labor_form_guidance | California

DLSE Enforcement Policies and Interpretations Manual

UIDca_dlse_claims_retaliation_forms:https-www-dir-ca-gov-dlse-dlsemanual-dlse-enfcmanual-pdf
CitationN/A
Court / bodyCalifornia Labor Commissioner's Office / DLSE
Decision dateN/A
CollectionCA_DLSE_CLAIMS_RETALIATION_FORMS
SourceOriginal

Summary

Text

The 2002 Update Of
The DLSE
Enforcement Policies and Interpretations
Manual
(Revised)
The Division of Labor Standards Enforcement (DLSE) Enforcement Policies and Interpretations
Manual summarizes the policies and interpretations which DLSE has followed and continues to
follow in discharging its duty to administer and enforce the labor statutes and regulations of the
State of California.
Lilia Garcia-Brower, State Labor Commissioner
AUGUST, 2019

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
DECEMBER, 2019 ii
TABL E OF CONTENTS
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. 1. INTRODUCTION 1-1
2. WAGES 2-1

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“Employer”, Defined 2-1
“Wages”, Defined 2-1
Piece Rate Or “Piece Work” 2-2
Commission 2-2
Bonus Defined 2-3
Status Of Wages 2-3
Extension Of Wage Definitions To Public Employees 2-4
3. WAGES PAYABLE ON TERMINATION 3-1

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Labor Code § 201 – Discharge 3-1
Layoff, When Discharge 3-1
Sale Of Business Constitutes Discharge 3-1
Motion Picture Workers’ Exception 3-2
Print Shoot Employees Exception 3-2
Oil Well Drilling Workers’ Exception 3-2
Professional Baseball and Live Theatrical Or Concert Events 3-2
Labor Code § 202 – Quit 3-2
“For A Definite Period”, Defined 3-2
Payment By Mail 3-2
Extension of Coverage of Wage Statutes to Some Public Employees 3-3
Temporary Services Employees 3-3

4. PENALTY FOR FAILURE TO PAY WAGES ON TERMINATION 4-1
“Willfully”, Defined 4-1
“Good Faith Dispute”, Defined 4-2
Payment By Mail 4-2
“Any Wages” 4-2
“Action”, Defined 4-3
Payment Of Wages Not Calculable Until After Termination 4-3
Labor Code § 203.1 – Civil Penalty For Payment With Non-Sufficient Funds Instrument 4-3

5. PAYMENT OF REGULARLY SCHEDULED WAGES 5-1
Payment Of Overtime Wages, Time For 5-1
Payment Of Bonus, Commission, Or Other Extraordinary Wages 5-2
Payment At Central Location, Special Rules 5-2
Commission Wages 5-2
Executive, Administrative Or Professional Employees, Special Rules 5-3
Commissioned Vehicle Salespersons 5-4
Agricultural And Household Occupations Receiving Room And Board 5-5
Farm Labor Contractors’ Employees 5-5
Most Agricultural Employees 5-5

6. COMPENSATING TIME OFF, Caveat Regarding Labor Code § 204.3 vs. § 513 6-1
7. WAGE PAYMENT — SPECIAL CONDITIONS 7-1
Conceded Wages Must Be Paid Without Condition 7-1
Release Of Wage Claim Prohibited 7-1
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DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
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DECEMBER, 2019 iii
TABLE OF CONTEN
TS (Cont’d
)
7. WAGE PAYMENT — SPECIAL CONDITIONS (Con t’d.)
Settlement By DLSE 7-2
Payday Notice Required 7-2
Place Of Payment 7-2
Payment In Strike Situation 7-3
Payment Of Wages Covered By Collective Bargaining 7-3
Wage Payment Where Holiday Occurs 7-3
Private Agreement May Not Contravene Labor Code Pay Provisions 7-4

8. PENALTIES TO EMPLOYEES OR THE STATE 8-1
Untimely Payment Of Wages
During Course Of Employment 8-1
9. METHOD OF PAYMENT OF WAGES 9-1
Wages Must Be Paid In Cash
Or Negotiable Instrument Payable In Cash 9-1
Requirements Regarding Negotiable Instruments 9-1
Payment By Scrip Specifically Prohibited 9-2
Payment To ERISA Trust Not Subject To Penalty 9-2
Limited Exceptions To Payment In Cash Or Negotiable Instrument 9-3
Payment Of Wages Due Deceased Employees 9-4

10. FAILURE TO PAY WAGES, WITHHOLDING WAGES 10- 1
Refusal To Pay Wa
ges 10-1
Employer Prohibited From Recovering Back Wages Paid To Employee 10-2
Criminal Sanctions For Secretly Paying Less Than Required By Statute Or Contract 10-2
11. DEDUCTIONS FROM
WAGES 11-1
Legal Deduction
s 11-2
Recovery Of Wages Paid, Illegal 11-2
Self-Help By Employer To Recover Debt From Wages Prohibited 11-3
Losses Which Are Result Of Simple Negligence Or Cost Of Doing Business 11-3
Not Recoverable By Deduction From Wages 11-3
Losses Suffered By Employer As Result Of Dishonest Or Willful Act Of Employee 11-3
Deductions For Loans Made To Employees 11-4
Deductions Must Be For Direct Benefit Of Employee 11-5
Deductions Allowed By IWC Orders, Caveat 11-5
Deductions For Tardiness 11-6
12. ENFORCEMENT AND
COVERAGE OF WAGE STATUTES 12-1
Claimants Hav
e Right To Private Action 12-1
Exemptions For Publi
c Employers 12-1
13. MEDICAL OR PHYS
ICAL EXAMINATION COSTS 13-1
14. WAGE STATEMENT RE
QUIREMENTS 14-1
Dama
ges and Penalties For
Failure To Provide Proper Wage Statement 14-6
15. VACATION WAGES 15-1

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JANUARY, 2022 iv
Prorata Vacation 15-1
Statute Does Not Require Employer Provide Vacation 15-1
Probation Periods 15-1
Use-It-Or-Lose-It Policies Are Not Allowed 15-1
Earnings Must Be Proportional 15-2
ERISA Preemption 15-2, 15-3
Sale Of Business Constitutes Discharge 15-4
Vacation vs. Other Leave Benefits 15-4

16. SEVERANCE PAY PROVISIONS 16-1
Determining ERISA Coverage Of Severance Plans 16-1,16-2
17. RETALIATION AND DISCRIMINATION — PROTECTED RIGHTS 17-1
Enforcement Jurisdiction Of DLSE 17-2
Examples of Prohibited Retaliation 17-13
Filing Or Threatening To File With Labor 17-13
Initiating Action or Notice Pursuant to Labor C ode §2699 17-14
Family Members Protected, Protection for Pre-emptive Retaliation 17-14
Penalties to Employees 17-14
California Equal Pay Act 17-15
Disclosure Of Information To Government Authorities or Employer 17-15
Filing Safety Complaint Or Refusal To Work In Unsafe Conditions 17-16

18. ASSIGNMENT OF WAGES 18-1
19. GRATUITIES – TIPS 19-1
Tip Pooling Limited 19-2
Service Charge May Be a Gratuity 19-3
No Cost May Be Imposed For Recovery For Tips Left On Credit Cards 19-4
20. EMPLOYEE BONDS – REQUIREMENTS AND LIMITATIONS 20-1
21. CONTRACTS AND APPLICATIONS FOR EMPLOYMENT 21-1
Employee Right To Copy Of Contract 21-1
Polygraph And Similar Tests Prohibited 21-1
22. PURCHASES BY EMPLOYEES – PATRONIZING EMPLOYER 22-1
Illegal To Require Payment To Apply For Employment 22-1
23. CONTRACTS AGAINST PUBLIC POLICY 23-1
24. SOLICITATION OF EMPLOYEES BY MISREPRESENTATION 24-1
25. CONSTRUCTION INDUSTRY CONTRACTORS’ REQUIREMENTS 25-1
Direct Contractor Liability – Labor Code § 218.7 25.1
26. EMPLOYEE PRIVILEGES AND IMMUNITIES 26-1
27. PROHIBITED OR LICENSED OCCUPATIONS, SUCCESSORSHIP, CAL WARN ACT 27-1
28. INDEPENDENT CONTRACTOR vs . EMPLOYEE 28-1
28-2
28-3
Burden Of Proof
ABC Test
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Express Exceptions ...................................................................................................................... 28-8
Borello Test ...........................................................................................................................
...... 28-14

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JANUARY, 2022 v
TABLE O
F CONTENTS (Cont’d)
28. INDEPENDENT CONTRACTOR vs . EMPLOYEE (Cont’d.)
28-15 Control as a Factor
Services For Which Contractor's License is Required
29. OBLIGATIONS OF EMPLOYERS
28-16
29-1
Obli
gation To Indemnify Employee For Expenses Or Losses 29-1
Labor
Code § 2810.5 Written Notice to Employees Upon Hire and for Changes 29-4
30. HEALT
HY WORKPLACES, HEALTHY FAMILIES ACT OF 2014 30-1
31. CONTRACTS – GENERALLY 31-1
32. CONTRACT INTERPRETATION - GENERALLY 32-1
33. CONTRACTS, IMPLIED-IN-LAW (QUASI-CONTRACTS) 33-1
34. COMMISSION WAGE PROVISIONS MUST BE IN WRITING 34-1
Bonus Plan Distinguished 34-1
Draws Against Commission 34-2
Forfeitures In Commission Plans 34-2
Commission Forfeitures Found To Be Illegal 34-3

35. BONUSES 35-1
Voluntary Termination Before Vesting 35-1
Illegal Conditions 35-2
Discretionary Bonus 35-2
Termination Of Employment 35-2

36. EFFECT OF ARBITRATION AGREEMENTS 36-1
Collective Bargaining Agreements With Arbitration Clauses 36-1
Federal Arbitration Act Restrictions 36-2
Revocable Arbitration Agreements 36-2
Current Law Regarding Arbitration Clauses 36-3

37. LEGAL ENTITIES, JOINT EMPLOYER, CLIENT-EMPLOYER, JOINT LIABILITY 37-1
Liabi
lity for Other Person under Labor Code §558 and 558.1 37-4
38. BANK
RUPTCY 38-1
39. ASSIGNMENTS FOR BENEFIT OF CREDITORS, RECEIVERSHIPS, ETC. 39-1
40. BULK SALE TRANSFERS, LIQUOR LICENSE TRANSFERS, ETC 40-1
No
Limit On Wage Preference 40-2
Processing A Claim 40-2
Liquor License Transfers 40-2

41. TIME RECORD REQUIREMENTS 41-1
42. RIGHT TO INSPECT PERSONNEL FILE 42-1
43. ENFORCEMENT OF WAGES, HOURS AND WORKING CONDITIONS REQUIRED
BY THE INDUSTRIAL WELFARE COMMISSION ORDERS 43-1

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Any Exemption From 8-Hour Norm Must Be Clearly Provided 43-2
IWC Orders Not Pre-Empted By FLSA 43-2
Coverage Or Applicability Of IWC Orders 43-2
Definition Of Federal Enclave 43-3
Employment By Indian Tribes 43-3
Enforcement Of Contractual Rights On Federal Enclave 43-5

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DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 vi
TAB
LE OF CONTENTS (Cont’d)
Determining Classification Of Employees: Industry Or Occupation Order 43-7
Determining Industry Order Coverage 43-8
Occupational Orders 43-8

44. MINIMUM WAGE OBLIGATION 44-1
All Hours Must Be Paid At Agreed Rate 44-2
45
. WORKING CONDITIONS UNDER THE IWC ORDERS 45-1
Reporting Time Pay 45-1
Meal Periods 45-4
Rest Periods 45-10
Meals And Lodging Costs 45-13
Uniform And Tool Requirements 45-14

46. HOURS WORKED 46-1
Definition 46-1
Travel Time 46-1
Time Spent Waiting 46-2
24-Hour Shift, Uninterrupted Sleep Time 46-7
Meal Periods 46-7
Changing Uniform Or Washing Up At Work 46-8
Training Programs 46-9
“Try Out” Time 46-10

47. CALCULATING HOURS WORKED 47-1
Rounding 47-1
Special Provisions Under IWC Orders – Recess Periods 47-2
Stipend Paid For Uncontrolled Standby Time 47-3
Unscheduled Overtime 47-3

48. BASIC OVERTIME INFORMATION 48-1
De
finition Of Workday 48-1
Definition Of Workweek 48-1
Fluctuating Workweek Arrangement Not Allowed In California 48-2
Belo Contracts Illegal In California 48-4
Make-Up Work Provisions Of IWC Orders 48-5
Work On Seventh Consecutive Day In Workweek 48-6
4
9. COMPUTATION OF REGULAR RATE OF PAY AND OVERTIME 49-1
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DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
DECEMBER, 2019 vii

TABLE OF CONTEN
TS (Cont’d)

Items Used In Computation 49-1
All Goods Or Facilities Received By Employee As Part Of WageTo Be Used In
Calculation Of
Regular Hourly Rate 49-1
Sums Which Must Be Included In Calculating Regular Rate 49-2
Sums Not Used In Computing Regular Rate 49-2
Methods Used In Computing Regular Rate Of Pay 49-6
Examples Of Overtime Calculation 49-9
Weighted Average Method 49-10

50. I
WC ORDERS EXEMPTIONS 50-1
Burden On Em
ployer To Prove Exemption 50-1
Cer
tain Employees In Computer Software Field 50-2
Physicians (by Labor Code) 50-2
Miscellaneous Other Categories 50-3
Hospitals, Rest Homes, Residential Care (New Provisions In Order 5 -2002) 50-4
Commissioned Salespeople 50-5
Employees Covered By Collective Bargaining Agreement 50-7
Certain Truck Drivers 50-8
Ambulance Drivers And Attendants 50-13
Professional Actors 50-14

51. DETERMINING EXEMPTIONS, GENERALLY
– Administrative,
Executive, Professional 51-1
Primarily Engaged In 51-1
Directly And Closely Related Activities 51-2
Exercise Of Discretion And Independent Judgment 51-2
Realistic Expectations 51-3
Salary Requirement 51-5
Salary May Not Be Prorated For Work Less Than “Full -Time” 51-6
Basic Differences Between Federal And California Law 51-7
Added Payments For Extra Work 51-12
Jury Duty, Attendance As Witness, Military Leave 51-13

52. ADMINISTRATIVE EXEMPTION 52-1
Titles
Not Determinative 52-2
Office Or No
n-Manual Work Required 52-2
Production Or Sales vs. Administrative 52-3
Directly Related To Management Policies Or General Business Operations 52-4
Discretion And Independent Judgment 52-5
Use Of Skill vs. Discretion And Independent Judgment 52-6
Knowledge And Experience vs. Discretion And Independent Judgment 52-6

53. EXECUTIVE EXEMPTION 53-1
Definition Of
Management Or Executive Employee 53-1
Where Management Duties Must Be Exercised 53-1
Two Or More Subordinates 53-2

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DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 viii

TABLE OF CONTENTS (
Cont’d)

54. PROFESSIONAL EXEMPTION 54-1
Categories Of Employees Specifically Found To Be Non -Exempt 54-1
Computer
Software Workers 54-2
Learned Or Artistic Professionals 54-3
Discretion And Independent Judgment 54-4

55. IWC DEFINITIONS 55-1
Employer
, Defined 55-1
Codified Definition Of Personal Attendant 55-1
Healthcare Industry, Defined 55-4
Workday, Workweek, Defined 55-5
Hours Worked, Defined 55-5
Outside Salesperson, Defined 55-5

56. ALTERNATIVE WORKWEEK ARRANGEME NTS 56-1
Orders 14 and 15 Exceptions 56-1
Employees In Healthcare Industry 56-2
Four-Hour Day Requirement In Most Orders 56-2
Two-Consecutive Days Off Requirement In Most Orders 56-2
Order 16 Exceptions 56-2
Regular Recurring Days Requirement 56-3
Choice Of Menu Options 56-3
Nine/Eighty Schedule 56-4
Overview Of Alternative Workweek Requirements 56-5
Secret Ballot Election Required 56-5
Alternative Workweek Must Meet Criteria In Wage Order 56-5
Affected Employees, Defined 56-5
Affected Employees, Other Definitions And Requirements Under Order 16 56-6
Written And Oral Disclosures To Employees Required 56-7
Election Must Be Held During Working Hours And At Workers Location 56-7
Failure To Meet Disclosure Requirements May Void Election 56-8
Employer May Not Reduce Regularly Hourly Rate Of Pay As A Result Of
Unilateral Implem
entation Of Alternative Workweek Arrangement 56-8
Employer May Not Intimidate Or Coerce Employees Regarding Elections 56-8
Existing Alternative Workweek Arrangements Adopted Pri or To 1998 56-9
Special Rules Regarding Orders 4 And 5 56-9
Employee Petition To Repeal Alternative Workweek Arrangement 56-10
Two-Thirds Majority Required to Repeal 56-10
Twelve-Month Interval Before Petition To Repeal May Be Voted Upon 56-11
Six-Month Interval Under Order 16 56-11
Employee Not Required To Work Alternative Workweek For First 30 Days 56-11
Employer Must Make Reasonable Accommodation 56-12

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DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 ix

TABLE OF CONTENTS (Cont’d)

Adoption, Repeal Or Nullification Of Alternative Workweek 56-11
DLSE Investigation Of Elections 56-13
Occasional Changes In Schedule 56-13
Premium Pay For Work Performed Within Scheduled Alternative Workweek 56-13
Healthcare Industry Exceptions 56-14
Premium Pay Required for Work Outside Of Regularl y Scheduled Alternative
Workweek 56-15
Substitution Of One Shift For Another At Request Of Employee 56-15
Work In Excess Of Daily Alternative Schedule 56-16
Regular and Recurring Schedule As A Subterfuge 56-16

INDEX OF OPINION LETTERS Addendum I
COMPILATION OF FEDERAL REGULATIONS Addendum II

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 1 - 1

INTRODUCTION

1.1 A primary function of the Division of Labor Standards Enforcement (DLSE) is to enforce
the State’s labor l
aws regulating wages, hours and working conditions for employees in
the State of California. (Labor Code § 95) The Division’s enforcement powers, however,
are limited by the phrase “the enforcement of which is not specifically vested in any other
officer, board or commission.”*
1.1.1 Since D LSE has the primary authority to investigate and prosecute all actions for the
collection of wages, it
is important to understand the concept of wages and the manner in
which DLSE has defined and interpreted the law for purposes of this enforcement.
1.1.2 The California Supreme Court has concluded that:
“Of course, interpretations that arise in the course of case- specific adjudication are
not regulations, t
hough they may be persuasive as precedents in similar subsequent
cases. Similarly, agencies may provide private parties with advice letters, which are
not subject to the rulemaking provisions of the APA. Thus, if an agency prepares a
policy manual that is no more than a restatement or summary, without commentary,
of the agency’s prior decisions in specific cases and its prior advice letters, the agency
is not adopting regulations. (Cf. Lab.Code, § 1198.4 [implying that some
“enforcement policy statements or interpretations” are not subject to the notice
provisions of the APA].) A policy manual of this kind would of course be no more
binding on the agency in subsequent agency proceedings or on the courts when
reviewing agency proceedings than are the decisions and advice letters that it
summarizes.
“The DLSE's primary function is enforcement, not rulemaking. (Lab.Code, §§ 61, 95,
98-98.7, 1193.5.) Neverthel
ess, recognizing that enforcement requires some
interpretation and that these interpretations should be uniform and available to the
public, the Legislature empowered the DLSE to promulgate necessary “regulations
and rules of practice and procedure.” (Labor Code § 98.8.) The Labor Code does not,
however, include special rulemaking procedures for the DLSE similar to those that
govern IWC rulemaking, nor does it expressly exempt the DLSE from the APA.”
Tidewater v. Bradshaw (1996) 14 Cal.4th 557, 569-570.

*The wages, hours and working conditions of public employees are, generally, guided by the
provisions of the Government Code or similar statutory authority. Labor Code § 220 was amended effective
January 1, 2001, and provides that some public employers are subject to wage, hour and working conditions
provisions of the Labor Code. See discussion at Section 12.1.1 of this Manual.

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 1 - 2

1.1.3 At first glance then, it would app ear that DLSE may not interpret the myriad of laws
which it must enforce without utilizing the ver y time consuming process of the
Administrative Procedures Act. The Tidewater court did , however, provide that:
If an issue is important, then presumably it will come before the agency either in an
adjudication or in a request for advice. By publicizing a summary of its decisions and
advice letters, the agency can provide some guidance to the public, as well as agency
staff, without the necessity of following APA rulemaking procedures.
1.1.4 The Supreme Court later expanded on its explan ation of the use of agency advice letters
in the case of Yamaha Corp. of America v. State Board of Equalization (1998) 19 Cal.4th
1, 21 (concurring opinion, adopted and cited with approval at Morillion v. Royal Packing
(2000) 22 Cal.4th 575, 590) when it stated:

“Long-standing, consistent administrative construction of a statute by those charged with its
administration, particularly where interested parties have acquiesced in the interpretation, is
entitled to great weight and should not be disturbed unless clearly erroneous. (Rizzo v. Board
of Trustees (1994) 27 Cal.App.4th 853, 861, 32 Cal.Rptr.2d 892). This principle has been
affirmed on numerous occasions by this court and the Courts of Appeal...Moreover, this
principle applies to administrative practices embodied in staff attorney opinions and other
expressions short of formal, quasi -legislative regulations. (See, e.g., DeYoung, supra, 147
Cal.App.3d 11, 19- 21, 194 Cal.Rptr. 722 [long -standing interpretation of city charter
provision embodied in city attorney's opinions]...”
The Supreme Court gave two reasons why such administrative letters should be entitled
to great weight:
First, “When an administrative interpretation is of long standing and has remained uniform,
it is likely that numerous transactions have been entered into in reliance thereon, and it could
be invalidated only at the cost of major readjustments and extensive litigation.” ( Whitcomb
Hotel, Inc. v. Cal. Emp. Com., supra, 24 Cal.2d at p. 757, 151 P.2d 233...
Second, as we stated in Moore, supra, 2 Cal.4th at pages 1017-1018, 9 Cal.Rptr.2d 358, 831
P.2d 798, “a presumption that the Legislature is aware of an administrative construction of a
statute should be applied if the agency’s interpretation of the statutory provisions is of such
longstanding duration that the Legislature may be presumed to know of it.” As the Court of
Appeal has further articulated: “[L]awmakers are presumed to be aware of long -standing
administrative practice and, thus, the reenactment of a provision, or the failure to substantially
modify a provision, is a strong indication the administrative practice was consistent with
underlying legislative intent.”
Finally, the Supreme Court in the case of Morillion v. Royal Packing Company 22 Cal.4th
575 at 584, concluded that “advice letters [of the DLSE] are not subject to the
rulemaking provisions of the APA.” (citing Tidewater, supra, 14 Cal.4th at page 571)
The Court then cited two of the Division’s advice [opinion] letters regarding the DLSE’s
interpretation of the term “hours worked”. The Court noted that the “DLSE interpretation
is consistent with our independent analysis of hours worked .”

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1.1.5 In a later development concerning the use by the courts of DLSE Opinion Letters, the California
courts have opined in the case of Bell v. Farmer’s Insurance (2001) 87 Cal.App.4th 805, 815:
“Advisory opinions... ‘while not controlling upon the courts by reason of their authority, do
constitute a body of experience an d informed judgment t o which courts an d litigants may
properly resort for guidance.’ ( Yamaha Corp. of America v. State Bd. of Equalization,
supra, 19 Cal.4t h at p. 14, 78 Cal.Rptr.2d 1, 960 P.2d 1031.) Thus, in Morillion v. Royal
Packing Co., supra, 22 Cal.4th a t page 584, 94 Cal.Rptr.2d 3, 995 P.2d 139, the court
reviewed two DLSE advice letters and found support in the fact that the DLSE interpretation
was consistent with its independent analysis. ( See also Tidewater Marine Western, Inc. v.
Bradshaw, supra, 14 Cal.4th at p.571, 59 Cal.Rptr.2d 186, 927 P.2d 296.)”
1.1.6 This manual summarizes the policies and interpretations which DLSE has followed in
discharging its duty to administer and enforce the labor statutes and regulations of the State of
California. The summarized policies and interpretations are derived from the following sources:
1. Decisions of California’s courts which construe the state’s labor statutes and regulations
and otherwise appl
y relevant California law.
2. California statutes and regulations which are clear and susceptible to only one reasonable
interpretation.
3. Federal court decisions which define or circumscribe the jurisdictional scope of California’s
labor laws and regulations or which a reinstructive in interpreting those California laws
which incorporate, are modeled on, or parallel federal labor laws and regulations.
4. Selected opinion letters issued by DLSE in response to requests from private parties which
set forth the policies and interpretations of DLSE with respect to the application of the state’s
labor statutes and regulations to a specific set of facts.
5. Selected prior decisions rendered by the Labor Commissioner or the Labor Commissioner’s
hearing officers in the course of adjudicating disputes arising under California’s labor
statutes and regulations.
1.1.6.1 The particular sources underlying the specified policies and interpretations are indicated in the
manual. Where the source is a statute, regulation, or court decision, its citation is set forth in the
text; where the source is an opinion letter, the parenthetical abbreviation “(O.L.)” is inserted in
the text, and w here the source is a prior quasi-adjudicative decision of the Labor Commissioner
(adopted as an “Administrative Decision”) resulting from an adjudication of a dispute, the
parenthetical abbreviation “(A.D. )” is inserted in the text. In the future, where the source is a
decision of the Labor Commissioner which has been adopted as a “Precedent Decision”, it will
be referenced in the manual by the parenthetical abbreviation “(P.D.)”.

1.1.6.2 Certain opinion letters cited in this manu al refer to “Interpretive Bulletins” that were previously
issued by DLSE. However, the California Supreme Court, in Tidewater, held that the Division’s
use of interpretive bulletins violates the provisions of the Administrative Procedures Act to the
extent that such bulletins go beyond a simple restatement or summary of existing laws, duly
promulgated regulations, judicial decisions, the Division’s opinion letters, or administrative
decisions. Thus, to the extent that any such interpretive bul letin purports to interpret the law by
setting out rules of general application and fails to present such interpretation as a restatement or
summary of the above enumerated sources, it is invalid.

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2 WAGES.
2.1 Initially, it is necessary to establish that, in fact, an employer-employee relationship exists. The term
“employee” is variously defined in the Wage Orders depending on the extent of the protections
which the IWC intended (e.g., definition in Wage Order 5, Section 2(F) covering lessees and Section
2(G) defining employee in the Healthcare Industry). Generally, the term means any person employed
by an employer.
2.2 “Employer”, Defined: The definition of employer for purposes of California’s la bor laws, is set
forth in the Wa
ge Orders promulgated by the Industrial Welfare Commission at Section 2 (see
Section 55.2.1.2 of this Manual), and reads in relevant part as follows:
“Employer” means an y person . . . w ho directly or indirectly, or through an
agent or any other person, employs or exercises control over the wages, hours ,
or working conditions of any person. (E.g., 8 CCR §11090(2)(F))
2.2.1 As explained in detail at Section 37.1.2 of this Manual, it is possible that two separate employer
entities (joint employers) may share responsibility for the wages due an employee. Also, at Section
28 of this Manual, there is a detailed discussion on how to distinguish between an employee and an
independent contractor.
2.3 Labor Code § 200. As used in this article:
(a) “Wages” includes all amounts for labor performed by employees of every description,
whether the
amount is fixed or ascertained by the standard of time, task , piece, commission
basis, or other method of calculation.
(b) “Labor” includes labor, work , or service wheth er rendered or performed under c ontract,
subcontract, partnership, station plan, or other arrangement if the labor to b e paid for is
performed personally by the person demanding payment.
2.4 Definition Of Wage . A wage is defined as money or other value which is received by an
employee as comp
ensation for labor or services performed. It is common to think of “wages” as
that amount received by an employee on a designated payday; but the courts have held that the term
also includes:
*
“...money a s well as other value given, including room, board and clothes. ( Schumann v.
California Cotton Cr
edit Corp. (1930) 105 Cal.App. 136, 140) “ ‘[T]he term ‘wages’ should be
deemed to include not only the periodic monetary earnings of the employee but also the other
benefits to which he is entitled as a par t of his compensation . [Citations.]’ ”(Department of
Industrial Relations, DLSE v. UI Video Stores, Inc. (1997) 55 Cal.App.4th 1084, 1091)
2.4.1 A case involving a violation of a statutory requirement that prevents an employer from passing on
costs to an employee may not, at first glance, appear to involve a claim for “wages”; but, as the court
in the UI Video Stores case pointed out, the real eff ect of such a statute “is to increase
the...employees’ wages by the amount which in the absence of the regulation they [the employer]
would have to pay towards the cost [incurred by the employee]”

*Except for the very limited exceptions found in Labor Code § 213, all wages due the employee on
a designated payday must be paid in cash or by an instrument negotiable and payable in cash as
provided by Labor Code § 212(a)(1) . (See also, Section 9 of this Manual)

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2.4.1.1 Premium pay required by the Labor Code and IWC Wage Orders such as overtime premium,
meal period premium, r
est period premium, reporting time pay and split shift premium are
“wages.” Murphy v. Kenneth Cole (2007) 40 Cal.4th 1094.
2.4.2 The amount of money which is received may be a fixed sum, or it may be ascertained or
determined by sta
ndard of time, task, piece, commission or by other method of calculation.
(Labor Code § 200).
2.4.3 Thus, an amount of compensation may be paid to an employee for labor or services and may
be measured by
hour, day, week, month, year, or any other subdivision of time (e.g., a
yearly “salary”).
2.4.4 A wage is also defined as a specified sum or amount which is paid to an employee in
exchange for a given
time of service to an employer, or a fixed sum which is paid for a
specified piece of work (e.g., “piecework”).
2.4.5 In the final analysis, wages are considered to be compensation paid to a person who is
employed to perf
orm labor or services for another person or entity.
2.5 The analysis used to determine what method of compensation the wage is based on is usually
simple. Howeve
r, there are cases where it is not entirely clear at first glance whether the
compensation is based on commissions or piece rate.

2.5.1 Piece Rate or “Piece Work”. “Work paid for according to the number of units turned out.”
(AMERICAN HERI
TAGE DICTIONARY definition.) Consequently, a piece rate must be
based upon an ascertainable figure paid for completing a particular task or making a particular
piece of goods.
2.5.2 Examples of piece rate plans can be as diverse as the following:
1. Automobile mechanics paid on a “book rate” (i.e., brake job, one hour and fifty minutes,
tune-up, one hour, etc.)
usually based on the Chilton Manual or similar;
2. Nurses paid on the basis of the number of procedures performed;
3. Carpet layer paid by the yard of carpet laid;
4. Technician paid by the number of telephones installed;
5. Factory worker paid by the widget completed;
6. Carpenter paid by the linear foot on framing job.
2.5.3 A piece rate plan of compensation may include a group of employees who share in the wage
earned for completing th
e task or making the product.
2.5.4 Commission. Labor Code § 204.1 defines commissions as: “Compensation paid to any person
for services r
endered in the sale of such employer’s property or services and based proportionately
upon the amount or value thereof.” Keyes Motors v. DLSE (1987) 197 Cal.App.3d 557. If the
compensation is based on a percentage of a sale, the compensation plan is a commission. On the
other hand, a compensation plan which pays employees for the number of pieces of goods
finished, the number of appointments made or the number of procedures completed, is based on
a piece rate, not a commission rate; though such compensation plans often refer to the payment
as “commission”.

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2.5.4.1 Again, as with a piece rate plan, a commission plan may include a group of employees who share
in the commissions
earned. (See detailed discussion of commissions at Section 34 of this Manual)
2.5.5 Bonus Defined. A bonus is money promised to an employee in addition to the monthly salary,
hourly wage, commission
or piece rate usually due as compensation. The word has been defined
as: “An addition to salary or wages normally paid for extraordinary work. An inducemen t to
employees to procure efficient and faithful service.” Duffy Bros. v. Bing & Bing, 217 App.Div.10,
215 N.Y.S. 755, 758 (1939). Bonuses may be in the form of a gratuity where there is no promise
for their payment; or they may be a contractually required payment where a promise is made that
a bonus will be paid in return for a specific result (i.e., exceeding a m inimum sales or piec e
quota). (See detailed discussion of Bonuses at Section 35 of this Manual)
2.5.5.1 Piece rate and commission plans may be in addition to an hourly rate or a salary rate of pay. Such
plans may also be in the alte
rnative to a salary or hourly rate. As an example, compensation plans
may include salary plus commission or piece rate; or a base or guaranteed salary or commission
or piece rate whichever is greater.
2.5.5.2 Bonus Plans Distinguished. Bonuses are in addition to any other remuneration rate an d are
predicated on perfo
rmance over and above that which is paid for hours worked, pieces made or
sales completed. A bonus is paid over and above wages earned fo r extraordinary work
performance or as an inducement to employees to remain in the employ of the employer.
2.6 Wages Not Ordinary Debts . The California and federal courts have established the principle
that wages are not
ordinary debts. They are preferred ove r all other claims becaus e of the
economic positio n of the average worker and his/her dependence on th e regular payment of
wages for the necessities of life. IWC v. Superior Court Kern County (1980) 27 Cal.3d 690; 166
Cal.Rptr. 331 (appeal dism., cert. den. 101 S.Ct. 602; 449 U.S. 1029; Reid v. Overland Machined
Products (1961) 55 Cal.2d 203; 359 P.2d 251; 10 Cal.Rptr. 819. In the later case of Boothby v.
Atlas Mechanical, Inc. (1992) 6 Cal.App.4th 1595, 1601, the court noted that under California
law, wages “are jealously protected by statutes for the benefit of employees.”
2.6.1 Both California and federal law prohibit imprisonment for debt (unlawful and violative o f
individual rights).
It should be noted, however, that the courts have upheld criminal cases which
involved imprisonment for failure to pay wages when there is the ability to pay. Cases define the
analytical framework applicable to claimed violations of the prohibition against imprisonment
for debt.
2.6.2 It is not, howe ver, every failure to pay wages which is subject to criminal sanctions. In In re
Trombley (1948) 31
Cal.2d 801, the court reviewed the assertion that Labor Code § 216, violated
the prohibition against imprisonment for debt. Citing the fraud exception to the imprisonment for
debt prohibition, the court noted the prohibition was “adopted to protect the poor but honest
debtor who is unable to pay his debts, and [was] not intended to shield a dishonest man who takes
an unconscionable advantage of another.” The court recognized that w ages were not ordinary
debts, that workers are particularly dependent on wages and that it was a matter of essential public
policy that workers receive their pay when due. The court stated: “An employer who knows that

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wages are due, has the ability to pay them, and still refuses to pay them, acts against good morals
and fair dealing, and necessarily intentionally does an act which prejudices th e rights of his
employee. Such conduct amounts to a ‘case of fraud’ within the meaning of the exception to the
constitutional prohibition and may be punished by statute.” Trombley’s formulation has been
applied and expanded in subsequent cases.
2.7 Extension Of Enforcement Coverage Of California Wage Statutes To Some Public
Employees. Effective January 1, 2001, Labor Code § 220 has been amended to extend coverage of
Division 2, Part
1, Chapter 1, Article 1 (§§ 200- 243) to employees of the State of California except §§
201.3, 201.5, 201.6, 201.7, 201.8, 203.1, 203.5, 204, 204a, 204b, 204c, 204.1, 205, and 205.5. Effective
January 1, 2020, Labor Code § 204 was amended to provide that employees directly employed by the
Regents of the University of California are specifically covered by section 204 and must be paid on a
regular payday, including those on a monthly payment schedule whose payment is due no later than five
days after the close of the monthly payroll period.

2.7.1 Note. Labor Code § 220(b) still exempts counties, incorporated cities, towns or other municipal
corporations from
the provisions of Labor Code §§ 200-211 and 215-219.

2.7.1.1 Other municipal corporations would include such entities as hospital districts, (See DLSE v. El Camino
Hospital District (1970) 8 Cal.App.3d, Supp. 30); community college districts, (See Kistler v. Redwoords
Community College Dist. (1993) 15 Cal. App.4th 1326), and a water storage district (See Johnson v. Arvin-
Edison Water Storage Dist. (2009) 174 Cal.App.4th 729). But see, Gateway Community Charters v. Spiess
(2017) 9 Cal.App.5 th 499, nonprofit public benefit corporation that operated charter schools was not a
municipal corporation and therefore not exempt from Labor Code § 203 waiting time penalties. In order
to be considered a municipal corporation the entity must perform ‘an essential governmental function for
a public purpose’ along with a consideration of the following factors: “whether the entity is governed by
an elected board of directors; whether the entity has regulatory or police powers; whether it has the power
to impose taxes, asessments, or tolls; whether it is subject to open meeting laws and public disclosure of
records; and whether it may take property through eminent domain.” Id. at 506.

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3 WAGES PAYABLE ON TERMINATION.
3.1 Labor Code § 201.
If an employer discharges an employee, the wages earned and unpaid at the time of discharge are due
and payable immediately. An employer who lays off a group of employees by reaso n of the
termination of seasonal employment in the curing, canning, or drying of any variety of perishable
fruit, fish or vegetables, shall be deemed to have made immediate payment when the wages of said
employees are paid within such reasonable time as may be necessary for computation and payment
thereof; provided, however, that such reasonable time shall not exceed 72 hours, and further provided
that payment shall be made by mail to any such employee who so requests and designates a mailing
address therefor.
3.2 The general rules for the payment of wages upon termination are found at Labor Code § 201, et seq.
Section 201 provides that in the event an employee is discharged, the wages earned and unpaid at the
time of th e discharge are due and payable immediately. There is an exception for employees in
“seasonal employment in the curing, canning, or drying of any variety of perishable fruit, fish or
vegetables” so long as wages of such employees are paid within 72 hours.
3.2.1 Employees in the curing, canning or drying occupations may be paid by mail if the employee so
requests and designates a mailing address. The time for payment by mail under this very limited
exception will, under California law, be timely if the wages are mailed within seventy-two hours of
the termination. (See C.C.P. § 1013(a))
3.2.2 Layoff. If an employee is laid off without a specific return date within the normal pay period, the
wages earned up t
o and including the lay off date are due and payable in accordance with Section
201. (Campos v. EDD (1982) 132 Cal.App.3d 961; 183 Cal.Rptr. 637; see also O.L. 1993.05.04 and
O.L . 1996.05.30) If ther
e is a return date within the pay period and the employee is scheduled to
return to wor
k, the wages may be paid at the next regular pay day.
3.2.2.1 Sale Of Business Constitutes Discharge. In California, the sale of a business (see Section 40 of
this Manual f
or a discussion of the term “bulk sale”) entails certain rights and responsibilities on the
part of the employees and the employer. California courts have held that a sale of the business
constitutes a termination of the employment and that unemployment benefits are not a prerequisite to
the right to receive wages or benefits due the employee at the time of the termination. ( Chapin v.
Fairchild Camera and Instrument Corp. (1973) 31 Cal.App.3d 192) This result is consist ent with
Labor Code § 2920(b) and common law contract theories; i.e., a n obligor (the employer who owes
the wages or benefits) may not substitute another obligor (the buyer) in his or her place without the
express written consent of the obligee (the employee).
3.2.3 Labor Code § 201.5 – Motion Picture Production . This section was amended in the 1998
legislative sessio
n and as a result, affects all employees engaged in motion picture production. The
1998 amendment provides that all employees in the motion picture industry (not only those at remote
locations as under the previous law) who are laid off (employment is terminated but the employee
retains eligibility for re -employment) must be paid their final wages by the n ext regular pay day.
The section was again amended in 2006 to require final wages due by the next regular pay day
anytime employment terminates. Now, an employee engaged in the production or broadcasting of
motion pictures, must be paid by the next regular pay day, anytime the employee is discharged, laid
off, resigns, completes employment for a specified term, or otherwise. See subsection (d).

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3.2.4 Labor Code § 201.5 covering employees in the motion picture industry now also contains a unique
provision that wages due a laid off or discharged employee in the motion picture industry may be
paid by mail (note that the mail payment may be at the employer’s discretion since there is no
requirement that the employee request the payment by mail) and the date of the mailing shall
constitute the date of payment for purposes of the section.

