In California, staying compliant with minimum wage laws is crucial for employers. Understanding these requirements, especially in a state with varying local rates, can be challenging. This blog post will guide you through the overview of California's minimum wage regulations and the potential pitfalls employers may face.

Current Minimum Wage Rates in California

Keeping track of minimum wage rates is essential. California's minimum wage can vary depending on location and employer size. To find the most up-to-date information, you can visit the California Department of Industrial Relations (DIR) website, which provides comprehensive details about both state and local minimum wage rates.

Certain Workers and Minimum Wage Law Compliance

Employing certain type of workers such as piece rate workers and commission-based employees can add a layer of complexity to wage calculations.

Piece-rate Workers and Minimum Wage

Piece rate workers are paid based on the number of units they produce or tasks they complete. For example, a car mechanic might be paid a flat rate for each brake job completed. Employers in California should be aware that piece rate workers must earn at least the applicable minimum wage for all hours worked, including rest and recovery periods. Calculating the correct rate for these employees can be intricate.

Example: A farm in California employs agricultural workers to pick fruit on a piece rate basis, paying them per bushel picked. The piece rate is set at $2 per bushel. In a workweek, Worker A picks 100 bushels, earning $200. Worker B picks 150 bushels, earning $300. The local minimum wage is $15 per hour.

While the piece rate seems fair, when the hours worked are considered, the violation becomes apparent. Worker A worked for 40 hours in the week, which means he should have earned at least $600 (40 hours x $15 per hour), not just $200. Worker B, who worked 50 hours, should have earned at least $750 (50 hours x $15 per hour), not just $300 plus applicable overtime payment for 10 hours.

Commission-Based Employees and Minimum Wage

Commission-based employees are paid based on the amount or value of the goods or services they sell. For instance, a car salesperson might be paid a percentage of each vehicle's sale price. For employees earning commissions, the California Labor Code requires that they also receive at least the applicable minimum wage. If their commissions do not reach the minimum wage threshold, the employer must make up the difference.

Example: An employee in a retail store earns a 10% commission on sales. In a particular week, she worked 40 hours but only made $100 in commissions. The local minimum wage is $15 per hour. To meet minimum wage requirements, the employer must pay an additional $500 ($600 (40 hours x $15) - $100) for that week.

Misclassified Independent Contractors and Minimum Wage

If an employer misclassifies its employees as independent contractors, it will likely face potential minimum wage violation.

Example: A residential manager earns $1,000 a month as his independent contractor fee. If he has to be classified as an employee, the employer must make sure this fee satisfies minimum wage requirements. If the manager works 70 hours a month, and the local minimum wage is $15 an hour, the employer must pay an additional $50 ($1,050 (70 hours x $15) - $1,000) for that month.

All Work Hours Must be Considered

Employers must include all their employees' work hours under their control in calculating minimum wage, not just the time spent producing pieces or performing tasks directly tied to their work and services. Following are examples employers commonly miss when calculating their employees work hours:

• Rest and Recovery Periods: Rest periods as mandated by California labor laws are considered hours worked and should be paid accordingly. If employees were relieved from all duties while taking their meal breaks, the meal periods are normally not considered hours worked.
• Waiting Time: Any time spent waiting for work assignments, equipment setup, or other tasks while under the employer's control is considered hours worked.
• Travel Time: Travel time between job sites or locations during the workday is typically counted as hours worked.
• Training Time: If the employer requires training, meetings, or other work-related activities, this time is generally considered hours worked.
• Known off-the-Clock Time: California employers may be liable for off-the-clock work if they knew or should have known that employees were working extra hours without reporting the time.

Employers should pay at least the minimum wage for their employees' hours spent on tasks that are not their direct "selling" or "servicing" hours subject to piece-rate or commission.

Consequences of Violating Minimum Wage Laws

Employers who fail to comply with California's minimum wage laws may face serious consequences. These can include:

1. Back Wages: Employers may be required to pay employees the difference between what they were paid and the legally required minimum wage for all underpaid hours.

2. Liquidated Damages: In some cases, employers may also be liable for liquidated damages, which can amount to double the unpaid wages.

3. Civil Penalties: The state labor agencies may impose civil penalties on employers who violate minimum wage laws. These penalties can vary depending on the severity and frequency of the violations.

4. Wage Statement Penalties: If minimum wage violation is found, it is common for the affecting employee's wage statements to be found as inaccurate. The pay stubs for the employee should have included information for those missing minimum wage payments. Employers will face penalties $50 for the initial pay period, $100 for subsequent pay periods, up to $4,000.  

5. Waiting Time Penalties: Because employers are considered not paid these minimum wages, they are also obligated to pay penalties for not paying them on time. Employers will face late payment penalty calculated by employee's daily average wage for each day the wages are not paid, up to a maximum of 30 days.

6. Class Action Lawsuits: Employees who have been affected by minimum wage violations may choose to file class-action lawsuits against their employer, potentially leading to significant financial liabilities.

7. Legal Costs: Employers may be responsible for covering the legal costs and attorney's fees of the employees, on top of their own attorneys' fees, who filed minimum wage violation claims against them.

8. Government Audits: Violations may trigger investigations and audits by state labor agencies, such as the California Division of Labor Standards Enforcement (DLSE) or the Employment Development Department (EDD). These investigations can be time-consuming and may result in additional penalties and fines.

Consult Our Office Today

Navigating California's complex employment laws, especially regarding minimum wage requirements, can be daunting for employers. As an employment law specialist, I am here to provide expert guidance and protect your business from costly legal consequences.

If you have concerns about minimum wage compliance or any other employment law matters in California, don't hesitate to reach out to me. I can help ensure your business stays on the right side of the law. Contact us today by filling out our ONLINE FORM or calling us at (310) 769-6836 to schedule a consultation and put your employment law worries to rest.