October 12, 2021

The Compensation Trap

Starting January 1, 2022, California employers risk criminal charges for the intentional theft of wages.[i] An intentional theft of wages in an amount greater than $950 for one employee, or $2,350 for two or more employees will subject an employer to a criminal charge of grand theft. Given the severity for failing to pay workers for all time owed, it is important to be mindful of some of the more common wage mistakes that can land an employer in serious trouble. Provided below are a few important reminders.

Payment of Wages for All Time Worked
In California, employers must pay nonexempt (i.e., hourly) employees for all hours worked. In the past, certain small amounts of time (e.g., opening the facility or locking) up were considered “de minimis” (i.e., too trivial or minor to merit consideration) and were not counted as hours worked. However, the California Supreme Court has made clear that even time considered “de minimis” must be compensated when the work performed  is done on a regular basis or as part of the job.

However, because the Court is unclear as to what might be considered de minimis, it is recommended that employees be paid for all time worked, including short periods of time for required pre/post duties; even if it is a small amount of time and/or doesn’t occur regularly.

Reporting Time (Time Spent Waiting)
Under California law, employees must be paid for all hours worked. This would include hours for which the employee is subject to the control of the employer even when hired to do nothing, merely wait around, or check in to find out whether they must report to work that day. IWC Orders for packing/processing and agricultural employees provides that if an employee is required to report for work at a scheduled time, and does, but is not put to work or works less than half of their usual day, that employee will receive reporting time pay.

Reporting time pay is 1.5 the normal hours worked at the regular rate for that employee at a minimum of 2 hours and a maximum of 4 hours. If an employee is required to report for work a second time, and works less than 2 hours, the employee must be paid for 2 hours at their regular rate of pay.

Reporting time pay is waived if the reason for stopping work is:

  • At the recommendation of civil authorities
  • When employees’ or the employer’s property is threatened
  • When public utilities fail; or
  • Due to an act of God or other causes not within the employer’s control.

According to the Division of Labor Standards Enforcement, if employees are required to wait out a weather delay, they must be paid for all time that they are restricted to the premises or worksite. Even if employees are relieved of all duties except for waiting for the weather to clear up, they must be paid their regular rate if they aren’t free to leave during that time.  The U.S. Wage & Hour Division takes the position that employees being told to wait at the nearby WalMart while crops are thawing are considered under the control of the employer, and must be paid for that time.

Reimbursement of Expenses
California employers are required to indemnify (i.e., reimburse) employees for all necessary expenditures or losses incurred by the employee as a direct consequence of the performance of their duties.

While it is yet unclear how this new criminal penalty will be interpreted or enforced, employers should take this opportunity to analyze and audit current compensation policies and practices. Increased training on internal policies and California law will also reinforce the seriousness of tight compliance. Most importantly, employers needing to take corrective measures after conducting an internal audit or review should contact legal counsel to ensure compliance with current laws.

Members with questions about wage and hour practices should contact Western Growers.

[i] AB1003 signed by the Governor September 27, 2021, effective January 1, 2022.