3.2.5 Labor Code § 201.6 – Print Shoot Employees. This section enacted and effective September 5,
2019, provides that
“print shoot employees” may be paid by the next regular payday. “Print shoot
employees” are defined as individuals hired for a period of limited duration to render services relating
to or supporting a still image shoot, including film or digital photography, for use in print, digital, or
internet media. The same mail provision discussed in 3.2.4 above applies to print shoot employees.
3.3 Labor Code § 201.7 – Oil Well Drilling. This section provides an exception from the immediate
payment provisions
of Labor Code § 201 for employees “engaged in the business of oil drilling.”
While the Legislative intent language states that the reason for the exception is that “their employment
at various locations is often far removed from the employer’s principal administrative offices,” the
section does not limit the exception only to situations where the worker was employed at a distant
location. Thus, any worker “engaged in the business of oil drilling” appear to be exempted from th e
requirement that a discharged employee must be paid immediately.
3.4 Labor Code § 201.8 was added in 2019, effective January 1, 2020, to allow “event
employees” wor
king an “event” at a “professional baseball venue” to be paid on the “ne xt
regular payday” unless the worker is fired or quits. The same mail provision discussed in
3.2.4 above applies to event employees working an event at a professional baseball venue.
3.5 Labor Code § 201.9 was added in 2006 to provide that employees employed at a venue that
hosts live theatrical o
r concert events who are dispatched through a hiring hall or other system
of regular short-term employement pursuant to a bona fide collective bargaining agreement
may establish by express terms in the collective bargaining agreement the time limits for
payment of wages to an employee who is discharged or laid off.
3.6 Labor Code § 202 – Employee Who Quits:
If an employee not having a written contract for a defi nite period quits his employment, his wages
shall become due and payable not later than 72 hou rs thereafter, unless the employee has given 72
hours previous notice of his intention to quit, in which case the employee is entitled to his wages at
the time of quitting. Notwithstanding any other provision of law, an employee who quits without
providing a 72-hour notice shall be entitled to receive payment by mail if he or she so requests and
designates a mailing address. The date of the mailing shall constitute the date of payment for purposes
of the requirement to provide payment within 72 hours of the notice of quitting.
3.6.1 Meaning Of Term: “For A Definite Period”. If a written contract contains a specific term of
employment (usual
ly one year, bu t it may be less) and is not terminable by either party except for
cause, the contract is one for a definite period of time. If, on the other hand, either party may, during
the term of the contract, terminate the employment simply by giving notice of such intention, it is
not a written contract for a definite period. (O.L. 1999.09.23)

3.6.2 Except where otherwise provided by statute, a quitting employee who has given notice of his or her
intention to quit 72 hours in advance must be paid at time of termination.
3.7 Payment By Mail: Quitting employees must return to the office or agency of the employer in the
county where th
e work was performed to recover wages after quitting except, of course, where the

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worker has given 72 hours notice or where the worker has requested payment by mail and provided
an address. (L
abor Code § 202; see also, Labor Code § 208 and see also Sections 4.3 and 7.4 of this
manual)
3.8 Note: Labor Code § 205.5 was amended in the 1997 Legislative session and as a result, all agricultural
employees subject to the section who quit their employment (as well as those who are discharged) are
entitled to receive waiting time penalties if they are not paid in a timely manner.
3.9 Extension Of Coverage Of Wage Statutes To Some Public Employees. Effective January 1, 2001,
Labor Code § 220 has b
een amended to extend the coverage of Labor Code §§ 201, 202, 203, 204.2,
206, 207, 208 and 209 to employees of the State of California. Effective January 1, 2020, Labor
Code § 204 was amended to provide that employees directly employed by the Regents of the
University of California are specifically covered by section 204 and must be paid on a regular payday,
including those on a monthly payment schedule whose payment is due no later than five days after
the close of the monthly payroll period.
3.9.1 Note. Labor Code § 220(b) still exempts counties, incorporated cities, towns or other municipal
corporations from the provisions of Labor Code §§ 200-211 and 215-219.
3.9.1.1 Other municipal corporations would include hospital districts, (See DLLE v. El Camino Hospital
District (1970) 8 Cal.App.3d Supp. 30); community college districts, (See Kistler v. Redwoords
Community College Dist. (1993) 15 Cal. App.4th 1326), and a water storage district (See Johnson v.
Arvin-Edison Water Storage Dist. (2009) 174 Cal.App.4th 729). But see, Gateway Community
Charters v. Spiess (2017) 9 Cal.App.5th 499, nonprofit public benefit corporation that operated charter
schools was not a municipal corporation and therefore not exempt from Labor Code § 203 waiting
time penalties. In order to be considered a municipal corporation the entity must perform ‘an essential
governmental function for a public purpose’ along with a consideration of the following factors:
“whether the entity is governed by an elected board of directors; whether the entity has regulatory or
police powers; whether it has the power to impose taxes, asessments, or tolls; whether it is subject to
open meeting laws and public disclosure of records; and whether it may take property through eminent
domain.” Id. at 506.
3.10
Labor Code §201.3 Weekly or Daily Pay Requirements -Temporary Services Employers.
Definition: An employing unit that contracts with clients or customers to supply workers to perfor m
services for the c
lients or customers and that performs all of the following:
(A) negotiates with clients and customers for matters such as the time and place where the services are
to be provided, the
type of work, the working conditions, and the quality and price of the services.
(B) Determines assignments or reassignments of workers, even if workers retain the right to refuse
specific assignm
ents.
(C) Retains the authority to assign or reassign a worker to another client or customer when the worker
is determined
unacceptable by a specific client or customer.
(D) Assigns or reassigns workers to perform services for clients or customers.
(E) Sets
the rate of pay of workers, whether or not through negotiation.
(F) Pays workers from its own account or accounts.
(G) Reta
ins the right to hire and terminate workers.
The law expressly excludes from the definition of temporary services employer:
(A) A bona fide nonprofit organization that provides temporary service employees to clients.
(B) A farm labor contractor, as define d in Labor Code §1682(b).
(C) A garment manufacturing employer, which has the same meaning as “contractor,” as defined in

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Labor Code §2671(d).
Employees must be paid weekly, regardless of when the assignment ends. Wages are due and
payable not later t
han the regular payday of the following calendar week. Note: Unless the daily
pay provisions below apply, the section was amended effective July 22, 2016, to provide that
registered security guard employees employed by a termpoary services employer and working for
a licensed private patrol operator, must be paid by the regular payday of the following workweek
for work performed during the prior workweek.
Under two circumstances employees must be paid daily:
1. Assignment is on a day-to-day basis and the employee r
eports to or assembles at the office of
the temporary services employer or other location, the employee is dispatched to a client’s
worksite each day and returns to or reports to the office of the temporary services employer or
other location upon completion of the assignment and the employees work is not executive,
administrative, or professional, as defined in the wage orders of the Industr ial Welfare
Commission, and is not clerical.
2. If the employee of a temporary services employer is assigned to work for a client engaged in
a trade dispute, the empl
oyee’s wages are due and payable at the end of each day, regardless
of when the assignment ends.
If the assignment is for over 90 consecutive calendar days, unless the employee is paid weekly the
requirements do not apply.
Upon discharge or quit, the requirements of Labor Code §§ 201 and 202 apply and a violation is
subject to waiting time penalties under Labor Code § 203.

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4 PENALTY FOR FAILURE TO PAY WAGES ON TERMINATION.

4.1 Labor Code Section 203.
If an employer willfully fails to pay, without abatement or reduction, in accordance with Sections
201, 201.3, 201.5, 201.6, 201.7,
201.8, 201.9, and 202, and 205.5, any wages of an employee who
is discharged or who quits, the wages of such employee shall continue as a penalty from the due
date thereof at the same rate until paid or until an action therefor is commenced; but such wages
shall not continue for more than 30 days. An employee who secretes or absents himself or herself
to avoid payment to him or her, or who refuses to receive the payment when fully tendered to him
or her, including any penalty then accrued under this section, is not entitled to any benefit under
this section for the time during which he or she so avoids payment.
Suit may be filed for these penalties at any time before the expiration of the statute of limitations
on an action for
the wages from which the penalties arise.
4.1.1 As stated in the California case of Mamika v. Barca (1998) 68 Cal.App.4th 487, 492:
“The reasons for this penalty provision are clear. ‘Public policy has long favored the “full and
prompt payment
of wages due an employee.’ ‘[W]ages are not ordinary debts...[B]ecause of the
economic position of the average worker and, in particular, his dependence on wages for the
necessities of life for himself and his family, it is essential to the public welfare that he receive
his pay” promptly.’ (Pressler v. Donald L. Bren Co. (1982) 32 Cal.3d 831, 837)... “Section 203
reflects these policy concerns. The statute is designed to ‘compel the prompt payment of earned
wages; the section is to be given a reasonable but strict construction’ [against the employer].
(Barnhill v. Robert Saunders & Co. (1981) 125 Cal.App.3d 1, 7) ‘The object of the statutory
plan is to encourage employers to pay amounts concededly owed by [them] to [a] discharged or
terminated employee without undue delay and to hasten settlement of disputed amounts.’ ( Triad
Data Services, Inc. v. Jackson (1984) 153 Cal.App.3d Supp. 1, 11.)”
4.1.1.1 The above language reflects the strong view California courts take regarding imposition of the penalty
wage provided in Labor Code § 203.
4.2 Willfully. The statute provides the penalty if the employer “willfully” fails to pay the wages due. The
definition of “w
illful” for purposes of Labor Code § 203 has been determined by the California courts
and is summarized at Title 8, California Code of Regulations, § 13520:
A willful failure to pay wages within the meaning of Labor Code Section 203 occurs when an
employer intentio
nally fails to pay wages to an employee when those wages are due. However, a
good faith dispute that any wages are due will preclude imposition of waiting time penalties under
Section 203.
A ‘good faith dispute ’ that any wages are due occurs when an employer presents a defense,
based in law or fact, which, if successful, would preclude any recovery on the part of the
employee. The fact that a defense is ultimately unsuccessful will not preclude a finding that a
good faith dispute di d exist. Defenses presented which,under all the circumstances, are
unsupported by any evidence, ar e unreasonable, or are presented in bad faith, will preclude a
finding of a ‘good faith dispute’. (8 C.C.R. § 13520) (Emphasis added)

4.2.1 Note. As the C.C.R. states, the “good faith dispute” if successful, would have to preclude any
recovery by the employee. In other words, an employer cannot withhold all of the wages due an
employee based on a purported good faith dispute as to a portion of those wages. Any undisputed
wages must be paid pursuant to the applicable law.

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4.2.2 If it is determined that a good faith dispute exists as to whether any wages are due (even if, after
resolution of the dispute wages are found to be due), the employer’s failure to pay is not willful, and
the employee is not entitled to waiting time penalties. The concept of a good faith defense to Section
203 penalties is supported by existing case law. (Davis v. Morris (1940) 37 Cal.App.2d 269) It
must be shown that the employer owes the debt and has failed to pay it. The employer is not denied
any legal defense as to the validity of the claim. (Barnhill v. Saunders (1981) 125 Cal.App.3d 1)
4.2.2.1 The civil penalty assessed under Labor Code § 203 does not require that the employer intended the
action; merely that the action occurred and it was within the employer’s control. ( Davis v. Morris
(1940) 37 Cal.App.2d 269; 99 P.2d 345)
4.2.3 Termination of Employment. Employment may be terminated by any of the following:
(a) Expiration of its appointed term. (Labor Code § 2920)
(b) Extinction of its subject. (Labor Code § 2920) (See also discussion a t 3.2.2.1 of this
Manual regardi
ng termination upon sale of business.)
(c) Death of the employee or the employer. (Labor Code §§ 2920, 2921)
(d) The employee’s or the employer’s legal incapacity to act as such. (Labor Code
§§ 2920 2921)
(e) Termina
tion at will by employer when employment is not for a specified period. (Labor
Code § 2922)
(f) Termina
tion by employee voluntarily or as a result of willful breach of the employment
contract by employ
er. (Labor Code § 2925)
4.3 Wages Due Quitting Employee. As discussed at Section 3.4 of this Manual, wages due most
employees who quit
are due within 72 hours after resignation unless 72 hours previous notice was
given. Under most circumstances a quitting employee must return to the office or agency of the
employer in the county where the work was performed for his or her wages. (See Section 7.4 of this
Manual)
4.3.1 There may, however, exist circumstances created by the employer which would prevent an employee
from returning for the wages or which would make the return an exercise in futility. (O.L. 1986.09.15)
Under those cir
cumstances, the penalty wage provided by Section 203 may apply.

4.3.2 Payment by Mail. Labor Code § 202 provides that an employee may elect to receive termination
wages by mail. In those cases, the date of the mailing constitutes the date of payment. In the event
that the employer contends that the employee elected to receive termination wages by mail, it is
necessary that the employer prove (1) that the employee chose this method of delivery and (2) that the
check was received by the employee. See Villafuerte v. Inter-Con Security Systems, Inc. (2002) 96
Cal.App.4th Supp. 45.

4.3.3 Labor Code §§ 201.5, 201.6, 201.7, and 201.8 do not require an election by the employee; the
employer may choose to pay the wages by mail and the date of mailing will be considered the date of
payment. In the event the employer unilaterally chooses to deliver the termination wages by mail, the
employer must not only prove that the letter was mailed to the correct address but, since the employee
did not assent to receipt by this method, it must prove that the check was received by the employee.
See Villafuerte v. Inter-Con Security Systems, Inc. (2002) 96 Cal.App.4th, Supp. 45.
4.3.4 Any Wages. “Any wages” includes any amount due as wages (see Labor Code § 200, see also,

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DIR, DLSE v. UI Video, 55 Cal.App.4th 1084,1091); but does not include expenses. (Hagin v. Pac. Gas &
Elec. 152 C
al.App.2d 93).

4.3.4.1 Failure to pay an employee all premium pay required by the Labor Code and Wage Orders as
required by Labor Code §§ 201 and 202, such as overtime premium, reporting time pay, meal
period/rest period premium, and split shift premium pay, may entitle an employee to waiting time
penalties.

4.4 30 Days. Penalties continue for up to 30 calendar days. The statutory reference is to 30 actual
days’ worth of wa
ges. Waiting time penalties for a specific number or days are computed by
multiplying the employee’s daily wage rate by the specified n umber of days since the payment of
the wages became due.
“[U]npaid wages continue to accrue on a daily basis for up to a 30-day period. Penalties accrue
not only on the days
that the employee might have worked, but also on nonworkdays… The
critical computation required by section 203 is the calculation of a daily wage rate, which can
then be multiplied by the number of days of nonpayment, up to 30 days…[A] somewhat similar
method…used to compute overtime compensation, i.e., the employee’s regular rate of pay is
computed by dividing the total weekly salary by no more than 40 hours (citations)…This
method of calculation has been used by a number of courts, but without much analysis.”
(Mamika v. Barca (1998) 69 Cal.App.4th 487, 492-493).
4.5 Action. Payment of the wages, or the commencement of an action, stops the penalties from accruing.
An action is comm
enced by filing in court. (See Code of Civil Procedure § 22). Filing a claim
with the Labor Commissioner is not considered the filing of an action and does not prevent the
penalties from continuing to accrue. (Cuadra v. Millan (1998) 17 Cal.4th 855, 72 Cal.Rptr.2d 687).

4.6 Payment Of Wages Not Calculable Until After Termination. There are situations where wages
(i.e., some comm
issions) are not calculable until after termination and, thus, are not due until that
time. The employer has an obligation to pay those wages as soon as the amount is ascertainable and failure
to pay those wages at that time will result in imposition of waiting time penalties. (See discussion at O.L.
1999.01.09).

4.6.1 Inability to pay is not a defense to the failure to timely page wages under Sections 201 and
202 and does not reliev
e the employer of penalties under Section 203. As noted above, the
civil penalty assessed under Labor Code § 203 does not require that the employer intended the
action; merely that the action occurred and it was within the employer’s control. (Davis v.
Morris (1940) 37 Cal.App.2d 269, 99 P.2d 345).

4.6.1.1 In addition, of course, ignorance of the law is no excuse. (Hale v. Morgan (1978) 22
Cal.3d 388, 396) Thus, f
ailure to comply with the payment sections based on the fact that the
employer did not know of the requirements is not an excuse.
4.6.2 The case of Diaz, et al v . Slaten (Placer Co. Sup. Crt. Appl Dept. (1997) unpub. opinion)
attached, accurately ref
lects the DLSE policy. The opinion of the court, adopted the view of the
DLSE. (See O.L. 1996.11.20)
4.7 Payment Of Wages By Insufficient Funds Instrument. Any employee who, during the
regular course
of employment or upon discharge, is paid with a non-sufficient funds instrument

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is entitled to recover a penalty of one day’s pay for each day those wages remain unpaid . The
penalty shall not exceed thirty days’ of wages. (Labor Code § 203.1)
4.7.1 Penalty Applies To Wages During The Course Of Employment Or At Time Of
Termination.
It is important to note that the penalty provided in Labor Code § 203.1 applies to
any wages paid with a non-s
ufficient funds instrument. Thus, if an employee is paid during the
regular course of employment with a non-sufficient funds check the employee is entitled to
recover penalties for each day the wages remain unpaid up to a thirty-day maximum.
4.7.2 If the NSF check is provided for payment of final wages owed pursuant to §§ 201, 201.5, 202, or
205, the employer woul
d be subject to penalties both for payment by NSF check under § 203.1
and for penalties under § 203 for late payment of final wages.
4.7.3 The penalties also apply to non-payment of “fringe benefits”. This provision has not been tested
in the California cou
rts and the issue of the pre-emptive effect of ERISA may play a role in the
final analysis of any case brought under this section.
4.7.4 The penalty provided in Section 203.1 is not applicable if the employee recovers the servic e
charge authorize
d by Section 1719 of the Civil Code.

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5 PAYMENT OF REGULARLY SCHEDULED WAGES.
5.1 § 204 – Payment Of Wages During Course Of Employment:
(a) All wages, other than those mentioned in Section 201, 201.3, 202, 204.1, or 204.2, earned
by any person i
n any employment are due and payable twice during each calendar month, on
days designated in advance by the employer as the regular paydays. Labor performed between
the 1st and 15th days, inclusive, of any calendar month shall be paid for between the 16th and
the 26th day of the month during which the labor was performed, and labor performed between
the 16th and the last day, inclusive, of any calendar month, shall be paid for between the 1st
and 10th day of the following month. However, salaries of executive, administrative, and
professional employees of employers covered by the Fair Labor Standards Act, as set forth
pursuant to Section 13(a)(1) of the Fair Labor Standards Act, as amended through March 1,
1969, in Part 541 of Title 29 of the Code of Federal Regulations, as that part now reads or may
be amended to read at any time hereafter, may be paid once a month on or before the 26th day
of the month during which the labor was performed if the entire month's salaries, including the
unearned portion between the date of payment and the last day of the month, are paid at that
time.
(b)(1) Notwithstanding any other provision of this section, all wages earned for labor in excess
of the normal work p
eriod shall be paid no later than the payday for the next regular payroll
period.
(2) An employer is in compliance with the requirements of subdivision (a) of Section 226
relating to tota
l hours worked by the employee, if hours worked in excess of the normal work
period during the current pay period are itemized as corrections on the paystub for the next
regular pay period. Any corrections set out in a subsequently issued paystub shall state the
inclusive dated of the pay period for which he employer is correcting its initial report of hours
worked.
(c) However, when employees are covered by a collective bargaining agreement that provides
different pay
arrangements, those arrangements shall apply to the covered employees.
(d) The requirements of this section shall be deemed satisfied by the payment of wages for
weekly, biweekl
y, or semimonthly payroll if the wages are paid not more than seven calendar
days following the close of the payroll period.
(e) Notwithstanding subdivision (a) of Section 220, all wages earned by employees directly
employed by the
Regents of the University of California shall be paid on a regular payday.
For the employees on a monthly payment schedule, payment is due no later than five days
after the close of the monthly payroll period. For employees on a more frequent payment
schedule, payment is due according to the pay schedule announced by the University of
California in advance. Nothing in this section shall be construed to prohibit the Regents of
the University of California from allowing its employees to choose to distribute their pay so
that they will receive paychecks throughout the year, rather than duri ng pay periods worked
only.
5.2 Wages must be paid according to a regularly- set schedule. (See Labor Code § 207
regarding Payday
Notice requirements.) The Legislature has established the general guidelines
for payment in Labor Code § 204. In most cases the employee must be paid at least twice per
month within the time set forth in the applicable Labor Code section.
5.2.1 Payment of Overtime Wages. Section 204 permits payment of wages earned for labor “in

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excess of the normal work period” to be delayed until no later than the payday for the next
pay period. Only the p
ayment of overtime premium wages may be delayed to the payday in
the following pay period; the straight time wages must still be paid within the time set forth in
the applicable Labor Code section in the pay period in which they were earned; or, in the case
of employees who are paid on a weekly, biweekly, or semi- monthly basis, not more than 7
(seven) calendar days following the close of the payroll period.
5.2.2 Caveat: Weekly Payment of Wages Covered Under Labor Code § 204b. Note that most
workers paid on a w
eekly basis must be paid pursuant to the provisions of Labor Code §
204 within seven days.
5.2.3 Section 204 also provides exceptions which allow the payment of salary, for those
employees who are
exempt under the Fair Labor Standards Act, once a month.
5.2.4 Base salary must be paid pursuant to the provisions of Labor Code § 204; how ever,
certain exceptions are
provided in the statute for specified extraordinary wages. For
instance, if a bonus (see definition at Section 2.5.5 of thi s Manual) is calculated on a
quarterly basis, the bonus need not be paid until the regular payday following the date
upon which the bonus is calculated. (O.L. 1986.12.23) Wages “earned in excess of the
normal work period”
(i.e., payment for unscheduled overtime work) need not be paid
until the following pay period; unless, of course, “regular overtime” or extended hours
which is scheduled to occur for a period of time is involved, in which case the wages for
these hours must be paid pursuant to Labor Code § 204. (O.L. 1988.05.05) The Opinion
Letters listed here, plus
O.L. 1993.04.19, present a number of issues which may be raised.
5.2.5 Payment Of Commission Wages . In some instances commission wages are not
ascertainable at
the time of a sale or transaction and must be calculated based on later
developments (i.e., receipt of payment, shipping, etc.) Commission wages are due and
payable when they are reasonably calculable.
5.3 § 204a – Payment of Wages at Central Place:
When workers are engaged in an employment that normally involves working for
several employ
ers in the same industry interchangeably, and the several employers,
or some of them, cooperate to establish a plan for the payment of wages at a central
place or places and in accordance with a unified sch edule of pay days, all the
provisions of this chapter except 201, 202, and 208 shall apply. All such workers,
including those who have been discharged and those who quit, shall receive their
wages at such central place or places.
This section shall not apply to any such plan until 10 days after notice of their
intention to set up s
uch a plan shall have been given to the Labor Commissioner by
the employers who cooperate to establish the plan. Having once been established, no
such plan can be abandoned except after notice of their intention to abandon such plan
has been given to the Labor Commissioner by the employers intending to abandon
the plan.

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5.3.1 The central place is required to maintain the time records, pay each worker for his or her
total time worked in
each pay period , and deduct and report taxes.
5.3.2 Both discharged and quitting employees must be paid at the central place. Employers
intending to start
a central pay plan must provide DLSE with a signed notice to that effect.
Wages of such employees may not be assigned. (Labor Code § 300(f); see Section 18.3
of this Manual)
Such pay plan cannot be implemented until ten (10) days after notice of
the intent to adopt the plan has been received by the Labor Commissioner. The plan may
not be abandoned without giving prior written notice to DLSE.
5.3.3 § 204c – Certain Executive, Administrative Or Professional Employees:
Section 204 shall be inapplicable to executive, administrative or professional
employees who
are not covered by any collective bargaining agreement, who are not
subject to the Fair Labor Standards Act, whose monthly remuneration does not
include overtime pay, and who are paid within seven days of the close of their
monthly payroll period.
5.3.4 Labor Code § 204c provides an exemption from the provisions of Section 204 for
exempt employees and allo
ws such employees to be paid monthl y under the limited
circumstance s set out in the statute . Each of the following circu mstance s must be
met in orde r for an employe e to be subjec t to Section 204c:
1. Employee not covered by a collectiv e bargaining agreement;

2. Employee not subject to the Fair Labor Standards Act (See regulations at Title 29, Part
541, Code of Federal Regulations for definitions);
3. Employee whose monthly remuneration does not include overtime pay;

4. Employe e is paid within seven days of the clos e of the monthl y pay roll
period.

5.4 § 204.1 – Commissioned Vehicle Salespersons:
Commission wages paid to any person employed by an employer licensed as a vehicle dealer
by the Department of Motor Vehicles are due and payable once during each calendar month on
a day designated in advance by the employer as the regula r payday. Commission wages
are compensation paid to any person for services rendered in the sale of such employer's
property or services and based proportionately upon the amount or value thereof.
The provisions of this section shall not apply if there exists a co llective bargaining
agreement betw
een the employer and his employees which provides for the date on which
wages shall be paid.
5.4.1 The Legislature enacted Section 204.1 to permit the monthly payment of commission wages by
employees employed by employers licensed as vehicle dealers. Mechanics and other employees
performing repair or related services are not “commissioned” employees. ( See Keyes Motors v.
DLSE (1987) 197 Cal.App.3d 557; 242 Cal.Rptr. 873) Also see, Sections 2.5.4 and 34.1 of this
Manual.
5.4.2 Section 204.1 does not app ly in those cases where there is a CBA which provides a date when

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commissioned wages shall be paid. (See discussion of law regarding handling of claims for work
performed where a
CBA is in effect at Section 7.5.2 of this Manual)
5.5 § 204.2 – Wages Of Exempt Employees In Addition To Salary:
Salaries of executive, administrative, and professional employees of employers covered by
the Fair Labor Standards Act, as set forth pursuant to Section 13(a)(1) of the Fair Labor
Standards Act of 1938, as amended through March 1, 1969, (Title 29, Section 213 (a)(1),
United States Code) in Part 541 of Title 29 of the Code of Federal Regulations, as that part
now reads, earned for labor performed in excess of 40 hours in a calendar week are due and
payable on or before the 26th day of the calendar month immediately following the month
in which such labor was performed. However, when such employees are covered by a
collective bargaining agreement that provides different pay arrangements, those
arrangements will apply to the covered employees.
5.5.1 Section 204.2 sets forth the requirement for pay for work in excess of the normal work week for
Executive, Administrative, and Professional employees of employers covered by the Fair Labor
Standards Act. Section 204 .2 provides that co ntract- generated wages earned by these classes
of employees for labor performed in excess of 40 hours in a calendar week are due and payable
on or before the 26th of the calendar month following the month in which the work was
performed. This section does not apply to those employees covered by a collective bargaining
agreement that provides for a different pay arrangement.

5.6 § 205 – Certain Occupations Where Employees Receive Room And Board:
In agricultural, viticultural, and horticultural pursuits, in stock or poultry raising, and in
household domestic servi
ce, when the employees in such employments a re boarded and
lodged by the employer , the wages due an y employee remaining in such employment shall
become due and payable once in each calendar month on a day designated in advance by
the employer as the regular payday. No two successive paydays shall be more than 31 days
apart, and the payment shall include all wages up to the regular payday. Notwithstanding the
provisions of this section, wages of workers employed by a farm labor contractor shall be
paid on payroll periods at leas t once every week on a business day designated in advance by
the farm labor contractor. Payment on such payday shall include all wages earned up to and
including the fourth day before such payday.
5.6.1 The Legislature has provided in Section 205 that in specified agricultural and domestic
occupations paydays may be on a monthly basis when the employee is lodged and boarded by the
employer. These provisions are applicable only when the following conditions exist:
1. The employment is in agriculture, viticulture, horticulture, stock raising, poultry raising or
household dom
estic service;
2. The employee is boarded and lodged by the employer;
3. Paydays are designated and are never more than 31 days apart;
4. The wage payments include all wages owed up to the payday.

5.6.2 Employees Of Farm Labor Contractors May Not Be Paid On The Schedule Set Out
In Section 205. Employees of farm labor contractors must be paid at least once per week on
a business day previ
ously designated by the farm labor contractor. Payment must include all
wages earned up to and including the fourth day before such weekly payday.
5.6.3 § 205.5 – Most Agricultural Employees: Excluding those emp loyees mentioned in Labor

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Code § 205, employees of agricultural employers are required to be paid at least twice each month
within seven days of
the end of the pay period. Note the statutory change in 1997 which extends
the right to penalty wages for covered agricultural employees who quit.
5.6.4 Section 205.5 defines agricultural employees by reference to the definition contained in Labor
Code § 1140.4.

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6. COMPENSATING TIME OFF.
6.1 For purposes of calculating overtime under the Industrial Welfare Commission Orders,
Labor Code § 204.3 ha
s been adopted by the Legislature providing its view of the use of
“compensating time off.” The adoption of that language has precluded the Division from
promulgating or enforcing any other “compensatory time” provisions. Thus, the Division
policy concerning compensatory time which had been in effect for many years may no
longer be applied. Further, in view of the language now contained in Labor Code § 513,
private employers in California (see caveat, below) may not utilize “compensatory time”
provisions.
6.1.1 Caveat: The provisions of Section 204.3 are patterned on provisions found in 29 U.S.C.
§ 207(o). It should
be noted that these compensatory time provisions are only applicable
under the federal law to state and local government employees; the compensating time
provisions under federal law are not applicable to employees of private employers. Any
employer utilizing the provisions of Section 204.3 should be advised of this caveat as use
of the compensating time provisions of the state law may result in violation of the federal
law.
6.2 New “Makeup Work Time” Provisions Adopted By Legislature Are Now Part of
IWC Orders Pr
omulgated In 2000. The IWC incorporated the language of Labor
Code § 513 into eac
h of the orders except 14 : *
If an employe r approves a written request of an employee to make up work time that is or
would be lost as a result of a personal obligatio n of the employee, the hours of that makeup
work time, if performed in the same workweek in which the work time was lost, may not
be counted towards computing the total number of hours worked in a day for purpose s of
the overtime requirements specified in Section 510 or 511, except for hours in excess of
11 hours of work in one day or 40 hours in one workweek. An employee shall provide a
signed written request for each occasion that the employee makes a request to make up
work time pursuant to this section. An employe r is prohibite d from encouragin g or
otherwis e solicitin g any employee to request the employer’ s approval to take personal time
off and make up the work hours within the same week pursuant to this section.
6.3 Labor Code § 513 Outlines A “Makeup Work Time” Exception, As Opposed to A
Compensatin
g Time Off Provision . With the adoption by the Legislature of Labor
Code § 513 there now exi
sts a system to provide a certain amount of flexibility without
compromising the 8-hour day concept.
6.4 See Section 48.2 of this Manual for further guidance regarding “Makeup Work Time.”

*Pursuant to AB 1066 (2016), as stated in Labor Code § 8 61, all overtime provisions in Labor Code Division 2, Part 2,
Chapter 1 (co mm
encing with section 500) not subject to the overtime phase- in began to apply to agricultural workers
covered by Order 14 on January 1, 2017. This includes the “makeup work time” provisions of Labor Code § 513.

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7 WAGE PAYMENT – CONDITIONS AND TIME AND PLACE.

7.1 § 206 – Conceded Wages Must Be Paid Without Condition:
(a) In case of a dispute over wages, the employer shall pay, without condition and within
the time set by thi
s article, all wages, or parts thereof, conceded by him to be due, leaving
to the employee all remedies he might otherwise be entitled to as to any balance claimed.
(b) If, after an investigation and hearing, the Labor Commissioner has determined the
validity of any
employee's claim for wages, the claim is due and payable within 10 days
after receipt of notice by the employer that such wages are due. Any employer having the
ability to pay who willfully fails to pay such wages within 10 days shall, in addition to
any other applicable penalty, pay treble the amount of any damages accruing to the
employee as a direct and foreseeable consequence of such failure to pay.
7.1.1 Section 206 requires an employer, in case of a dispute over the amount of wages due, to pay,
without condit
ion, any amount conceded due in accordance with the time limits set forth in
Article 1 of the Labor Code. (See Labor Code §§ 201, 201.3, 201.5, 201.7, 202, 204, 204b,
204.1, 203.2, 205 and 205.5; Reid v. Overland Machined Product s (1961) 55 Cal.2d 203,
207)
7.1.2 No Conditions May Be Put On Payment Of Conceded Wages . This section compels
prompt payment
of all wages conceded due and expressly precludes the employer from
conditionally offering the disputed amount as a means of coercing the employee into settling
the disputed wage claim. (Reid v. Overland Machined Products, supra, 55 Cal.2d at 207)
7.1.3 An accord and satisfaction (See Section 31.7 of this Manual for definition) is invalid if
entered into in
violation of the terms of Section 206. (Reid v. Overland Machined Products,
supra, 55 Cal.2d at 208)
7.1.4 The employee has a right to recover damages in a civil action not through DLSE.
7.2 § 206.5 – Release Of Claim Of Wages Illegal Unless Wages Previously Paid:
No employer shall require the execution of any release of any claim or right on account
of wages due, or
to become due, or made as an advance on wages to be earned, unless
payment of such wages has been made. Any release required or executed in violation of
the provisions of this section shall be null and void as between the employer and the
employee and the violation of the provisions of this section shall be a misdemeanor.
7.2.1 Existence Of Release Does Not Preclude Employee From Pursuing Unpaid Wages .
Section 206.5 prohibits an employer from requiring the execution of a release of any wage
claim or right
to wages due before payment of those wages has been made. In addition, the
section provides that any such release is null and void as between the

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employer and the employee and further, that the violation of this section by the employer is
a misdemeanor
. The existence of a release does not preclude the employee from pursuing a
claim for the wages if the wages, in fact, had not been paid. The question whether the wages,
in fact, had been paid, is one of fact and must be determined based on the testimony and
information submitted.
7.2.1.1 There are exceptions to the general rule stated above such as supervised settlements in
pending Berma
n Hearing proceedings (permitted by Labor Code § 98.2(e)); stipulated
settleme nts in court action s wher e the princ iples of res judicat a, merger or bar apply,
and voluntary dismissal with prejudic e coupled with a settlemen t operate s to bar a new
action.
7.2.2 Settlement By DLSE. (1) If the Division enters into a settlement in a claim for minimum
wages or overt
ime, an employee will be bound if he or she accepts the benefits demanded
and obtained through settlement (Labor Code § 1193.5) or the employee consents to bringing
the action in which settlement is reached (Labor Code § 1193.6); (2) in the event of a claim
for wages of any kind the employee will be bound if he or she agrees to sign the release
required by the DLSE as a condition of receiving settlement benefits obtained by DLSE.
7.2.2.1 The DLSE is invested with broad authority to act on behalf of employees in a fiduciary
capacity and to gen
erally supervise and oversee settlements for their benefit. (See Labor
Code §§ 90-106; 1193.5; 1193.6)
7.3 § 207 – Required Notices Of Paydays And Place Of Payment:
Every employer shall keep posted conspicuously at the place of work, if practicable, or
otherwise wh
ere it can be seen as employees come or go to their places of work, or at the
office or nearest agency for payment kept by the employer, a notice specifying the regular
pay days and the time and place of payment, in accordance with this article.
7.3.1 Notice Of Time And Place Of Regular Payday . Under the provisions of this section,
employers must
post a notice setting forth the schedule of paydays; it must be posted where
the employees can see it. There is no specific form required for the payday notice so long as
it lists all of the required information. DLSE form 8 may be used.
7.4 § 208 – Place Of Payment Of Wages At Termination:
Every employee who is discharged shall be paid at the place of discharge, and every
employee who qui
ts shall be paid at the office or agency of the employer in the county where
the employee has been performing labor. All payments shall be made in the manner provided
by law.
7.4.1 Section 208 states where wage payments due to discharged or quitting employees are to be
made – at the
office of the employer in the county where the employee performed the labor.

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7.4.2 Discharged Employees. The section specifically states that discharged employees must be
paid at the place
of discharge.
7.4.3 Quitting Employees. The section provides that employees who quit their employment must
be paid at the off
ice or agency of the employer in the county where the employee has been
performing labor. (Cf. Section 4.3.1 of this Manual for exception to this rule.)
7.5 § 209 – Wage Payment In Event Of Strike.
In the event of any strike, the unpaid wages earned by striking employees shall become due
and payable on the
next regular pay day, and the payment or settlement thereof shall include
all amounts due the striking employees without abatement or reduction. The employer shall return to
each striking employee any deposit, money, or other guaranty required by him from the employee
for the faithful performance of the duties of the employment.
7.5.1 Note that there is no provision in this section designating the place of payment of the striker’s
wages. The place o
f paym ent must, obviously, be reasonably situated – under the
circumstances – to give all of the workers an opportunity to be paid.
7.5.2 Payment of Wages Due Earned In Collective Bargaining Situation. The Supreme Court
decision in Liv
adas v. Bradshaw 512 U.S. 107, 114 S.Ct. 2068 (1994) makes it clear that under
certain circumstances wages owed under the terms of a collective bargaining agreement may
be recovered in a claim before the Labor Comm issioner. Cf., Livadas v. Bradshaw (1994)
865 F.Supp. 642, which is the consent decree inc orporating the Division policy for handling
claims filed by employees covered by CBAs; the claims must be first reviewed by the Legal
Section in accordance with this consent decree. (See Section 36.2.2 of this Manual).
7.6 Wage Payment Where Holidays Occur. Occasionally, the designated payday will fall on a
holiday. The quest
ion then arises: When are the em ployees required to be paid? T he DLSE
has established an enforcem ent position which relies on the provisions of Sections 7, 9, 10
and 11 of the California Ci vil Code and on Section 12a of the Cali fornia Code of Civil
Procedure:

C.C. § 7: “Holidays within the meaning of this code are every Sunday and such other
days as are specified or provided for as holidays in the Government Code of the State
of California.”
C.C. § 9: “All other days than those mentioned in Section 7 are business days for all
purposes;…”
C.C. § 10:
“The time in which any act provided by law is to be done is computed by
excluding the firs
t day and including the last day, unless the last day is a holiday, and
then it is also excluded.”

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C.C. § 11: “Whenever any act of a secular nature, other than a work of necessity or
mercy, is appointed by law or contract to be performed upon a particular day, which day
falls upon a holiday, it may be performed upon the next business day, with the same
effect as if it had been performed upon the day appointed.”
C.C.P § 12a(a): “If the last day for the performance of any act provided or required by
law to be performed
within a specified period of time is a holiday, then that period is
hereby extended to and including the next day which is not a holiday. For purposes of
this section, "holiday" means all day on Saturdays, all holidays specified in Section 135
and, to the extent provided in Section 12b, all days which by terms of Section 12b are
required to be considered as holidays.
7.6.1 The following days have been designated as holidays by Government Code: January 1, the
third Monday in Janua
ry, February 12, the third Monday in February, March 31, the last
Monday in May, July 4, the first Monday in Septe mber, the se cond Monday in October,
November 11, Thanksgiving, the day after Thanksgiving and December 25.
7.6.2 The above statutes have been relied upon by DLSE to allow an employer the option of paying
wages due on a Sat
urday or Sunday (or holiday listed in the Government Code and scheduled
as a holiday by the employer) on the next business day.
7.7 § 219 – Private Agreement May Not Contravene Pay Provisions.
Nothing in this article shall in any way li mit or prohibit the paym ent of wages at more
frequent inter
vals, or in greater amounts, or in full when or before due, but no provision of
this article can in any way be contravened or set aside by a private agreement, whether
written, oral or implied.
7.7.1 The specified times when wages must be paid, as established by the Labor Code, may not be
set aside by a pr
ivate agreement. Pay ment of wages at more frequent intervals than those
required is permitted.
7.7.2 Note that some of the statutes regarding time and place of payment of wages contain
exemptions for CBAs. (S
ee Section 36.2.2 of this Manual for further discussion concerning
handling of “opt-out” clauses in CBAs)

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8 PENALTIES TO EMPLOYEES OR THE STATE.

8.1 § 210 – Penalty For Failure To Pay Wages During Course Of Employment:
(a) In addition to, and entirely independent and apart from, any other penalty provided
in this articl
e, every person who fails to pay the wages of each employee as provided in
Sections 201.3, 204, 204b, 204.1, 204.2, 204.11, 205, 205.5, and 1197.5, shall be subject
to a civil penalty as follows:
(1) For any initial violation, one hundred dollars ($100) for each failure to
pay each emplo
yee.
(2) For each subsequent violation, or any willful or intentional violation, two hundred
dollars ($200) for e
ach failure to pay each employee, plus 25 percent of the amount
unlawfully withheld.
(b) The penalty shall either be recovered by the employee as a statutory penalty pursuant
to Section 98 or by t
he Labor Commissioner as a civil penalty through the issueance of a
citation or pursuant to Section 98.3. The procedures for issuing, contesting, and
enforcing judgments for citations issued by the Labor Commissioner under this section
shall be the same as those set forth in subdiviisions (b) through (k), inclusive, of Section
1197.1.
(c) An employee is only entitled to either recover the statutory penalty provided for in
this section or t
o enforce a civil penalty as set forth in subdivision (a) of Section 2699,
but not both, for the same violation.
8.1.1 Penalty To Employee or State For Untimely Payment Of Wages. When an employer fails
to pay wages as required by Lab
or Code §§ 201.3, 204 (on a regular pay day), 204b (on a
regular weekly pay day), 204.1 (on a monthly basis for commission wages), 204.2 (for
monthly salaries), 204.11 (commissioned barbering and cosmetology employees) 205
(monthly wages to agricultural employees boarded and lodged by an employer, and weekly
to employees of farm labor contractors), 205.5 (semi-monthly to agricultural employees) and
1197.5 (equal pay), the employer, under Section 210, is subject to a civil penalty for each
such missed or untimely pay day.
8.1.2 Amount Of Penalty. An initial violation may subject the employer to the assessment of a
penalty of $100 per
employee. Willful or intentional and subsequent violations both subject
the employer to the assessment of penalties at the rate of $200 per employee and an additional
25% of the amount paid in accordance with the sections cited above.
8.1.3 Penalty Recoverable Through Labor Code § 98(a) Process . The statutory penaltie s
provided by Labor Code
§ 210 may be recovered by an employee through a hearing held
pursuant to Labor Code § 98(a) et seq.

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8.2 § 211 – Recovery Of Penalty In Action Brought By DLSE. The Division has the authority
to pursue payday
penalties assessed pursuant to Labor Code § 210 through the courts or
through the citation process set forth in Labor Code § 1197.1. This section requires that a
demand be made prior to court action being brought. Section 211 allows the Division to
pursue these penalties without cost and provides for the collection of any fees through any
judgment obtained.
8.3 § 225.5 – Additional Civil Penalty:
In addition to, and entirely independent and apart from, any other penalty provided in
this article
, every person who unlawfully withholds wages due any employee in
violation of Section 212, 216, 221, 222, or 223 shall be subject to a civil penalty as
follows:
(a) For any initial violation, one hundred dollars ($100) for each failure to pay each
employee.
(b) Fo
r each subsequent violation, or any willful or intentional violation, two hundred dollars
($200) for each f
ailure to pay each employee, plus 25 percent of the amount unlawfully withheld.
The penalty shall be recovered by the Labor Commissioner as part of a hearing held to recover
unpaid wages and penalties or in an independent civil action. The action shall be brought in the
name of the people of the State of California and the Labor Commissioner and attorneys thereof
may proceed and act for and on behalf of the people in bringing the action. Twelve and one-half
percent of the penalty recovered shall be paid into a fund within the Labor and Workforce
Development Agency dedicated to educating employers about state labor laws, and the remainder
shall be paid into the State Treasury to the credit of the General Fund.
8.3.1 Section 225.5 provides for civil penalties, payable to the state, for violations of Labor Code §§ 212
(paying with non-negotiable instrument), 216 (willful failure to pay wages even though having ability
to do so), 221 (collecting back an employee’s wages), 222 (failure to pay agreed upon wage rate) or
223 (secretly paying a wage less than required by statute or con tract). (See Section 10 of this
Manual for discussion of these provisions.)
8.3.2 These penalties are all payable to the Labor and Workforce Development Agency and the State
Treasurer and are in addition to any other applicable penalties provided in the Labor Code. Penalties
are assessed at $100 per employee not paid in accordance with the cited statutes for the first violation
and $200 per employee for subsequent violations plus 25% of the amount withheld (i.e., not timely
paid). These penalties may be assessed either as a part of a hearing or through a civil action brought
by the Division.

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9 METHOD OF PAYMENT OF WAGES.

9.1 § 212 – Payment By Non-Sufficient Funds Instrument Illegal:
(a) No person, or agent or officer thereof, shall issue in payment of wages due, or to become due,
or as an advance on wages to be earned:
(1) Any order, check, daft, note, memorandum, or other acknowledgment of indebtedness, unless
it is negotia
ble and payable in cash, on demand, without discount, at some established place of
business in the state, the name and address of which must appear on the instrument, and at the
time of its issuance and for a reasonable time thereafter, which must be at least 30 days, the maker
or drawer has sufficient funds in, or credit, arrangement, or understanding with the drawee for its
payment.
(2) Any scrip, coupon, cards, or other thing redeemable, in merchandise or purporting to be
payable or redeemab
le otherwise than in money.
(b) Where an instrument mentioned in subdivision (a) is protested or dishonored, the notice or
memorandum of prot
est or dishonor is admissible as proof of presentation, nonpayment and
protest and is presumptive evidence of knowledge of insufficiency of funds or credit with the
drawee.
(c) Notwithstanding paragraph (1) of subdivision (a), if the drawee is a bank, the bank’s address
need not appear on the i
nstrument and, in that case, the instrument shall be negotiable and payable
in cash, on demand, without discount, at any place of business of the drawee chosen by the person
entitled to enforce the instrument.
9.1.1 Wages Must Be Paid In Cash Or Instrument Negotiable In Cash. The wages of workers in
California m
ust be paid in cash or other acknowledgment that is payable in cash without discount,
upon demand.
9.1.2 The requirements placed on the employer regarding the payment of wages are:
1. Wages must be paid in cash or by an instrument payable in cash money without discount. (See
limited except
ions in Labor Code Sections 213(a) and (c).) (See Section 9.1.8 of this Manual)
2. The instrument must show on its face the name and address of some established business within
the State of Ca
lifornia where it can be cashed, even if the instrument is drawn on an out-of-state
financial institution.
3. At the time of issuance, and for 30 days thereafter, the maker must maintain sufficient funds to
redeem the instr
ument or have a credit arrangement with the drawee that provides for its
redemption.
4. If the instrument is presented within 30 days and is refused redemption, this constitutes sufficient
evidence for
a charge of the violation of Section 212. This is not a specific intent criminal statute.
5. It should be noted that in the event the check is drawn on a bank, the address of the bank need not
be on the face of
the check and the check must be honored at any place of business of the bank
in this State.

