CALIFORNIA COURT RULING
When is a rest period not a rest period? When you’re kept working or on-call the whole time, the California Supreme Court ruled. In a case decided just a couple weeks ago, the court ruled that California law prohibits rest periods and breaks where an employee remains on-duty or on-call, such as when employees are required to respond to calls or perform basic tasks, even when on a required break. For a break or rest period to meet the requirements of California law, the court concluded, employees must be truly free from work duties.
The California Labor Code section 266.7 dictates that “No employer shall require any employee to work during any meal or rest period mandated by an applicable order of the Industrial Welfare Commission.” IWC Wage Order 4 further requires that employers provide 10-minute breaks for every four hours worked. Failure to comply with the break requirement obliges employers to provide one hour of pay for every day without a provided rest period. The order also requires 30-minute meal breaks where the employee is relieved of all duties, unless an on-duty meal break is agreed to in writing.
Since the meal break provision required employees to be relieved from all duties while the 10-minute rest provision did not, the Court of Appeal found that no such full relief from work was required. The California Supreme Court disagreed. “The ordinary meaning of rest conveys, in this context, the opposite of work,” Associate Justice Mariano-Florentino Cuéllar wrote for the court. That is, a time “free from labor, work, or any other employment-related duties.” If the IWC wanted to allow on-duty breaks, the court reasoned, it would have done so specifically, as it did for meal breaks. It did not. While on-duty lunch breaks are paid, rest periods are not. Requiring the employee to work during on-duty rest periods would be akin to requiring a worker to perform free work, the court concluded.
The same goes for on-call rest periods. Even if an employer releases a worker from employment duties while on break, the employer cannot then require the worker to remain on-call during that time. “One cannot square the practice of compelling employees to remain at the ready, tethered by time and policy, to particular locations or communications devices,” with the requirement that employees be given rest periods, the court wrote.
In its conclusion, the court lays out the takeaways quite clearly: Wage Order 4, subdivision 12(A) and section 226.7 prohibit on-duty rest periods. What they require, instead, is that employers relinquish any control over how employees spend their break time, and relieve their employees of all duties – including the obligation that an employee remain on-call. A rest period, in short, must be a period of rest.
It is unclear how trucking companies in California will accommodate these new laws, as the business of trucking does not fit nicely into the premise of these rules. Companies will be forced to adhere to the rules, even though they don’t make sense for drivers, and the drivers will surely be confused. What could possibly go wrong! And you know how it usually goes – as goes California, so goes the rest of the country – it’s only a matter of time.
WORKER MISCLASSIFICATION
Are you aware that at this very moment, your company could be at risk? With 2017 comes a myriad of new laws and regulations, plus court cases that could affect your business. One of the most critical issues today is worker misclassification. It affects companies of any size and, if left unaddressed, can have serious financial ramifications. Worker misclassification is the practice of labeling and treating workers as independent contractors rather than employees, either deliberately or accidentally. Most companies are unaware that they’re even doing it, let alone the risk it creates for their company, even though the misclassification is accidental on their part.
To reduce payroll costs and avoid paying standard benefits or unemployment and payroll taxes, some employers misclassify their workers. Instead of calling them employees, they put them under the independent contractor umbrella (commonly perceived as anyone who completes a 1099 form), hoping to cut costs. These companies are putting their bottom lines at tremendous risk. Many large companies have already learned tough lessons about the consequences of misclassification. Heavy hitters like Uber, Lyft, and FedEx have all felt the financial sting of such consequences, with hefty price tags, in the hundreds of millions.
Equally alarming for employers is the recent crackdown on misclassification by the Internal Revenue Service (IRS) and the Department of Labor (DOL), which believes that 30% of employers may be misclassifying their workers. Meanwhile, the IRS has ramped up the investigation and enforcement of misclassification to recoup what could be billions of dollars in lost tax revenue. To improve compliance and present a united front on the issue, the IRS and the DOL signed a memorandum of understanding, allowing the sharing of information and resources to increase compliance with both federal tax requirements and labor laws.
As the head of your company, no matter its size, it’s time to ask some difficult questions. As a company, are you creating unnecessary risk, and, if so, how would it impact you financially? As an employer, you should look at your business practices and determine if misclassification has occurred. If it hasn’t, then you will have increased awareness and can stay vigilant to ensure continued compliance. But, if you discover that misclassification is occurring, you should formulate a plan to address it, correct it, and bring your company into compliance. The short-term promise of a potential payroll savings won’t matter if your company gets hit – either by a lawsuit or by a multi-agency audit.
We all want to lower our costs and improve productivity, but we must achieve these benefits without breaking the labor laws. I feel tremendous pride in the fact that NTA can provide a solid solution to remove the worry of “what if” from your business. Let NTA partner with you and provide what you need so that you can rest easy, knowing you are shielded from misclassification claims. Our expert partner attorneys are proven leaders, so regardless of your carrier size, you can feel secure in the knowledge that our 28 years of expertise is working to protect you and your company’s bottom line. Don’t wait until it’s too late – join now by calling (562) 279-0557 or visit www.ntassoc.com today.
