion or independent judgment. In 2010, 157 writers had joined the lawsuit, which was finally settled for $5 million, approximately $21,000 from the settlement. The exact amount is determined by the number of hours worked and how long the worker had been with the company, according to lawyers for the writers.
- Since the lawsuit, companies such as Oracle, modified their policies to allow technical writers to receive overtime pay.
- In 2018, the California Supreme Court changed the rules for independent contractors, including freelance writers. The ruling determines that to classify someone as an independent contractor, businesses must show that the worker is free from the control and direction of the employer; performs work "that is outside the hirer’s core business"; and customarily engages in an independently established trade, occupation or business. This definition work could also affect other classes, such as minor league baseball players, as pointed out by the New York Times.
- In 2019, Target was hit with a lawsuit, where the plaintiff claims that, despite being employed as an “Executive Team Leader-Human Resources”, most of his duties were not in the administrative sphere, and therefore, could not classify him as exempt.
- Activision Blizzard was also sued by its artists for mis-classifying them as exempt under the “creative” title. The artists claimed that this classification was inappropriate, considering that the activities performed didn’t require creative input on their end. The case was settled for $1.5 million.