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9.1.2.1 Payment By Scrip Prohibited. The DLSE has, on a number of occasions, addressed the
issue of payment
“in cash” or in an “instrument negotiable in cash”. In one such situation,
for instance, a “bonus” offered by the employer for meeting financial performance targets
and paid by means of scrip which was redeemable for goods offered in a catalog violated
both Labor Code § 212 and § 450. (O.L. 1998.09.14)
9.1.3 Effective January 1, 2001, the provision at Labor Code § 203.1 which provides a penalty for
payment of any wa
ges by non-sufficient funds instrument is now extended to employees in
all industries. The pen alty covers not only wages but also “fringe benefits ” paid to any
employee.
9.1.3.1 Failure To Pay ERISA Trust. A penalty for failure to pay fringe benefits to an ERISA trust
would not be recoverab
le since this penalty would add a collection tool to that available for
recovery under federal law, and such remedy would be pre-empted. (Carpenters So. Cal.
Admin. Corp. v. El Capitan (1991) 53 Cal.3d 1041. Deputies are encouraged to check with
the assigned attorney regarding fringe benefit collections.
9.1.4 Constitutionality. Labor Code § 212(a) has been found to be constitutional by the courts.
9.1.5 Criminal Proceedings. The case of People v. Turner (1957) 154 Cal.App.2d Supp. 883,
gives a broad inter
pretation to the applicability of Section 212 and makes it clear that the
section applies to all instruments when issued in lieu of cash for the payment of wages, and
that a violation exists when any one of the elements contained in the section is present. The
Turner case holds that knowledge of insufficiency of funds is not essentia l to the
establishment of a violation under this section. It further holds that even though knowledge
is not required, the section is constitutional in that it does not purport to inflict punishment
for failure to pay wages, but for undertaking to pay wages by the issuance of an instrument
which does not conform to Section 212.
9.1.6 In the case of People v. Hampton (1965) 236 Cal.App.2d 795, the court held that the
prosecution need
only establish a prima facie case by introducing evidence of the issuance
of a check for wages which check, when presented for payment, was dishonored by
reason of insufficien t funds and that there was no credit arrangement with the depositing
bank. The defendant must make some showing that the non- negotiable instrument resulted
from circumstances “neither foreseeable nor preventable by reasonably prudent investigation
or action .”
9.1.7 Prosecutions under Section 212(a) are conducted by the appropriate city or district attorney.
The Division personne
l perform the investigation and prepare the statement of case for the
prosecutor.

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9.1.8 § 213 – Not All Payments Subject To Section 212:
Nothing contained in Section 212 shall:
(a) Prohibit an employer from guaranteeing the payment of bills incurred by an employee
for the neces
saries of life or for the tools and implements used by the employee in the
performance of his or her duties.
(b) Apply to counties, municipal corporations, quasi-municipal corporations or school districts.
(c) Apply to students of nonprofit schools, colleges, universities, and other nonprofit educational
institutions.
(d) Prohibit an employer from depositing wages due or to become due or an advance on
wages to be ear
ned in an account in any bank, savings and loan association or credit union
of the employee’s choice with a place of business located in this state, provided that the
employee has voluntarily authorized the deposit. If an employer discharges an employee
or the employee quits the employer may pay the wages earned and unpaid at the time the
employee is discharged or quits by making a deposit authorized pursuant to this
subdivision, provided that the employer complies with the provisions of thi s article
relating to the payment of wages upon termination or quitting of employment
.
9.1.9 Exceptions To Payment Directly To Employee In Cash Or Negotiable Instrument.
Labor Code § 213 provides some exceptions to the requirements of Labor Code § 212 and
DLSE has addr
essed some of these exceptions. (O.L. 1996.11.12 and O.L. 1994.02.03-1).
9.1.9.1 An employer may guarantee the payment of bills incurred by an employee for the necessities
of life or for the
tools and implements used by the employee in the performance of his
duties.
9.1.9.2 The provisions of Section 212 do not apply to counties, m unicipal corporations, quasi-
municipal corpora
tions, school districts or to students of nonprofit schools, c olleges,
universities, and other nonprofit educational institutions.
9.1.9.3 An employer may deposit wages due or to become due or an advance on wages to be earned
in an account in any
bank, savings and loan association or credit union of the employee’s
choice which is located in the State of California if the employee has authorized such
deposit. (See discussion on this issue in O.L. 1994-02.03-1).

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9.1.9.4 Note: If an employer discharges an employee or the employee quits, the employer may pay
the wages earned and
unpaid at the ti me the em ployee is discharged or quits by m aking a
deposit authorized pursuant to the provi sions of Labor Code section 213(d), provided that
the employer complies with the provisions relating to the payment of wages upon termination
or quitting of employment.
9.1.10 Employer Obligation To Pay Wages Earned In Event Recipient Employee Cannot Be
Located. Labo
r Code § 96.7 provides that the Labor Com missioner is authorized to collect
any wages or b
enefits (vacation wages, severance pay) on behalf of employees in California
without assignment, and shall act as trustee of the Industrial Relations Unpaid W age Fund.
The Labor Commissioner is required to m ake a “diligent effort” to locate the workers and is
authorized to re mit those wages to: (1) the worker (if found) (2) the worker’s lawful
representative, or (3) any trust or custodial fund established under a plan to provide benefits.
Note that there are certain ER ISA concerns which arise when pay ments are m ade to such
trusts.
9.1.11 Payment of Wages Due Deceased Worker. DLSE may collect wages due to deceased
workers. Such col
lections are placed in the Unpaid Wage Fund and, as described below,
escheat to the State pursuant to law.
9.1.11.1 Probate Code § 13600 provides that in the event of the death of a w orker, the surviving
spouse or the gua
rdian or conservator of the estate of the surviving spouse may collect salary
or other com pensation owed by an e mployer to the deceas ed worker in an a mount not to
exceed $ 16,625.00, for 2020, as adjusted periodically in accordance with Section 890.
Probate Code § 13601(a) sets out the form of affidavit which may be signed by the surviving
spouse. DLSE has form affidavits which may be used to notify the employer of the obligation
to pay the salary due.
9.1.11.2 Note: Deputies unfamiliar with the Probate forms should contact their assigned attorne y
through their Sen
ior Deputy.
9.1.12 Escheat To State. In addition, California Code of Civil Procedure also provides that an y
unclaimed personal
property (which would include wages) escheats to the State. Unclaimed
wages must be forwarded to the Controller of the State of California within three years after
the debt was incurred. (See Code of Civil Procedure §§ 1500 et seq.)

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10 FAILURE TO PAY WAGES, WITHHOLDING WAGES—CRIMINAL SANCTIONS
10.1 § 215 – Criminal Sanctions For Violation Of Payment Laws:
Any person, or the agent, manager, superintendent or officer thereof, who violates any
provision of Secti
ons 201.3, 204, 204b, 205, 207, 208, 209, or 212 is guilty of a
misdemeanor. Any failure to keep posted any notice required by Section 207 is prima
facie evidence of a violation of such sections.
10.2 § 216 – Refusal To Pay Wages:
In addition to any other penalty imposed by this article, any person, or an agent, manager,
superintendent, or officer thereof is guilty of a misdemeanor, who:
(a) Having the ability to pay, willfully refuses to pay wages due and payable after demand
has been made.
(b) Falsely denies the amount or validity thereof, or that the same is due, with intent to secure for
himself, his empl
oyer or other person, any discount upon such indebtedness, or with intent to
annoy, harass, oppress, hinder, delay, or defraud, the person to whom such indebtedness is due.
10.2.1 The constitutionality of Section 216 has been challenged and upheld in several cases. (In re
Oswald (1926) 76 C
al.App. 347; In re Samaha (1933) 130 Cal.App. 116; Sears v. Superior
Court (1933) 133 Cal.App. 704, and In re Trombley (1948) 31 Cal.2d 801)
10.2.2 Unlike the elements involved in the assessment of a penalty under Labor Code § 203, the
ability to pay is an
essential element necessary to prosecute a violation of Section
216.
10.3 § 217 – DLSE Required To Diligently Enforce Labor Laws:
The Division of Labor Law Enforcement shall inquire diligently for any violations of this article,
and, in cases which it deems proper, shall institute the actions for the penalties provided for in
this article and shall enforce this article.
10.4 § 221 – Employer May Not Collect Or Receive Wages Paid Employee:
It shall be unlawful for any employer to collect or receive from an employee any part of wages
theretofore paid by said employer to said employee.
10.5 Section 221 is “declarative of a strong public policy against fraud and deceit in the
employment relatio
nship. Even where fraud is not involved, however, the Legislature has
recognized the employee’s dependence on wages for the necessities of life and has,
consequently, disapproved of unanticipated or unpredictable deductions because they impose
a special hardship on employees.” ( Hudgins v. Neiman Marcus Group, Inc. (1995) 34
Cal.App.4th 1109, 1118-1119)

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10.5.1 Section 221 Prevents Employer From Recovering Wages Paid To Employee. By enacting
section 221, and retaining
it as interpre ted by the courts and the IWC, the Legislature has
prohibited employers from using self-help to take back any part of “wages theretofore paid”
to the employee, except in narrowly-defined circumstances provide d by statute. This is
consistent with the ruling in the case of CSEA v. State of California (1988) 198 Cal.App.3d
374; 243 Cal.Rptr. 602, which held that absent a contrary provision in the law, the attachment
and garnishment laws in California prohibi t an employer from recovering any wages
previously paid to the employee.
10.6 § 222 – Illegal To Withhold Wage Agreed To In Collective Bargaining:
It shall be unlawful, in case of any wage agreement arrived at through collective
bargaining, ei
ther wilfully or unlawfully or with intent to defraud an employee, a
competitor, or any other person, to withhold from said employee any part of the wage
agreed upon.
10.7 § 223 – Illegal To Pay Wage Lower Than That Required By Statute Or Contract:
Where any statute or contract requires an employer to maintain the designated wage scale, it shall
be unlawful to secretly pay a lower wage while purporting to pay the wage designated by statute
or by contract.
10.7.1 The purpose of Section 223 is to prevent fraud in accordance with the underlying policy of
law. (Sublett v. Henry
’s Turk and Taylor Lunch (1942) 21 Cal.2d 273)

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11 DEDUCTIONS FROM WAGES.
Labor Code Section 224.
The provisions of Sections 221, 222 and 223 shall in no way make it unlawful for an employer to
withhold or divert any portion of an employee’s wages when the employer is required or
empowered so to do by state or federal law or when a deduction is expressly authorized in writing
by the employee to cover insurance premiums, hospital or medical dues, or other deductions not
amounting to a rebate or deduction from the standard wage arrived at by collective bargaining or
pursuant to wage agreement or statute, or when a deduction to cover health and welfare or pension
plan contributions is expressly authorized by a collective bargaining or wage agreement.

Nothing in this section or any other provision of law shall be construed as authorizing an employer
to withhold or
divert any portion of an employee’s wages to pay any tax, fee or charge prohibited
by Section 20026 of the Government Code, whether or not the employee authorizes such
withholding or diversion.

11.1.1 The express provisions of Labor Code §224 allow the employer to withhold or divert any
portion of wages w
here the deduction is required or the employer is empowered to do so
by federal or state law.
11.1.1.1 This category includes withholdings for feder al and state taxes. Also, under the Pension
Protection A ct
of 2006 (“PPA”) (Public Law 109- 280) which a mended provisions of
ERISA and the Internal Revenue Code, e mployers may automatically enroll e mployees
in a defined contribution plan, e.g. 401(k), 403(b), 457 plans, under an auto matic
contribution arrange ment unless the em ployee elects to not particip ate (and ele cts to
receive cash paym ent). Under an a utomatic contribution arrange ment, an e mployee is
treated as though he or she made an elective contribution unless they specifically opt-out
of the arrangement or specify a different amount for their contribution. In order for a plan
to qualify as an autom atic contribution a rrangement under federal law, the e mployer’s
plan must meet federal statutory requirements, including specified features to insure that
the plan provides for autom atic deferral of co mpensation, m atching or non- elective
employer contributions, and specific notice to employees regarding the auto matic
contribution, including the right to elect to receive cash payment.
11.1.1.2 A preemption provision in the PPA states that any state law is superseded which directly
or indirectly
prohibits or restricts the inclusion in any plan of an autom atic contribution
arrangement (29 U.S.C. §1144(e)(1)) Howeve r, as indicated in Section 11.1.1.1 above,
Labor Code §224 authorizes diversion of a portion of wages when performed pursuant to
federal law, and the state standard is thus not preempted. Additionally, the pree mption
provision further defines what constitutes an “autom atic contribution arrangement” for
purposes of preemption. Accordingly, automatic contribution arrangements which do not
comply with the federal requirements may be invalid under federal law and also m ay be
a violation of Labor Code §224 if there were no amounts automatically contributed for

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the employee’s elective contribution. If there was no automatic deferral of compensation
by the e mployer unde
r the defined contribution pl an, and the claim is against the
employer’s general assets, DLSE could investigate whether a specific claim is subject to
PPA and determine whether it has jurisdiction to recover an unauthorized and unlawful
withholding or diversion of wages. (See Section 15.1.8 of this Manual)
11.1.2 Legal Deductions. Deductions for insurance premiums, hospital or medical dues or other
deductions not amounting
to a rebate or deduction from the standard wage under a CBA
or required by statute may also be deduct ed upon written conse nt of the e mployee.
Deductions for health and welfare or pens ion pay ments provided by a CBA are also
allowed even without the written consent of the e mployee. As discussed in Sections
11.1.1.1 and 11.1.1.2, diversion of wages under a qualified automatic contribution
arrangement for a defined contribution plan is authorized under provisions of federal law
(PPA) and, when perfor med in accordance with federal requirements, does not require
prior written authorization of the employee.
11.1.3 Deductions From Wages. The courts in California and the United States Supreme Court
have held that de
ductions from wages in effect allow an empl oyer a self -help remedy
which is illegal. (Sniadach v. Family Finance, 395 U.S. 337 (1969). California law was
changed in 1970 to conform to the holding in Sniadach. (See C.C.P. § 487.02(c)). See
also Randone v. Appellate Depar tment (1971) 5 Cal.3d 536 and CSEA v. State of
California (1988) 198 Cal.App.3d 374; 243 Cal.Rptr. 602.
11.2 Employer May Not Collect Or Receive Wages Paid Employee. Labor Code § 221
prohibits an employ
er from recovering wages paid. This provision prohibits an employer
from receiving from an employee any wage paid by the employer to the employee either
by deduction or recovery after payment of the wage:
“It shall be unlawful for any employer to collect or receive from an employee any part of
wages theretofore paid by said employer to said employee.”

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11.2.1 The California courts have held that Section 221 is “declarative of a strong public policy
against fraud and deceit
in the employment relationship. Even where fraud is not involved,
however, the Legislature has r ecognized the e mployee’s dependence on wages for the
necessities of life and has, co nsequently, disapproved of unanticipated or unpredictable
deductions because they i mpose a special hardship on e mployees.” ( Hudgins v. Neiman
Marcus Group, Inc. (1995) 34 Cal.App.4th 1109, 1118-1119).
11.2.2 Self-Help By Employers To Recover Unliquidated Sums. The California case of Kerr’s
Catering v. DIR
(1962) 57 Cal.2d 319; 369 P.2d 20; 19 Cal.Rptr. 492, which pre -dated
Sniadach, made it clear that the California courts look closely at any attempt by employers
to recover back wages earned by em ployees. As the case of Hudgins v. Neiman Marcus
Group, Inc. (1995) 34 Cal.App.4th 1109, 41 Cal.Rptr.2d 46, states, an employer who resorts
to self-help to take deductions does so at its own risk.
11.2.3 Losses Which Result From Simple Negligence. The courts have held that since shortages
and other losse
s occurring without any fault on the part of the employee or merely as a result
of simple negligence are inevitable in almost any business operation, and the employer must
bear such losses as an expense of doing business.
11.2.3.1 As the court in Kerr’s Catering noted, the employer may, and usually does, either pass these
costs on to the cus
tomer in the form of higher prices or lower the em ployees’ wages
proportionately, thus distributing the losses among a wide group.
11.2.3.2 Discipline As An Alternative . In addition, of course, an employer is free to discipline any
employee whose car
elessness caused the losses. But the threat of discharge in the event the
employee refuses to allow a deduction is not allowed. (See Labor Code § 98.6 which protects
an employee who exercises “any right afforded him.”) In addition, the courts have determined
that a discharge which is a resul t of a complaint made by an employe e about an illegal
deduction constitutes a violation of public policy giving rise to a cause of action for wrongful
discharge. (Phillips v. Gemini Moving Specailists (1998) 63 Cal.App.4th 563)
11.2.4 Loss Suffered As A Result Of The Dishonest Or Willful Act Or By The Gross
Negligence Of Em
ployee. The IWC Orders purport to provide the employer the right to
deduct for losses suffered
as a result of a dishonest or willful act or through the gros s
negligence of the employee. Labor Code § 224 clearly proscribes any deduction which is not
either authorized by the employee in writing or permitted by law. Again, any employer who
resorts to self-help does so at its own risk since even under the proviso contained in the IWC
Orders, an objective test is applied to determine whether the loss was due to dishonesty or a
willful or grossl y negligent act. (O.L. 1993.02.22-2, and 1994.01.27) In the event it is
determined that the
employee was not guilty of a dishonest or willful act or gross negligence,
the employee would be entitled to recover not only the amount of wages withheld, but any
waiting time penalties due.

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11.2. 5 Deductions For Loans Made To Employees . In Barnhill v. Saunders (1981) 125
Cal.App.3d 1, the court
concluded that deductions may be made by the employer, with the
written consent of the employee, for payments on loans made by the employer to the employee;
but “balloon payments” made at the time of termination are not allowed even if the employee
has given his or her consent to such payments.

11.2.6 The conclusion reached by the Barnhill court allowing deductions from the wages of
employees to rep
ay loans made by the employer to the employee is open to question in view
of the provisions of Labor Code § 300. That statute provides that no assignment of future
wages may be made unless wages have already been earned except that future wages may be
assigned for necessities of life (necessary food, necessary clothing, housing ) and such
assignment for necessities must be made directly to the person or persons supplying the
necessities. In addition, an assignment requires spousal consent unless at least an interlocutory
judgment of dissolution has been entered. (See Discussion of Labor Code § 300 at Section
18 of this Manual). It should be noted that the Barnhill decision does not address Labor Code
§ 300.

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11.3 Any Deduction Must Be For Direct Benefit Of Employee. Deductions are only permitted
for items which are f
or the direct benefit of the employee – not deductions which in any
way benefit the employer either directly or indirectly. (3 Ops.Atty.Gen. 178).
11.3.1 Specific Deductions. The Division has addressed the question of deductions m ade by or
suggested by an empl
oyer for a number of different reasons. (See O.L. 1994.01.27, dealing
with the cost of replacing a lost or stolen payroll check). The position taken by DLSE in
denying such recovery has always relied heavily on the decisions in Barnhill and, in
particular, the later case of CSEA v. State of California (1988) 198 Cal.App.3d 374, as well
as the U.S. Supreme Court’s rationale in Sniadach. (O.L. 1991.05.07).
11.3.2 Deductions Allowed By IWC Orders – Caveat: Under the IWC Orders in effect prior to
January 1, 2000, Secti
on 9 of each Order provided that the employer might “deduct from the
employee’s last check the cost of an item (uniform, tools, etc.) furnished…in the event said
item is not returned.” As the courts have s tated on a number of occasions, the Legislature
enacted Labor Code §§ 400-410 to provide a method whereby the parties to an employment
contract may create a bond to insure against loss by the employer and the IWC’s rationale in
adopting the provisions of Section 9 m ay not pass judicial scrutiny (See Califor nia State
Restaurant Assn. v. Whitlow (1976) 58 Cal.App.3d 340). DLSE has continued to explain that
the agency will enforce the I WC Orders as w ritten. However, e mployers should be aware
that there is a caveat regarding the right of an employer to deduct for unreturned uniforms or
tools from the final wages. (See O.L. 1993.04.19-1)
11.3.2.1 Note: IWC Order 16 Prohibits Deductions By Employers. It is interesting to note that the
newest I WC Order
(Effective January 1, 2001) prohibits an employer from m aking
deductions and, further, specifically prohibits any charge by the em ployer or his agent for
cashing a payroll check. In this regard, it should be noted, that DLSE would have determined
the charging for cashing a payroll check to be illegal under the provisions of Labor Code §
221 in any event. Thus, such a pra ctice is illegal in any industry or occupation; not just in
the occupations covered by Order 16.
11.3.3 Allowable Deductions. Note that section 224 also allows deductions when authorized by
the employee in
writing but that a uthorization is lim ited to (1) in surance premiums, (2)
hospital or m edical dues, or (3) other deductions not a mounting to a rebate or deduction
from the wage paid to the employee. Section 224 may not, consequently, be relied upon to
allow an em ployer to deduct an amount from an employee’s pay which is for the use or
benefit of the employer.

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11.3.4 Deduction for Tardiness: California Labor Code § 2928 provides:
No deduction from the wages of an employee on account of his coming late to work shall
be made in excess of the proportionate wage which would have been earned during the
time actually lost, but for a loss of time less than 30 minutes, a half hour's wage may be
deducted.
11.3.4.1 Pursuant to this statute an employer could, for instance, deduct only thirty-five minutes from
an employee who was thir
ty-five minutes late, but could deduct thirty minutes from the wages
of an employee who was only five minutes late. Obviously, most employers do not have such
a policy since it would encourage employees who were going to be a few minutes late to be
at least thirty minutes late since the deduction would be the same in either event.

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12 ENFORCEMENT AND COVERAGE OF WAGE STATUTES

12.1 Labor Code § 218.
Nothing in this article shall limit the authority of the district attorney of any county
or prosecuting a
ttorney of any city to prosecute actions, either civil or criminal, for
violations of this article or to enforce the provisions thereof independently and
without specific direction of the division. Nothing in this article shall limit the right
of any wage claimant to sue directly or through an assignee for any wages or penalty
due him under this article.
12.1.1 Claimants Have Private Right of Action. Section 218 extends the authority to prosecute
actions for recovery
of wages to district attorneys and prose cuting city attorneys, and
permits claimants to sue directly or through an assignee for any wages or penalties that
may be due.
12.1.2 Attorney’s Fees May Be Recovered in Private Action . Labor Code § 218.5 provides
for recovery of
attorney’s fees to the prevailing party in the event of an action to recover
wages brought by a private party if any party to the action requests attorney’s fees and
costs upon the initiation of the action. However, if the prevailing party in the court action
is not an employee, attorney’s fees and costs shall be awarded pursuant to this section
only if the court finds that the employee brought the court action in bad faith. This section
does not apply to an action brought by the Labor Commissioner, to a surety issuing a
bond pursuant to certain provisions of the Business and professions Code or to an action
to enforce a mechanics lien brought under certain sections of the Civil Code.
12.1.3 Amendment Of L abor Code § 220 Reduces Exceptions For State Employees;
Continues Excepti
ons For Other Public Entity Employees.
220. (a) Sections 201.3, 201.5, 201.7, 203.1, 203.5, 204, 204a, 204b, 204c, 204.1,
205, and 205.5 do not apply to the
payment of wages of employees directly employed
by the State of California. Except as provided in subdivision (b), all other employment
is subject to these provisions.
(b) Sections 200 to 211, inclusive, and Sections 215 to 219, inclusive, do not apply to
the payment of wa
ges of employees directly employed by any county, incorporated
city, or town or other municipal corporation. All other employments are subject to
these provisions. Nothing in sections 200 to 211 and 215 to 219, inclusive, shall apply
to the payment of wages of employees directly employed by any county, incorporated
city or town or other municipal corporation. All other employments are subject to
these provisions.

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12.1.4 Enforcement Coverage Of California Wage Statutes . Effective January 1, 2001,
Labor Code § 220 has b
een amended to extend coverage of Division 2, Part 1, Chapter 1,
Article 1 (§§ 200 -2 43) to employees of the State of California except §§ 201.3, 201.5,
201.7,203.1, 203.5, 204, 204a, 204b, 204c, 204.1, 205, and 205.5.
12.1.4.1 Note. Labor Code § 220 (b) still exempts counties, incorporated cities, towns or other
municipal corpora
tions from the provisions of Labor Code §§ 200-211 and 215-219.
12.1.4.2 Other municipal corporations would include such entities as hospital districts, (See DLSE
v. El Camino H
ospital District (1970) 8 Cal.App.3d, Supp. 30); community college
districts, ( See Kistler v. Redwoords Community College Dist. (1993) 15 Cal. App.4th
1326), and a water storage district ( See Johnson v. Arvin -Edison Water Storage Dist .
(2009) 174 Cal.App.4th 729). But s ee, Gateway Community Charters v. Spiess (2017) 9
Cal.App.5th 499, nonprofit public benefit corporation that operated charter schools was
not a municipal corporation and therefore not exempt from Labor Code § 203 waiting time
penalties. In order to be considered a municipal corporation the entity must perform ‘an
essential governmental function for a public purpose’ along with a consideration of the
following factors: “whether the entity is governed by an elected board of directors;
whether the entity has regulatory or police powers; whether it has the power to impose
taxes, asessments, or tolls; whether it is subject to open meeting laws and public disclosure
of records; and whether it may take property through eminent domain.” Id. at 506.

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13 MEDICAL OR PHYSICAL EXAMINATION COSTS.

13.1 Labor Code § 222.5 – No Charge For Medical Examination:
No person shall withhold or deduct from the compen sation of any employee, or require
any prospective employee or applicant for employment to pay, an y fee for, or cos t of,
any pre-employment medical or physical examination taken as a condition of employment,...
13.1.1 Neither Current Employee Nor Applicant May Be Charged Where Requirement Is
Imposed Only by Employer. Labor Code § 222.5 is easier read when divided into its two
main parts. The language cited above prohibits an employer from charging an employee
or applicant for employment the costs of any pre-employment medical examination which
is required by the employer as a condition of employment. The language, by implication,
means that an employer must pay the cost of any medical or physical examination
required a s a condition of employment of any employee, prospective employee or
applicant for employment.
...nor shall any person withhold or deduct from the compensation of any employee,
or require any employee to pay any fee for, or costs of, medical or physical
examinations required by any law or regulation of federal, state or local governments
or agencies thereof.
13.1.2 Current Employee May Not Be Charged Where Requirement Is Imposed by Law.
The second half of the statute, cited directly above, prohibits an employer from requiring
any employee to pay the costs of any medical or physical examination required by law.
However, medical or physical examinations required b y law in the pre-employment
period are excluded; an employer may require that an applicant or prospective employee
pay the costs of any pre-employment medical or physical examination if the examination
is required by law as a condition of employment.
13.1.3 Labor Code § 231 – Driver’s License Physical Exam Requirement
Any employer who requires, as a condition of employment, that an employee have a
driver's license shall pay the cost of any physical examination of the employee which
may be required for issuance of such license, except where the physical examination
was taken prior to the time the employee applied for such employment with the
employer.
13.1.4 Driver’s License Physical Examination. This section constitutes a limited exception to
Labor Code § 222.5 sinc e it provides that the employer must pay the cost of a physical
examination required to obtain a driver’s license if, as a condition of employm ent, the
worker must have such a license. The section extends this requirem ent to applicants
(except where the physical examination was taken before the employee applied for the
employment).

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14 WAGE STATEM ENT RE QUIRE MENTS.

14.1 Labo r Cod e § 226.
(a) An employer, semimonthly or at the time of each payment of wages, shall furnish
to his or her
employee, either as a detachable part of the check, draft, or voucher
paying the employee’s wages, or separately if wages are paid by personal check or
cash, an accurate itemized statement in writing showing (1) gross wages earned, (2)
total hours worked by the employee, exc ept as provided in subdivision (j), (3) the
number of piece -rate units earned and any applicable piece rate if the employee is
paid on a piece -rate basis, (4) all deductions, provided that all deductions made on
written orders of the employee may be aggreg ated and shown as one item, (5) net
wages earned, (6) the inclusive dates of the period for which the employee is paid,
(7) the name of the employee and only the last four digits of his or her social security
number or an employee identification number other than a social security number,
(8) the name and address of the legal entity that is the employer and, if the employer
is a farm labor contractor, as defined in subdivision (b) of Section 1682, the name
and address of the legal entity that secured the services of the employer, and (9) all
applicable hourly rates in effect during the pay period and the corresponding number
of hours worked at each hourly rate by the employee and, beginning July 1, 2013, if
the employer is a temporary services employer as de fined in Section 201.3, the rate
of pay and the total hours worked for each temporary services assignment. The
deductions made from payment of wages shall be recorded in ink or other indelible
form, properly dated, showing the month, day, and year, and a copy of the statement
and the record of the deductions shall be kept on file by the employer for at least
three years at the place of employment or at a central location within the State of
California. For purposes of this subdivision, “copy” includes a duplicate of the
itemized statement provided to an employee or a computer -generated record that
accurately shows all of the information required by this subdivision.
(b) An employer that is required by this code or any regulation adopted pursuant to
this code to keep
the information required by subdivision (a) shall afford current and
former employees the right to inspect or copy records pertaining to their
employment, upon reasonable request to the employer. The employer may take
reasonable steps to ensure th e identity of a current or former employee. If the
employer provides copies of the records, the actual cost of reproduction may be
charged to the current or former employee .
(c) An employer who receives a written or oral request to inspect or copy records
pursuant to sub
division (b) pertaining to a current or former employee shall comply
with the request as soon as practicable, but no later than 21 calendar days from the
date of the request. A violation of this subdivision is an infraction. Impossibility of
performance, not caused by or a result of a violation of law, shall be an affirmative
defense for an employer in any action alleging a violation of this subdivision. An
employer may designate the person to whom a request under this subdivision will be
made.

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(d) This section does not apply to any employer of any person employed by the
owner or occupa
nt of a residential dwelling whose duties are incidental to the
ownership, maintenance, or use of the dwelling, including the care and supervision
of children, or whose duties are personal and not in the course of the trade, business,
profession, or occupation of the owner or occupant.
(e) (1) An employee suffering injury as a result of a knowing and intentional failure
by an employer
to comply with subdivision (a) is entitled to recover the greater of
all actual damages or fifty dollars ($50) for the initial pay period in which a violation
occurs and one hundred dollars ($100) p er employee for each violation in a
subsequent pay period, not to exceed an aggregate penalty of four thousand dollars
($4,000), and is entitled to an award of costs and reasonable attorney’s fees.
(2) (A) An employee is deemed to suffer injury for purposes of this subdivision if
the employer f
ails to provide a wage statement.
(B) An employee is deemed to suffer injury for purposes of this subdivision if the
employer fai
ls to provide accurate and complete information as required by any one
or more of items (1) to (9), inclusive, of subdivision (a) and the employee cannot
promptly and easily determine from the wage statement alone one or more of the
following:
(i) The amount of the gross wages or net wages paid to the employee during the pay
period or any of th
e other information required to be provided on the itemized wage
statement pursuant to items (2) to (4), inclusive, (6), and (9) of subdivision (a).
(ii) Which deductions the employer made from gross wages to determine the net
wages paid to t
he employee during the pay period. Nothing in this subdivision alters
the ability of the employer to aggregate deductions consistent with the requirements
of item (4) of subdivision (a).
(iii) The name and address of the employer and, if the employer is a farm labor
contractor, as de
fined in subdivision (b) of Section 1682, the name and address of
the legal entity that secured the services of the employer during the pay period.
(iv) The name of the employee and only the last four digits of his or her social
security number
or an employee identification number other than a social security
number.
(C) For purposes of this paragraph, “promptly and easily determine” means a
reasonable pe
rson would be able to readily ascertain the information without
reference to other documents or information.
(3) For purposes of this subdivision, a “knowing and intentional failure” does not
include an isol
ated and unintentional payroll error due to a clerical or inadvertent
mistake. In reviewing for compliance with this section, the factfinder may consider
as a relevant factor whether the employer, prior to an alleged violation, has adopted
and is in compliance with a set of policies, procedures, and practices that fully
comply with this section.
(f) A failure by an employer to permit a curr ent or former employee to inspect or
copy records
within the time set forth in subdivision (c) entitles the current or former

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employee or the Labor Commissioner to recover a seven-hundred-fifty-dollar ($750)
penalty from the employer.
(g) The listing by a n employer of the name and address of the legal entity that
secured the serv
ices of the employer in the itemized statement required by
subdivision (a) shall not create any liability on the part of that legal entity.
(h) An employee may also bring an action for injunctive relief to ensure compliance
with this section,
and is entitled to an award of costs and reasonable attorney’s fees.
(i) This section does not apply to the state, to any city, county, city and county,
district, or
to any other governmental entity, except that if the state or a city, county,
city and county, district, or other governmental entity furnishes its employees with a
check, draft, or voucher paying the employee’s wages, the state or a city, county,
city and county, district, or other governmental entity shall use no more than the last
four digits of the employee’s social security number or shall use an employee
identification number other than the social security number on the itemized statement
provided with the check, draft, or vouc her.
(j) An itemized wage statement furnished by an employer pursuant to subdivision (a)
shall not be req
uired to show total hours worked by the employee if any of the
following apply:
(1) The employee’s compensation is solely based on salary and the employee is
exempt from pay
ment of overtime under subdivision (a) of Section 515 or any
applicable order of the Industrial Welfare Commission.
(2) The employee is exempt from the payment of minimum wage and overtime under
any of the foll
owing:
(A) The exem ption for persons employed in an executive, administrative, or
professional c
apacity provided in any applicable order of the Industrial Welfare
Commission.
(B) The exemption for outside salespersons provided in any applicable order of the
Industrial Wel
fare Commission.
(C) The overtime exemption for computer software professionals paid on a salaried
basis provided in S
ection 515.5.
(D) The exemption for individuals who are the parent, spouse, child, or legally
adopted child of t
he employer provided in any a pplicable order of the Industrial
Welfare Commission.
(E) The exemption for participants, director, and staff of a live -in alternative to
incarceration
rehabilitation program with special focus on substance abusers
provided in Section 8002 of the Penal Cod e.
(F) The exemption for any crew member employed on a commercial passenger
fishing boat lic
ensed pursuant to Article 5 (commencing with Section 7920) of
Chapter 1 of Part 3 of Division 6 of the Fish and Game Code provided in any
applicable order of the Industrial Welfare Commission.
(G) The exemption for any individual participating in a national service program
provided in any appli
cable order of the Industrial Welfare Commission.

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Labor Code § 226.1. The requirements of item (9) of subdivision (a) of Section 226,
with respect to a temporary services employer, do not apply to a security servi ces
company that is licensed by the Department of Consumer Affairs and that s olely
provides security services.
14.1.1 Summary Of Required Information. A California employer must furnish a statement
showing the follow
ing information to each employee at the time of payment of wa ges
(or at least semi-monthly). In Canales v. Wells Fargo Bank (2018) 23 Cal.App.5th 1262,
the court held it is enough to furnish the wage statement semimonthly. Therefore, at
discharge, it was sufficient to mail the statements later the day of discharge or the ne xt
day, so long as the statements were furnished by the semimonthly deadline:
1. Gross wages earned;
2. Total hours worked except:
a) Employees exempt from overtime under Section 515(a) or any IWC Order and
compensated solely
by salary;
(b) Employees exempt from minimum wage and overtime by one of the
following provisions:

1. IWC Order exemption for executive, administrative or professional
employees;
2. IW
C Order exemption for outside salespersons;
3. Exempt as a computer professional and paid on a salary basis as
provided in Section 515.5;

4. A parent, spouse, child or legally adopted child of the employer;
5. A participant, director, or staff member of a live -in alternative to
incarceration re
habilitiation program focusing on substa nce abuse and
prevention under Penal Code section 8002;
6. A crew member on a commercial passenger fishing boat who meets
the exemption requir
ement in the IWC orders;
7. National service progam participant who meets the exemption in the
IWC Orders.
3. The number of piece rate units earned and any applicable piece rate whenever an
employee is being paid on a piecework basis (and commissioned employees, i.e.,
commission rate and amount of sales, unless exempt from minimum wage under
Subsection (j)). Note: Employees paid by commission who are not exempt from
minimum wage do not meet the exemption in subdivision (j).
4. All deductions provided that all deductions made on the written orders of the
employee may be
aggregated and shown as one item;
5. Net wages earned;
6. The inclusive dates of the period for which the employee is paid;
7. The name and only the last four digits of the social security number or employee
identification number;

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8. The name and address of the legal entity which is the employer and if the employer
is a farm labor contractor, as defined in Subdivision (b) of Section 1682, the
names and address of the legal entity that secured the services of the employer.
9. All applicable hourly rates of pay and the corresponding number of hours an
employee worked at each rate during the pay period, and if the employer is a Temporary
Services employer as defined in Section 201.3, the rate of pay and the total hours worked
for each Temporary Services assignment;
10. The amount of paid sick leave available or paid time off leave an employer provides in
lieu of sick leave. If paid sick leave is unlimited, simply “unlimited” suffices. Labor
Code § 246(i). Note this requirement applies to exempt and non-exempt employees,
regardless of the method of payment.
11. For employees paid on a piece-rate basis, the total hours of compensable rest and recovery
periods, the rate
of compensation, and the gross wages paid for the rest and recovery
periods during the pay period must appear on the itemized statement. Labor Code §
226.2(a)(2). In addition, unless employees paid on a piece -rate basis are separately
compensated at an hourly rate of at least the applicable minimum wage for all hours
worked, the total hours of other nonproductive time, the rate of compensation, and the
gross wages paid for that time during the pay period must also appear on the itemized
statement. Labor Code §226.2(a)(2)(B).
12. There are additional requirements imposed on garment manufacturers . See 8 CCR
13659(c). Also, new Labo
r Code section 226.75 imposes additional requirements for
petroleum facility workers in safety sensitive positions under Wage Order 1 subject to
collective bargaining agreements when an emergency interrupts the rest period and no
authorization or permitting of a make-up rest period is made by the employer reasonably
promptly.

14.1.2 Note: Labor Code section 226 only sets out the employer’s responsibilities in
connection with the wa
ge statement which must accompany the check or cash payment
to the employee. The requirements of Section 1174 of the Labor Code and the
requirements of Section 7 of the applicable IWC Order concerning payroll records also
must be met by the employer. See Section 41.2 of this Manual for further discussion of
those requirements. Labor Code Section 226(f) provi des for a $750.00 penalty for a
violation of the right to inspect or receive a copy of any of the records referenced in
226(b), including time records. (See Labor Code Section 226(c).)
14.1.3 The deductions must be recorded in ink or other indelible form, properly dated showing
the month, day and year, and a copy, m
eaning duplicate, of the deductions must be kept
on file by the employer for at least three years.
14.1.4 Both current and former employees have the right to review the employer’s records upon
written or oral re
quest and shall comply as soon as practicable, but no later than 21 days
from the date of the request.
14.1.5 A failure to comply within 21 days entitles the employee or the Labor Commissioner to
receive $750.00. If the e
mployee wants copies of the records a fee may be imposed by

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the employer to cover the actual costs of reproduction.
14.1.5.1 This section does not apply to an employee employed by the owner or occupant of a
residence if the duties of
the employee are incidental to the ownership, maintenance or
use of the dwelling including the care and supervision of children, or whose duties are
personal and not in the course of the trade, business, profession or occupation of the
owner or occupant. 226(d).
14.1.6 Damages may be recovered b y an employee who suffers injury as a result of an
employer’s know
ing and intentional failure to comply with paystub content requrements.
An employee is deemed to have suffered injury if no pay stub was provided or the stub
fails to provide accurate and complete information as required by any one or more of
items 1-9 of subdivision (a) and the employee cannot promptly and easily determine from
the wage statement alone one or more of the following:
1. amount of gross or net wages paid;
2. number of hours worked;
3. number of piece rate units earned, what the piece rate is, the commission rate or
amount of sales
from commissions;
4. all deductions;
5. the inclusive dates for the pay period;
6. all applicable hourly rates for the pay period;
7. deductions from gross wages;
8. the name and address of the employer and if a farm labor contractor the name and
address of the l
egal entity that secured the services of the farm labor contractor;
9. the name of the employee and the last 4 digits of the social security number or
employee identif
ication number.
The statute excludes from the definition of knowing and intentional, an isolated and
unintentional payr
oll error due to a c lerical or inadvertent mistake. The statute further
provides that a fact finder may consider as relevant whether the employer adopted and is
in compliance with a set of policies, procedures and practices that fully comply with this
section. In addition, attorney’s fees are recoverable.
14.1.6.1 This section does not apply to public employers.
14.2 Labor Code § 226.3 – P
enaltie s For Failur e To Provid e W age State ment:
Any employer who violates subdivision (a) of Section 226 shall be subject to a civil penalty
in the amount of two hundred fifty dollars ($250) per employee per violation i n an initial
citation and one thousand dollars ($1,000) per employee for each violation in a subsequent
citation, for which the employer fails to provide the employee a wage deduction statement
or fails to keep the records required in subdivisio n (a) of Section 226. Th e civil penalties
provided for in this section are in addition to any other penalty provided by law. In enforcing
this section, the Labor Commissioner shall take into consideration whether the violation was
inadvertent, and in his or her discretion, may decide not to penalize an employer for a first
violation when that violation was due to a clerical error or inadvertent mistake.

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14.2.1 The penalties provided for failure to provide deduction statements as required by Labor Code §
226 are $250 per employee per violation in an initial citation and $1,000 per employee for each
violation in a subsequent citation. This means $250 per employee for a first violation and $1,000
per employee for any subsequent violations.
14.2.2 In enforcing this section the Labor Commissioner is to take into consideration whether the
violation was inadvertent, and, in his or her discretion, may decide not to penalize an employer
for a first violation when that violation was due to a clerical error or inadvertent mistake.

14.2.3 The section is enforced by citation served upon the employer pursuant to the provisions of
Labor Code § 226.4.

14.3 Labor Code § 226.4 – Citation Procedures:
If, upon inspection or investigation, the Labor Commissioner determines that an employer is
in violation of subdiv
ision (a) of Section 226, the Labor Commissioner may issue a citation
to the person in violation. The citation may be served personally or by registered mail in
accordance with subdivisio n (c) of Section 11505 of the Government Code. Each citation
shall be in writing and shall describe the nature of the violation, including reference to the
statutory provision alleged to have been violated.
14.3.1 The employer may appeal the citation and a hearing must be scheduled. (See Labor Code § 226.5)
The employer may seek review of the decision of the hearing officer by filing a writ in Superior
Court.
14.3.2 Labor Code § 226.6. A criminal violation may be referred to the city or district attorney against
not only the employer, but “any officer, agent, employee, fiduciary, or other person who has the
control, receipt, custody, or disposal of, or pays, the wages due any employee, and who knowingly
and intentionally participates or aids in the violations of any provisions of Labor Code §§ 226 or
226.2 ...”
14.4 Garment Manufacturing Record Requirements. Garment manufacturers are required by Labor
Code § 2673 to keep the following records for three years:
(a) The names and addresses of all garment workers directly employed by such person.
(b) The hours worked daily by employees, including the times the employees begin and end
each wor
k period.
(
c) The daily production sheets, including piece rates.
(d) The wage and wage rates paid each payroll period.
(e) The contract worksheets indicating the price per unit agreed to between
the contractor a
nd manufacturer.
(f) The ages of all minor employees.
(g) Any other conditions of employment.

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15 VACATION WAGES.

15.1 Labor Code § 227.3.

Unless otherwise provided by a collective-bargaining agreement,
whenever a contract of employment or employer policy provides for
paid vacations, and an employee is terminated with out having taken off
his vested vacation time, all vested vacation shall be paid to him as
wages at his final rate in accordance with such contract of employment
or employer policy respectin g eligibility or time served, provided,
however, that an employment contract or employer policy shall not
provide for forfeiture of vested vacation time upon termination. The
Labor Commissioner or a designated representative , in the resolution of
any dispute with regard to vested vacation time, shall apply the
principles of equity and fairness.

15.1.1 Prorata Vacation. Labor Code § 227.3, as interpreted by the California Supreme Court in
Suastez v. Plas
tic Dress-up Co. (1982) 31 C al.3d 774, provides employees with the right to
vacation pay upon termination of employment when vacation is offered in an employer’s policy
or contract. Because such vacation entitlements constitute deferred wages which vest as they are
earned, any entitlement to vacation is a proportionate right and vests as labor is rendered. Thus,
on termination, employees are entitled to a pro rata share of their vacation pay without any
reduction or loss based on conditions imposed by the employer. (See Suastez decision.) Vacation
pay may not be forfeited for failure to take the vacation under a so-called “use it or lose it” policy. (Boothby v. Atlas Mechanical (1992) 6 Cal.App.4 th 1595, 1601.) The Suastez decision makes
clear that Section 227.3 requires that, upon termination, an employee must be paid for the pro rata
share of his or her vacation which has accrued through the termination date.

15.1.2 Statute Does Not Require That Employer Provide Vacation. Neither the statute nor the case
law requires t
hat any employer provide vacation benefits; the law only addresses the requirements
which a vacation plan, if offered, must meet. (O.L. 1987.05.14).

15.1.3 Statute Does Not Prevent Probation Periods. Vacation plans which establish probation periods
during which no vaca
tion pay is vested are permitted. If the employer has not promised vacation
pay during a probation period, no pro rata portion is due the employee whether or not he or she
passes probation. (O.L. 1990.09.24)

15.1.4 Use-It-Or-Lose-It Policies Are Not Allowed. Vacation plans may not have a “use it or lose it”
provision as such pr
ovision would be an illegal forfeiture. However, a variant of a “use it or lose
it” policy whereby a cap is placed on the amount of vacation which accrue s if not taken is
acceptable. (Henry v. Amrol (1990) 222 Cal.App.3d Supp. 1; see also O.L. 1986.10.28,
1986.11.04, 1986.12.30, 1988.08.04, 1991.01.07, 1998.09.17)

15.1.4.1 DLSE has repeatedly found that vacation policies which provide that all vacation must be taken
in the year it is earned (or in a very limited period following the accrual period) are unfair and
will not be enforced by the Division. (See the detailed discussions of these issues at O.L.
1991.01.07 and 1993.08.18)

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15.1.5 Earnings Must Be Proportional. The anniversary dates on which entitlement to vacation pay
are based must provide
for an earning of a proportionate share of the agreed vacation. Arbitrary
dates or accelerated earning periods which would allow for a disproportionate rate of earning are
prohibited. (Such plans could possibly entitle an employee who works only one or two days to
the same amount of vacation as an employee who works as long as six months.) (O.L. 1987.03.16,
1988.08.04, 1986.12.30).

15.1.6 Limited Opt-Out Provision Under A Collective Bargaining Agreement. Section
227.3 provides an op t-out for
employees under a collective bargaining agreement. (Livadas v.
Bradshaw 512 U.S. 107, 114 S.Ct. 2068 (1994)). Thus, the provisions of the Suastez case do not
apply where the opt -out is met and DLSE would not have jurisdiction to determine whether
vacation pay is due. In Choate v. Celite Corporation (2013) 215 Cal.App.4 th 1460, the court
held the union collective bargaining agreement must contain a provision explicitly waiving the
anti-forfeiture protections set forth in Labor Code section 227.3. DLSE has jurisdiction to
determine if waiting time penalties are due for late-paid vacation wages after any arbitration
rememdies under the collective bargaining agreement are completed both where an opt-out is met
and where it is not met, as under Choate.. (See discussion of collective bargaining exception at
Section 36.2.2 of this Manual).

15.1.7 ERISA Preemption. Employers may have vacation plans or programs subject to control
of the federal E
mployee Retirement Income Security Act of 1974. There are several
important factors to be considered in determining whether the employer’s vacation plan
is subject to the provisions of ERISA:

1. The practice of paying vacation from an employer’s general assets does not
implicate ERIS
A and has been exempted from ERISA’s coverage. Massachusetts
v. Morash 490 U.S. 107 (1989), applying United States Departement of Labor
regulation 29 C.F.R. section 2510.3-1(b).
2. The federal courts have required that in order to show that the plan is pre-empted
by the ERISA law,
the employ er must show not only that there was a separate
fund but that the separate fund must actually be liable for the beneifts. (See Alaska
Airlines, Inc. v. Oregon Bureau of Labor 122 F.3d 812 (9th Cir. 1997); Czechowski
v. Tandy Corporation, 731 F.Supp. 406 (N.D. Cal. 990).)
3. After these decisions, the United S tates Department of Labor issued opinion
letters setting f
orth a four -part test to determine if ERISA is implicated where
payments are issued from a separate trust set up by an employer. (See, Villegas
v. The Pep Boys-Manny, Moe & Jack, 551 F.Supp.2d 982 (C.D. Cal. 2008).)

1. The trust must be a bond fide separate fund;
2. The trust must have a legal obligation to pay plan benefits;
3. The employer must have a legal obligation to make contributions to the trust;
4. The contributions must be actuarily determ ined or otherwise bear a
relationship to th
e plan’s accruing liability.
See US DOL Advisory Opinions 2004-08A and 2004-10A.

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15.1.7.1 In evaluating the method of funding for a purported ERISA plan a thorough review of
the following d
ocuments is necessary:
1. all Annual Reports (Form 5500’s, including all schedules and attachments therefo;
2. Summary Annual Reports, inclufing all schedules and attachments thereto;
3. all plan documents, including all amendments therefto;
4. all Summary Plan Descriptions (also known as Plan Summaries or SPD’s,
including all state
ments of material modification
5. all trust agreements, including all amendments therefto;
6. all financial statements, other reports or opinion letters prepared by auditors or
accountants for
the plan;
7. all trust account and/or bank account statements for any account maintained by
the plan;
8. all
account statements for any bank account used to pay vacation or paid time off;
9. records of all contributions made by the employer to the trust;
10. documents relating to the calculation of the employer’s contributions to the trust;
and
11. records of a
ny reimbursements that the employer received from the trust.

15.1.8 DLSE Has The Right To Determine Whether An Employer’s Plan Is, In Fact, Subject
To ERISA. DLSE may only
accept claims for vacation pay which would be paid out of
an employer’s gen
eral assets and, thus, not subject to ERISA. (California Hospital Assn.
v. Henning, 770 F.2d 856, modified 783 F.2d 946 (9th Cir. 1985), cert . den. 477 U.S. 904).
But, DLSE has the right to investigate to determine if the vacation plan is an ERISA
covered plan in order to establish its jurisdictional parameters. ( Millan v. Restaurant
Enterprises Group, Inc . (1993) 14 Cal.App.4th 477, rev. den. 5 -19-93; see also DLSE
Management Memorandum dated July 19, 1993)

15.1.9 Statute of Limitations. The statute of limitations for recovery of vacation pay claims is
four years on a cont
ract or obligation in writing in accordance with Code of Civil
Procedure section 337(1). As stated in Wilson v. Wallace (1931) 113 Cal.App.278, the
agreement or obligation to pay wages need not be contained in a signed contract fo r the
four year statute of limitations to be applicable. However, the terms of the agreement must
be evidenced in writing. In Division of Labor Law Enforcemen t v. Dennis (1947) 81
Cal.App.2d 306, the court held that the four year statute of limitations is applicable to a
claim on a written obligation brought by an employee hired through an oral agreement,
where the employee shows that he/she is in the class of persons for whose benefit the
obligation is made. A written vacation policy or other similar written documentation which
constitutes a unilateral or bilateral agreement by an employer to provide paid vacation to
an employee is subject to the four year limitations period. An oral promise to provide paid
vacation which is unaccompanied by such written documentation is subject to the two
year statute of limitations contained in Code of Civil Procedure section 339.

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IMPORTANT NOTE: While vacation becomes vested as it accrues over time in
accordance with the Sua
stez decision, the obligation of the employer to pay vacation
wages does not normally occur until the employee takes vacation or his/her employment
terminates. The Court of Appeal in Church v. Jamison (2006) 143 Cal.App.4th 1568 held
that the statute of limitations on accrued vacation pay entitlement begins to run from the
date an employer fails to pay vacation pay in breach of contract. In the case of an
employee with vested vacation entitlement at termination, this is at the time final wages
are due.

15.1.10 Many Issues Arise In Vacation Pay Disputes. A series of opinion letters are attached
to this Manual whi
ch will provide guidance on various discrete situations relating to the
interpretation of the Suastez decision and the Labor Commissioner’s application of the
principles of equity and fairness provided in the statute. (O.L. 1994.03.08, 1987.05.11,
1986.11.17, 1986.05.20, 1987.7.13).

15.1.11 Sale Of Business Constitutes Discharg e. In California, the sale of a busines s (see
Section 40 of this Manual
for a discussion of the term “bulk sale”) entails certain rights
and responsibilities on th e part of the employees and the employer. California courts
have held that a sale of the business constitutes a termination of the employment and that
unemployment benefits are not a prerequisite to the right to receive wages or benefits due
the employee at the time of the termination. (Chapin v. Fairchild Camera and Instrument
Corp. (1973) 31 Cal.App.3d 192) This result is consistent with Labor Code § 2920(b)
and common law contract theories; i.e., an obligor (the employer who owes the wages or
benefits) may not substitute another obligor (the buyer) in his or her place without the
express written consent of the obligee (the employee).

15.1.12 Confusion Of Vacation Pay With Other Leave Benefits. DLSE has been asked on
numerous occasions
to give an opinion regarding the difference between vacation wages
and other leave benefits. The DLSE has always opined that leave time which is provided
without condition is presumed to be vacation no matter what name is given to the leave
by the employer. Such an enforcement policy insures that leave policies which are
nothing more than vacation policies under a different name are not instituted as
subterfuges to defeat the provisions of Labor Code § 227.3 and the conclusions of the
California Supreme Court in Suastez. Thus, there must be an objective standard by which
it can be established that the leave time is attributable to holidays, sick leave, bereavement
leave or other specified leave. Tying the right to take the time to a specific event or chain
of events such as allowing a vacation period for the Thanksgiving weekend would suffice
to satisfy the test. (See discussion of the test in O.L. 1992.04.27, 1986.10.28, 1986.11.04,
1987.01.14-1).

15.1.12.1 O.L. 1987.03.11 provides an example of application of DLSE policy. That letter analyzes
a “sick leave”
policy which provided for continuing accrual, but, until at least 80 hours
had been accrued, the time could not be used for any purpose except sick leave. After 80
hours had accrued in the sick leave program, the employer policy provided that up to 24

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of those hours could be used for “personal compelling business” purposes. In the letter,
the DLSE opined that it would consider all time in the sick leave policy to be exempt
from the requirements of the Suastez doctrine; but that in the event of the termination of
any employee with more than 80 hours of sick leave accumulated, 24 hours (in excess of
the 80 hours) would be considered vested as vacation time.

15.1.13 Sabbatical Leave Programs –Under limited circumstances sabbatical leave programs,
which are in addition t
o the normal vacation available to an individual, will not be
considered vacation subject to Labor Code section 227.3. In Paton v Advanced Micro
Devices (2011) 197 Cal.App.4th 1505, the Court adopted the following test to determine
whether a sabbatical program is vacation or a sabbatical. Each case has to be decided on
its own facts.
1. Leave that is granted infrequently tends to support t he assertion that the leave is
intended to retain
experienced employees. Every seven years is the traditional
frequency. Greater or less frequency could be appropriate depending upon the industry
or particular company involved.
2. The length of the leave should be adequate to achieve the employer’s purpose. The
length of the leave s
hould be longer than that “normally” offered as vacation.
3. A legitimate sabbatical will always be granted in addition to regular vacation. This
point carries mor
e weight when the regular vacation program is comparable in length
to that offered by other employers in the relevant market.
4. A legitimate sabbatical program should incorporate some feature that demonstrates
that the employee tak
ing the sabbatical is expected to return to work for the employer
after the leave is over.

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16 SEVERANCE PAY PROVISIONS.

16.1 Labor Code § 96(h) allows the Labor Commissioner to accept claims for severance pay.
However, the federal ERISA law pre-empts DLSE from enforcing claims for severance pay
where such sever
ance pay plan is subject to ERISA. (See California Chamber of Commerce
v. Simpson, et al, 601 F.Supp. 104 (C.D. Cal. 1985)
16.2 The question, then, is whether the severance pay is subject to ERISA. The DLSE has the
authority to determi
ne its own jurisdiction and, based on this principle, Deputies may take
claims involving severance pay for the purpose of determining whether DLSE has jurisdiction
to enforce the claim.
16.3 A number of recent federal court cases have tested the breadth of ERISA pre-emption in the
area of severanc
e pay. In the Ninth Circuit, the case of Bogue v. Ampex Corp., (1992, 9th
Cir.) 976 F.2d 1319, involved a former vice-president of a division of Ampex Corp. who filed
suit in state court seeking severance benefits denied him upon his 1988 resignation from the
company. Plaintiff claimed he was entitled to severance because he had not been offered
“substantially equivalent” employment as provided in the plan. Defendants removed case to
federal court on the grounds that the plan was covered by ER ISA and the sole remedy was
under the federal law. The Ninth Circuit affirmed the judgment of the District Court finding
that under the plan the employer was “obligated to apply enough ongoing, pa rticularized,
administrative, discretionary analysis to make the program in this case a ‘plan’.”
16.4 On the other hand, in a more recent case, that same Ninth Circuit held in the case of Delaye
v. Agripac, Inc. (
1994, 9th Cir.), that a lower court erred in holding that an employer ha d
violated ERISA by not paying employee severance pay when he was discharged. The federal
district court had awarded severance benefits on an ERISA theory , but the Ninth Circuit
ordered the case remanded to the district court to vacate the judgment and dismiss the action
without prejudice to Plaintiff bringing an action i n state court in Oregon. Plan stated if
employee were terminated “without cause”, he was entitled to receive a fixed monthly amount
for 12 to 24 months according to a set formula, pay accrued vacation pay, and provide the
same accident, health, life and disability insurance he had during employment until he found
other employment or until monthly payments under the plan ceased. The court found that
there was no ERISA plan because “[S]ending [Plaintiff], a single employee, a check every
month plus continuing to pay his insurance premiums for the time specified in the
employment contract does not rise to the level of an ongoing administrative scheme.”
16.5 Based upon the most recent cases in this area, the Legal Section has developed the table found
on page 16-2, supra, whic
h may be used to predict whether the severance program will be
found to be an ERISA-covered plan. (Velarde v. Pace Warehouse, Inc., 105 F.3d 1313 (9th
Cir.1997)

16.6 It is important, however, that all severance plans be submitted to the Legal Section for review
before any fur
ther action is taken. The following table is simply designed as a guide to better
understand the problem.

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16.7 Severance Pay: Does “Plan” Require Ongoing Administration?

FACTORS

MOR E LIKEL Y NOT
AN ERIS A PLAN

MOR E LIKEL Y IS AN
ERIS A PLAN

Amount of discret ion
needed to determine
eligibili ty*

No discretio n necessary

case -by-case review
required . For instance
plan may require
determinatio n of what
constitute s “substa ntially
equivalent ” employment

Numbe r of employee
covered

Very few

All employees

Num ber of p aymen ts

One lump sum payment

Continu o us periodic
paym ents

Duratio n of obligation

Short term

Lon g term (months or
even years)

Numbe r of covered
benefits

Wages o nly

Wages plus several other
benefits such as medical
and out-placement
services

Trigger ing event

one, such as plant closure

Empl oyee s beco me
eligibl e at di fferen t

*Most importan t factor

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17 RETALIATION AND DISCRIMINATION — PROTECTED RIGHTS.
17.1 Retaliation and Discrimination Defined. The term “retaliation” means taking adverse action against
a person because the person engaged in protected activity. ( Yanowitz v. L’Oreal USA, Inc. (2005)
36 Cal.4th 1028, 1042.) The term “discrimination,” in general, means a failure to treat all persons
equally where no reasonable distinction can be found between those favored and those not favored.
(Daly v Exxon Corp. (1997) 55 Cal.App.4th 39.) The basic elements of a retaliation case include:
1. Employee engaged in a protected activity;
2. Employer was aware of the protected activity;
3. Employer takes adverse action (termination, disciplinary action, demotion, suspension) against the
employee. Adverse a
ction does not have to be directly related to employment, Burlington Northern
& Santa Fe Railroad v. White, 548 U.S. 53, 126 S. Ct. 2405 (2006);
4. A causal connection exists between the protected act and the adverse action (in other words,
the employer took the adverse action because the employee engaged in the protected act).
17.1.1 Employees Protected. Any employee who suffers any loss protected by the statutes listed below, may
file a complaint with the Labor Commissioner if they meet the criteria set out in the statute.
17.1.2 Time For Filing. Generally, a complaint alleging retaliation or discrimination in violation of
laws under the juris
diction of the Labor Commissioner must be filed within one year after
the occurrence of the alleged retaliatory or discriminatory action (Labor Code § 98.7). The
exceptions to the one year rule include: 1197.5 (2 years, 3 years if willful for an underlying
violation, but one year for retaliation); 2929 (60 days); Health & Safety Code §§ 1596.881
and 1596.882 (90 days).
17.1.3 Enforcement Procedure. Unless otherwise specified, the DLSE investigates and enforces the
retaliation or discrimination statutes within its jurisdiction pursuant to the procedures set forth in
Labor Code sections 98.7. The administrative procedures for handling retaliation matters generally
differ from that of wage and hour violations claims. Retaliation matters processed pursuant to Labor
Code 98.7 typically do not involve a hearing. Although the Labor Commissioner’s Office may hold
hearings in retaliation matters (for example, claims pursuant to Health and Safety Code section
1596.881), the overwhelming majority of matters are investigated instead. After investigation, the
Labor Commissioner issues a Determination letter. If the Labor Commissioner finds in favor of the
employer, it shall take no further action in the matter. If the Labor Commissioner finds in favor of
the employee, it will issue a Demand for remedies to the employer. Where the employer does not
comply, the Labor Commissioner shall file an action in the appropriate court against the employer.
A determination is not self-executing and a writ of mandate does not lie from a determination. Any
person or employer has a plain, speedy and adequate remedy in that it can raise all claims and
defenses once the Labor Commissioner files a lawsuit. American Corporate Security v. Su (2013)
220 Cal.App.4th 38.
Effective January 1, 2018, the DLSE may, in its discretion, investigate retaliation or discrimination
statutes pursuant to the procedures set forth in Labor Code section 98.74. Under these procedures,
the DLSE will investigate and issue a citation to an employer or person who has engaged in unlawful

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retaliation or dis
crimination. A citation may be appealed by requesting a hearing before a hearing
officer for the Labor Commissioner. A citation that is not appealed shall become a final order. The
hearing officer shall issue a written decision. The hearing officer’s decision may be appealed by
filing a writ of mandate in superior court pursuant to Section 1094.5 of the Code of Civil Procedure.
As a condition to filing a writ, the petitioner shall post a bond with the Labor Commissioner.
Also effective
January 1, 2018, the DLSE may “with or without receiving a complaint” investigate an
employer that it suspe
cts to have engaged in retaliatory conduct during the course of an adjudication
of an employee’s wage claim, during an inspection by the Labor Commissioner’s Bureau of Field
Enforcement unit, or in instances of suspected immigration-related threats. The DLSE may also, upon
finding reasonable cause, petition the superior court for appropriate temporary or preliminary
injunctive relief.
17.1.4 Enforcement Jurisdiction Of The DLSE. The DLSE has jurisdiction over all cases of retaliation or
discrimination invo
lving any of the following statutes. There is no exhaustion requirement. Thus, an
employee may proceed directly in court without first filing with the Labor Commissioner. (See Labor
Code §98.7(g) and Labor Code § 244. Additionally, effective June 27, 2017, the Labor Commissioner
may close an investigation where the complainant files an action in court based on the same or similar
facts, and may reject claims where the complainant has already challenged his or her discipline or
discharge through an internal government procedure or through a collective bargaining agreement.
Labor Code section 96(k)
Protects an employee from loss of wages as a result of a failure to hire, demotion, suspension,
or discharge from empl
oyment because the employee engaged in lawful conduct asserting
“recognized constitutional rights ” occurring during nonworking hours away from the
employer’s premises.
Labor Code section 98.6
Protects an employee filing or threatening to file a claim or complaint with the Labor
Commissioner, insti
tuting or causing to be instituted any proceeding relating to rights under
the jurisdiction of the Labor Commissioner, or testifying in any such proceeding,
complaining orally or in writing about unpaid wages, or for exercising (on behalf of oneself
or other employees) any of the rights provided under the Labor Code or Orders of the
Industrial Welfare Commission, including, but not limited to, the right to demand payment
of wages due, the right to express opinions about, support or oppose an alternative workweek
election, or the exercise of any other right protected by the Labor Code. In addition to other
remedies that might be available, a civil penalty of up to $10,000 may be awarded to an
employee for each violation of Labor Code section 98.6. Also, protects an employee who is
a family member of a person who has or is perceived to have engaged in any protected
conduct.
Labor Code section 230(a)
Prohibits an employer from discharging or in any manner retaliating against an employee for
taking time off to serve on a j
ury provided the employee gives reasonable notice that he or
she is required to serve.
Labor Code section 230(b)
Protects an em ployee who is a victim of a crime, who take s time off to appear in court to
comply with a subpoena
or other court order as a witness to a judicial proceeding.

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Labor Code section 230(c)
Prohibits an employer from discharging or in any manner discriminating or retaliating against
an employee who is
a victim of domestic violence, sexual assault, and/or stalking for taking
time off from work to obtain or attempt to obtain relief to help ensure his or her health, safety,
or welfare, or that of his or her child or children.
AB 2992 amends Labor Code section 230, effective January 1, 2021, to expand the category
of workers who are cove
red by the above provision to include victims of a crime that caused
physical injury or mental injury, crimes involving threat of physical injury, or crimes
involving persons whose immediate family member is deceased as a direct result of that
crime.
Furthermore, AB 2992’s amendments to section 230 define “ immediate family member” to
include a child, pare
nt, spouse, sibling, and any other individual whose close association with
the employee is the equivalent of a family relationship of a child, parent, spouse, or sibling.
AB 2992’s amendments now defines “crime” as a public offense as defined in Section 13951
of the Government Code and regardless of whether there is an arrest, prosecution, or
conviction for committing the crime. (The complaint must be filed within one year from the
date of occurrence of the violation.)
Labor Code section 230(d)
Under section 230 (d)(2) and section 230.1 (b)(2), an employer cannot take any action against
an employee who has
had an unscheduled absence if the employee provi des certification of
the domestic violence, sexual assault, or stalking within a reasonable time after the absence.
Certification includes a police report, a court order, documentation from a license medical
professional, domestic violence counselor, sexual assault counselor, licensed health care
provider, or counselor that the employee was undergoing treatment for physical or mental
injuries or abuse. Under AB 2992’ s amendments, the certification is no longer limited to
instances of domestic violence, sexual assault, or stalking but also includes certification for
a crime or abuse, including a crime that caused physical injury or that caused mental injury
and a threat of physical injury. AB 2992 also expands the types of certification that can be
provided to include documentation that reasonably verifies that the crime or abuse occurred,
including but not limited to, a written statement signed by the employee, or an individual
acting on the employee ’s behalf, certifying that the absence is for an authorized purpose
under sections 230 or 230.1. Significantly, an employee may now self-certify that an absence
was for an authorized purpose by providing a signed written statement. AB 2992 also adds
“victim advocates ” to the list of individuals who can provide the certification. Section
230(d)(2)(C). AB 2992 defines “victim advocate ” as an individual who is either paid or
serves as a volunteer and provides services to victims under the auspices or supervision of
an agency or organization that has a documented record of providing services to victims or
under the auspices or supervision of a court or law enforcement or prosecution agency.
Labor Code section 230(e)
An employer shall not discharge or in any manner discriminate or retaliate against an
employee because of th
e employee’s status as a victim of domestic violence, sexual assault,
and/or stalking, if the victim provides notice to the employer of the status or the employer
has actual knowledge of the status. AB 2992 amends the above provision by broadly
prohibiting discrimination against employees because of their status as a victim of crime or

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abuse. (The complaint must be filed within one year from the date of occurrence of the
violation.)
Labor Code section 230(f)
An employer of any size shall provide reasonable accommodations for a victim of domestic
violence, sexual ass
ault, and/or stalking who requests an accommodation for the safety of the
victim while at work. AB 2992 expands Section 230 (f)(2) by providing that reasonable
accommodations may include assistance in documenting domestic violence, sexual assault,
stalking, or “ other crime” that occurs at work, or another work adjustment in response to
domestic violence, sexual assault, stalking, or “other crime”. AB 2992 also makes the anti -
retaliation provision in section 230 (f)(8) applicable to victims generally, including victims
of domestic violence, sexual assault, stalking, victims of a crime that caused physical injury
or that caused mental injury and a threat of physical injury, and a person whose immediate
family member is deceased as a direct result of a crime. (The complaint must be filed within
one year from the date of occurrence of the violation.)
Labor Code section 230.1
Protects an employee who is a victim of domestic violence, sexual assault, an d/or stalking
and works for an employ
er with 25 or more employees who takes time off to seek medical
attention, to obtain services from a domestic violence program or psychological counseling,
or to participate in safety planning. AB 2992 expands the category of workers covered to
include victims of a crime that caused physical injury or that caused mental injury and a
threat of physical injury, and persons whose immediate family member is deceased as a direct
result of a crime. Section 230.1 defines “famil y member” and “crime” in the same way as
Section 230.
(The complaint must be filed within one year from the date of occurrence of the
violation.)
Labor Code section 230.2(b)
Requires an employer to allow an employee who is a victim of a crime, an immediate family
member of a victim, a r
egistered domestic partner of a victim, or the child of a registered
domestic partner of a victim to take time off from work to attend judicial proceedings related
to that crime. (The complaint must be filed within one year from the date of occurrence of
the violation.)
Labor Code section 230.3
Protects an employee who takes time off to perform emergency duty as a volunteer
firefighter, a res
erve peace officer, or an officer, employee, or member of a disaster medical
response entity sponsored or requested by the State. An employee who is a health care
provider must notify his or her employer at the time the employee becomes designated as
emergency response personnel and when the employee is notified that he or she will be
deployed as a member of a disaster medical response team.
Labor Code section 230.4
Protects an employee who is a volunteer firefighter, a reserve peace officer, or emergency
rescue personnel, and wo
rks for an employer employing 50 or more employees, from being
discriminated or retaliated against because he or she has taken time off to engage in fire or
law enforcement training. The employee is permitted to take up to an aggregate of 14 days
per calendar year for such training.

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Labor Code section 230.5
Protects an employee who is a victim of an offense listed under Labor Code section 230.5
for taking time off
from work, to appear in court to be heard at any proceeding, including
any delinquency proceeding, involving a postarrest release decision, plea, senten cing,
postconviction release decision, or any proceeding in which a right of the victim is at issue.
A victim is any person who suffers direct or threatened physical, psychological, or financial
harm as a result of the commission or attempted commission of a crime or delinquent act.
The term “victim” also includes the person’s spouse, parent, child, sibling, or guardian. (The
complaint must be filed within one year from the date of occurrence of the violation.)
Labor Code section 230.7 and Education Code section 48900.1
Protects an employee who is the parent or guardian of a pupil for taking time off from work
to appear in the pupil
’s school at the request of the pupil’s teacher, if the employee, prior to
taking the time off, gives reasonable notice to the employer that he or she is requested to
appear at the school.
Labor Code section 230.8
Protects an employee who is a parent (including stepparent, foster parent, or person who
stands in loco parenti
s to the child), guardian, or grandparent, and who is emplo yed by an
employer who employs 25 or more employees, for taking time off from work (up to 40 hours
each year, not exceeding eight hours in any calendar month) to participate in activities of the
child’s school, or to locate or enroll the child in school or with a child care provider or for
school emergencies (no eight hour restriction for school emergencies.)
232(a) and (b)
Prohibits an employer from requiring an employee, as a condition of employment, to refrain
from disclosing or disc
ussing the amount of his or her wages or requiring an employee to
sign a waiver or other document that purports to deny the employee the right to disclose or
discuss his or her wages.
Labor Code section 232.5
Prohibits an employer from requiring that an employee refrain from disclosing or discussing
information about the em
ployer’s working conditions, and from requiring an employee to
sign a waiver or other document that restricts or denies the employee the right to disclose or
discuss information about the employer’s working conditions.
Labor Code section 233 and 234
Prohibits retaliation for using or attempting to use sick leave that accrued during six months
for a reason allowe
d under section 246.5. Section 234 provides that an employer’s “absence
control” policies that punish sick leave taken pursuant to section 233 are a violation of section
233. Applies to plans that have accrued increments of compensated leave, not uncapped
unlimited leave programs. McCarther v. Pacific Telesis Group (2010) 48 Cal.4th 104.
Employees have the sole discretion to designate days taken as paid sick leave under section
233.
Labor Code section 244
Reporting or threatening to report an employee ’s, former employee ’s, or prospective
employee’s citizens
hip or immigration status, or the suspected citizenship or immigration

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status of a family member of the employee, former employee, or prospective employee, to a
federal, state, or local agency because the employee, former employee, or prospective
employee exercises a right under the Labor Code, the Government Code, or the Civil Code
constitutes an adverse action for purposes of establishing a violation of an employee’s,
former employee’s, or prospective employee’s rights. Claims of immigration-related
retaliation may be processed by the Labor Commissioner under this section, in conjunction
with section 98.6, which prohibits retaliation against employees, former employees, and
prospective employees for exercising their rights under the Labor Code.
Labor Code sections 245-249
Protects an employee who uses accrued paid sick leave, files a complaint with the Labor
Commissioner claiming pa
id sick leave, alleges a violation of paid sick leave rights,
cooperates in an investigation or prosecution under this statute, or oppos es a policy or
practice prohibited by this statute. Employers are prohibited from denying an employee the
right to use paid sick leave, or discharging, threatening to discharge, demoting, suspending
or in any manner discriminating against an employee who e xercises these rights. There is a
REBUTTABLE presumption of unlawful retaliation if the employer acts in a manner
described above within 30 days of the employee ’s request for leave or other protected
activity. In addition to other remedies that might be available, damages of up to $8,000 may
be awarded.
Labor Code section 432.3
See Section 1197.5 below.
Labor Code section
432.6.
(a) A person shall not, as a condition of employment, continued employment, or the receipt
of any employment-rel
ated benefit, require any applicant for employment or any employee
to waive any right, forum, or procedure for a violation of any provision of California Fair
Employment and Housing Act… or this code, including the right to file and pursue a civil
action or a complaint with, or otherwise notify, any state agency, other public prosecutor, law
enforcement agency, or any court or other governmental entity of any alleged violation.
(b) An employer shall not threaten, retaliate or discriminate against, or terminate any
applicant for emplo
yment or any employee because of the refusal to consent to the waiver of
any right, forum, or procedure for a violation of the California Fair Employment and Housing
Act or this code, including the right to file and pursue a civil action or a complaint with, or
otherwise notify, any state agency, other public prosecutor, law enforcement agency, or any
court or other governmental entity of any alleged violation.
Labor Code section 432.7
Prohibits an employer from seeking or using as a factor in an employment decision, any
record of an arrest or
detention that did not result in a conviction or any information regarding
referral to, and participation in, any pretrial or posttrial diversion program or concerning a
conviction that has been judicially dismissed or ordered sealed. A “record” is “interpreted in
its common-sense meaning as ‘[a]n account, as of information or facts, set down especially
in writing as a means of preserving knowledge ’ or ‘[ i]nformation or data on a particular
subject collected and preserved.’ ” ( Garcia-Brower v. Premier Automotive Imports of CA,

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LLC (2020) 55 Cal.App.5th 961, 976- 77.) A worker ’s discharge for “ falsification of job
application” despite notice to the employer that the “ falsification” involved a dismissed
conviction could violate Labor Code sections 98.6 and 432.7. (Id., at 975, 978, 979.)
Protects the right of an applicant for employment not to disclose information about his or her
criminal history that o
ccurred while the applicant was subject to juvenile court law. Provides
exceptions for law enforcement employment, health facilities, concessionaires and other
specific employment situations. In addition, regarding asking an applicant or seeking
information about criminal convictions, now only particular convictions, (including
eradicated, expunged, dismissed, or sealed convictions) which are relevant to the position
being applied for may be inquired into and only under specific circumstances such as when
an employer is required by law to obtain information regarding an applicant’s conviction, the
applicant would be required to possess a firearm in the course of employment, law prohibits
an individual convicted of a crime from holding the position applied for, or the employer is
prohibited by law from hiring an applicant who has been convicted of a crime. Thus, only
particular criminal convictions as opposed to any criminal conviction are allowed as
questions and only if particular requirements are met. A particular conviction is defined as a
conviction for specif ic criminal conduct or a category of criminal offenses that contains
requirements or exclusions expressly based on specific criminal conduct or category of
criminal offenses.
Labor Code section 432.8
Protects the rights of an applicant for employment or employee from disclosing information
regarding a convicti
on related to the possession of marijuana where the conviction is more
than two years old.
Labor Code section 752
Ensures that employees in non-unionized smelters or underground mines have a right to a
fair and impartial el
ection to establish a workday greater than eight hours. In addition to other
remedies that might be available, a civil penalty of up to $200 for each violation for each
affected employee may be awarded.
Labor Code section 1019
Prohibits certain unfair immigration-related practices in retaliation for engaging in activities
protected by the L
abor Code and local ordinances. Unfair immigration -related practices
include: requesting more or different documents than are required by federal immigration
laws; refusing to accept such documents when they reasonably appear on their face to be
genuine; using the federal E -Verify system to check the employment authorization of a
person at a time or in a manner not required under federal law; filing or threatening to file a
false police report or a false report or complaint with any State or federal agency, including
the Federal Immigration and Customs Enforcement Agency (“ ICE”); or cont acting or
threatening to contact immigration authorities. Labor Code section 1019 creates a private
right of action in court for victims of unfair immigration-related practices that are retaliatory.
The Labor Commissioner will process such complaints under Labor Code section 98.6,
which prohibits retaliation for engaging in rights protected under the Labor Code.

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Labor Code section 1019.1-1019.4
Makes it an unlawful practice for an employer to re quest more or different documents than
thos
e required b y f ederal immigration la w, refuse t o honor doc um ents t hat appear t o be
g
enuine, or attempt to r einvestigate or reverify any incumbent employee ’s aut horization to
wor
k using an unfair immigration-re lated practice. In addition to other remedies that might
be avail
able, a penalty of up to $10,000 may be awarded for each violation.
Labor Code section 1024.6
An employer may not discharge an employee or in any manner discriminate, retaliate, or take
any adverse action against an employee because the employee updates or atte mpts to update
his or her personal information based on a lawful change of name, social security number, or
federal employment authorization document.
Labor Code sections 1025-1028
Ever
y private employer regularly empl oying 25 or more employees shall provide reasonable
accommodations for an employee to participate in an alcohol or drug rehabilitation program.
If the employee believes that he or she has been denied such reasonable accommodation, he
or she may file a retaliation complaint with the Labor Commissioner’s office.
Labor Code sections 1030-1034
Pursuant to Labor Code Section 1030 every employer, including the state and any political
subdivision, must provide a reasonable amount of break time to accommodate an employee
desiring to express breast milk for the employee's infant child each time the employee has a
need to express milk. The break time shall, if possible, run concurrently with any break
time already provided to the employee. Break time for an employee that does not run
concurrently with the rest time authorized for the employee by the applicable wage order of
the Industrial Welfare Commission need not be paid.
Pursuant to Labor Code Section 1031, an employer shall provide the employee with the use
of a room or other location, other than a bathroom, in close proximity to the employee's
work area, shielded from view, and free from intrusion while the employee is expressing
milk in private. The room or location may include the place where the employee normally
works if it otherwise meets the requirements of this section. The lactation room or location
must be safe, clean, and free from hazardous materials, as defined in Labor Code section
6382, contain a surface to place a breast pump and personal items, contain a place to sit and
have access to electricity or alternative devices, including but not limited to, extension
cords or changing stations needed to operate an electric or battery-powered breast pump.
Access to a sink with running water and a refrigerator suitable for storing milk, in close
proximity to the employee’s workspace must also be provided by the employer.
Use of a multipurpose room for lactation takes precedence over other uses for the time it is
in use for lactation. A multitenant or multiemployer worksite may provide a shared space
among multiple employers within the building or worksite if the employer cannot provide a
lactation location within the employer’s own workspace. Employers or general contractors
coordinating a multiemployer worksite must provide lactations accommodations or a safe
and secure location for a subcontractor employer to provide the lactation accommodations
on the worksite within two business days upon written request of a subcontractor employer.

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Agricultural employers may be deemed in compliance by providing a private, enclosed and
shaded space, including, but not limited to an air-conditioned cab of a truck or tractor. A
temporary location may be designated if an employer is unable to provide a permanent
lactation location because of operational, financial, or space limitations. The temporary
location cannot be a bathroom, and must be in close proximity to the employee’s work area,
shielded from view, free from intrusion while the employee is expressing milk, and
otherwise compliant with Labor Code section 1031.
Exception for Employer with less than 50 employees:
An employer with less than 50 employees is not required to provide an employee break time
for purposes of expressing milk if to do so would impose an undue hardship by causing the
employer significant difficulty or expense, when considered in relation to size, financial
resources, nature, or structure of the employer’s business. If an employer with less than 50
employees can demonstrate that providing the use of a room or other location, other than a
bathroom would impose an undue hardship when considered in relation to size, nature, or
structure of the employee’s business, the employer must make reasonable efforts to provide
a room or other location, other than a toilet stall.
Pursuant to Labor Code Section 1033
, the denial of a break or adequate space to express
milk may result in the recovery of one hour of pay at the employee’s regular rate of pay for
each violation by filing a wage claim under Labor Code section 226.7. Additionally, an
employee may report a violation of the lactation accommodations laws with the Labor
Commissioner’s Bureau of Field Enforcement (BOFE), and after an inspection or
investigation, BOFE may issue a citation for one hundred dollars ($100) for each day an
employee is denied reasonable break time or adequate space to express milk.
Employers are required to develop and implement a policy regarding lactation
accommodation. The policy must be provided to employees upon hire, when an employee
makes an inquiry about or requests parental leave and the policy must be included in an
employee handbook or set of policies that the employer makes available to employees. The
policy must include the following:
1. an employee has a right to request a lactation accommodation;
2. the process an employee must follow to make such a request;
3. that the employer must respond in writing to the employee making the request

if the employer cannot provide break time or a location that complies with the
policy;
4. and that the employee has the right to file a complaint with the Labor
Commissioner for any violation of their rights for lactation accommodation.

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Labor Code section 1041-1044
Every private employer regularly employing 25 or more employees shall reasonably
accommodate and
assist any employee who reveals a problem of illiteracy and requests the
employer’s assistance
in enrolling in an adult literacy education program. An employee who
believes she or h e has been denied reasonable accommodation to enroll and participate in an
adult literacy
education program may file a r etaliation complaint with the Labor
Commissioner’s office.
Labor Code section 1101
Protects
employees who engage or participate in politics or who become candidates for
public office. An employer may not make, adopt, or enforce any rule, regulation or policy
that forbids, controls, directs or tends to direct the political activities or affiliations of
employees.
Labor Code section 1102
Prohibits an employer from coercing, influencing or attempting to coerce or influence
employees’ political action or political activity.
Labor Code section 1102.5
Protects against retaliation for disclosing information, or because an employer believes an
employee has disclosed information, to a government or law enforcement agency, to a person
with authority over the employee, or to another employee who has the authority to
investig
ate, discover, or correct a violation where employee reasonably believes that the
information discloses a violation of a state or federal statute, or a violation of or
noncompliance with a local, state, or federal rule or regulation. Protects an employee who
refuses to participate in an activity that would result in a violation of a state or federal
statute, or a violation of or noncompliance with a
local, state, or federal rule or regulation.
Protects an employee who exercised their rights under Labor Code section 1102.5 in any
former employment. Protects an employee who is a family member of a person who has or is
perceived to have engaged in any protected conduct. In addition to other remedies that might
be available, a civil penalty of up to $10,000 may be awarded for each violation and
reasonable attorney’s fees may be awarded to a plaintiff who brings a successful action

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Labor Code section 1171
Protects individuals participating in a national service program (e.g., AmeriCorps), for
refusing to work overtime for any legitimate reason.
Labor Code section 1197.5
Allows an employee who is paid at a wage rate less than the rate paid to an employee of the
opposite sex, or another race or ethnicity for substantially similar work, when viewed as a
composite of skill, effort, and responsibility, and which is performed under similar working
conditions, except where the payment is made pursuant to a seniority system, a merit system,
a system which measures earnings by quantity or quality of production, or a differential based
on a bona fide factor other than sex, race, or ethnicity, to file a claim for unequal pay with
the Labor Commissioner ’s office. A civil action to recover wages under section 1197.5(a)
may be commenced no later than two years after the cause of action occurs, except that a
civil action arising out of a willful v iolation may be commenced no later than three years
after the cause of action occurs. The same filing period will be used for a claim filed with the
Labor Commissioner for equal pay as the filing period for a civil action. Also protects an
employee who invokes or assists with the enforcement of the equal pay law, discloses his or
her own wages, discusses the wages of others, inquires about another employee ’s wages, or
aids or encourages any other employee to exercise his or her rights under this section and is
retaliated against. A complaint with the Labor Commissioner alleging retaliation must be
filed within one year of the adverse action. Effective January 1, 2018, this law has been
extended to cover public entities. Labor Code section 432.3 and 1197.5 prohibit an employer
from relying on prior salary to justify any pay disparity based on sex, race, or ethnicity.
Section 432.3 provides that employers may ask about salary expectations but may not ask
for prior salary or rely on prior salary to justify a pay disparity. The section defined
“reasonable request,” “pay scale” and “applicant.” A current employee’s existing salary may
be considered as long as any disparity is justified by a seniority system, a merit system, a
system that measures earnings by quantity or quality of production, or a bona fide factor
other than sex, race, or ethnicity, such as education, training, or experience.
Labor Code section 1198.3
Prohibits retaliation against an employee who refuses to work hours in excess of those
permitted by the Industrial Welfare Commission (IWC) Orders.
Labor Code section 1311.5
Provides for triple damages for individuals who are retaliated against for having filed a claim
or civil action alleging a Labor Code violation occurring while the individual was a minor,
even if the claim was filed after the individual reached 18. Extends the time limit for claims
under the Labor Code, including claims for unpaid wages and r etaliation claims, such that
the time limit does not begin to run until the individual turns 18.
Labor Code section 1512
Prohibits retaliation against an employee who exercises the right to take a paid leave of
absence for the purpose of donating his or her organ or bone marrow to another person

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Labor Code section 2814
Makes it unlawful to use E -Verify to check the employment authorization status of an
existing employee or applicant who has not been offered employment at a time or in a manner
not required by federal law, authorized by a federal agency, or as a condition of receiving
federal funds. An employer who has offered employment to an applicant can lawfully utilize
the federal E-Verify system to check the employment authorization status of a person who
has been offered employment. Requires that the employer furnish to the employee any no-
match notification issued by the Social Security Administration or the United States
Department of Homeland Security containing information specific to the employee ’s E-
Verify case. In addition to other remedies that might be available, each unlawful use of the
E-Verify system carries a civil penalty not to exceed $10,000.
Labor Code section 2929(b) and (c)
Prohibits discrimination because the garnishment of an employee ’s wages has been
threatened, or because his or her wages have been subjected to garnishment for the payment
of one judgment. The employee shall give notice to his or her employer of his or her intention
to make a wage claim within 30 days after being discharged, and file a wage claim with the
Labor Commissioner within 60 days after being discharged.
Labor Code section 2930
Protects an employee who is disciplined or discharged based on a shopping investigator ’s
report of the employee’s conduct, performance, or honesty when the employee was not
provided with a copy of the report before the discipline or discharge. The shopping
investigator must be licensed under the Business and Professions Code for this section to
apply.
Labor Code section 6310
Protects an employee who: (1) complains about safety or health conditions or practices, (2)
institutes or causes to be instituted any proceeding relating to the employee ’s rights to safe
and healthful working conditions, or testifies in any such proceeding, (3) exercises any rights
under the California Occupational Safety and Health Act, or (4) participates in an
occupational health and safety committee established pursuant to Labor Code section 6401.7.
Protects an employee who is a family member of a person who has or is perceived to have
engaged in any protected conduct.
Effective January 1, 2021, Labor Code section 6310
explicitly includes protections for “domestic work employees.”
Labor Code section 6311
Protects an employee who refuses to perform work in the performance of which the Labor
Code, any occupational safety or health standard, or any safety order would be violated where
the violation would create a real and apparent hazard to the employee or her or his co -
workers.
Effective January 1, 2021, Labor Code section 6311 explicitly includes protections
for “domestic work employees.”
Labor Code section 6311.5
Effective January 1, 2021, AB 2658 added Labor Code section 6311.5, which prohibits
employers from “willfully and knowingly” directing employees, to remain in or enter an area
closed due to a menace to the public health or safety. An employer ’s violation of section

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6311.5 constitutes a misdemeanor and is subject to criminal penalties under California ’s
Penal Code.
Labor Code section 6399.7
Protects an employee who complains or testifies regarding non- compliance with the
Hazardous Substances
Information and Training Act. Effective January 1, 2021, Labor Code
section 6399.7 explicitly includes protections for “domestic work employees.”
Labor Code section 6403.5
Protects an employee who refuses to lift, reposition, or transfer a patient due to the health
care worker’s concerns about patient or worker safety or because of the lack of trained lift
team personnel or equipment.
Health and Safety Code section 1596.881 and 1596.882
Protects an employee who: (1) complains about the violation of any licensing or other laws
relating to child day c
are facilities (e.g., staff-child ratios, transportation of children, or child
abuse), (2) institutes or causes to be instituted any proceeding against the employer relating
to the violation of any licensing or other laws, (3) appears as a witness or testifies in a
proceeding relating to the violation of any licensing or other laws, or (4) refuses to perform
work in violation of a licensing or other law or regulation after notifying the employer of the
violation. A claim by the employee alleging the violation by the employer of section
1596.881 shall be presented to the employer within 45 days after the action as to which
complaint is made, and presented to DLSE not later than 90 days after the action as to which
complaint is made.
Unemployment Insurance Code section 1237
Protects an employee who seeks information from the Employment Development
Department (EDD) concerning rights under the Unemployment Insurance Code or Labor
Code, cooperates with any investigation undertaken by EDD, or testifies in any proceeding
brought pursuant to the Unemployment Insurance Code or the Labor Code.
IWC Orders 1 through 13, section 3(C)(8); IWC Order 16, section 3(C)(7); and IWC
Order 17, section 5 “El
ection Procedures” (H)
Protects an employee who expresses an opinion concerning an alternative workweek election
or for opposing or supporting i
ts adoption or repeal.
17.3 Examples of Prohibited Retaliation. Some of the more common complaints received by the
DLSE involve employees w
ho are discharged or otherwise disciplined because they complain
about wage violations (including in connection with the Equal Pay Act), disclose information
about violations of the law, or complain about a health and safety problem at work. We
discuss each of these common complaints in more detail below.
17.4
Filing Or Threatening To File Claim With Labor Commissioner. Labor Code § 98.6 prohibits
any employer from disc
harging or otherwise discriminating against any employee or job applicant
because the employee or applicant has:
1. Filed or threatened to file a bona fide complaint or claim against the employer, or
2. Instituted or caus
ed to be instituted any proceeding under or relating to his or her rights under the
jurisdiction of the
Labor Commissioner, or

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3. Testified or is about to testify in any such proceeding , or
4. Made a written or oral complaint that he or she is owed wages, or
5. Initiated any action or notice pursuant to Section 2699, or
6. Exercised any right afforded him or her on behalf of himself or herself or others, specifically
incl
uding the rights protected by Labor Code §§ 96(k) and 1101 through 1102.5.
17.4.1 A complaint is considered “bona fide” for purposes of this statute when it has been made in good
faith and a reasonable person in the circumstances would consider the complaint to be valid and
enforceable.
17.4.2 Note that the first two protected activities involve a filing or threat to file or engaging in a proceeding
within the jurisdiction of the Labor Commissioner; but activity numbered 6 is not so limited. Many
activities can be viewed as falling within the gambit of “any right afforded,” however, the “any rights”
language is limited to rights found in the Labor Code. (See Grinzi v. San Diego Hospice Corp. (2004)
120 Cal. App. 4th 72, concluding after review of the statutory language and its legislative history,
that the rights protected under the “any rights” clause were limited to rights contained in the Labor
Code.)
17.4.3 “A written or oral complaint that he or she is owed unpaid wages”. In 2014, Labor Code §
98.6 was amended to provide that written or oral complaints made directly to employers
regarding “unpaid wages” are protected under that section. This amendment is consistent
with the DLSE’s interpretation, relying in part on federal cases that have long considered
oral complaints made to employers to be protected. Lambert v. Ackerley (1999) 180 F.3d
997, 1003-1005 (holding that statutory protection for employees who have “filed any
complaint ... related to” the FLSA “extends to employees who complain to their employer
about an alleged violation of the Act.”)
17.4.4 Initiating any action or notice pursuant to Labor Code section 2699.
Under Labor Code
section 2699, the so- called “Labor Code Private Attorney Generals Act of 2004" ( or
“PAGA”), an employee can file a civil action against an employer for the recovery of civil
penalties for violations of various provisions of the Labor Code, with recovered penalties
distributed in part to any aggrieved employees and in part to the Sta te. Prior to filing any
such action, the employee is required to provide notice to the employer and to the Labor and
Workforce Development Agency. (Lab. Code §2699.3(a)(1).)
17.4.5 An employee who is a family member of a person who has “or is perceived to have” engaged
in any protected a
ctivity is also protected from retaliation pursuant to section 98.6(e). The
inclusion of this language in 2015 is consistent with the DLSE’s broad interpretation of anti-
retaliation laws to prohibit retaliation against employees who are family members. The
statutory protections also apply to an employee who is pre -emptively fired because the
employer fears the employee may file a complaint. Lujan v. Minagar (2005) 124 Cal.app.4
th
1040.
17.4.6 Penalty assessed against employer. Effective January 1, 2014, section 98.6(b)(3) provides
for a civil penalty of up to $10,000 per employee for each violation. This provision was
further amended to specify that the penalty goes to the employee or employees. Unlike the

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penalty available under section 1102.5, this penalty may be assessed against any type of
employer, not just corporations or LLCs.
17.5 Wage disparity based on sex, race, or ethnicity. The California Equal Pay Act (section
1197.5) prohibits paying an em
ployee less than another employee of a different sex, race, or
ethnicity, where they are performing substantially similar work, when viewed as a composite
of skill, effort, responsibility, and under similar working conditions. This law was
significantly amended in 2015 and again in 2016. The law lists exemptions based on
seniority, a merit system, a system that measures earnings by quality or quantity of
production, or a “bona fide factor” other than sex, race, or ethnicity.
17.5.1 If a difference in wage rate is based on one of the exceptions, the employer must prove that
the factor is applied r
easonably and accounts for the entire wage differential. Additionally, if
the wage rate is based on a “bona fide factor” other than sex, race, or ethnicity, the employer
must also demonstrate that the factor not based on or derived from a sex-, race-, or ethnicity-
based differential, is job related, and is consistent with business necessity.
17.5.2 Section 1197.5 explicitly protects employees who discuss their own wages, the wages of
others, and who assist ot
hers with enforcing their rights under this statute. Additionally,
employees may ask about the wages of other employees, however, the employer does not
have to provide that information.
17.5.3 Time limits for filing a complaint with the Labor Commissioner’s Office. A complaint for
violation of the Equal P
ay Act may be filed with the Labor Commissioner’s Office within 2
years after the cause of action occurs or 3 years if the violation is willful. A complaint for
retaliation based on exercising rights under the Equal Pay Act may be filed with the Labor
Commissioner’s Office within one year of the retaliatory act. Investigations of complaints
filed under this statute are handled pursuant to the procedures set forth in Labor Code section
98.7.
17.5.4 Remedies for violation of this statute include unpaid wages, interest, and liquidated damages
in the amount of the unpaid wage
s. Attorneys’ fees may be recovered in a private civil action.
17.6 State Whistleblower Statute. Labor Code § 1102.5 protects employees who disclose
information to their e
mployer or to a governmental or law enforcement agency where the
employee has reasonable cause to believe that the information discloses a violation of state
or federal statutes, a violation of state or federal statutes, or noncompliance with a local, state
or federal regulation. The violation is not limited to violation of a fundamental public policy
nor involve a violation arising out of the employer’s business activities. Cardinas v. M.
Fanaian, D.D.S., Inc. (2015) 240 Cal.App.4th 1167 (termination for reporting wedding ring
stolen from her at work potentially by co-worker actionable under Labor Code §1102.5).
17.6.1 Disclosure need not
be made to government agency. In 2014, the Legislature expanded Labor
Code § 1102.5 to cover disclosure t
o “a person with authority over the employee or another
employee who has the authority to investigate, discover, or correct the violation or
noncompliance ….” Whistleblower employees who report reasonable suspicions of
lawbreaking directly to their private employers are now protected in that disclosure by Section
1102.5. The statute is also not limited to the first employee who discloses a violation and

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report need not reveal something hidden or unknown. Hager v. County of Los Angeles (2014)
228 Cal.App.4th 1538.
17.6.2 Testimony before public bodies. In 2014, the Legislature amended section 1102.5 to protect
employees agai
nst retaliation for “providing information to, or testifying before, any public
body conducting an investigation, hearing, or inquiry.” Again, this has always been the law
under Section 1102.5, since testimony before a public body would amount to disclosure to a
government agency pursuant to the old language of section 1102.5.
17.6.3 An employee who is a family member of a person who has “or is perceived to have” engaged
in any protected ac
tivity is also protected from retaliation pursuant to section 1102.5(h). The
inclusion of this language in 2015 is consistent with the DLSE’s broad interpretation of anti-
retaliation laws to prohibit retaliation against employees who are family members.
17.6.4 Penalty assessed against employer.
Section 1102.5(f) provides for a civil penalty of up to
$10,000 for each violation. This provision is not limited to an employer who is a corporation
or limited liability company.
17.7 Protection For Filing Safety Complaint. Labor Code § 6310 forbids an employer taking
adverse action aga
inst an employee who:
1. Made a bona fide written or oral complaint concerning safety or health to any
government agency ha
ving statutory responsibility for employee safety or health,
the employer, or the employee’s representative (union, etc.), or
2. Took any action to institute or causes to be instituted any proceedings under or
relating to safety
or health in the workplace, or
3. Testified or agreed to testify in any such proceeding,
4. Exercised on behalf of himself or herself or others of any rights afforded to the
employee with res
pect to occupational health and safety, or
5. Participated in an occupational health and safety committee.
17.7.1 Protection Not Dependent on Ultimate Merits of Complaint; All Good Faith Complaints
Are Protected. A compla
int is protected under this statute if it “is made in good faith about
working conditions or pract ices which [the employee] reasonably believes to be unsafe.”
(Hentzel v. Singer Company (1982) 138 Cal.App.3d 290, 299-300.) Thus, a complaint can
be considered “bona fide,” within the meaning of this statute, even if the working
conditions or practices that are the subject of the complaint do not violate any OSHA
standard or order. Protection extends to employee’s credible threats of violence reported
to the employer or to the police since explicit public policy of Labor Code section 6400
and Code of Civil Procedure Section 527.8 require the employer to provide a safe and
secure workplace. Franklin v. Monadnock Co. (2007) 151 Cal.App.4th 252.

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18 ASSIGNM ENT OF W AGES.
18.1 Provisions Of Labor Code § 300. According to the statute – and reiterated by the courts – the purpose
of Labor Code Section 300 is to protect employees and their families from assigning wages to t he
extent that the remaining portion of the wages would severely impair the wage earner’s economic
well being. These restrictions protect the employee by prohibiting the employer from paying out to
“assignees” more of the employee’s wages than is permitted by law.
18.1.1 Note : The employe r may also be an assigne e and the statut e reco gnizes this fact . See
Labor Code § 300(g ).
18.2 If an employee inadvertently, or through ignorance, exceeds the limits under Section 300 and the
employer subsequently makes deductions exceeding Section 300 limitations, a wage claim may result
against the employer as such an assignment would be considered an invalid deduction. Assignments
are limited to not more that 50% of the employee’s wages. (See § 300(c)) This obviously places an
obligation on the employer to review each assignment as the employer must accept responsibility for
any wage deductions based on the employee’s assignment. The provisions of Labor Code Section
300(d) set forth the limits of the employer’s responsibility.
18.3 Labor Code Section 300 codifies many, but not all, of the restrictions placed upon the assignment of
wages by an employee. The section severely limits the right of employees to assign wages and no
assignment is valid unless all of the following are present:
1. The assignment is in a sep arate writing, signed by the wage earner and specifying the transaction
to which the assignment rel
ates.
2. Spousal consent is obtained in writing and attached to the assignment unless the wage earner is
legally separated or
living separate and apart after an interlocutory judgment of dissolution has
been entered and a written statement setting forth those facts is attached to the assignment or a
written statement setting forth the fact that the wage earner is single is attached to the assignment.
3. An assignment by a minor is s igned by a parent or guardian.
4. The wage earner has made no ot her assignment involving the same transaction and a written
statement to that effect is attached to the assignment.
5. A notariz ed copy of the assignment toge ther with the required statements is filed wit h the
employer and, at the
time of such filing, no other assignment is subject to payment and no court
ordered earnings withholding order is outstanding.
6. Not more than fifty percent of the employee’s wages may be withheld from any one payroll
payment and the assignment i
s revocable at any time.
7. The wages of an employee who is paid at a central location as set out at Labor Code
Section 204 a may not be assigned. (See Section 5.3 o f this Manual)
18.3. 1 Note that these provisions do not apply in assignments for spousal or child support. (See § 300(a))
18.3. 2 Does Not Apply To Certain Deductions. Section 300 does not apply to deductions which the employer
is requested in w
riting by the employee to make for the payment of insurance, taxes or contributions
to funds or plans providing for death, disability, retirement, etc., or for contributions to charitable,
educational, patriotic or similar purposes or for the payment for goods or services furnished by the
employer to the employee or the emp loyee’s family. (See Labor Code Section 300(g).)

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18.3.2.1 Goods Or S
ervice s Furnishe d By The Employer . It shoul d be note d that whil e the provision s
of Sectio n 3 00 do no t apply, inter alia, to deductions for goods and services furnishe d by the
employer to the employee or his family, this particula r deductio n is onl y applicabl e whe re the
goods or service s are directly furnishe d by the employ er. These goods or servic es usua lly
invo lve ren t or food. ( See IWC Orders , Secti on 10, limitin g the amount of these deductions)
18.3.2.2 In addition to be ing limite d to go ods or service s directl y furnishe d by the employer , the
deduction must al
so meet the criteria set out in the case of Barnhill v. Saunders (1981) 125
Cal.App .3d1; 177 Cal .Rptr . 803.

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19 G
RATUITIES – TIPS.
19.1 Labo r Cod e § 350
As used in this article, unless the context indicates otherwise:
(a) "Employer" means every person engaged in any business or enterprise in this State, which
has one or more persons
in service under any appointment, contract of hire, or apprenticeship,
express or implied, oral or written, irrespective of whether such pe rson is the owner of the
business or is operating on a concessionaire or other basis.
(b) "Employee" means every person including aliens and minors, rendering actual service in any
business for an employ
er, whether gratuitously or for wages or pay and whether such wages or
pay are measured by the standard of time, piece, task, commission, or other method of calculation
and whether such service is rendered on a commission, concessionaire, or other basis.
(c) "Employing" includes hiring, or in any way contracting for the services of an employee.
(d) "Agent" means every person other than the employer having the authority to hire or discharge
any employee or sup
ervise, direct, or control the acts of employees.
(e) "Gratuity" includes any tip, gratuity, money, or part thereof, which has been paid or given to
or left for an employ
ee by a patron of a business over and above the actual amount due such
business for services rendered or for goods, food, drink, or articles sold or served to such patron.
Any amounts paid directly by a patron to a dancer employed by an employer subject to Industrial
Welfare Commission Order No. 5 or 10 shall be deemed a gratuity.
(f) "Business" means any business establishment, or enterprise, regardless of where conducted.
19.1.1 The provisions of Labor Code § 350 provide detailed definitions of the terms used in the Article
(Labor Code §§ 350 through 356).
19.2 Labor Code § 351.
No employer or agent shall collect, take, or receive any gratuity or a part thereof, that is paid, given
to or left for an employee by a patron, or deduct any amount from wages due an employee on account
of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against
and as a part of the wages due the employee from the employer. Every gratuity is hereby declared to
be the sole property of the employee or employees to whom it was paid, given, or left for. An
employer that permits patrons to pay gratuities by credit card shall pay the employees the full amount
of the gratuity that the patron indicated on the credit card slip, without any deductions for any credit
card payment processing fees or costs that may be charged to the employer by the credit card
company. Payment of gratuities made by patrons using credit cards shall be made to the employees
not later than the nex t regular payday following the date the patron authorize d the credit card
payment.
19.2.1 Statutory Scheme Must Be Read Carefu lly. Particular note should be made of the definition of
“gratuity” co
ntained in Section 350, which includes any tip, gratuity, money, or part thereof, which
has been paid or given to or left for an employee by a patron of a business over and above the actual
amount due the business for services rendered or for goods, food, drink, or articles sold or served
to the patron.
19.2.1.1 Note that the amendment to Labor Code § 350 effective January 1, 2001, adds specific language
regarding dancers.
Also, as explain ed below, section 351 now prohibits, among other things, the
practice of recovering credit card charges incurred by an employer when a tip is left on a credit card.

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19.3 Statute Prohibits Employers Or Their Agents From Taking Or Receiving Tip Money Left For
Employee. Section 351 prohibits employers and their agents (defined, above, as every person other
than the employer hav
ing the authority to hire or discharge any employee or supervise, d irect, or
control the acts of employees) from sharing in or keeping any portion of a gratuity left for or given
to one or more employees by a patron.

19.3.1 In the case of Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.e3d 1062, the Second District
Court of Appeal, in a split decision, held that an employer policy mandating a tip pooling arrangement
among waiter/waitresses and busboys and bartenders was legal despite the language of Section 351.
While, in Leighton, the tip pooling policy in question applied to employees who provided “direct”
table service, the court recognized that this was a long -standing practice in the restaurant industry.
The acknowledgment of prevailing industry practice was also recognized in a DLSE opinion letter
interpreting Leighton issued in 1998. The DLSE opinion states that it is the correlation with prevailing
industry practice “that makes tip pooling a fair and equitable system”. (DLSE Opinion Letter No.
1998.12.28-1).

Recognizing that prevailing industry practice is likely to evolve over time as a result of competitive
market demands and changing technology, the DLSE in an opinion letter issued in 2005, interpreted
Labor Code section 351 to allow for a tip pool policy requiring the employee receiving the tip to
contribute 15% of the actual tips to the tip pool and all money from the tip pool then to be distributed
to the other employees in the “chain of service” based on the number of hours they worked, as is
consistent with industry custom, provided:

1) Tip pool participants are limited to those employees who contribute in the chain of the service
bargained for by the patron, pursuant to industry custom [examples of employees included in
“chain of service” provided in Opinion Letter], and
2) No employer or agent with the authority to hire or discharge any employee or supervise, direct,
or control the acts of employees may collect, take or receive any part of the gratuities intended
for the employee(s) as his or her own. (also see Definitions for “Employer” and “Agent” , Cal
Labor Code section 350). (See DLSE Opinion Letter 2005.09.08).
19.3.2 No Wage Deductions For Gratuities. Additionally, this section prohibits employers from
making wage deduction
s from gratuities, or for using gratuities as direct or indirect credits
against the employee’s wage and now specifically disallows a recovery of credit card charges
incurred by the employer.

19.3.3 Employment agreements allowing an employer to employ so -called “tip credits” (allowed
under federal law)
against wages owed to an employee are illegal under California law.
(Henning v. IWC and California Restaurant Assn. (1988) 46 Cal.3d 1262; 252 Cal.Rptr. 278)

19.3.4 Note : Section 351 was amended effective January 2, 2001, and no longer provides an
exemption which allows em
ployers to take or receive the gratuities left for employees where
there is no charge made for the service.

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19.3.5
19.4
Service Charge May Be a Gratuity. The Labor Commissioner issued two opinion
letters which stated that a charge which must be paid added to a customer’s bill for the
service is not a gratuity and may be received and disbursed by the employer without limit
by Labor Code § 351 et seq. (O.L. 1994.01.07 and 2000.11.02). On the other hand, if the
“service charge” or “added gratuity” is waivable or negotiable, or couched in terms of
being less than a fixed amount which must be paid, the charge is not an added “charge” to
the bill and payment is gratuitious. Some local ordinances contain provisions that require
the entire service charge be paid to the employee who provided the service when the
customer is required to pay a service charge. The reasoning is that customers, believing the
charge will go to the employee prov iding the service does not also leave a gratuity. ( See
Garcia v. Four Points Sheraton LAX (2010) 188 Cal.App. 4th 364.)(Upholding hotel
ordinance and holding no preemption or constitutional bar to enforcement.) Service charge
claims based on local or dinances may be enfo rced through the Labor Commissioner’s
claims process or through the Bureau of Field Enforcement. In O’Grady v. Merchant
Exchange Productions, Inc. (2019) 41 Cal.App.5th 771, the court held mandatory service
charges added to food and beverages could constitute a gratuity. An opinion letter dated
November 2, 2000, makes reference to a particular set of facts where customer intent may
deem a service charge a gratuity. In the letter, the specific facts make reference to a club
that includes a service charge but forbids servers from receiving tips and explicitly tells
customers the service charge is a gratuity and instructs servers to represent that to customers.
Under this scenario the Labor Commissioner concluded the practice may violate Labor
Code
section 356 and at the very least “misleads the patron who is led to believe that the charge
he or she is paying is, at least in part, being used to pay a tip to the employee.”
Labo r Code § 353.
Every em ployer s hall k eep a ccurate records of all gratuities r eceived by hi m, w hether
received directly from the employee or indirectly by means of deductions from the wages of
the employee or otherwise. Such records shall be open to inspection at all reasonable hours
by the department.
19.4.
1 Section Requires Employer To Keep Records. This Section requires the employer to keep
accurate records of an
y gratuity received by him through any means. Gratuities received
through credit cards would fall within these recordkeeping requirements. Since the employer
is obligated to keep the records, the burden of proof regarding amounts due employees from
credit card charges would be on the employer.
19.5 Labo r Cod e § 356.
The Legislature expressly declares that the purpose of this article is to prevent fraud upon the public
in connection with the practice of tipping and declares that this article is passed for a public reason and
can not be contravened by a private agreement. A s a part of the social public policy of this State, this
article is binding upon all departments of the State.
19.5.1 Statutory Scheme Has Public Purpose. The Legislature has declared that the provisions of
this Article, dealing with ti
ps, is to prevent fraud upon the public and cannot be contravened
by private agreement.
19.5.2 California courts have determined that an employer policy of crediting tips of restaurant
employees agai
nst their minimum wage violates Labor Code § 351 and that damages are

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recoverable under Business and Professions Code § 17200 as an unfair business practice.
(Application Group, I
nc. v. Hunter Group, Inc. (1998) 61 Cal.App.4th 881, 907-908;
Hudgins v. Neiman Marcus (1995) 34 Cal.App.4th 1109, 1126-1127)
19.6 Credit Card Charges As Tips. As noted above, under the amended statute, an employer
cannot offset t
he cost of credit card charges which may be incurred by an employer against
tips paid by the patron on the credit card. This addition is in keeping with a decision of the
1st District Court of Appeal which held that any cost of doing business must be borne by the
employer and not the employee. (Hudgins v. Neiman Marcus (1995) 34 Cal.App.4th 1109)
Inasmuch as credit card purchases are common, the cost of credit card charges are a cost of
doing business. Thus this decision had been interpreted by DLSE to prohibit any deduction
from the wages of employees by the employer to recover costs incidental to tips left for
employees.

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20 EMPL OYEE BO NDS – REQUIREME NTS AND LIMITATI ONS.

20.1 Cost Of Bond Or Photograph. If a bond or photograph of an employee or applicant is required by any
employer, the cost thereo f shall be paid by the employer. (Labor Code § 401) This covers any
situation where either the employer or a third person requires a photograph or a bond (purchased from
a bonding company) guaranteeing the performance of the duties or obligations of the employee. This
is typical in certain employment s involving the handling of large sums of money, goods or
commodities.
20.2 Cas h Bon d – Labo r Code § 402:
No employer shall demand, exact,, or accept any cash bond from any employee or applicant unless:
(a) The employee or applicant is entrusted with property of an equivalent value, or
(b) The employer advances regularly to the employee goods, wares, or merchandise to be delivered
or sold by the empl
oyee, and for which the employer is reimbursed by the employee at regular
periodic intervals, and the employer limits the cash bond to an amount sufficient to cover the value
of the goods, wares, or merchandise so advanced during the period prior to the payment therefor.
20.3 Cash Bonds must be deposited in a savings account in a bank authorized to do business in California.
The account must be set up in such a way that the amount deposited can only be withdrawn by the
joint signatures of both the employer and the employee (or applicant), the sum may not be co-mingled
with other money of the employer, and the agreement concerning the bond must be in writing. The
money in such an account is not subject to a money judgment obtained against either the employer or
the employee or applicant except in an action between the employer or employee or applicant, their
successors and assigns. The amount held in the bond account (plus any interest accrued) must be
returned to the employee or applicant upon the return of the money or property to the employer,
subject only to the deduction necessary to balance accounts between the employer and employee.
(Labor Code § 403).

20.3.1 A Written Agreement Concerning The Bond Is Required By The Statute. The DLSE will enforce any
term of such an agreement which is not abusive, unfair or in derogation of the spirit of the statute.
This agreement may, for instance, provide for recovery of damages done to the goods. Such recovery
may be made from the bond if both the employer and employee agree on the amount of damages; or,
in the event there is no agreement, either party may sue to recover the bond amount from the account
in which case the issue of damages would be decided by the trier of fact.
20.4 The California Supreme Court has found that “Labor Code sections 400 through 410 set out in detail
the employee’s bond law, and the manner in which a cash bond may be exacted from an employee to
cover merchandise entrusted to him”... deductions “from wages due appear to be in contravention of
the spirit, if not the letter, of the employee’s bond law.” (Kerr's Catering v. DIR (1962) 57 Cal.2d
319, 327-328)

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21 CONTRACTS AND APPLICATIONS FOR EMPLOYMENT.

21.1 Labo r Cod e § 407:
Investments and the sale of stock or an interest in a business in connection with the securing of a
position are ill
egal as against the public policy of the State and shall not be advertised or held out in
any way as a part of the consideration for any employment.
21.1.1 This provision of the Labo r C ode prohibit s any empl oyer from advertis ing tha t any
employmen t opportunit y is base d upo n a purchas e of stoc k or an interest in a b usiness or
requirin g such a purchas e as a conditio n of e mployment . The DLSE take s the positio n tha t
any purchas e of stock or interes t in a busines s as a condit ion of continued employment is
likewis e prohibi ted.
21.2 Labo r Cod e § 432 provide s tha t eithe r an employe e or an app licant has the right to
obtai n a cop y of an y employment instru ments he or sh e is required to sig n. Employmen t
instru ments includ
e any docum ent dealin g eithe r directl y or indirectly with empl oyment or
continued employment.
21.3 Polygraph Tests And Similar Tests – Labor Code § 432.2: Employer s are prohibite d from
requirin g an appl
ican t for employment or any employe e to take a polygraph, lie dete ctor or
simila r test and if an employe r “request s” an employee to take such a test , the employe e must be
advised, in w riting, of his right not to take such a test.
21.3.1 Certain psychological tests may or may not meet the criteria of Section 432.2 (“similar test or
examination”); but in any event those tests may constitute an invasion of privacy under article I,
section 1, of the California Constitution absent a showing of a compelling interest by the
employer. (Central Valley Chapter 7th Step Foundation, Inc. v. Younger (1989) 214 Cal.App.3d
145, 151, 162-165) In addition to any enforcement action taken by the DLSE, claimants with
complaints regarding use of so-called psychological testing should also be cautioned to contact
private counsel.
21.4 Remedy For Refusal To Take Test. Since the requirement to take a polygraph or similar test is
forbidden, no adverse action may be taken by the employer against an applicant for employment or
employee who refuses to submit to such a test. (§ 98.6)
21.5 Contracts Void As Against Public Policy – Labo r Cod e § 432.5:
No employer, or agent, manager, superintendent, or officer thereof, shall require any employee /or
applicant for em
ployment to agree, in writing, to any term or condition which is known by such
employer, or agent, manager, superintendent, or officer thereof to be proh ibited by law.
21.5.1 Every person is charged with the responsibility of knowing the law; thus, it is not a defense for an
employer to contend that they had not read or were unaware of the law.

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22 PURCHASES BY EMPLOYEES – PATRONIZING EMPLOYER.
22.1 Labo r Cod e § 450:
(a) No employer, or agent or officer thereof, or other person, may compel or coerce any
employee, or appli
cant for employment, to patronize his or her employer, or any other person, in
the purchase of any thing of value.
(b) For purposes of this section, to compel or coerce the purchase of any thing of value includes,
but is not limited to, i
nstances where an employer requires the payment of a fee or consideration
of any type from an applicant for employment for any of the following purposes:
(1) For an individual to apply for employment orally or in writing.
(2) For an individual to receive, obtain, complete, or submit an application for employment.
(3) For an employer to provide, accept, or process an application for employment.
22.1.1 Illegal To Require Payment To Apply For Employment. Note that recent legislation makes it
illegal for an em
ployer in California to charge a fee to an employee for applying for employment,
receiving an application for employment or for providing, accepting or processing an application for
employment. This had been a common practice in the air transport industry. (Se e O.L. 2002.01.22 )
22.2 Requirement That Employee Patronize Employer Or Third Party Prohibited. Any other
requirement
by an employer that an employee patronize the employer or a third person in the purchase
of anything of value is prohibited by this statute.
22.2.1 The provisions of Section 450 do not preclude an employer from “prescribing the weight, color,
quality, texture, style, form and make of uniforms required to be worn by his employees.” (Labor
Code § 452) The fact that the employer may prescribe the uniform does not relieve the employer of
the obligation to pay the cost of the uniform (DIR, DLSE v. UI Video, 55 Cal.App.4th 1084, 1091),
the statute simply permits the employer to designate the store where the goods may be purchased.
22.3 Varied Circumstances Surrounding Enforcement Of Section 450. As the Division’s responses to
inquiries evidences, the question of the applicability of Section 450 arises often and i n sometimes
unique factual circumstances. The DLSE has opined that the section precludes an employer from
requiring that an employee: pay for a safety orientation program required on a particular job site (O.L.
1993.01.19-2 ), purchase insurance coverage for an automobile used for business purposes (O.L.
1993.02.22-3 ), pay for uniforms required by the employer, purchase a truck to be used by the
employee in the
business (O.L. 1997.01.02), or pay for a bank account as a condition of receiving
incurred expens
es by direct deposit (O.L. 1997.03.2 1-2). The employee must show that there is a
cost involved t
o the employee before Section 450 is applicable. For instance, the code section
does not preclude an employer from requiring that an employee make application for a specific credit
card if no costs are involved in maintaining that credit card (O .L. 1997.02.21-2 ).
22.4 Costs Of Recovering Tips Left On Credit Cards. See Section 19.6 of this Manual for discussion
regarding prohibition on employer’s recovering costs of tips left for an employee on a credit card.

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23 CONTRACT S AGAINS T PUBLI C POL ICY.

23.1 There are a number of statutes in the Labor Code which specifically prohibit contracts between
employers and employees on certain subjects. Examples of actions which have been declared to be
against “public policy” are:
1. Any contract to release a claim for wages entered into before those wages
have been paid (La
bor Code § 206.5);
2. Contracts which would deprive employee of tips (Labor Code § 356);

3. Contract to abrogate the provisions of Labor Code § 405 dealing with use
of bond to pay for pro
perty entrusted to employee;
4. Investment in business prohibited as inducement to employ (Labor Code
§ 407);

5. Waiver of
Talent Agency Act provisions (Labor Code § 1701.19);
6. Waiver of any provision of Labor Code requiring employer to indemnify his employee
for expenses inc
urred in employment (Labor Code 2804 );

7. Contract which allows discharge for garnishment (Labor Code § 2929);
8. Failure to secure workers’ compensation insurance (Labor Code § 3712 ).

23.2 Union Organization: The announced public policy of the State of California (as found in Labor Code
§§ 921 and 923) provides that freedom to organize is guaranteed. Section 923 states:
“Negotiation of terms and conditions of labor should result from voluntary agreement bet ween
employer and employees. Governmental authority has per mitted and encouraged employers to
organize in the corporate and other forms of capital control. In dealing with such employers, the
individual unorganized worker is helpless to exercise actual liberty of contract and to protect his
freedom of labor, and thereby to obtain acceptable terms and conditions of employment.
Therefore it is necessary that the individual workman have full freedom of association,
self-organization, and designation of representatives of his own choosing, to negotiate the terms
and conditions of his employment, and that he shall be free from the interference, restraint, or
coercion of employers of labor, or their agents, in the designation of such representatives or in
self-organization or in other concerted activities for the purpose of collective bargaining or other
mutual aid or protection.”
23.2.1 Any agreement which interferes with the right of employees to organize is void as against public
policy.
23.2.2 Labor Code § 922 provides that coercion to enter an agreement not to join or to become a member
of any labor organization as a condition of securing or continuing in employment is a misdemeanor.
23.2.3 See also, Section 31.3.1, et seq. of this Manual for further discussion regarding contracts in
derogation of public policy.

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24 SOLICITATION OF EMPLOYEES BY MISREPRESENTATION

24.1 Offering employment based on intentional misrepresentations is a violation of Labor Code
Section 970. The Labor Commissioner has jurisdiction to hear claims arising from a violation
of Labor Code § 970. (See Labor Code § 96 (d))
24.1.1 Labor Code § 970 prevents employers from inducing employees to move to, from, or within
California by misrepresenting the nature, length or physical conditions of e mployment. ( Tyco
Industries, Inc. v. Superior Court (1985) 164 Cal.App.3d 148, 155) While originally adopted to
protect migrant workers from the abuses heaped upon them by unscupulous employers and
potential employers – especially involving false promises made to induce migrant workers to
move in the first instance – the courts have construed sections 970 and 972 to apply to other
situations as well. ( Munoz v. Kaiser Steel Corp. (1984) 156 Cal.App.3d 965, 980). Nothing in
the statute restricts application of the statutory language to any particular class or kind of
employment. ( Ibid., at 980)
The apparent purpose of sections 970 and 972 is to protect potential employees from being
solicited to c
hange employment by false representations concerning the nature or duration of
employment. The statutory scheme is particularly addressed to preventing employers from
inducing potential employees to move to a new locale based on misrepresentations of the nature
of the employment. ( Tyco Industries, Inc. v. Supe rior Court , supra, 164 Cal.App.3d at 155) The
relocation of the employee’s residence is required in order to state a cause of action. ( Eisenberg
v. Alameda Newspapers, Inc. (1999) 74 Cal. App.4th 1359)

24.2 Remedy. Double damages are the remedy for violation of section 970. Thus, double any cost
incurred by the employee in changing employment (and residence) is recoverable.
24.3 Labor Code § 973 prohibits advertisement or other solicitation of employees during a strike,
lockout or other trade dispute unless the advertisement contains a plain and explicit mention in
such advertisement or solicitation that a strike, lockout or labor disturbance exists. The section
explains in detail the procedure which must be followed if such advertising is undertaken. The
DLSE will take action to enforce this section. (O.L. 1993.05.04- 2 )
24.4 Labor Code § 976 prohibits any advertisement offering employment as a salesman, broker or
agent which is willfully designed to mislead any person as to compensation or commissions
which may be earned, or falsely represents the compensation or commissions which may be
earned.
24.5 Labor Co de §§ 1010- 1018 prohibits misre presentation of union affiliation by means of false
labels, buttons, cards, etc.
24.6 Labor Code §980 prohibits an employer from requiring or requesting an employee or applicant
to disclose a u
sername or password for the purpose of accessing personal social media, access
personal social media in the presence of the employer, or divulge any personal social media
unless the employer reasonably believed the socal media to be relevant to an investigation of
allegations of employee misconduct or employee violation of applicable laws and regul ations.
Social media accessed for purposes of such investigation or a related proceeding may only be
used for purposes of that investigation or proceeding. An employer is not precluded from
requiring or requesting an employee to disclose userame, pass word or other method for purpose
of accessing an employer -issued electronic devise.

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25 CONSTR UCTIO N INDUSTR Y CONTRAC TORS’ REQUI REME NTS.

25.1 Labor Code § 1021. Any person who does not hold a valid state contractor's license issued
pursuant to Chapter 9 (commencing with S ection 7000) of Division 3 of the Business and
Professions Code, and who employs any worker to perform services for which such a license is
required, shall be subject to a ci vil penalty in the amount of one hundred dollars ($2 00) per
employee for each day of such employment. The civil penalties provided for by this section are
in addition to any other penalty provided by law.

25.2 Labor Code § 1021.5 provides that in the event a licensed construction industry contractor
“willingly and knowingly” enters into a contract with any person to perform services for which
a license is required and that person does not hold a license(or meet the requirements of
independent contractor pur suant to the provisions of Labor Code § 2750.5), the licensed
contract or is subject to a penalty of $2 00.00 for each person so contracted with. California courts
have concluded that a DLSE Hearing Officer may consider the contractor’s failure to make
reasonable efforts to ascertain whether the subcontractor was licensed to warrant an inference
that the contractor knew the unlicensed status of the subcontractor. ( Wang v. DLSE (1986) 219
Cal.App.3d 1152, 1158-1159)

25.2.1 Note: When an investigation by the division determines that an employer has violated Section
1021, 1021.5, 1197, or 1771, or otherwise determines that an employer may have failed to report
all the payroll of the employer’s employees as required by law, the division shall advise the
Insurance Commissioner and request that an audit be ordered pursuant to Section 11736.5 of the
Insurance Code.

25.2.2 Contractors Empl oyed Exclusively On Federal Projects. It is not within the jurisdiction of the
Labor Commissioner (or the State of California) to require that a person performing work on an
exclusively federal project have a state contractor’s license. ( Gartrell Const. Inc. v Aubry (1991,
CA 9 Cal) 940 F2d 437)
25.3 Direct Contractor Liability – Labor Code § 218.7 extends liability for unpaid wages, interest
and benefit s to
a “ direct contractor .” “ Direct contractor ” has the same meaning as defined in
Civil Code § 80 18, meaning a contractor with a direct contractual relationship with an owner,
sometimes refered to as a “prime contractor.” A “subco ntractor” is defined as a contractor that
does not have a direct contractual relationship with an owner and includes a contractor that has
a contractual relationship with a direct contractor or with another subcontractor. See Civil Code
§ 8046.
25.3.1 On or after January 1, 2018, a direct contractor making or taking a contract in California for the
“erection,
construction, alteration, or repair of a building, structure, or other private work, shall
assume, and is liable for , any debt owed to a wage cla imant or thir d party on the wage claimant’s
behalf, incurred by a subcontractor at any tier acting under, by or for the direct contractor for the
wage claimnt’s performance of labor includ ed in the subject of the contract between the direct
contractor and the owner.” The liability of the dirct contractor extends to unpaid wage, fringe
or other benfit payment s or contributions , including interest, but does not extend to penalties or
liquidated damages. The Labor Commissioner may enforce against a direct co ntractor the
liability for unpaid wages and interest under Labor C ode section 98 or 1197.1 or through a civil
action. The action shall be filed within one year of the earlist of the following :
1. Recordation of the notice of completion;

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2. Recordation o f a notice of cessation;
3. Actual completion of the work.

25.3.2 This sec
tion does not apply to work performed by a n employee of the state, a special district, a
city, a county, a city and county or any political subdivision of the state.

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26 EMPLOYEE PRIVILEGES AND IMMUNITIES .

26.1 Employees have unwaivable statutory rights which prohibit any employer from requiring as
a condition of emplo
yment that an employee agree to not disclose or discuss his or her wages,
hours, working conditions, salary information, salary information of other workers, or
working conditions affecting safety as provided in Labor Code §§ 232, 232.5 and 1197.5 and
6310. In addition, Labor Code § 1102.5(a) prohibits policies that forbid employees from
disclosing information about potential violations of the law. Any confidentiality, non-
compete, or non- disclosure agreement, which limits or restricts what information an
employee may discuss or disclose, may not waive or infringe on these statutory protections.
Brown v. TGS management Co., LLC (2020) 57 Cal.App.5
th 303, *8.

26.2 Labor Code section 1024.5 prohibits use of a consumer credit report for employment
purposes unless the
position of the person for whom the report is sought is exempt under the
executive exemption as set forth in Wage Order 4 or meets one of the other enumerated
categories contained in the statute.

26.3
Labor Code § 1025, Alcohol And Drug Rehabilitation: Employers of more than 25 employees
(on a regular basis) are required to “reasonably accommodate any employee who wishes to
voluntarily enter and participate in an alcohol or drug rehabilitation program, provided that this
reasonable accommodation does not impose an undue hardship on the employer.”
26.3.1 The Legislature has announced its intent ion adopting this statute:
“It is the intent of the Legislature that employers subject to this act reasonably
accommodate
employees by providing time off necessary to participate in an
alcoholic rehabilitation program when this will not impose an undue hardship
on the employer. In determining whethe r providing the necessary time off
would impose an undue hardship it is the intent of the Legislature that the
size and type of the employer and facility, the nature and cost of the
accommodation involved, notice to the employer of the need for the
accommodation, and any reasonable alternative means of accommodation be
considered.” (1984, Ch. 1103)
26.3.2 An employer must take reasonable efforts to safeguard the privacy of the employee as to the fact
that he or she has enrolled in an alcohol or drug rehabilitation program. (Labor Code §1026)
26.3.3 Note that an employer is not responsi ble for paying an employee for absences occasioned by entry
into an alcohol or drug rehabilitation program, but the employee may use sick leave to which he
or she is otherwise entitled to pay for such leave. (Labor Code § 1027)
26.3.4 An employee may file to recover lost wages or for reinstatement with the Labor Commissioner
if the employer denies reasonable accommodation.

26.4 Labor Code § 1040, et seq ., Employee Literacy Education Assistance Act: Every employer
regularly employing more than 25 employees must “reasonably accommodate any employee who
reveals a problem of illiteracy and requests employer assistance in enrolling in an adul t literacy
education program, provided that this reasonable accommodation does not impose an undue
hardship on the employer.”

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26.4.1 The employer must make reasonable efforts to safeguard the privacy of the em ployee as to the
fact that he o r she has a problem with illiteracy (Labor Code § 1042) and an employee may not
be discharged based solely on the revelation of a problem with literacy so long as the employee
satisfactorily performs his or her work.
26.4.2 Note that an employer is not obligated to pay for the time an employee is off to enroll or
participate in an adult literacy education program. (Labor Code § 1043)
26.5 Labor Code § 1050, Preventing Re -employment By Means Of Misrepresentation: It is illegal for
an employer (or any person, agent or officer thereof) to prevent the re -employment of an
employee who has left the employer’s service either by discharge or voluntary quit. An employee
who is damaged by an employer’s untruthful statements may recover treble damages. (Labor
Code § 1054)
26.5.1 Truthful Statement. It is not illegal, however, for an employer to furnish, upon special request
(i.e., a specific request for information regarding that employee), a truthful statement concerning
the reasons for termination. (Labor Code § 1053)
26.5.1.1 In the past, it was not unheard of for employers to put a special mark or signal on letters of
recommendation or answers to requests for information which, to the initiated, conveyed a
meaning different from that conveyed by the plain words of the letter or message. The
Legislature made any such mark or sign or the fact that the information was furnished without
there being a “special” request, prima facie evidence of a violation of the statute. (Labor Code §
1053)
26.5.1.2 Certain investment companies and investment advisers are exempt from the provisions of Labor
Code §§ 1050 et seq. Deputies are advised to seek help from the Legal Section.
26.6 Labor Code §§ 1101 And 1102, Freedom Of Political Affiliation: Employers may not make,
adopt or enforce any rule, regulation or policy which forbids or prevent employees from engaging
or participating in politics or from becoming candidates for public office; nor may an employer
control or direct or tend to control or direct the political activities of employees. The employer
is further prohibited from coercing or influencing or attempting to coerce or influence employees
through or by means of threat of discharge or loss of employment to adopt or follow or refrain
from adopting or following any particular course or line of political action or political activity.
26.6.1 By inference (See Labor Code § 1106) the provisions of Labor Code §§ 1101 and 1102 are not
applicable to public entity employees. However, under the federal and state Constitutions, public
employees, like others, have the right to speak freely and effectively on public questions as well
as the inseparable and cognate right to petition the government for a redress of grievances.
(California Teachers Assn. v Governing Board (1996) 45 Cal.App.4th 1383, 53 Cal.Rptr.2d
474). Labor Code § 96(k) which took effect January 1, 2000, prohibits public employers from
discriminating against public employees for engaging in lawful activity asserting “recognized
constitutional rights” during non -work hours away from the employer’s premises. Barbee v.
Household Automotive Finance Corp. (2003) 113 Cal.App.4th 525; Grinzi v. San Diego Hospice
Corp. (2004) 120 Cal.App.4th 72 .

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26.6.2 Applicants Covered. Employers cannot be permitted to evade the salutary objectives of a statute
by indirection. Thus, although Labor Code §§ 1101 and 1102, prohibiting employers from
interfering with an employee's political activities, refers only to employees, the prohibition
protects applicants for employment as well as on the job employees. (Gay Law Students Asso. v
Pacific Tel. & Tel. Co. (1979) 24 Cal.3d 458, 156 Cal.Rptr. 14) Under the amendments to Labor
Code § 98.6, effective January 1, 2002, Labor Code § 96(k) now protects job applicants against
discrimination for engaging in lawful conduct asserting “recognized constitutional rights” away
from the employer’s place of business. Barbee v. Household Automotive Finance Corp. (2003)
113 Cal.App.4th 525; Grinzi v. Sa n Diego Hospice Corp. (2004) 120 Cal.App.4th 72

26.7 Labor Code §1171.5 extends state law protections and remedies to all workers “regardless of
immigration status”.
The section provides “All protections, rights and remedies available
under state law, except any reinstatement remedy prohibited by federal law, are available to
all individuals regardless of immigration status who have applied for employment, or who
are or who have been employed, in this state.”

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27 PROHIBITED OR LICENSED OCCUPATIONS , SUCCESSORSHIP, CAL -WARN ACT
27.1 Industrial Homework .

27.1.1 Labor Code § 2651 prohibits the manufacture by industrial homework of the following articles:
1. Articles of food or articles for use in connection with the serving of food or drink;
2. Articles of wearing apparel;
3. Toys and dolls;
4. Tobacco;
5. Drugs and pois
ons;
6. Bandages an
d sanitary goods;
7. Explosives, fireworks, and articles of like character, and
8. Articles, the manufacture of which by industrial homework is determined by the
Division to
be injurious to the health or welfare of the industrial homeworkers
within the industry or to render unduly difficult the maintenance of existing labor
standards or enforcement of labor standards established by law or regulation for factory
workers in the industry.
27.1.1.1 Section 2650 of the Labor Code provides the definitions to be used in enforcement of the
industrial homework provisions.
27.1.2 Note that articles not specifically mentioned above may be manufactured by persons employed
in their home, provided that both the “employer” and the homeworker are licensed pursuant to §
2658.
27.1.2.1 An “employer” for purposes of the industrial homeworker statutes is “any person who, directly
or indirectly or through an employee, agent, independent contractor, or any other person, employs
an industrial homeworker. (§ 2650(b)) To “employ” for purposes of this statutory scheme, means
“to engage, suffer or permit any person to do industrial homework, or to tolerate, suffer, or permit
articles or materials under one's custody or control to be manufactured in a home by industrial
homework.” (§ 2650(g))
27.2 Garment Manufacturing. Workers in the garment industry are afforded special protections under
the provisions of Labor Code § 2670, et seq. which requires that all persons engaged in garment
manufacturing be registered with the Labor Commissioner.
27.2.1 The Division has adopted regulations dealing with garment manufacturing. These regulations
are found at 8 C.C.R. § 13630, et seq.
27.2.2 Any person engaged in the business of garment manufacturing who contracts with any other
person similarly engaged who has not registered with the commissioner or does not have a valid
bond on file with the commissioner, as required by Section 2675, shall be deemed an employer,
and shall be jointly liable with such other person for any violation of Section 2675 and the
sections enumerated in that section.

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27.2.3 These sections include liability for unpaid wages, damages and penalties.
27.2.4 Additional Protections For Garment Workers. Garment workers are afforded additional protections
under the Labor Code. Starting January 1, 2022, it is unlawful to pay the piece rate to employees
performing garment operations and instead they must be paid at an hourly rate not less than the
applicable minimum wage. (Labor Code § 2673.1(b)). Entities contracting for t he performance of
garment manufacturing operations, regardless of layers of contracting, are jointly and severally liable
with the employer of garment employees for unpaid wages, reimbursements, and other compensation
including interest, an employee’s reasonable attorney’s fees, and civil penalties for failure to secure
workers’ compensation insurance. (Labor Code § 2673.1(a)). Additionally, garment manufacturers
that contract with the employers of garment employees are proportionally liable for all damages and
penalties found owed to employees . (Labor Code § 2673.1(b)). The additional protections include
liquidated damages on unpaid overtime wages in addition to unpaid minimum wages as well as
specific successorship liability. (Labor Code §§ 2673.1(b); 2684). Prior to January 1, 2022, Labor
Code §2673.1 provided that minimum wage and overtime wages earned by persons engaged in
garment manufacturing were to be guaranteed by garment manufacturers who contracted with t he
garment worker’s employer. The prior law also provided for liquidated damages, attorney’s fees and
successor liability. Both the prior law and the new law require the Labor Commissioner to investigate
and make a Finding and Assessment on each claim filed under the legislation. (See Labor Code §§
2673.1, et seq. and 8 CCR §§ 13630, et seq.).
27.2.5 Displaced Janitor Opportunity Act. Labor Code §§ 1060 et seq. require any person who awards
or otherwise enters into contracts for janitorial or building maintenance services, including any
subcontracts, to notify a contractor that the service contract has been terminated or will be terminated.
The terminated contractor shall, within three working days after receiving notification, provide
to the successor contractor, or awarding authority (if identity of successor unknown) the name, date
of hire, and job classification of each employee employed at the time of contract termination. Any
successor contractor or subcontractor shall retain for 60 days employees who were employed by the
terminated contractor or its subcontractors for the preceding four months or longer at the site or
sites covered by the successor services contract unless reasonable and substantiated cause not to hire
a particular employee based on performance or conduct is established. A written offer shall be made
to each employee in their primary language or language in which the employee is literate and shall
state the time within which the employee must accept that offer, but in no case may that time be less
than 10 days. The wages and benefits are not required to be the same as those previously paid. If
fewer employees are needed, employees shall be retained by seniority within job classification. The
successor must provide a list of its employees to the awarding authority and indicate which employees
were employed by the terminated contractor or subcontractor and a list of any employees not retained
and the reason for not retaining them. Preferential hiring must be done through a list maintained by
the successor during the 60 day transition period. At the end of the transition period successor shall
provide a written performance evaluation to each employee retained and if satisfactory, shall offer
continued employment on an at-will employment basis. An employee not retained or discharged in
violation of this chapter may file a superior court action and may be awarded backpay, including the
value of benefits for each day during which the violation continues to occur, calculated at the average
regular rate of pay in the same occupation classification during the last three years multiplied by the
average hours worked or the final regular rate of pay at the time of termination of the predecessor
multiplied by the number of hours, whichever is higher, a preliminary or permanent injunction, and
reasonable attorney’s fees and costs, if the employee is the prevailing party.
27.2.6 Public Transit and Collection and Transportation of Solid Waste. Labor Code §§ 1070 et seq. require
any bidder for a public transit or collection and transportation of solid waste contract to declare as
27 - 2

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part of the bid for a service contract whether or not the bidder will retain the employees of the prior
contractor for not less than 90 days, if awarded the service contract. This chapter as it applies to
the collection and transportation of solid waste is limited to when an exclusive contract is bid not to
an invitation to bid, extending an existing contract, renegotiating with a prior contractor or exceeding
rights afforded by Public Resources Code § 40059. An awarding authority shall give a 10 percent
preference to any bidder who agrees to retain the employees of the prior contactor or subcontractor.
A successor contractor who agrees to retain employees shall do so except for reasonab le and
substantiated cause limited to performance or conduct while working under the prior contract or the
employee’s failure of any controlled substances and alcohol test, physical examination, criminal
background check required by law as a condition of employment or other standard hiring qualification
lawfully required by the successor contractor or subcontractor. In determining qualification, successor
may require an employee to posess any license that is required by law to operate equipment. A written
offer shall be made to each employee and shall state the time within which the employee must accept
that offer, but in no case may that time be less than 10 days. The wages and benefits are not required
to be the same as those previously paid. An employee not retained or discharged in violation of this
chapter may file a superior court action and may be awarded backpay, including the value of benefits
for each day during which the violation continues to occur, a preliminary or permanent injunction,
and reasonable attorney’s fees and costs, if the employee is the prevailing party. An awarding
authority on its own or at the request of a member of the public may terminate a service contract if
the contractor or subcontractor breached the contract and holds a public hearing within 30 days of the
public requiest or its own intention to terminate. Terminated contractors or subcontractors are
ineligible to bid or be awarded a contract for not less than one year nor more than three years. For
solid waste contracts, su ccessors are required to retain only employees who would have been
terminated due to the award to the successor and of those employees an exception applies to
employees not meeting any standard hiring qualification lawfully required, or if it would require the
termination or reassignment of an existing employee covered by a collective bargaining agreement or
if the number of employees exceeds the number of those employees communicated to bona fide
bidders. An employee or awarding body bringing an action must provide a 30 day notice to cure.
27.2.7 T
he provisions of the California Worker Adjustment and Retraining Notification Act (Cal WARN)
were enacted in 2002 and became effective in 2003. The Cal WARN Act is found beginning at Labor
Code section 1400. The Labor Commissioner or private parties may enforce the Cal WARN Act by
filing a civil action to enforce these provisions. An employer is defined as “any person… who,
directly or indirectly, owns and operates a “covered establishment.” “A parent corporat ion is an
employer as to any covered establishment directly owned and operated by its corporate subsidiary.”
A “covered establishment is “any industrial or commercial facility or part thereof, that employs, or
has employed within the preceding 12 months, at least 75 persons. There are three separate type of
events at a “covered establishment” that can trigger application of the CAL WARN ACT: (1) a “mass
layoff”; (2) a business “relocation”; or (3) a business “termination.” A mass layoff is defined as a
layoff during any 30-day period of 50 or more employees at a covered establishment. A mass layoff
is further defined as a separation from a position for lack of funds or lack of work. When employees
are transferred from one employer to another but continue to perform the same work, for the same
pay and benefits, the notice requirements of the California Warn Act are not triggered as such actions
are not considered a mass law off. MacIsaac v. Waste Management Collection and Recycling (2005)
134 Cal.App.4th 1076. A relocation is defined as a removal of all or substantially all of the industrial
or commercial operations in a covered establishment to a different location 100 miles or more away.
A termination is defined as the cessation or substantial cessation of industrial or commercial
operations in a covered establishment. Unlike a mass layoff, which requires a layoff of 50 or more
employees at a covered establishment, once it is determined that the employer
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op
erates a covered establishment, there is no numerical requirement for the nu mber of employees
affected by a reloca
tion or termination. An employee is defined as a person employed for at least
6 months of the 12 months preceding the date on which notice is required.
Al
l of the following must receive a 60 day notice:
1. The
affected employe
e;
2. E
DD, WARN Ac
t coordinator at the System Support Section, Workforce Investment Division;
3. T
he local Workforce Investment Board;
4. T
he chief elec
ted official of each city and county government within which the termination,
relocation, or mass l
ayoff occurs .
Vi
olations subject the employer to a civil penalty of $500.00 per day for each day of violation;
Back pay of up to 60 days calculated at the employee’s average regular rate of compensation
during the last three years of employment or the final rate of compensation, whichever is higher;
Loss of benefits for up to 60 days. The liability is calculated up to the maximum of 60 days or
half the number of days that the employee was employed by the employer, whichever period is
shorter. The amount will be reduced by any wages the employer pays to employees during the
period of the violation and for any voluntary and unconditional payments made to the employees
that is not required by any legal obligation, except it does not reduce liability for vacation pay
accrued prior to period of the employer’s violation. Reasonable attorneys fees and costs may be
awarded to any prevailing plaintiff.
Ex
ceptions to the notice requirement include, “the actively seeking capital or business”
exception. The “act
ively seeking capital or business” exception can be found in Section 1402.5.
The employer must establish all three requirements in raising this affirmative defense to the 60
day notice provisions. The three requirements are as follows: (a) The employer must have been
actively seeking capital or business “[a]s of the time notice would have been required”; (b) The
capital or business sought, if obtained, would have enabled the employer to avoid or postpone
the relocation or termination; and ( c) The employer must have reasonably and in good faith
believed that giving a 60 day notice would have precluded the employer from obtaining the
needed capital or business. In addition, the employer must supply an affidavit, containing a
declaration signe d under penalty of perjury stating that the affidavit and the contents of the
documents contained in the records submitted are true and correct, and must verify the contents
of the documents upon which it relies, in making the defense. This defense only applies to
terminations or relocations not mass layoffs. Additional exceptions are a physical calamity or
act of war; A particular project or undertaking governed by Industrial Welfare Commission
Wage Order 11 (broadcasting industry) Wage Order 12 (motion picture industry) or Wage Order
16 (on -site occupations in the construction, drilling, logging, and mining industries) if the
employees were hired with t he understanding that their employment was limited to the duration
of that project or undertaking and s easonal employees hired with the understanding that their
employment was seasonal and temporary are also not covered by the California Warn Act .
27.2.
8 Janitorial Employer Registration. Legislation enacted in 2016 (AB 1978), the Property Services
Workers Protection A
ct (“PSWPA”), (Labor Code sections 1420 – 1434) established a
registration program for janitorial services employers and biennial in -person sexual violence and
harassment prevention training requirements. Effective July 1, 2018, Labor Code §§ 1420 et seq.
prohibits any employer who provides janitorial services from conducting any business unless

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registered with the Labor Commissioner. An “employer” is defined as any person or entity that
employs at least one employee and one or more covered workers and enters into contracts,
subcontracts, or franchise arrangements to provide janitorial services. A “covered worker” is
defined as a jani tor, including any individual predominantly working, whether as an employee,
independent contractor, or franchisee, as a janitor as that term is defined in the Service Contract
Act Directory of Occupations maintained by the United States Department of Labor.
27.2.8.1 Labor Code § 1432 provides for a penalty of one hundred dollars ($100) for each calendar day
that the employer is unregistered, not to exceed ten thousand dollars ($10,000). Any person or
entity that contracts with an employer who lacks a current and valid registration, as displayed on
the online registration database at the time the contract is executed, extended, renewed, or
modified, under this part on the date the person or entity enters into or renews a contract or
subcontract for janit orial services with the employer is subject to a civil fine of not less than two
thousand dollars ($2,000) nor more than ten thousand dollars ($10,000) in the case of a first
violation, and a civil fine of not less than ten -thousand dollars ($10,000) nor more than twenty-
five thousand dollars ($25,000) for a subsequent violation. An employer who makes a material
misrepresentation in connection with an initial or renewal applicant is subject to a civil fine of
ten thousand dollars ($10,000) per violation.
27.2.8.2 Legislation enacted in 2019 (AB 547) added additional requirements to the janitorial employer
registration process and further clarified the sexual violence and harassment prevention training
requirements under AB 1978 .
27.2.8.3 Pursuant to Labo r Code sections 1422 and 1429.5, the Labor Commissioner adopted regulations
to implement and administer both the registration program and the biennial in -person sexual
violence and harassment prevention training requirements. These regulations became effective
July 15, 2020 and are found at 8 C.C.R. § 13810 -13822.

27.2.9 Car Wash Registration. Labor Code §§ 2050 et seq. require every car wash employer to register
with the L abor Commissioner and prohibit conducting any bus iness without registering. Fail ure
to register subjects a car wash employer to a civil fine of one hundred doll ars ($100) for each
calendar day, not to exceed ten thousand dollars ($10,000) that the employer conducts car
washing and polishing while unregister ed. Employer is defined as any individual, partnership,
corporation, limited liability c ompany, joint venture, or association engaged in the business of
car washing and polishing that engages any other individual in providing these services. Car
washing and polishing means washing, drying, cleaning, drying, polishing, detailing, servicing,
or otherwise providing cosmetic care to vehicles. Employers required to register do not include
any charitable, youth, service, veteran, or sports group or club, or association that conducts car
washing and polishing on an intermittent basis to raise funds for charitable, education, or
religious purposes, any licensed vehicle dealer or car rental agency that conducts car washing
and polishing a ncillary to its primary business of se lling, leasing o r servici ng vehi cles, a new
motor vehicle dealer, as defined in Vehicle Code § 426, that is primarily engaged in the business
of selling, lea sing, renting or servicing vehic les, an automotive repair dealer, as defined by
Business & Professions Code § 9880.1(a), who is primarily engaged in the business of repairing
and diagnosing malfunctions of motor vehicles, and any self -service car wash or automated car
wash that has employees for cashiering or maintenance purposes only.

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27.2.
10 Grocery Workers Retention. Effective January 1, 2016, AB 359, enacted as Labor Code §§ 2500
et seq., require th
e buyer of an existing grocery store to retain employees for at least 90 days
from the date the grocery store is fully operational and open to the public under the new owner.
An amendment to the statute (AB 897) specifies that the law does not apply to retail stores that
have ceased ope rations for six months or more. Labor Code § 2504 requires, upon a change in
control of a grocery establishment, that incumbent grocery employers prepare a list of specified
eligible grocery workers for a successor grocery employer, and require s successor grocery
employer s hire from this list during a 90 -day transition period. During the 90 day period an
employee may only be discharged for cause, and, upon the close of that period, the successor
grocery employer is requ ired to consider offering continued employment to these workers. Labor
Code § 2508 requires the incumbent grocery employer to post public notice of the change in
control at the location of the affected grocery establishment within five business days follow ing
execution of the transfer document. The notice shall include the names and contact information
of the incumbent and successor employers and the date of the change in control, and shall be
posted in a conspicuous place readily viewed by eligible grocery workers. Labor Code § 2516
exempts from the preceding provisions grocery establishments that will be located in geographic
areas designated by the U.S. Department of Agriculture as a "food desert," as specified, provided
that more than six years have ela psed since the most recent grocery establishment was located in
the area designated as a food desert and that the grocery establishment stocks and sells fresh
fruits and vegetables in amounts, and of a quality, that is comparable to what the establishment
sells in its three geographically closest stores, which are located outside of the food desert. Labor
Code § 2512 also allows for a collective bargaining agreement to supersede the requirements of
the statute.
27.3 Farm Labor Contractors. This licensed occupation is regulated by the Labor Commissioner
pursuant to Labor Code § 1682, et seq.
27.3.1 Definition Of Farm Labor Co ntractor. The term means any person who, for a fee, employs
workers to render personal services in connection with the production o f any farm products to,
for, or under the direction of a third person, or who recruits, solicits, supplies, or hires workers
on behalf of an employer engaged in the growing or producing of farm products, and who,
for a fee, provides in connectio n therewith one or more of the following services: furnishes board,
lodging, or transportation for those workers; supervises, times, checks, counts, weighs, or
otherwise directs or measures their work; or disburses wage payments to these persons.
27.3.2 Any grower or farm labor contractor who enters into a contract or agreement in violation of this
section shall be subject to a civil action by an aggrieved worker for any claims arising from the
contract or agreement that are a direct result of any violatio n of any state law regulating wages,
housing, pesticides, or transportation committed by the unlicensed farm labor contractor. The
court shall grant a prevailing plaintiff reasonable attorney's fees and costs. (Labor Code §
1695.7(c)(2))
27.4 Talent Agents. This licensed occupation is regulated by the Labor Commissioner pursuant to
the provisions of Labor Code § 1700, et seq.
27.4.1 Talent Agency means a person or corporation who engages in the occupation of procuring,
offering , promising, or attempting to procure employment or engagements for an artist or artists,
except that the activities of procuring, offering, or promising to procure recording contracts for

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an artist or artists shall not of itself subject a person or corporation to regulation and lic ensing
under this cha
pter. Talent agencies may, in addition, counsel or direct artists in the development
of their professional careers. (Labor Code § 1700 .4(a))
27.4.2 Artists means actors and actresses rendering services on the legitimate stage and in the production
of motion pictures, radio artists, musical artists, musical organizations, directors of legitimate
stage, motion picture and radio productions, musical directors, writers, cinematographers,
composers, lyricists, arrangers, models, and other artists and persons rendering professional
services in motion picture, theatrical, radio, television and other entertainment enterprises.
(Labor Code § 1700.4 (b))
27.4.2.1 Petitions to determine controversies are filed with the Licensing Section in Oakland . The
hearings in connection with those petitions are heard by attorneys in the Division’s Legal Section.
27.5 Foreign Labor Contractor Registration – Legislation enacted in 2014 (SB 477) established a
registration pr
ogram within the Labor Commissioner’s Office for foreign labor contractors who
recruit workers residing outside the United States for employment opportunities in California , as
part of the federal H -2B visa prog ram for temporary, non -agricult ural labor. See Business and
Professions Code §§ 9998.1 through 9998.11 and 8 CCR 13850 et seq. Regulations set forth the
registration program for for eign labor contractors and employers who use the H -2B program for
temporary, non- agricultural labor. The primary industries in which H -2B workers are employed
are: forestry, amusement, construction, food services, hotels and motels, janitorial services, and
landscaping. Registration with the Labor Commissioner is required for foreign labor contractors
who recruit or solicit workers residing abroad f or H-2B employment oppo rtunities in California.
Employers are requi red to use only registered foreign labor contractor s and to disclose to the
Labor Commiss ioner their use of a foreign labor contractor. Foreign labor contractors are
required to provide disclosures, including a copy of the work contract, to foreign workers who
are being recruited. Recruitment fees are prohibited. The Labor C ommissioner posts online the
names of registered foreign labor c ontractors and a list of employer s and other registe red
contractors who perform foreign labor contracting activities for each registrant, as well as a list
of foreign labor contractors who have been denied renewal or registration. Foreign labor
contractors must post a surety bond. A private cause of actio n for any aggrieved person, as well
as allowing the Labor Commissi oner to bring suit for vio lations, is also part of the law.

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28 INDEPENDENT CONTRACTOR vs. EMPLOYEE.

28.1 In Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th
903, the California Supreme Court applied the “ABC test” to questions of employee vs.
independent contractor status for wage order violations and Labor Code claims that
derive from obligations in the wage orders. In the Dynamex decision, a unanimous
California Supreme Court set forth a streamlined test for determining whether a worker
is an employee or an independent contractor. In doing so, the Court disfavored use of a
multifactor standard that requires consideration of all facts relevant to an employment
relationship, such as the approach used by the California Supreme Court in S.G. Borello
& Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, and the
“economic realities” test used under the federal Fair Labor Standards Act. The Court
noted significant disadvantages associated with a multifactor standard – namely, it
makes it difficult for both hiring entities and workers to know in advance how workers
will be classified, often until a court issues a determination, and it makes it easier for
hiring entities to evade obligations associated with being an employer, including
providing critical protections under wage and hour laws. The “ABC test” adopted by
the Supreme Court in Dynamex begins with an assumption of employee status, as does
Borello , and requires a hiring entity claiming that a worker is an independent contractor
to establish three specific criteria that overlap with factors considered under the Borello
standard.

New legislation that took effect on January 1, 2020 – AB 5 – codifies the Dynamex
decision and application of the ABC test for purposes of the Industrial Welfare
Commission (IWC) wage orders and Labor Code violations relating to the wage orders.
In addition, it expands use of the ABC test to all of the Labor Code and the
Unemployment Insurance Code. Both the Dynamex decision and the legislation
codifying it, AB 5, recognize that worker misclassification is a serious problem in the
state, depriving workers of critical labor law protections, depriving the state of tax
revenue, and depriving law-abiding businesses from a level playing field on which to
compete. One of the specific intents o f AB 5 is to “ensure workers who are currently
exploited by being misclassified as independent contractors instead of recognized as
employees have the basic rights and protections they deserve under the law, including a
minimum wage, workers’ compensation if they are injured on the job, unemployment
insurance, paid sick leave, and paid family leave.”

AB 5 added new Labor Code section 2750.3 to existing law. AB 2257 repealed Labor
Code section 2750.3 and reorganized former section 2750.3 into new separate Labor
Code sections, 2775-2787 . Together AB 5 and AB 2257:

 Codify the ABC test for purposes of the Labor Code, the Unemployment Insurance
Code, and the IWC wage orders.
 Retain existing exceptions to employment status, as well as extensions of employer
liability, contained in express language in the Labor Code, Unemployment Insurance
Code, and IWC wage orders.
 Provide for continued use of Borello where a court rules that the ABC test does not
apply in situations other than the express exceptions contained in statutory and IWC
wage order language.
 Provide exemptions for certain jobs, industries, and contracting relationships,

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allowing use of the Borello test instead of the ABC test but often requiring the hiring
entity to satisfy specific statutory prerequisites before it may use the Borello test.
 State that the Attorney General or a city attorney, as specified, may file an action for
injunctive relief to prevent the continued misclassification of employees as
independent contractors.
 State that new Labor Code section 2785 is declaratory of existing law with respect to
the IWC wage orders and violations of the Labor Code relating to wage orders, and
that it applies to the remainder of the Labor Code and the Unemployment Insurance
Code beginning January 1, 202 0, with the exception of workers’ compensation,
which went into effect on July 1, 2020.
28.2 Burden Of Proof. The party seeking to avoid liability has the burden of proving that
persons whose services he has retained are independent contractors rather than
employees. In other words, there is a presumption of employment. ( Dynamex, supra ,
fn. 24 citing Robinson v. George (1940) 16 Cal.2d 238, 242; Linton v. DeSoto Cab Co.,
Inc. (2017) 15 Cal.App.5 th 1208, 1220-1221; Labor Code §§ 27 75 (b)(1), 3357; S.G.
Borello & Sons, Inc. v. Dept. of Industrial Relations (1989) 48 Cal.3d 341 at pp. 349,
354.)

28.3 The ABC Test

New Labor Code section 2775 provides that, for purposes of the Labor and Unemployment
Insurance Codes and the IWC wage orders, “a person providing labor or services for
remuneration shall be considered an employee rather than an independent contractor.” This
section sets forth a presumption of employee status. A hiring entity claiming that the
person is an independent contractor instead of an employee must demonstrate all of the
following conditions:
(A) The person is free from the control and direction of the hiring entity in connection with
the performance of the work, both under the contract for the performance of the work and in
fact;
(B) The person performs work that is outside the usual course of the hiring entity’s business;
and
(C) The person is customarily engaged in an independently established trade, occupation, or
business of the same nature as that involved in the work performed.
The “failure to satisfy any one of the three parts itself establishes that the worker should be
treated as an employee.” (Dynamex, 4 Cal.5th at 963 (emphasis added).) In other words, to
find employee status, it is only necessary to find that the hiring entity cannot demonstrate
any one part – not all three parts – of the ABC test.

In addition, the three-part test may be evaluated in any order that facilitates resolution of the
question of employee status. The Supreme Court noted that “in many cases it may be easier
and clearer to determine whether or not part B or part C of the ABC standard has been
satisfied than to resolve questions regarding the nature or degree of a worker’s freedom
from the hiring entity’s control for purposes of part A of the standard.” (Dynamex, 4
Cal.5th at 963.) Below is detailed information on each factor of the ABC test, as explained
by the Supreme Court in Dynamex.

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28.3.1 Part A: Is the Worker Free from the Control and Direction of the Hiring Entity
in the Performance of the Work, Both Under the Contract for the performance of the
Work and in Fact?

General framework for Part A as discussed in Dynamex
 A worker who is subject, either as a matter of contractual right or in actual practice, to the
type and degree of control a business typically exercises over employees would be
considered an employee. (Dynamex, 4 Cal.5th at 963.)
 As discussed in Borello, depending on the nature of the work and overall arrangement
between the parties, a business need not control the precise manner or details of the work
in order to be found to have maintained the necessary control that an employer ordinarily
possesses over its employees. (Id.)

Case examples from other states applying Part A of the ABC test, as described by the
Supreme Court in Dynamex
 Work-at-home knitters and sewers who made clothing for a children’s wear company
were not sufficiently free of the company’s control to satisfy part A of the ABC test, even
though the knitters and sewers worked at home on their own machines at their own pace
and on the days and at the times of their own choosing. The court reasoned that “[t]he
degree of control and direction over the production of a retailer’s product is no different
when the sweater is knitted at home at midnight than if it were produced between nine
and five in a factory. That the product is knit, not crocheted, and how it is to be knit, is
dictated by the pattern provided by [the company]. To reduce part A of the ABC test to a
matter of what time of day and in whose chair the knitter sits when the product is
produced ignores the protective purpose of the [applicable] law.” (Fleece on Earth v.
Dep’t of Empl. & Training (Vt. 2007) 923 A.2d 594, 599-600.)
 Truck driver was not free from control within the meaning of part A of the ABC test
where the hiring entity required the driver to keep the truck clean, to obtain the
company’s permission before transporting passengers, to go to the company’s dispatch
center to obtain assignments not scheduled in advance, and could terminate driver’s
services for tardiness, failure to contact the dispatch unit, or any violation of the
company’s written policy. (Western Ports v. Employment Sec. Dept. (Wash.Ct.App.
2002) 41 P.3d 510, 517-520)
 A worker who specialized in historic reconstruction was sufficiently free of the
construction company’s control to satisfy part A of the ABC test where the worker set his
own schedule, worked without supervision, purchased all materials he used on his own
business credit card, and had declined an offer of employment proffered by the company
because he wanted control over his own activities. (Great N. Constr., Inc. v. Dept. of
Labor (Vt. 2016) 161 A.3d 1207, 1215.)

Part A “control” can be analyzed just as “necessary” control is analyzed under Borello
In discussing Part A of the ABC test, the Supreme Court specifically referred to Borello
to explain that a business need not exercise control over work details in order to have
exercised all “necessary” control over the worker sufficient to create an employment
relationship. Therefore, discussion of the control factor in Borello and other California
cases following Borello is helpful in understanding and interpreting Part A of the ABC
test:
 S.G. Borello & Sons, Inc. v. Dep’t of Industrial Relations (1989) 48 Cal.3d 341
Even where “complete control” or “control over details” of the work (such as the exact
manner and means of accomplishing the work) is lacking, the “right of control” test may
be satisfied where an employer retains pervasive or all necessary
control by direct or
indirect means over the business operation as a whole, and the nature of the work makes

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detailed control unnecessary. The growers who were found to be employers by the
Borello court did not have the contractual authority to exercise supervision over work
details, yet the court ruled that they retained “all necessary control” over their operations.
Though purporting to give up control over the details of cucumber harvesting (e.g.,
exactly when the cucumbers are picked by the workers), the grower retained pervasive
overall control of agricultural operations on its premises, from planting to sale of crops.
All meaningful aspects of the business relationship (price, crop cultivation, fertilization
and insect prevention, payment, and right to deal with buyers) were controlled by grower.
Grower owned and cultivated the land for its own purposes. Without any participation by
workers, grower decided to grow cucumbers, obtained a sale price formula from the one
available buyer, planted the crop, and cultivated it throughout most of its growing cycle.
Grower recruited cucumber harvesters. The harvest took place on grower’s fields, at a
time determined by the cucumber crop’s maturity. Grower supplied the sorting bins and
boxes, removed harvested cucumbers from its fields, transported cucumbers to market,
sold them to the buyer, maintained documentation on workers’ proceeds from the sale,
and handed out the workers’ checks (issued directly by the buyer at the grower’s request).
It was the simplicity of the harvesting work which made detailed supervision
unnecessary. Thus, grower retained all necessary control over cucumber harvesting,
which can only be done one way.
 Yellow Cab Cooperative, Inc. v. Workers’ Comp. Appeals Board (1991) 226
Cal.App.3d 1288
The test of “control” may be satisfied even where “complete control” or “control over
details” is lacking – at least where the employer retains pervasive control over the
operation as a whole, the worker’s duties are an integral part of the operation, the nature
of the work makes detailed control unnecessary, and adherence to statutory purpose
favors a finding of coverage by the protective legislation. By both direct and indirect
means, Yellow exercised pervasive control over the enterprise as a whole. Yellow had an
obvious interest in the drivers’ performance as drivers, and was not merely concerned
with collecting rent from the leased cabs and protecting the leased property. For
example, Yellow’s dispatchers, who instructed drivers on what to do including where to
go, had extensive control over the drivers’ work. Drivers were coerced into accepting
assignments from dispatchers whether or not they found them profitable, and dispatchers
could demand that a driver return to the yard. If drivers violated the radio dispatcher
rules, they could be written up and leases could be terminated. Indirect control over
drivers was exercised by Yellow through the payment system and threat of termination.
In addition, cab driving is usually done without supervision and does not involve the kind
of expertise which requires an independent professional. Any actual independence
enjoyed by drivers was inherent in the work and was not the product of any specialized
skill. Thus, Yellow exercised all necessary control over various aspects of the work of
drivers and treated the drivers as employees.
 JKH Enterprises, Inc. v. Dep’t of Industrial Relations (2006) 142 Cal.App.4th 1046
Pickup and delivery of papers or packages and driving in between, which constituted the
heart of JKH’s courier service business, did not require a high degree of skill. By
obtaining the clients in need of the courier service and providing the workers to conduct
the courier service, JKH retained all necessary control over the operation as a whole,
even in the absence of JKH’s control over the details of the work, and even though JKH
was more concerned with the results of the work rather than the means of its
accomplishment.

28.3.2 Part B – Does the Worker Perform Work that is Outside the Usual Course of
the Hiring Entity’s Business?

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General framework for Part B as discussed in Dynamex
 The operative question for Part B is whether the worker’s role within the hiring entity’s
usual business operations is more like that of an employee, or more like that of an
independent contractor. (Dynamex, 4 Cal.5th at 959.)
 One principal objective of the “suffer or permit to work” standard that the Supreme Court
interpreted as the ABC test is to bring within the “employee” category all individuals
who can reasonably be viewed as working in the hiring entity’s business, meaning
individuals who are reasonably viewed as providing services to the business in a role
comparable to that of an employee, rather than in a role comparable to that of a
traditional independent contractor. (Id. at 959.) Workers whose roles are most clearly
comparable to those of employees include individuals whose services are provided within
the usual course of the business of the entity for which the work is performed and thus
who would ordinarily be viewed by others as working in the hiring entity’s business and
not as working, instead, in the worker’s own independent business. (Id.)

Fact scenarios noted by the Supreme Court in Dynamex
 Where services are NOT part of the hiring entity’s usual course of business:
o When a retail store hires an outside plumber to repair a leak in a bathroom on its
premises.
o When a retail store hires an outside electrician to install a new electrical line.
 Where services are part of the hiring entity’s usual course of business:
o When a clothing manufacturing company hires work-at-home seamstresses to
make dresses from cloth and patterns supplied by the company that will
thereafter be sold by the company.
o When a bakery hires cake decorators to work on a regular basis on its custom-
designed cakes.

Case examples from other states applying Part B of the ABC test, as described by the
Supreme Court in Dynamex
 The cutting and harvesting of timber by an individual worker was work performed in the
usual course of business of a timber management company whose business involved
contracting for the purchase and harvesting of trees and the sale and delivery of the cut
timber to customers. Rejecting the company’s contention that the timber harvesting
work was outside its usual course of business because the company did not currently
own any timber harvesting equipment itself, the court upheld an administrative ruling
that the harvesting work was “not ‘merely incidental’ to [the company’s] business, but
rather was an ‘integral part of’ that business.” (McPherson Timberlands v.
Unemployment Ins. Comm’n (Me. 1998) 714 A.2d 818, 821.)
 The performance of live entertainers was within the usual course of business of a resort
that advertised and regularly provided entertainment. (Appeal of Niadni, Inc. (N.H.
2014) 93 A.3d 728.)
 An art instructor who taught art classes at a museum performed work within the usual
course of the museum’s business where the museum offered art classes on a regular and
continuous basis, produced brochures announcing the art courses, class hours, registration
fees and instructor’s names, and discounted the cost of the classes for museum members.
(Mattatuck Museum-Mattatuck Historical Soc’y v. Administrator, Unemployment
Compensation Act (Conn. 1996) 679 A.2d 347, 351-352.)
 A general construction company established that specialized historic restoration work
performed by the worker in question was outside the usual course of the company’s
business within the meaning of part B where the work involved the use of specialized
equipment and special expertise that the company did not possess and did not need for its

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usual general commercial and residential work. (Great N. Constr., Inc. v. Dept. of Labor
(Vt. 2016) 161 A.3d 1207, 1215.)

Part B can be analyzed just as the “regular” or “integral part” of the business is analyzed
under Borello
Borello instructed that various multifactor tests are “logically pertinent” to the determination
of employee or independent contractor status, including the Restatement Second of Agency,
Labor Code section 2750.5, and the “economic realities” test used under the Fair Labor
Standards Act. Each of these tests include a factor akin to Part B’s “outside the usual course
of business.” The Restatement includes “whether or not the work is a part of the regular
business of the principal,” Labor Code section 2750.5 includes “performing work that is not
ordinarily in the course of the principal’s work,” and the “economic realities” test includes
“whether the service rendered is an integral part of the alleged employer’s business.” As a
result, Borello’s discussion of when the work performed was a “regular” or “integral part” of
the hiring entity’s business, as well as cases following Borello, can aid in the analysis of Part
B of the ABC test. If the work was a “regular” or “integral part” of the hiring entity’s
business, then the work would also be considered part of the “usual course” of the entity’s
business.
 Borello
“The harvesters form a regular and integrated portion of [the grower’s] business operation.”
(48 Cal.3d at 357.)
 Yellow Cab Cooperative
Yellow’s enterprise consists of operating a fleet of cabs for public transportation. Drivers are
“active instruments” of that enterprise who provide an “indispensable” service to Yellow; the
enterprise could no more survive without them than it could without working cabs. Drivers
are a regular and integrated portion of Yellow’s business operation. (226 Cal.App.3d at
1293-1294.)
 JKH Enterprises
Pickup and delivery of papers and packages and driving in between constituted the integral
heart of JKH’s courier service business. (142 Cal.App.4th at 1064.)

28.3.3 Part C – Is the Worker Customarily Engaged in an Independently Established
Trade, Occupation, or Business of the Same Nature as the Work Performed for the
Hiring Entity?

General framework for Part C as discussed in Dynamex
 It is well established that a business cannot unilaterally determine a worker’s status
simply by assigning the worker the label “independent contractor” or by requiring the
worker, as a condition of hiring, to enter into a contract that designates the worker an
independent contractor. (Dynamex, 4 Cal.5th at 962.)
 The term “independent contractor,” when applied to an individual worker, ordinarily has
been understood to refer to an individual who independently has made the decision to go
into business for themselves. (Id.)
 When a worker has not independently decided to engage in an independently established
business but instead is simply designated an independent contractor by the unilateral
action of a hiring entity, there is a substantial risk of misclassification. (Id.)
 The fact that a company has not prohibited or prevented a worker from engaging in an
independent business is not sufficient to establish that the worker has independently made the
decision to go into business for themselves. (Id.)

Fact scenarios noted by the Supreme Court in Dynamex

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An individual who independently has made the decision to go into business for themselves:
 Generally takes the usual steps to establish and promote their independent business.
Examples of this include
o Incorporation, licensure, advertisements
o Routine offerings to provide the services of the independent business to the public or to a
number of potential customers, and the like.

Case examples from other states applying Part C of the ABC test, as described by the
Supreme Court in Dynamex
 The fact that the hiring business permits a worker to engage in similar activities for other
businesses is not sufficient to demonstrate that the worker is “ ‘customarily engaged in an
independently established ... business’ ” for purposes of part C of the ABC test. (JSF
Promotions, Inc. v. Administrator (Conn. 2003) 828 A.2d 609, 613.)
 “[T]he appropriate inquiry under part (C) is whether the person engaged in covered
employment actually has such an independent business, occupation, or profession, not
whether he or she could have one.” (McGuire v. Dept. of Employment Security (Utah Ct.App.
1989) 768 P.2d 985, 988 (emphasis added).)
 Under part C of the ABC test, “‘[t]he adverb “independently” clearly modifies the word
“established”, and must carry the meaning that the trade, occupation, profession or business
was established, independently of the employer or the rendering of the personal service
forming the basis of the claim.’” (In re Bargain Busters, Inc. (Vt. 1972) 287 A.2d 554, 559.)
 A hiring entity failed to prove that its siding installers were engaged in an independently
established business where, although the installers provided their own tools, no evidence was
presented that “the installers had business cards, business licenses, business phones, or
business locations” or had “received income from any party other than” the hiring entity.
(Brothers Const. Co. v. Virginia Empl. Comm’n (Va. Ct.App. 1998) 494 S.E.2d 478, 484.)
 The hiring entity, a same-day pickup and delivery service, failed to establish that a bicycle
courier was engaged in an independently established business where the entity did not present
evidence that the courier “held himself out as an independent businessman performing
courier services for any community of potential customers” or that he “had his own clientele,
utilized his own business cards or invoices, advertised his services or maintained a separate
place of business and telephone listing.” (Boston Bicycle Couriers v. Deputy Dir. of the Div.
of Empl. & Training (Mass.App.Ct. 2002) 778 N.E.2d 964, 971.)
 A hiring entity established that auto repair appraisers were customarily engaged in an
independently established business where the appraisers had their own independent licenses,
possessed their own home offices, provided their own equipment, printed their own business
cards, and sought work from other companies (despite a lack of evidence that the appraisers
had actually worked for other businesses). (Southwest Appraisal Grp., LLC v. Adm’r,
Unemployment Comp. Act (Conn. 2017) 155 A.3d 738, 741-752.)

Part C can be analyzed in a manner similar to the Borello factor analyzing whether the
worker is engaged in an independently established trade, occupation, or business
As with Parts A and B of the ABC test, this part of the test does not introduce a new factor.
However, Dynamex makes clear the question under part C is not whether the hiring entity has
not prohibited or prevented the worker from engaging in an independently established
business, or whether the worker could have so engaged, but instead, whether the worker “is
customarily engaged in an independently established trade, occupation, or business.”
(Dynamex, 4 Cal.5th at 962-963 (emphasis added)

28.4 Situations in which the ABC test will not apply

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Labor Code section 2775 provides that the ABC test is not required to be used in certain
situations (separate from the occupation-based exemptions described below).
28.4.1 Express exceptions from employment status and express extensions of employer liability
remain in effect
AB 5 retains existing express exceptions to the terms “employee,” “employer,” “employ,” or
“independent contractor” that are part of the Labor Code, Unemployment Insurance Code, or
IWC wage orders. The bill references subdivision 2(E) of Wage Order No. 2, which establishes
that individuals in the personal service industry, such as barbers and hairstylists, are considered to
be employees under certain conditions. If the wage order definition of employee is not met then
the statute, which has an explicit exception to ABC contained in Labor Code section 2778(L),
may apply.
Another example would be the specific definitions of “domestic work employee” and “domestic
work employer” in the Domestic Worker Bill of Rights that exclude certain types of workers and
employers from the overtime requirements of that law. (See Labor Code section 1450(b)(2)(A) &
(c)(2)(A).) In such cases, the ABC test will not otherwise apply to establish employee or
employer status; rather, the specific statutory language will continue to govern for specifying
which employees are subject to overtime but the ABC test will apply to determine employment
status when the independent contractor defense is raised.
In addition, AB 5 retains any express “extensions of employer status or liability” contained in
the Labor Code, Unemployment Insurance Code, or IWC wage orders. An example of an express
extension of employer liability is the extension of liability under Labor Code section 2810.3 to a
“client employer” for any wage and workers’ compensation violations involving the employees of
a labor contractor that were provided to perform labor within the client employer’s usual course
of business. The ABC test would not override or constitute a test that would need to be layered
on top of this express extension of liability.1
Another area involving express extensions of employer status or liability involves public
employment. Where the IWC wage orders and Labor Code have extended protections to
employees of public entities, the public employers remain liable for those protections. The IWC
included public employees in limited sections of the wage orders, like minimum wage. For
example, Section 1 of Wage Order 4 states: “(B) Except as provided in Sections 1, 2, 4, 10, and
20, the provisions of this order shall not apply to any employees directly employed by the State or
any political subdivision thereof, including any city, county, or special district.” Thus, the
enumerated sections do extend employer liability to government entities. Additionally, there are
prov
isions in the Labor Code that expressly extend obligations to government entities as
employers, such as Labor Code section 1182.12. There are also provisions of the Labor Code
such as sections 201, 202, 245.5, and 246 that expressly apply to the state as an employer, as well
as section 203 which has been interpreted to apply to the state based on express legislative
history. Therefore, wherever a government entity is currently liable as an employer under the
wage orders, Labor Code, or Unemployment Insurance Code, AB 5 does not change the public

1 This is the case with respect to the specific statutory definition and liability of a “client employer” under section
2810.3, but not as to the determination of whether a worker who provides labor or services is an employee of the
labor contractor. If a labor contractor asserts that a worker is an independent contractor and not an employee of the
contractor, the ABC test would apply to that determination of employment status absent an applicable exemption.

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entity’s underlying liability. What AB 5 does is codify that the ABC test applies, absent another
applicable exemption, where these provisions that extend employer liability to a public entity do
not contain a specific test for determining whether a worker is an employee or an independent
contractor of the public entity.
28.4.2 When a court rules that the ABC test does not apply
An additional circumstance in which the ABC test does not apply is where a court determines that
the ABC test cannot be used in a particular context based on grounds other than an express
statutory exception to employment status. In such a situation, the determination of employee or
independent contractor status will instead be governed by Borello.
28.4.3 Exemptions for certain occupations, industries, and contracting relationships
Labor Code sections 2776-2787 contain several exemptions for particular occupations, industries,
and contracting relationships where the ABC test may not apply. Under AB 5, a limited number
of occupations are simply exempt from application of the ABC test and the employment
relationship will be analyzed under Borello. For other jobs, industries, or contracting
relationships, additional statutory requirements must first be met by the hiring entity in order for
Borello to apply. Further, for certain occupations, a Business & Professions Code standard will
apply. Threshold statutory requirements must be met for many occupations and contracting
relationships in order for the hiring entity to use the Borello standard instead of ABC. The
threshold requirements are very similar, and overlap with, the analysis under Borello. AB 2257
changed some of the criteria for these exemptions from the ABC test and added some additional
occupations, industries and contracting relationships.
A list of the exemptions is provided below.
Occupations where Borello applies instead of ABC under Labor Code section 2775 et
seq.:
• Certain occupations in connection with creating, marketing, promoting, or
distributing sound recordings or musical compositions
• Certain licensed insurance agents, brokers, and persons who provide underwriting
inspections, premium audits, risk management, claims adjusting, third-party
administration consistent with use of the term “third-party administrator,” as defined
in subdivision (cc) of Section 10112.1 of Title 8 of the California Code of
Regulations, or loss control work for the insurance and financial service industries
• Certain licensed physicians, surgeons, dentists, podiatrists, psychologists, or
veterinarians
• Certain licensed attorneys, architects, landscape architects, engineers, private
investigators and accountants
• Certain registered securities broker-dealers or investment advisers or their agents and
representatives
• Certain direct salespersons
• Certain manufactured housing salespersons
• Certain licensed commercial fishers (only through December 31, 2025 unless
extended by the Legislature)
• Certain newspaper distributors or carriers (only through December 31, 2024 unless
extended by the Legislature)
• Certain persons engaged by an international exchange visitor program

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 Certain competition judges
 Certain home inspectors, as defined in Section 7195 of the Business and Professions
Code, and subject to the provisions of Chapter 9.3 (commencing with Section 7195)
of Division 3 of that code.

Occupations or contracting relationships where Labor Code section 2775 et seq.
requires that additional requirements must first be met in order to use Borello instead
of ABC:
 Certain professional services contracts for marketing; human resources
administration; travel agents; graphic design; grant
writers; fine artists; enrolled
agents licensed to practice before the IRS; payment processing agents; still
photographers / photojournalists; videographers; photo editors to a digital content
aggregator; freelance writers, translators, editors, copy editors, illustrators, or
newspaper cartoonists; content contributors, advisors, producers, narrators, or
cartographers for a journal, book, periodical, evaluation, other publication or
educational, academic, or instructional work in any format or media; licensed barbers,
cosmetologists,
electrologists, estheticians, or manicurists (manicurists only through
December 31, 2024); specialized performing arts Master Class Instructors, appraisers,
registered professional foresters, and data aggregators, as defined.
Borello applies to
determine whether the individual is an employee of the hiring entity if initial
requirements are met.
 Relationships between two individuals working on a single engagement event,
defined as a stand-alone non-recurring event in a single location, or a series of events
in the same location no more than once a week. Borello
applies if initial requirements
are met.
 Certain individuals performing work under a subcontract in the construction industry,
including construction trucking (with certain specific conditions applicable to
construction trucking only through December 31, 2024).
Borello and Labor Code
section 2750.5 apply to determine whether the individual is an employee of the
contractor if initial requirements are met.
 Certain service providers who are referred to customers through referral agencies to
provide services including, but not limited to, graphic design, web design,
photography, tutoring, consulting, youth sports coaching, caddying, wedding or event
planning, services provided by wedding and event vendors, minor home repair,
moving, errands, furniture assembly, animal services, dog walking, dog grooming,
picture hanging, pool cleaning, yard cleanup, and interpreting. Borello
applies to
determine whether the service provider is an employee of the referral agency if initial
requirements are met.

o The following services are excluded: services provided in an industry
designated as a high hazard industry, janitorial, delivery, courier,
transportation, trucking, agricultural labor, retail, logging, in-home care, or
construction services other than minor home repair.
 Certain individuals performing services pursuant to a third party’s contract with a
motor club to provide motor club services. Borello applies to determine whether the
individual is an employee of the motor club if initial requirements are met.

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 Certain bona fide business-to-business contracting relationships. Borello applies to
determine whether the business providing services is an employee of the business
contracting for the services if initial requirements are met.
For two specific industries, special rules under Labor Code section 2778(b) require
examination under the Business and Professions Code:
 Certain real estate licensees, for whom the test of employee or independent contractor
status is governed by section 10032(b) of the Business and Professions Code. (If that
section is not applicable, then Borello is the applicable test for purposes of the Labor
Code, except ABC will be the applicable test for purposes of workers’ compensation
as of July 1, 2020.)
 Certain repossession agencies, for which the determination of employee or
independent contractor status is governed by Section 7500.2 of the Business and
Professions Code.

The exemptions from the ABC test for certain industries, occupations, or contracting
relationships may involve some complicated rules and criteria which are not set forth
above. Employers and workers should seek independent advice and counsel if they have
questions about the applicability of any exemption to their particular case.

Application of ABC test and exemptions for work performed before January 1, 2020

Labor Code section 2785 contains several statements regarding the retroactive or prospective
application of the ABC test. First, it states that the new section of the Labor Code codifying the
ABC test “does not constitute a change in, but is declaratory of, existing law with regard to wage
orders of the Industrial Welfare Commission and violations of the Labor Code relating to wage
orders.” In other words, the ABC test applies to existing or pending claims involving the wage
orders and Labor Code provisions relating to the wage orders. The ABC test is already in effect
for these purposes, as a result of Dynamex. In Vasquez v. Jan-Pro Franchising International, Inc.
(2021) 10 Cal.5th 944, the California Supreme Court concluded “that the standard set forth in
Dynamex applies retroactively — that is, to all cases not yet final as of the date our decision in
Dynamex became final — we rely primarily on the fact that Dynamex addressed an issue of first
impression. It did not change a settled rule on which the parties below had relied. No decision of
this court prior to Dynamex had determined how the “suffer or permit to work” definition in
California’s wage orders should be applied in distinguishing employees from independent
con
tractors. Particularly because we had not previously issued a definitive ruling on the issue
addressed in Dynamex, we see no reason to depart from the general rule that judicial decisions are
given retroactive effect.” (Id. at p. 948.)
In addition, because the ABC test is already in effect for the claims referenced above that pre-date
January 1, 2020 (the effective date of AB 5), section 2785(b) allows an employer to use any of
the new statutory exemptions to the ABC test retroactively to “relieve an employer from liability”
for existing claims pending at the time the law goes into effect. This means that the employer
would not be subject to the ABC test with respect to these claims if it establishes that the job or
occupation falls within one of the exemptions – including if the claim involves work performed
before January 1, 2020.

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Finally, with respect to all other provisions of the Labor Code and the Unemployment Insurance
Code, section 2785(c) states that the ABC test applies prospectively “to work performed on or
after January 1, 2020.” A separate section of the bill delayed the initiation date to July 1, 2020 for
workers’ compensation.
When implementing AB 5 for claims or violations involving work performed prior to January 1,
2020, the Labor Commissioner’s Office will be required to interpret which provisions of the
Labor Code “relate to” the wage orders such that the ABC test applies. The reasoning of the
Labor Commissioner’s Office Opinion Letter issued in May 2019 explains a framework for
determining which Labor Code claims relate to the wage orders.2
The May 2019 opinion letter explains that, post-Dynamex, the ABC test applies to Labor Code
sections enforcing wage order obligations, including minimum wage, overtime, reporting time
pay, recordkeeping (including itemized pay stub obligations), meal and rest periods, and
reimbursement for cash shortages, breakage, or loss of equipment, as well as for required
uniforms, tools, and equipment. The letter also notes that, because an employee who brings a
waiting time penalty claim under Labor Code section 203 for failure to timely pay minimum or
overtime wages after termination is seeking to enforce those wage obligations in the wage orders,
it would also be appropriate to apply the ABC test to section 203. The letter further explains that
for workers whose regular rate of pay is higher than the minimum wage (e.g., the minimum wage
of $11 is part of the $25 regular wage per hour), where the worker is not paid at all or is paid
below the minimum wage, this is a minimum wage violation even though the worker has a higher
hourly contract wage. Consequently, the ABC test applies to contract wage claims that serve to
enforce payment of minimum wage (or overtime). Finally, the letter notes that courts have
applied the ABC test to Labor Code provisions such as liquidated damages under section 1194.2
(which serves to enforce payment of minimum wage).
Based on the rationale set forth in the May 2019 opinion letter, with respect to work performed
prior to January 1, 2020, the ABC test applies to Labor Code provisions that serve to enforce
underlying wage order obligations. Thus, in addition to the Labor Code provisions noted in the
opinion letter, this would include applying the ABC test to claims under Labor Code section
203.1, and anti-retaliation provisions when the alleged retaliation relates to enforcement of rights
under a wage order. Labor Code claims involving work performed prior to January 1, 2020 that
do not serve to enforce the wage orders should be analyzed under Borello. The need to undertake
his kind of analysis is time-limited; as the statutes of limitation expire for claims based on work
performed prior to January 1, 2020, the analysis will become simpler.3

2 See Opinion Letter, Application of the "ABC" Test to Claims Arising Under Wage Orders,
https://www.dir.ca.gov/dlse/opinions/2019-05-03.pdf.
3 For statute-based wage claims, the three-year statute of limitations for work performed prior to January
1, 2020 will expire in 2023, and for written contract-based wage claims, the statute of limitations for work
performed prior to January 1, 2020 will expire in 2024. (See Cal. Code Civ. Proc., §§ 337, 338.)

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ABC Test Applies for Work Performed
Before January 1, 2020
Borello Applies for Work Performed Before
January 1, 2020
All wage order obligations Labor Code claims not listed in the first
column4
Minimum wage
Overtime
Meal and rest periods
Recordkeeping
Itemized pay stub
Reporting time
Waiting time penalties where minimum wages
or overtime were not paid
Contract wage violations where failure to pay
also violates minimum wage or overtime
requirements
Liquidated damages
Reimbursement of business expenses5
Insufficient funds/bounced check penalties
where minimum wages or overtime were not
paid
Retaliation claims that relate to enforcing rights
under any wage order

4 This is subject to change based on evolving case law.
5 In general, for claims alleging failure to reimburse business expenses under Labor Code section 2802,
the ABC test should be the test utilized, absent any applicable exemption or court ruling otherwise, for
work performed prior to January 1, 2020 – even when there is a “mixed” reimbursement claim that arises
both under the wage order and potentially outside the wage order (e.g., a reimbursement claim for
uniforms and also for mileage). Indeed, courts have recognized how enforcement of section 2802
implicates enforcement of an employer’s wage obligations. (See, e.g., In re Work Uniform Cases (2005)
133 Cal.App.4th 328; Stuart v. RadioShack Corp. (N.D. Cal. 2009) 641 F.Supp.2d 901; Dep’t of
Industrial Relations v. UI Video (1997) 55 Cal.App.4th 1084; Vasquez v. Franklin Management Real
Estate Fund, Inc. (2013) 222 Cal.App.4th 819.)

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28.5 The Borello Test

Under the Borello test, just as under the ABC test, it is assumed that the worker is an
employee and the hiring entity must prove that the worker is an independent contractor.
Borello is referred to as a “multifactor” test because it requires consideration of all
potentially relevant facts – no single factor controls the determination. It is necessary to
consider the nature of the work and the overall arrangement between the parties on a case-
by-case basis in light of the purpose of the law. The test is construed with particular
reference to effectuating the remedial purposes of social welfare legislation, and will often
result in an outcome similar to the ABC test.
Under the multifactor approach adopted by the California Supreme Court in Borello –
applied specifically to wage and hour claims in Linton v. DeSoto Cab Co., Inc. (2017) 15
Cal.App.5th 1208 – whether the person who receives the services (the potential employer)
has the right to control the work is one factor that should be considered, but the control need
not actually be exercised or be detailed or direct. Other relevant factors include:
1. Whether the worker performing services holds themselves out as being engaged in an
occupation or business distinct from that of the employer;
2. Whether the work is a regular or integral part of the employer’s business;
3. Whether the employer or the worker supplies the instrumentalities, tools, and the place for
the worker doing the work;
4. Whether the worker has invested in the business, such as in the equipment or materials
required by their task;
5. Whether the service provided requires a special skill;
6. The kind of occupation, and whether the work is usually done under the direction of the
employer or by a specialist without supervision;
7. The worker's opportunity for profit or loss depending on their managerial skill;
8. The length of time for which the services are to be performed;
9. The degree of permanence of the working relationship;
10. The method of payment, whether by time or by the job;
11. Whether the worker hires their own employees;
12
. Whether the employer has a right to fire at will or whether a termination gives rise to an
action for breach of contract; and
13. Whether or not the worker and the potential employer believe they are creating an
employer-employee relationship (this may be relevant, but the legal determination of
employment status is not based on whether the parties believe they have an employer-
employee relationship).

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Courts have emphasized different factors in the multifactor test depending on the
circumstances. For example, where the employer does not control the work details, an
employer-employee relationship may be found if (1) the employer retains control over the
operation as a whole, (2) the worker's duties are an integral part of the operation, and (3) the
nature of the work makes detailed control unnecessary. (Yellow Cab Cooperative v. Workers
Compensation Appeals Board (1991) 226 Cal.App.3d 1288.)
28.5.1 Control As A Factor. Borello brought about a sharp departure from control over work
details. The growers who were found to be employers by the Borello court did not have
the contractual authority to exercise supervision over work details, yet the court ruled
that they retained “all necessary control” over their operations. The simplicity of the
work, or the existence of a piece-rate based payment system, may make it unnecessary
for an employer to assert direct control over work details and the employer may retain
“all necessary control” by indirect means. In Ayala v. Antelope Valley Newspapers,
Inc. (2014) 59 Cal.4 th 522, 532-40, the Supreme Court explained that the proper
standard in evaluating the control factor under Borello is the right to exercise control
not on how that right was actually exercised. ( Dynamex, (2018) 4 Cal.5 th 903 at fn. 15.)
28.5.2 “The ‘control’ test, applied rigidly and in isolation, is often of little use in evaluating
the infinite variety of service arrangements.” ( Borello , 48 Cal.3d at p. 350.) While the
right to control the work remains a significant factor, the Borello court identified the
above referenced factors that also must be considered.
28.5.3 Factors Cannot Be Applied Mechanically. These “individual factors cannot be applied
mechanically as separate tests; they are intertwined and their weight depends often on
particular combinations.” These factors must be applied “with deference to the
protective legislation ,” in a manner that will effectuate the provisions of the Labor
Code, in view of the history and fundamental purposes of the legislation. ( Borello ,
supra, 48 Cal.3d at pp. 351, 353.) For example, in the application of minimum wage
legislation, “employees are those who as a matter of economic reality are dependent
upon the business to which they render service.” (Real v. Driscoll Strawberry
Associates (9th Cir. 1979) 603 F.2d 748, 754.).
28.5.4 Application Of the Borello Test: In Yellow Cab Cooperative v. Workers
Compensation Appeals Bd. (1991) 226 Cal.App.3d 1288, the court held that taxi drivers
who pay a daily lease fee to a taxi company for the right to drive a taxi are employees
rather than independent contractors, despite the company's contention that the drivers
did not have to take radio calls, could drive wherever they wanted, could use the taxi to
run personal errands or carry non-paying passengers, and could choose to work
whenever they wanted. The court, while noting the absence of control over work
details, reasoned that “to the extent [a driver’s] freedom might appear to exceed that of
a typical employee, it was largely illusory. If he wanted to earn a livelihood, he had to
work productively and that meant carrying paying passengers.” ( Yellow Cab
Cooperative , 226 Cal.App.3d at p.1299.) The absence of control over details is of no
consequence “where the pri ncipal retains pervasive control over the operation as a
whole, the worker’s duties are an integral part of the operation, the nature of the work
makes detailed control unnecessary, and adherence to statutory purpose favors a finding
of [employment].” ( Id., 226 Cal.App. at p.1295.)
28.5.5 Investment As A Criteria. A disproportionate level of investment by the employer is a
factor that points towards an employer/employee relationship. For example, in a typical

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taxi lease arrangement, the taxi company owns the vehicle and the medallion, and pays
for liability insurance, a radio dispatch system, towing, taxi repairs and maintenance.
The driver pays a daily or weekly lease fee and may be responsible for filling the taxi
with gasoline before returning it.
28.5.6 Business Of Employer As A Factor. “The modern tendency is to find employment
when the work being done is an integral part of the regular business of the employer,
and when the worker, relative to the employer, does not furnish an independent
business or professional service.” ( Borello , supra, 48 Cal.3d at p.357.)
28.5.7 Labels Not Dispositive. The existence of a written agreement purporting to establish an
independent contractor relationship is not determinative. “The label placed by the
parties on their relationship is not dispositive, and subterfuge will not be
countenanced.” (48 Cal.3d at p.349 .) The Labor Commissioner, and the courts, will
look behind any such agreement in order to examine the facts that characterize the
parties’ actual relationship.
28.5.8 Length of Service. The fact that a person may be hired to work for only a short period
of time is also, obviously, not always a determinative factor. The so- called “share
farmers”, found to be employees in Borello , were engaged to provide services during
the course of a sixty-day harvest season. Despite the seemingly temporary nature of
this arrangement, the court observed that their seasonal positions are “permanently
integrated into the [grower’s] business.”
28.5.9 Effect of Tax Status. The fact that a person who provides services is paid as an
independent contractor, that is, without payroll deductions and with income reported by
an IRS form 1099 rather than a W2, is of no significance whatsoever in determining
employment status. “An employer c annot change the status of an employee to one of
an independent contractor by illegally requiring him to assume a burden which the law
imposes directly on the employer.” (Toyota Motor Sales v. Superior Court (1990) 220
Cal.App.3d 864, 877.)
28.5.10 Tools and Equipment. Even under the traditional, pre- Borello common law standard, a
person making pizza deliveries was held to be an employee of the pizzeria,
notwithstanding the fact that the delivery person was required to provide his own car
and pay for gasoline and insurance. ( Toyota Motor Sales v. Superior Court , 220
Cal.App.3d 864, 876.)
28.5.1 Services For Which A Contractor's License Is Required.
ABC and the holding in Dynamex do not apply to the relationship between a contractor and
an individual performing work pursuant to a subcontract in the construction industry, and
instead the determination of whether the individual is an employee of the contractor shall be
governed by Section 2750.5 and Borello if the contractor demonstrates that all of the
statutory prerequisites are satisfied.
AB 5 and the construction exemption do not affect use of Labor Code section 218.7, under
which the Labor Commissioner’s Office can enforce liability for unpaid wages and interest
(but not liquidated damages or penalties) against a direct contractor in private construction
based on wages owed to workers by a subcontractor at any tier acting under, by, or for the
direct contractor.

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Although, Private homeowners are not subject to the Construction Industry exemption when
they hire workers to perform construction work for their homes because the homeowners are
not contractors in the construction industry, as construed above, private homeowners are
subject to the test set forth in Labor Code section 2750.5, discussed below, because Labor
Code section 2750.5 constitutes both an extension of employer status or liability and an
exception to the term “independent contractor” – such express provisions remain in effect
pursuant to Labor Code section 2775.
The worker must be performing work under a subcontract with a contractor in the
construction industry. The term “construction industry” is not defined in the statute.
However, Wage Order 16 contains a definition for “construction occupations,” (at section
2(C)) namely, “all job classifications associated with construction, including but not limited
to work involving alteration, demolition, building, excavation, renovation, remodeling,
maintenance, improvement, and repair work, by the California Business and Professions
Code, Division 3, Chapter 9, Sections 7025 et seq., and any other similar or related
occupations or trades.” Further, under the industry-based wage orders, “industry” means
“any industry, business, or establishment operated for the purpose of” providing services or
activities in that industry. (See, e.g., Wage Order 1 section 2(H).) Therefore, for the
purposes of this exemption, the term “construction industry” should be construed to mean a
subcontract for the type of work listed in the Wage Order 16 definition with a contractor that
operates a business providing construction services. Note that an individual performing
work pursuant to a subcontract in the construction industry could be a sole proprietor who
enters into a subcontract with a contractor as well as workers hired by the subcontractor to
perform work pursuant to the subcontract.
If the worker is performing work in the construction industry as discussed above, the
next step is for the contractor to demonstrate that all of the following seven criteria are
satisfied:
(1) The subcontract is in writing, and,
(2) The subcontractor is licensed by the Contractors State License Board and the work is
within the scope of that license, and,
(3) If the subcontractor is domiciled in a jurisdiction that requires the subcontractor to have a
business license or business tax registration, the subcontractor has the required business
license or business tax registration and,
(4) The subcontractor maintains a business location that is separate from the business or
work location of the contractor, and,
(5) The subcontractor has the authority to hire and to fire other persons to provide or to
assist in providing the services, and,
(6) The subcontractor assumes financial responsibility for errors or omissions in labor or
services as evidenced by insurance, legally authorized indemnity obligations, performance
bonds, or warranties relating to the labor or services being provided, and,

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(7) The subcontractor is customarily engaged in an independently established business of the
same nature as that involved in the work performed.
If all of the criteria have been met, Labor Code section 2750.5 applies to determine if
the subcontractor is an employee or an independent contractor. If any of the criteria
have not been met, then the ABC test applies to the contractor in the Construction
Industry. If the contractor has failed to rebut the presumption of employee status
under section 2750.5 – the worker is an employee and no further analysis is necessary.
If the contractor has established that the worker is an independent contractor under
section 2750.5, then Borello must also be applied to determine employment status.
28.6.1 Labor Code Section 2750.5 The factors that must be met to meet the burden of
establishing independent contractor status are set forth in the statute, including the
requirement that such person “shall hold a valid contractor’s license as a condition of
having independent contractor status” if a license is required by Chapter 9
commencing with section 7000 of Division 3 of the Business and Professions Code.
Therefore, an unlicensed contractor is the employee of the person who hired him or
her.
Under Labor Code section 2750.5, there is a rebuttable presumption that a worker
performing services for which a Contractors State Licensing Board license is required, or
who is performing such services for a person who is required to obtain such a license, is an
employee rather than an independent contractor. Proof of independent contractor status
includes satisfactory proof of these factors:
(a) That the individual has the right to control and discretion as to the manner of
performance of the contract for services in that the result of the work and not the means by
which it is accomplished is the primary factor bargained for.
(b) That the individual is customarily engaged in an independently established business.
(c) That the individual’s independent contractor status is bona fide and not a subterfuge to
avoid employee status. A bona fide independent contractor status is further evidenced by the
presence of cumulative factors such as substantial investment other than personal services in
the business, holding out to be in business for oneself, bargaining for a contract to complete
a specific project for compensation by project rather than by time, control over the time and
place the work is performed, supplying the tools or instrumentalities used in the work other
than tools and instrumentalities normally and customarily provided by employees, hiring
employees, performing work that is not ordinarily in the course of the principal’s work,
performing work that requires a particular skill, holding a license pursuant to the Business
and Professions Code, the intent by the parties that the work relationship is of an
independent contractor status, or that the relationship is not severable or terminable at will
by the principal but gives rise to an action for breach of contract.
There is a long line of cases that hold that LC section 2750.5 operates to make the
employees of an unlicensed subcon tractor employees of the general contractor. (See e.g.,
Hunt Building Corp. v. Bernick (2000) 79 Cal.App,4th 213.) This is true not only for
unemployment and workers’ compensation purposes, but also for wage and hour purposes.

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(Sanders Construction Co. v. Cerda (2009) 175 Cal.App.4th 430.)
Business and Professions Code section 7026, a part of the Contractors’ State License Law
(“CSLL”) provides, “a contractor is any person who undertakes to or offers to undertake
to ..., or does himself or herself or by or through others, construct, alter, [or] repair ... any
... structure, project, development or improvement....” (B&P Code § 7026.) Section 7031,
subdivision (a) provides that no person “engaged in the business or acting in the capacity
of a contractor” can bring an action for compensation for work requiring a contractor's
license if the person was not properly licensed at all times during the performance of the
work. Section 7031, subdivision (b) goes further, permitting a person “who utilizes the
services of an unlicensed contractor” to bring an action for disgorgement of “all
compensation paid to the unlicensed contractor.” Both of these sub sections of section
7031 are designed to enforce compliance with the CSLL.
B&P Code section 7053, however, prohibits application of section 7031 if the following
are satisfied:
(1) The person receives wages as their sole compensation
- “wages,” as defined by Labor Code section 200, includes “all amounts for labor
performed by employees of every descriptio n, whether the amount is fixed or
ascertained by the standard of time, task, piece, commission basis, or other method of
calculation.” Both an agreement to pay the person a specified amount per hour worked
could be an agreement to pay wages, so too is an agreement to pay the person a
specified amount for the completion of a particular project or task. And sometimes
bona fide independent contractors charge by the project, other times by the hour.
(2) The person does not customarily engage in an indepen dently established business.
- The factors enumerated at LC section 2750.5(c) for use in determining whether “the
individual’s independent contractor status is bona fide” provides a useful analysis.
(3)The person does not have the right to control or discretion as to manner of performance
- the test is not whether the principal actually exercises this control, but whether they
have the right to control.
Sanders Construction Co. v. Cerda (2009) 175 Cal.App.4th 430, explains the way these
statutes relate with one another. Sanders arose with the filing of seven Labor
Commissioner wage claims against a general contractor. Six of the claimants were
employees of an unlicensed subcontractor, the seventh was the unlicensed subcontractor.
The Labor Commissioner’s hearing officer dismissed the subcontractor’s claim, finding
that he misrepresented himself as a licensed contractor, and that he was acting as an
independent contractor (though not licensed), and as such, concluded that the Labor
Commissioner had no jurisdiction over the claim. The subcontractor did not challenge the
dismissal. As for the six employees of the unlicensed subcontractor, the hearing officer
held that the general contractor was their statutory employer, and thus, awarded wages.
The general contractor filed timely de novo appeals. The trial court found, like the
hearing officer, in favor of the employees. The general contractor appealed. The court of
appeal also found in favor of the employees. The court’s decision provides in pa rt:
“[The general contractor’s] additional argument is that making respondents the statutory
employees of [the general contractor] contravenes Business and Professions Code section
7031, which prohibits an unlicensed contractor from recovering payment fo r services.
Under section 7031, for example, [the unlicensed subcontractor] was properly denied his

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wage claim. But [the general contractor] advocates extending that prohibition to [the
subcontractor’s] employees. [The general contractor’s] reliance on Fillmore v. Irvine
(1983) 146 Cal.App.3d 649, 194 Cal.Rptr. 319 is misplaced because it is factually
distinguishable. In Fillmore, plaintiff was a drywall finisher who acted as an unlicensed
independent contractor and hired other drywall workers. ( Id. at pp. 652–654, 194 Cal.Rptr.
319.) Like [the subcontractor here], the Fillmore plaintiff was not entitled to recover his
wages under Business and Professions Code section 7031 or as a statutory employee under
section 2750.5.”
“Respondents in the present case we re employees who did not act like unlicensed
independent contractors. Business and Professions Code section 7053 explains that the
prohibition of Business and Professions Code section 7031 does not apply to a person who
receives wages as his sole compensat ion, who does not engage in an independent business,
and who cannot control how the work is performed. The record offers no evidence that the
six claimants were not employees as described under Business and Professions Code
section 7053 and [the general co ntractor here] makes no such argument. Respondents were
not required to be licensed as set forth in Business and Professions Code section 7031.
Therefore, pursuant to Business and Professions Code section 7053, Business and
Professions Code section 7031 do es not prohibit the six claimants from suing for their
wages.” Sanders Constuction Co., supra , 175 Cal.App.4th at 436.
For Purposes Of Workers’ Compensation Coverage, Labor Code § 2750.5 establishes that
if a person performs services for which a contr actor’s license is required (pursuant to
Chapter 9 of Division 3 of the Business and Professions Code) and the person does not
have such a license, there is an irrebuttable presumption that the individual is an
employee. If such a person has a license, th ere is still a rebuttable presumption that the
person is an employee, rather than an independent contractor, unless the above -listed
factors contained in subdivisions (a), (b) and (c) of Section 2750.5 can be satisfied. See
Fillmore v. Irvine (1983) 146 Cal.App.3d 649, 656-57. Workers’ Compensation does not
apply Business and Professions Code sections 7031 and 7053 because the workers are not
seeking compensation.

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29 OBLIGATIONS OF EMPLOYERS.
29.1 Employer Must Exercise Ordinary Care In Dealing With Employee. Employers must
indemnify employees for all losses caused by the employer’s want of ordinary care. (Labor Code
§ 2800) The rule is well established in California that an employer is under a duty to furnish a
safe working place for his employees. This duty requires the employer to exercise ordinary
care and “to make a reasonably careful inspection at reasonable intervals to learn of dangers, not
apparent to the eye”. Cordler v. Keffel, 161 Cal. 475, 479, 119 P. 658, 660; Fogarty v. Southern
Pacific Co., 151 Cal. 785, 795, 91 P. 650; see Carbbe v. Mammoth Channel Gold Mining Co.,
168 Cal. 500, 503, 143 P. 714; Russell v. 179 Pacific Can Company , 116 Cal. 527, 531, 48 P.
616; Alexander v. Central Lumber & Mill Co., 104 Cal. 532, 539, 38 P. 410; PROSSER, Torts
(1941) p. 507; Rest., Agency, § 503.
29.1.1 In addition to this general statutory obligation, the Legislature has added a specific secti on
dealing with safeguarding musical instruments located on the employer’s premises. (Labor
Code § 2800.1)
29.1.2 Note that the employer must exercise ordinary care and is responsible to the employee for any
damages which result from the lack of ordinary care.
29.2 Labor Code § 2802, Employer Must Indemnify Employee for All Losses Incurred in
Direct Consequence of Discharge of Duties:
(a) An employer shall indemnify his or her employee for all necessary expenditures of losses
incurred by the employee in direct consequence of the discharge of his or her duties, or of his
or her obedience to the directions of the employer, even though unlawful, unless the
employee, at the time of obeying the directions, believed them to be unlawful.
29.2.1 The test for recovery under section 2802 is whether the expense or loss was incurred within the
course and scope of employment. In determining whether, for purposes of indemnification, an
employee’s acts were performed within the course and scope of employment, the courts have
looked to the doctrine of respondeat superior. Under that doctrine, an employer is vicariously
liable for risks broadly incidental to the enterprise undertaken by the employer --that is, for an
employee’s conduct that, in the context of the employer's enterprise, is “not so unusual or
startling that it would seem unfair to include the loss resulting from it among other costs of th e
employer’s business.” Rodgers v. Kemper Constr. Co. (1975) 50 Cal.App.3d 608, 619, 124
Cal.Rptr. 143; accord Mary M. v. City of Los Angeles (1991) 54 Cal.3d 202, 209, 285 Cal.Rptr.
99 ; Perez v. Van Groningen & Sons, Inc. (1986) 41 Cal.3d 962, 968, 227 Cal.Rptr. 106, 719
P.2d 676.) Legal costs of defending a third party action based on the employee's job -related
conduct must be paid by the employer. (Jacobus v. Krambo Corp. (2000) 78 Cal.App.4th 1096,
1100–1101)
29.2.2 No Vicarious Liability. An employer is not vicariously liable for an employee’s conduct if the
employee substantially deviates from his course of duty so as to amount to a complete departure.
DeMirjian v. Ideal Heating Corp. (1954) 129 Cal.App.2d 758, 766, 278 P.2d 114. However,
acts that are necessary to the comfort, convenience, health, and welfare of the employee while
at work, though personal and not acts of service, do not take the employee outside the scope of
his employment. Alma W. v. Oakland Unif ied School Dist. (1981) 123 Cal.App.3d 133, 139,
176 Cal .Rptr. 287; DeMirjian, supra, 129 Cal.App.2d at p.765, 278 P.2 d 114 .) Moreover, an
employee's conduct may fall within the scope of his employment even though the act does not
benefit the employer, even though the act is willful or malicious, and even though the act may

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violate the employer's direct orders or policies. (Mary M . v. City of Los Ange les, supra, at 54
Cal.3d 202, 209.)
29.2.2.1 Not All Damages Incurred By Employee Are Recoverable. The California cases have
consistently held that under the doctrine of respondeat superior, sexual misconduct falls outside
the course and scope of employment. ( Lisa M. v. Henry Mayo Newhall Memorial Hospital
(1995) 12 Cal.4th 291, 48 Cal.Rptr.2d 510 [hospital not liable for sexual battery on patient by
technician]; Jeffrey E. v. Central Baptist Church (1988) 197 Cal.App.3d 718, 722, 243 Cal.Rptr.
128 [church not liable for child molesting by Sunday school teacher]; Alma W. v. Oakland
Unified School Dist., supra, 123 Cal.App.3d 133, 140-142, 176 Cal.Rptr. 287 [school district
not liable for rape of student by janitor].) In line with that authority, the California Supreme
Court has held that an employer has no obligation to indemnify a sexual harasser, even though
the acts occurred during work hours on the employer’s premises. (Farmers Ins. Group, supra,
11 Cal.4th 992, 47 Cal.Rptr.2d 478, 906 P.2d 440)
29.2.3 Most Common Issues Arising Within The Employment Context are situations where the
employer requires, as a condition of employment, that the employee furnish tools or equipment
or underwrite costs in order that the employee may discharge his or her duties. The California
Supreme Court held an employer could satisfy the reimbursement obligation by increasing base
salary or commission rates to meet its reimbursement obligation under Labor Code §2802 only
where the employer provides some method or formula to identify the amount of the combined
employee compensation payment that is intended to provide for expense reimbursement and
using that method or formula, the employee “can readily determine whether the employer has
discharged all of its legal obligations as to both wages and business expense reimbursement.”
(Gattuso v Harte-Hanks Shoppers, Inc. (2007) 42 Cal.4
th 554, 573.) As the California Supreme
Court explained, “Although section 2802 does not expressly require the employer to provide an
apportionment method, it is essential that employees and officials charged with enforcing the
labor laws be able to differentiate between wages and expense reimbursements. Because
providing an apportionment method is a practical necessity for effective enforcement of section
2802 's reimbursement provisions, it is implicit in the statutory scheme.” Id.

29.2.3.1 Examples. The provisions of Section 2802 cover a multitude of situations and care should be
used in determining whether the loss to the employee is covered by that section. For instance, if
an employer requires that an employee open a bank account in order to receive his or her pay by
direct deposit, the employer must pay the employee for any cost involved in opening or operating
that bank account. A same conclusion would be required if expenses were involved. (O.L.
1997.03.21-2) Costs of insurance required by an employer are recoverable under the provisions
of Section 2802. (O.L. 1993.0
2.22-3) (See also issues discussed in O.L . 1991.08.30 and
1994.08.14)
29.2.3.2 It should be noted that the IWC Orders allow an employer to require that employees furnish
“hand tools and equipment” if the hand tools and equipment are “customarily required by the
trade or craft”. The DLSE has concluded that in the phrase “hand tools and equipment”, the
word “hand” is an adjective which modif ies both the word “tools” and the word “equipment”.
As the Labor Commissioner opined in 1984, an automobile is not the type of equipment
contemplated in the IWC Orders.
29.2.3.3 IWC Definition Of Hand Tools And Equipment Consistent With DLSE View. In its Statement
As To The Basis for the recently adopted wage orders, the IWC states that the term “hand tools
and equipment” is to be read narrowly and is limited to “hand (as opposed to power) tools and

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personal equipment, such as tool belts or tool boxes, tha t are needed by the employee to secure
those hand tools. Moreover, such hand tools and equipment must be customarily required in a
recognized trade or craft.” When “the custom of the trade required the employee to supply his
own tools” and the tools were “too heavy to be transported routinely to and from the place of
employment,” section 2802 required the employer to reimburse the employee for the loss
suffered when the employee's tools w ere stolen from the employer's premises. ( Machinists
Automotive Trades Dist. Lodge v. Utility Trailer Sales Co. , (1983) 141 Cal.App.3d 80, 86.)
29.2.3.4 Costs which are incurred in training leading to licensure pursuant to a statute (real estate, etc.)
are not, usually, the responsibility of the employer. (O.L. 1994.11.17)
29.2.4 IRS Mileage Allowance. DLSE has opined that use of the IRS mileage allowance will satisfy
the expenses incurred in use of an employee’s car in the absence of evidence to the contrary.
29.2.5 Award Of Attorney’s Fees And Interest. Both interest and attorney’s fees incurred in claims
and actions to enforce 2802 are recoverable and may be awarded by either the courts or the Labor
Commissioner to an employee (but not the DLSE or employer) who prevails in such an
enforcement claim or action. (Labor Code § 2802(c))
29.2.6 Note: The provisions of Labor Code § 2800 and 2802 may not be altered or waived by private
agreement. (Labor Code § 2804)
29.2.7 Applicants for employment, and employees are now protected by new Labor Code section 2802,
effective January
1, 2 021, from incurring any expense or cost of any “ employer-provided or
employer-required educational program or training” for an employee providing direct patient
care or for an applicant for direct patient care employment for a “general acute care hospital” as
defined in subdivision (a) of Section 1250 of the Health and Safety Code.
1 Labor Code §
2802.1(c). Under Labor Code section 2802.1(a)(2) “ employer provided or employer required
educational program or training” includes, but is not limited to, “residencies, orientations, or
competency validations necessary for direct patient care employment.” The definition does NOT
include either of the following:
• Requirements for a license, registration, or certification necessary to legally practice in a
specific employee
classification to provide direct patient care; or
• Education or training that is voluntarily undertaken by the empl oyee or applicant solely at
their discretion.
T
he statute prohibits an employer, or any person acting on behalf of the employer, from
retaliating ag
ainst an applicant for employment or employee for refusing to enter into a contract

1 “General acute care hospital” means a health facility having a duly constituted governing body with overall
administrative and professional responsibility and an organized medical staff that provides 24-hour inpatient
care, including the following basic services: medical, nursing, surgical, anesthesia, laboratory, radiology,
pharmacy, and dietary services

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or agreement that violates these provisions. Labor Code § 2802.1(b). In addition to injunctive
relief and any ot
her remedies available, a prevailing plaintiff is entitled to reasonable attorney’s
fees and costs. Labor Code § 2802.1(d). The provisions of Labor Code section 2802.1 are
declaratory of and clarifies the existing obligation under Labor Code section 2802 that employers
reimburse employees for expenses resulting from employer-required expenses. And Labor Code
section 450 protects applicants from employer required expenses. Now Labor Code section
2802.1 extends further protections for applicants and employees under Labor Code section
2802.1 for any employer-provided educational program or training as defined. New labor Code
section 2802.1 also prohibits retaliation against employees who refuse to enter into a contract or
agreement that is in violation of AB 2588. A prevailing plaintiff is entitled to injunctive relief
and attorney fees and costs.
29.3 Labor Code §2810.5 Requires Employers to P rovide Written Notice to Emplo
yees Upon Hiring
and Notification of Changes, Directs the Labor Commissioner to Prepare and Make Available a
Template.
At the time of hiring, an employer shall provide to each employee, a written notice, in the
language the emp
loyer normally uses to communicate employment -related information to the
employee, containing the following:
(A) The rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week,
salary, piece, commission, or otherwise, including any rates for overtime, as
applicable.
(B) Allowances, if any, claimed as part of the minimum wage, including meal or lodging
allowances;
(C) The regular payday designated by the employer in accordance with the requirements
of this code;
(D) The name of the employer, including any “doing busine ss as” names used by the
employer.
(E) The physical address of the employer’s main office or principal place of business, and
a mailing address, if different;
(F) The telephone number of the employer;
(G) The name, address, and telephone number of the empl oyer’s workers’ compensation
insurance carrier;
(H) That an employee: may accrue and use sick leave; has the right to request and use
accrued paid sick leave; may not be terminated or retaliated against for using or
requesting the use of accrued paid sick leave; and has the right to file a complaint
against an employer who retaliates;
(I) Any other information the Labor Commissioner deems material and necessary.
For temporary services employers defined in Section 201.3, the notice must also
include the name and physical address of the main office, the mailing address if
different from the physical address of the main office and the telephone number of the
legal entity for whom the employee will perform work, and any other information the
Labor Commissioner deems material and necessary. This additional requirement does

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not apply to a security servi ces company licensed by the Department of Consumer
Affairs if it so
lely provides security services.
Employers are required to notify employees in writing of any changes to the above
information within s
even calendar days after the time of the changes unless all the
changes are reflected on a timely wage statement furnished in accordance with Section
226 or notice of all changes is provided in another writing required by law within
seven days of the changes.
The notice requirement does not apply to employees directly employed by the state or
any political subdi
vision thereof, including any city, county, city and county, or
special district, an employee exempt for the payment of overtime wages by statute or
Industrial Welfare Commission Wage Order or an employee covered by a valid
collective bargaiing agreement if the agreement expressly provides for the wages,
hours of work, and working conditions of the employee, and if the agreement provides
premium wage rates for all overtime hours worked and a regular hourly rate of pay
for those employees of not less than 30 percent more than the state minimum wage.
The template developed by the Labor Commissioner is available on the Labor
Commissioner’s we
bsite.

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30 HEALTHY WORKPLACES, HEALTHY FAMILIES ACT OF 2014
30.1 The Healthy Workplaces, Healthy Families Act of 2014, a new article beginning at Labor Code
§§ 245 et seq. recognized that every worker in the State of California will at some time during
the year need some time off from work to take care of his or her own health or the health of
family members and by providing paid time off will ensure a healthier and more productive
workforce in California. Sick workers will be able to take time off to care for themselves or ill
family members lessening recovery time and reducing the spread of illness in the workforce.
Costs of decreased productivity caused by sick workers exceed costs of employee absenteeism.
Affording survivors of domestic violence and sexual assault paid sick leave is vital to their
independence and recovery.
30.2 Entitlement: An employee who, on or after July 1, 2015, works in California for 30 or more
days within a year for the same employer is entitled to paid sick days, compensated at the same
wage rate the employee normally earns. An employee shall be entitled to use paid sick days
beginning on the 90th day of employment and as accrued thereafter. The employer shall provide
payment for sick leave taken no later than the payday for the next regular payroll period after
the sick leave was taken. An employer may calculate the payment to non-exempt employees
in one of two alternative manners: 1) The regular rate of pay for the workweek in which the
paid sick leave was taken or 2) All non overtime earnings for the prior 90 days divided by the
total hours if the employee is paid by piece rate or commission basis or if paid by salary, divided
by the non-overtime hours. See O.L. 2016.10.11. Paid sick leave for an exempt employee is
calculated in the same manner the employer calculates wages for other forms of paid leave
time. An employee may determine how much paid sick leave he or she uses at any given time.
Employers may set reasonable m inimum increments not to exceed two hours. The employee
shall provide reasonable advance notification if the need for the sick leave is foreseeable and if
unforeseeable, the employee shall provide notice of the need as soon as practicable. An
employer is prohibited from requiring an employee to search for or find a replacement worker.
30.3 Purposes: The purposes for which paid sick leave may be used include: Diagnosis , care or
treatment of an existing health condition of, or preventative care for, an employee or the
employee’s family member. For an employee who is a victim of domestic violence or sexual
assault or stalking, paid sick leave may be use for the purposes specified in Labor Code §§ 230
and 230.1. Family member includes a child (as specified including foster child), a parent (as
specified including foster parent), a spouse, a registered domestic partner, a grandparent, a
grandchild, a sibling, or a designated person. An employer is not obliged to inquire into or
record the purposes for which an employee uses paid leave or paid time off.
30.4 Accrual: Paid sick leave accrues at the rate of no less than one hour for every 30 hours worked.
An employer may (but is not required to) lend paid sick days to an employee in advance of
accrual. Exempt administrative, executive and professional employees are deemed to work 40
hours per week, unless the normal workweek is less, in which case the hours are computed
based on the normal workweek. An employer can limit use to 24 hours or 3 day
s in each

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calendar year of employment. Paid sick days shall be carried over t o the following year of
employment but employers may through a policy limit an employee’s total accrual of paid sick
leave to 48 hours or 6 days provided an employee’s rights to accrue and use paid sick leave is
not otherwise limited. Employers are not required to provide compensation for accrued unused
sick leave upon separation from employment unless the employer provides paid sick leave
through a paid time off policy as described below in which case all accrued paid time off leave
is required to be paid at termination in conformity with Labor Code § 227.3. If a separated
employee is re-hired within one year from the date of separation, previously accrued sick leave
shall be re-instated unless it was paid out at termination.

An employer is not required to provide additional paid sick days if the employer has a paid
leave policy or paid time off policy, that may be used for the same purposes and conditions
specified in Labor Code §246.5. A different accrual method is acceptable so long as it is on a
regular basis so that the employee has no less than 24 hours of accrued sick leave or paid time
off by the 120th calendar day of employment or by the 120th day in each calendar y ear or in
each 12-month period. Under either an accrual or a front -loaded plan (as discussed below) an
employee must be provided with either 24 hours or three days, whichever is more. See O.L.
2015.0807. The law sets minimum requirements and does not preempt, limit or otherwise affect
the applicability of an y other law or requirement that provides greater accrual or use by
employees of sick days, or that extends other protections to employees nor may it be construed
to discourage or prohibit an employer from the adoption or retention of a paid sick days policy
more generous than the one required by the statute.

Grandfathered plans. An employer with a previous paid sick leave or paid time off policy that
was in existence prior to January 1, 2015, which provides for sick leave that may be used for
the same purposes as the paid sick leave law may comply with the law so long as the accrual is
on a regular basis and provides no less than one day or 8 hours of accrued paid sick leave or
paid time off within three months of employment per year, and the employee was eligible to
earn at least three days or 24 hours of paid sick leave or paid time off within 9 months of
employment. Any modification to the accrual method (other than increasing the accrual amount
or rate) for this type of grandfathered sick leave or paid timeoff poli cy will modify its
qualification as a granfathered policy and the employer will b e required to comply with the
accrual requirements under the new law or provide the full amount of leave at the beginning of
each year of employment, calendar year, or 12-month period.

Front-loaded plans. Providing the full amount of leave at the beginning of employment and for
each 12-month period thereafter is referred to as front-loading. For initial hires, the full amount
of leave must be provided by the end of the 120th day of employment in the fir st year of
employment. Full amount of leave for front-loaded plans means three days or 24 hours. For In-
Home Supportive Services employees “full amount of leave” is defined as eight hours or one
day beginning July 1, 2018, sixteen hours or two days beginning when the minimum wage
reaches thirteen dollars per hour, twenty -four hours or three days when the minimum wage
reaches fifteen dollars per hour.
30.5 Exclusions: Employees covered by a valid collective bargaining agreement if the agreement
expressly provides for the wages, hours or work, and working conditions of employees and

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expressly provides for paid sick days or a paid leave or a paid time off policy that perm its the
use of sick days for those employees, final and binding arbitration of disputes concerning the
application of its paid sick days provisions, premium wage rates for all overtime hours worked
and a regular hourly rate of pay of not less than 30 percent more than the state minimum wage
rate.
Employees in the construction industry covered by a valid collective bargaining agreement that
expressly provide
s for the wages, hours of work, and working conditions of employees,
premium wage rates for all overtime hours worked, and regular hourly pay of not less than 30
percent more than the state minimum wage rate, and the agreement either was entered into
before January 1, 2015 or expressly waives the requirements of this article in clear and
unambiguous terms.
An individual employed by an air carrier as a flight deck or cabin crew member who is subject
to the provisions of the f
ederal Railway Labor Act provided that the individual is provided with
compensated time off equal to or exceeding one hour per every 30 hours worked, beginning at
the commencement of employment or the operative date of this article, whichever is later.
Retired annuitents working for public agencies, as specified.

30.6 Anti-Retaliation Provisions: Prohibits an employer from denying an employee the right to use
sick days, dischar
ging, threatening to discharge, demoting, suspending or in any manner
discriminating against an employee for using sick days, attempting to exercise the right to use
accrued sick days, filing a complaint with the Labor Commissioner or alleging a violation of
rights under this article, cooperating in an investigation or prosecution, or opposing a policy or
practice prohibited by this article. Establishes a rebuttable presumption of unlawful retaliation
if an employer takes certain action within 30 days of specified activity on the part of an
employee.
30.7 Notices, Paystub and Record Keeping : Requires employers to provide notice of these
requirements, a
t the time of hiring by amending Labor Code section 2810.5(H). In addition to
individual notice, requires that employers must display a poster in each workplace concerning
the requirements of this article; and provides for a $100.00 penalty for an employer who
willfully violates the posting requirements. Requires an employer to provide the employee with
written notice that sets forth the amount of sick leave available or paid time off leave provided
in lieu of sick leave on the itemized wage statement or in a separate writing on the designated
pay days with the employee’s payment of wages. For employers with unlimited paid sick leave
or unlimited paid t ime off plans, the notice or itemized pay stub or separate writing provided
with the payment of wages may meet the requirement to provide how much paid sick leave is
available for use by stating “unlimited”. Employers have a separate record keeping requirement
to keep for three years, records documenting hours worked and paid sick days accrued and
used. Employers must also provide for access of records for an employee in the same manner
as described in Section 226 and to the Labor Commissioner pursuant to Section 1174. When
an employer does not maintain adequate records, a presumption is established that the employee
is entitled to the maximum number of hours accruable unless the employer can show otherwise,
by clear and convincing evidence. Section 226 allows for the storing of records electronically,

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including these records . Liquidated damages provided for shall not be assessed due to an
isolated and unintentional payroll error or written notice error that is either clerical or an
inadvertent mistake regarding the accrual or amount of paid sick leave available for use. The
factfinder may consider as a relevant factor whether the employer, prior to an alleged violation,
has adopted and is in compliance with a set of policies, procedures, and practices that fully
comply with this section. An employer’s failure to comply with the paystub requirement under
this new law will give rise to an action either through an administrative claim or a civil action
for damages pursuant to Labor Code section 248.5(b)(3).
30.8 Damages and Interest . In addition to payment of the amount of paid sick leave unlawfully
withheld, i nteres
t shall also be awarded at 10% on all amounts due and unpaid in any
administrative or civil action. For unlawful withholding of payment for sick days, an employee
may also be entitled to damages computed by multiplying the dollar amount of the unpaid sick
days by eith er THREE (3) or ALTERNATIVELY, $250, whichever amount is greater. If a
violation results in other harm to the employee or person, such as discharge (or other retaliatory
actions), or otherwise results in a violation of the rights of the employee or person, the damages
shall include a sum of fifty dollars for each day or portion thereof that the violation occurred or
continued. These damages may not to e xceed an aggregate penalty of $8 ,000, $4000, for
violation of 248.5(b)(2) and $4,000 for violation of 248.5(b)(3). These damages are payable to
the employee. There is also an additional penalty to the state of $50.00 for each day or portion
of a day a violation occurs or continues for each employee or other person whose rights under
this article were violated where prompt compliance by an employer is not forthcoming and the
Labor Commissioner is required to take additional enforcement action, including the filing of
a civil action.

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31 CONTRACTS - GENERALLY.
31.1 Deputies are often called upon to interpret the provisions of employment contracts to determine
the rights and liabilities of the parties. As will be evident, there are many provisions of general
contract law which are not applicable to employment contracts because of statutory protections
of employees in general. However, many of the rules of contract law (some dating to the English
Common Law upon which California rules are based) have relevance in interpreting modern
employment contracts. Any questions regarding the application of contract law should be
referred to the Legal Section.
31.2 Various statutory provisions and case law principles form the area of contract law in California.
Generally, a contract is an agreement between two or more persons which creates an obligation
to do or not do a particular thing. In the area of employment contracts both general principles
of contract law and special factors may apply to determine terms and enforceability of a contract.
31.2.1 In California, a contract is defined by statute as “an agreement to do or not to do a certain thing.”
(Civil Code § 1549). Four essential elements of a contract are (1) parties capable of contracting;
(2) (mutual) consent; (3) a lawful object, and (4) a sufficient cause or consideration (Civil Code
§ 1550)
31.2.2 Formation - A contract can only be created following an offer and acceptance by capable parties.
An offer is a communication made by someone (the offeror) which creates in the person to whom
the offer is made (the offeree) the power to form a contract by accepting the offer in an authorized
manner.
31.2.3 Types Of Contracts - A contract is either express or implied (Civil Code § 1619). An express
contract is one which the terms are stated in words, written or oral, (Civil Code § 1620) and an
implied (in-fact) contract is one which the existence and terms are manifested by conduct (Civil
Code § 1621). Both types of contracts are based upon the intention of the parties and are
distinguishable only by how the parties actually manifested their assent, i.e., by words or through
their conduct. (Blaustein v. Burton (1970) 9 Cal.App.3d 161, 88 Cal.Rptr. 319)
31.2.3.1 An example of an implied -in-fact contract is one where the employer announces to a group of
applicants that he/sh e is willing to pay $15 per hour to the first ten persons who report to the
docks to unload the ship “Gallant.” None of the first ten workers ever expressly agree to the
wage but their reporti ng to the docks under those circumstances creates an implied in -fact
contract whereby they are entitled to recover $15 for every hour they work.
31.2.3.2 Note: A contract may also be “implied in -law” by the courts under equitable principles in order
to prevent unjust enrichment by one party at the expense of the other. These implied in -law
contracts, also called “quasi -contracts,” are not true contracts since they may lack an essential
element, e.g., consent. See, Section 33 of this manual for further discussion of contracts implied
in-law.

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31.2.4 Ascertainable Parties Capable Of Contracting. It is essential that the parties exist and be identifiable.
(Civil Code § 1558).
31.2.4.1 All persons are capable of contracting, except minors, persons of unsound mind, and persons
deprived of civil rights. (Civil Code § 1556).
31.2.4.2 Generally, minors may enter into contracts for employment but such contracts may be subject to
disaffirmance by the minor. (Civil Code § 1557, Family Code §§ 6700, 6710 et seq.) A minor may
enforce his/her rights by civil action or proceedings in the same manner as an adult but a guardian
must conduct the action or proceeding. (Family Code § 6601)
31.2.5 Mutual Assent. In order for a binding contract to arise there must be mutual assent (consent) between
the parties (Civil Code § 1565) such that each must intend to enter into the contract under the same
terms and conditions (Civil Code § 1580). Historically, this element has been referred to as the
“meeting of the minds” but this phrase, to the extent it connotes a subjective understanding of the
parties has been replaced with the “objective theory” for determining whether mutual assent exists.
In determining mutual assent, the inquiry is a factual one.
31.2.5.1 Consent must be free, mutual, and communicated by each to the other by words or conduct. (Civil
Code §§ 1565, 1581). Consent is not mutual unless all agree upon the same thing in the same sens e.
(Civil Code § 1580)
31.2.5.2 Apparent consent is not free when it is obtained through duress, menace, fraud, undue influence, or
mistake. (Civil Code §§ 1567 -1578). A contract based upon consent obtained through these means
is voidable, but may be ratified by a subsequent valid consent. (Civil Code § 1588)
31.2.6 “Objective Theory” Determines Mutual Assent: Whether there exists expressed mutual assent is
tested under an “objective theory.” The reasonable meaning of the words and acts of the parties (as
a reasonable person in the position of the parties would view them) controls in determining mutual
assent. This is an external standard which is to be distinguished from an internal standard which
focuses on the states of mind of the parties, unexpressed intentions, or (subjective) understanding.
Merced County Sheriff’s Employees’ Assn. V. Merced (1987) 188 Cal.App.3d 662, 672, 233
Cal.Rptr. 519, 525-6; Meyer v. Benko (1976) 55 Cal.App.3d 937, 127 Cal.Rptr. 846901- 2.
31.2.6.1 There is no meeting of the minds while the parties are negotiating terms of the agreement. To be
final, the agreement must extend to all of the material terms the parties intend to produce. Stephan
v. Maloof (1969) 274 Cal.App.2d 843, 79 Cal.Rptr. 461. One engaging such preliminary negotiations
will not be bound (obligated to perform as stated) unless he/she has misled the other party.

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31.2.7 Offer And Acceptance. Manifestation (Expression) of Assent - The expression of mutual assent
is generally achieved through the making of an offer (by an offeror) communicated to an offeree
and an acceptance by the offeree communicated to the offeror. See Moorpark v. Moorpark
Unified School Dist. (1991) 54 Cal.3d 921, 930, 1 Cal.Rptr.2d 896.
31.2.7.1 An offer is described as a manifestation (expression) of willingness to enter into a bargain so
made as to justify another person in understanding that his assent to that bargain is invited and
will conclude the bargain. (Restatement 2d, Contracts, §24) The legal effect is that it creates a
power of acceptance to enter into a contract. In order to be valid, an offer must contain a promise
or commitment that is communicated to an offeree. Preliminary negotiations, an invitation to
make an offer or bid, or statements of future intentions generally do not contain sufficient words
of commitment. (See, American Aeronautics Corp. v. Grand Central Aircraft Co. (1957) 155
Cal.App.2d 69, 317 P.2d. 694) Again, the test is going to be whether a person in the offeree’s
shoes would have reasonably understood that the offeror was proposing an agreement.
31.2.7.2 Incapacity, e.g., by death, insanity, of the offeror (Civil Code § 1587(4)) terminates or revokes
the offer even if the offeree has no knowledge of it. Fritz v. Thompson (1954) 125 Cal.App.2d
858, 863, 271 P.2d 205, 209). Also, the destruction of the thing essential to performance prior to
an acceptance, terminates or revokes the offer.
31.2.7.3 An offer may be accepted only by a person to whom the offeror intended to create a power of
acceptance and the acceptance must be the “mirror image” of the offer. If the response by the
offeree conflicts with the terms of the offer, it is generally considered a rejection of the offer and
counteroffer. (Civil Code § 1585)
31.2.8 Offer for bilateral contract. If an offer can reasonably be interpreted to exchange a promise for a
return promise, it is an offer for a bilateral contract. Acceptance is effective when communicated
and both parties are bound to perform their respective promises. (Chicago Bridge & Iron Co. v.
Industrial Accident Comm. (1964) 226 Cal.App.2d 309, 318, 38 Cal.Rptr. 57, 63)
31.2.9 Offer for unilateral contract. If an offer requests an act or forbearance to act on the part of the
offeree without any requirement of a return promise, it is an offer for a unilateral contract and
acceptance is effective when the act is completed. The offeree may choose to act or not act and
will not be liable under contract for failing to perform or for abandoning pe rformance once
commenced because there is no enforceable promise to perform.

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31.2.9.1 Offer which invites acceptance (or is ambiguous as to acceptance) by a return promise or
act on the part of the of
feree. The offeree may accept the offer by either promising to
perform what the offer requests or by rendering pe rformance, as the offeree chooses.
(Restatement 2d, Contracts, §§ 32, 62) The beginning of performance operates as a
promise to complete performance.
31.2.9.2 An offer will be terminated by a direct, unqualified rejection by the offeree. However,
there may be inst
ances where the offeree’s response does not constitute a total rejection
but merely proposes an alternative bargain and explicitly does not reject the original offer.
31.2.10 Duration Of Offer And Revocation. If an offer contains a time limit within which it must
be accepted, t he offer ter
minates at the end of the stated period and an attempte d
acceptance after that time is merely a counteroffer. If no time limit is stated in the offer,
the lapse of a reasonable time without acceptance will revoke or terminate the offer. (Civil
Code § 1587) Generally, offers are revocable at the will of the offeror prior to the time of
acceptance. (Civil Code § 1586). Limited exceptions may exist makin g the offer
irrevocable in specific situations.
31.2.10.1 Commencing Performance I n Unilateral Contracts. A unilateral contract is where the
offeror makes a promise
in exchange for an act. The offeree does not exchange with a
promise but is free to act or not act. (Compare with a bilateral contract which consists of
an exchange of promises to perform.). Acceptance of the offer can only be made by full
performance. However, where the offeree begins to perform, the courts will treat the offer
as being temporarily irrevocable. (R estatement 2d, Contracts, § 45(1)) (See Lucien v.
Allstate Trucking (1981) 116 Cal.App.3d 972, case involved a promise of a bonus which,
the court found, amounted to an offer of a unilateral contract which could not be revoked
after performance by the employee had begun.)
31.2.10.2 Example: A states to B “I will pay you $25.00 to load this truck now.” A does not seek
“a promise” from
B to load the truck, but instead, has offered his promis e to pay in
exchange for B’s act of loading the truck. If B begins to load the truck, A’s offer is
temporarily irrevocable.
31.2.11 Changed Conditions Of Employment. An at-will employee who continues to work after
the employer gives
notice of changed terms of employment will be deemed to have
accepted the changed terms. Digiacinto v. Ameriko-Omserv Corp. (1997) 59 Cal.App.4th
629.

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31.2.12 Option Contracts. The offeror grants the offeree an option to enter into the contract if the offeror has
given some consideration for the offer. The consideration given by the offeree makes the offer
irrevocable. ( Lowe v. Massachusetts Mut. Life Ins. Co. (1976) 54 Cal.App.3d 718, 725, 127
Cal.Rptr. 23, 26)
31.2.12.1 Detrimental reliance by action or part performance to an ambiguous offer. If the offer does not make
clear whether the offer calls for a promise or performance by the offeree, the offeree has a choice of
accepting by promise or performance. If he/she begins performance, the offeree is protected against
revocation of the offer by the offeror. Under this doctrine, commencement of performance
constitutes acceptance of the offer and the offeree is bound to complete performance. (Restatement
2d, Contracts, § 63)
31.2.12.2 Offers made non-revocable by statute, e.g., “firm offers” by merchants to sell goods. (Commercial
Code § 2205)
31.2.13 When Offer Or Acceptance Effective. Unless otherwise provided in the offer, acceptance is effective
upon proper dispatch. (Civil Code § 1583; Restatement 2d, Contracts, § 63(a)). Thus, putting the
acceptance in the mail would normally constitute an acceptance of the offer. This rule applies even
if the acceptance is lost in transmission so long as the offeree has chosen a reasonable manner of
sending his acceptance. The rule is designed to protect the offeree against revocation while his
acceptance is in transit. (Restatement 2d, Contracts, § 64, Commenta.)
31.2.13.1 Even if an unreasonable means of sending the acceptance is used or the acceptance is misaddressed,
it is still effective upon dispatch if it is received within the time which a properly dispatched
acceptance would normally have arrived. If it is not received within this time period, then it is
effective only when actually received by the offeror. (Restatement 2d, Contracts, §§ 67, 68;
Commercial Code § 1201 (37))

31.2.14 Silence cannot constitute an acceptance of an offer to enter into a bilateral contract since acceptance
must be communicated. An exception applies where there is a relationship between the parties
or a previous course of dealing pursuant to which silence would be understood as acceptance.
(Southern California Acoustics Co. v. C.V. Holder, Inc. (1969) 71 Cal.2d 719, 722, 79 Cal.Rptr. 319,
322 - listing by a contractor of the subcontractors he intends to retain cannot reasonably be construed
as an expression of acceptance of the subcontractor’s bid)
31.2.15 Lawful Object (Civil Code § 1550): Every contract must have a lawful object. (Civil Code § 1550)
The object of a contract is the thing which is agreed by the party receiving the consideration to do
or not do. (Civ il Code § 1595 ) The object must be lawful when the contract is made, and possible
and ascertainable by the time the contract is to be performed. (Civil Code § 1596)

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31.2.16 Object Of Contract May Not Be In Conflict With Statute Or Public Policy. The object of the
contract must not be in conflict with express statutes, public policy or express statutes though not
expressly prohibited, or otherwise contrary to good morals. (Civil Code § 1667) (See also, Section
23 of this Manual)
31.2.16.1 The effect of a contract that does not have a lawful object is that it is void. (Civil Code § 1598)
Since an illegal contract is void at the outset, it cannot be ratified by any subsequent act, and no
person can be estopped (prevented) to deny its validity, nor can the illegality be waived by
stipulation in the contract. (Cook v. King Manor and Convalescent Hospital (1974) 40 Cal.App.3d
782, 793, 115 Cal.Rptr. 471, 478)
31.2.17 Severability. Where a contract has several distinct objects one of which is unlawful and at least one
of which is lawful, the contract is void as to the unlawful one and valid as to the rest. (Civil Code §
1599)
31.2.18 Generally, a contract made in violation of a regulatory statute is void since the courts will not lend
their aid to enforcement of illegal agreements or one against public policy. However, the bargain
made by a party in furtherance of his wrongful purpose is enforceable against him by a party who is
innocent of the wrongful purpose. ( Tri-Q v. STA -HI Corp. (1965) 63 Cal.2d 199, 219 -20, 45
Cal.Rptr. 878)
31.3 Private Parties May Not Agree To Alter Statutory Duties. ( De Haviland v. Warner Bros. Pictures
(1944) 67 Cal.App.2d 225, 235 -236; Imel v. Laborers Pension Trust Fund for No. Calif. (9th Cir.
1990) 904 F.2 d 1327, cert den. 498 U.S. 939) This principle of law is particularly important in
dealing with employment contracts. (See Section 23 of this Manual)
31.3.1 Common examples of the above rule occur when either the employer or the employee (or both of
them in conjunction) agree, for instance, to payment of less than the minimum wage; or payment of
less than a premium for overtime; or payment of less than the established prevailing wage on public
works jobs. Such a contract is void.
31.3.2 Any Remedial Provision In The Law written for the protection of an employee may not be violated
by agreement of the employee. (Civ. Code §§ 1668 and 3513)
31.3.2.1 An example of this rule is illustrated by a recent trend in provisions contained in employment
contracts which purport to relieve an individual providing information regarding an applicant. Labor
Code § 1050 provides a criminal penalty for anyone who “by any misrepresentation prevents or
attempts to prevent” a former employee from obtaining employment. Any provision which would
waive that provision would be void as against public policy. More important, a statement to the
effect that an individual would have no liability would be misleading and could cause that individual
to be less careful about what he or she says. (See O.L. 1994.06.21)

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31.3.2.2 When a statute prohibits or attaches a penalty to doing an act, the act is void even though the statute
does not expressly pronounce it so. The imposition by a statute of a penalty implies a prohibition of
the act referred to and a contract provision founded upon such act is void. ( Kerr’s Catering Service
v. Dept. of Industrial Relations (1962) 57 Cal.2d 319, 328, 19 Cal.Rptr. 492, 497 – employer’s
deductions from wages contravened the spirit if not the letter of employee’s bond law contained in
Labor Code 400 -410); Quillian v. Lion Oil Co. (1979) 96 Cal.App.3d 156, 157 Cal.Rptr. 740.
[Note: as a corollary, a contract of employment is deemed to include applicable provisions of the
Labor Code. Lockheed Aircraft v. Superior Court (1946) 28 Cal.2d 481, 171 P.2d 21]
31.3.2.3 A subsequent change in the law, including repeal of the applicable statute, does not validate the
previously void contract because the contract was void at the inception; also, any amendment (or
repeal) of a statute generally does not have retroactive effect so as to retroactively validate a previous
illegal contract. (Interinsurance Exchange Auto. Club v. Ohio Casualty Ins. Co. (1962) 58 Cal.2d
142, 23 Cal.Rptr. 592)
31.4 Potentially Illegal Contract Provisions.
31.4.1 Payment of less than minimum wages. The minimum wage for employees fixed by the Industrial
Welfare Commission is the minimum wage to be paid to employees, and the payment of a lesser
wage is unlawful. Labor Code § 1197. (See also, Labor Code § 1194)

31.4.2 Obviously, if the statutory obligation increases (i.e., a raise in minimum wage) a contract which
provides less than the new minimum would, to that extent, be void and the new minimum wage
must be paid. (Barrentine v. Arkansas-Best Freight System, 450 U.S. 728 (1981))
31.4.3 Hours of work and conditions of labor. The maximum number of hours of work and the
standard conditions fixed by the Industrial Welfare Commission shall be the maximum hours and
standard conditions of labor for employees. Employment of any employee for longer hours than
those fixed by the IWC order or under conditions of labor prohibited by the order is unlawful. (Labor
Code § 1198)
31.4.4 Timely payment of wages. Labor Code § 219 prohibits private parties from contravening any portion
of the Labor Code which regulates the payment of wages.
31.5 Sufficient Consideration To Support A Contract. There may be mutual promises existing between
parties, but in order for a promise to be “enforceable,” there must be consideration. Every executory
contract requires sufficient consideration (Civil Code § 1550 ).
31.5.1 “Consideration” may be either a benefit conferred or agreed to be conferred upon the promisor or
some other person, or a detriment suffered or agreed to be suffered by the promisee or some other
person. (Civil Code §§ 1605, 1606)
31.5.1.1 Historically, consideration was defined as a legal benefit received by the promisor or a legal
detriment incurred by the promisee. Legal detriment was defined as doing (or promising to do) that
which one is not obligated to do, or forbearing (or promising to forebear) from doing that which one
has a legal right to do .

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31.5.1.2 In traditional unilateral contracts, consideration may include payment of money, transfer of
property, and performance of work in reliance of promise to pay.
31.5.1.3 Example: Continuing services of an employee is consideration for an employer’s promise to pay a
pension in the future. Hunter v. Sparling (1948) 87 Cal.App.2d 711, 722, 197 P.2d 807, 814.
31.5.1.4 Example: After giving oral notice of intent to quit, employer enacted regulations for generous
severance and other benefits. Because of change, employee stayed for additional one and one -half
months and was terminated. Since the purpose of the benefits was to induce employees to stay (and
was not simply offers of gifts), it constituted a unilateral contract offer which employee accepted by
continuing employment. (Chinn v. China Nat. Aviation Corp. (1955) 138 Cal.App.2d 98, 291 P.2d
91 - court found that such benefits are designed to make employees content, cause employees to
forego efforts to seek other employment, avoids labor turnover, and are an advantage to both
employer and employee).
31.5.1.5 Example: Where the employer pays and the employee accepts a fixed salary, the normal implication
is that all services are compensated for thereby; but where the parties agree that an additional amount
shall be paid, such agreement, if supported by consideration consisting of either the employee's entry
upon the service, or his continuing therein when not otherwise bound to continue, is enforceable.
Sabatini v. Hensley (1958) 161 Cal.App.2d 172, 175-176.
31.5.1.6 In bilateral contracts, the promise of one party is consideration for that of the other party (or third
person). (Restatement 2d, Contracts, § 75)
31.5.1.7 The modern approach is that consideration is any performance which is “bargained for.” A bargain
is the exchange on which each party views his promise or performance as the price of the other’s
promise or performance. (See, Restatement 2d, Contracts, §§ 72, 75) Generally, there is no
requirement that the “value” of the consideration be in equal value to the promise or performance
received in return, leaving it to the parties to judge the desirability of the bargain.
31.5.1.8 A gross inequality between the respective promises (or performance), however, may be evidence of
fraud, duress, unconscionability or mistake. (Restatement 2d, Contracts § 79, commente). However,
since such inequality is only evidence of unconscionability, it does not directly establish a lack of
consideration. See Section 32.2, below, for discussion of voiding a contract or terms therein for
unconscionability.
31.5.1.9 A written instrument (more than an informal letter) is presumptive evidence of consideration.
(Civil Code § 1614). The presumption is, however, rebuttable.
31.5.1 .10 Insufficient consideration can also be a promise which is void due to illegality (Civil Code § 1607).
See Section 31.2.15,
above, for discussion of a lawful object of a contract.

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31.6 Promissory Estoppel. A doctrine based in equity which may, in limited circumstances, be a
“substitute” for consideration, i.e., applied where there is a lack of consideration, is promissory
estoppel. A promise which the promisor should reasonably expect to induce action or forbearance
on the part of the promisee or third person and which does induce such action or forbearance is
binding if injustice can be avoided only by enforcement of the promise. (Restatement 2d, Contracts,
§ 90(1)).
31.6.1.1 Promissory estoppel is inapplicable if there were neither a clear promise nor any reliance and
substantial detriment o n the part of the promisee. ( Southern California Acoustics Co. v. Holder
(1969) 71 Cal.2d 719, 723, 79 Cal.Rptr. 319, 323 - no promise by general contractor who used
subcontractor’s bid but did not subsequently accept subcontractor’s bid; Blatt v. University of So.
Calif. (1970) 5 Cal.App.3d 935, 943, 85 Cal.Rptr. 601 - detrimental reliance)
Consideration which is not generally sufficient includes: acts or forbearance p reviously performed,
i.e., “past consideration” ( Simmons v. Calif. Institute of Technology (1949) 34 Cal.2d 264, 272,
209 P.2d 581, 585 - past employment of promisor not consideration for subsequent promise);
promise to perform an existing legal duty under contract under statute (Civil Code § 1605); and a
compromise of a wholly invalid claim ( Orange County Foundation v. Irvine Co. (1983) 139
Cal.App.3d 195, 200, 188 Cal.Rptr. 552, 555).
31.6.1.3 In the employment context, illustrations of insufficient consideration of a preexisting legal
(contractual) duty owed to the promisee cover two kinds of cases: (1) where a person agrees to pay
more for a performance already owed to him, and (2) where a person agrees to take less on a debt
already owed to him.

31.6.1.2

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31.6.1.4 Example: A (employer) agrees to pay B (employee) more money for a performance on a specific job
which is already owed to A, for which B previously promised to perform at a lower rate. Under the
general rule, there is no consideration for the subsequent promise to pay a higher rate and such
promise would be unenforceable. However, a slight difference between the duties which had been
originally promised and the actual duties for the specific job to be performed would be sufficient
consideration making the promise to pay the higher rate enforceable.
31.6.1.5 Example: A (employer) promised to pay B (employee) $10.00 per hour. After B works 8 hours, A
offers to pay B only $50.00. Aside from being void under the provisions of Labor Code § 206.5,
there is no consideration due to the preexisting contractual duty, and thus, B’s agreement to accept
the lower rate would be unenforceable. Also, since B already performed prior to the subsequent
offer, his performance constituted “past consideration” which is also insufficient consideration
.
31.6.1.6 Although there is no consideration for the compromise of a wholly invalid claim, consideration may
be sufficient in a compromise of a claim (debt) where the claim is in fact doubtful because of
uncertainty as to the facts or law, or, where the forbearing (compromising) party believes that the
claim or defense may be fairly determined to be valid. (Restatement 2d, Contracts, § 74(1))
31.6.1.7 A revived or reaffirmed promise to pay a debt otherwise barred by the statute of limitations or a
bankruptcy is sufficient consideration and is enforceable since the promisor is undertaking a new
promise to pay upon which he is not otherwise obligated due to the statute of limitations or
bankruptcy.
31.6.1.8 A valid release supported by new consideration given to th e debtor by the creditor effectively
extinguishes an obligation; or if the release is made in writing it may be with or without new
consideration. (Civil Code § 1541) The execution of DLSE Form 51 and the acceptance of the sum
set out in the release extinguishes the claimant’s wage claim(s) and forecloses the claimant’s right
to bring any other action to recover any part of the amount claimed. (But see, Labor Code § 206.5
at Section 7.2 of this Manual)
31.7 Accord And Satisfaction: An accord is an (independent) agreement to accept something different
from or less than that which the person agreeing to accept (creditor) is entitled in order to extinguish
an obligation. (Civil Code § 1521) Acceptance, by the creditor, of the consideration of an accord
extinguishes the obligation, and is called satisfaction. (Civil Code § 1523)

31.7.1 Payment of uncontested amounts. Generally, in the case of a dispute over the total money due on a
contract and it is conceded by the parties that part of the money is due, the debtor may pay, without
condition, the amount conceded to be due, leaving the other party all remedies to which he might
otherwise be entitled as to any balance claimed. (Civil Code § 1525) However, with respect to
payment of wages, “[I]n case of a dispute over wages, the employer shall pay, without condition and
within the time set by this article, all wages, or parts thereof, conceded by him to be due, leaving the
employee all remedies he might otherwise be entitled to as to any balance claimed.” (Labor Code §
206(a ))

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31.7.2 Labor Code § 206.5 , however, prohibits an employer from requiring execution of a release of any
claim or right on account of wages due, or to become due, or made as an advance on wages to be
earned, unless payment of such wages has been made; and further, provides that any such release in
violation of the above provisions is null and void as between the employer and the employee. (See
Section 7.2 of this Manual)
31.7.2.1 Restrictive Endorsement on payment by check or draft. In the case of a disputed claim, payment by
a check or draft which contains a restrictive endorsement (“payment in full”) does not constitute an
accord and satisfaction if either (1) the creditor (employee) protests against acceptin g the tender in
full payment by striking out or deleting the restrictive notation, or (2) the acceptance of the check or
draft was inadvertent or without knowledge of the notation. (Civil Code § 1526) Acceptance of the
check by the creditor (employee ) will constitute an accord and satisfaction when the check is issued
pursuant to or in conjunction with a release. A thorough discussion of the effect of the California
statute is found in a case decided by the federal courts: Red Alarm v. Waycrosse, Inc. , 47 F.3d 999
(9th Cir.1995)

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32 CONTRACT INTERPRETATION - GENERALLY
32.1 Generally, the language of a contract is to govern its interpretation if the language is clear and
explicit and does not involve an absurdity. (Civil Code § 1638) For the purpose of ascertaining the
intention of the parties to a contract where the intent is otherwise doubtful or uncertain, the rules of
interpretation provided in Civil Code §§ 1635-1663 will be applied. (Civil Code § 1637).
Additionally, however, courts will sometimes apply special rules, e.g., interpretation against
forfeiture (See Sections 34.4 and 34.5 of this Manual for discussion on forfeiture)
32.1.1 The words of a contract are to be given their ordinary and popular sense, rather than their strict legal
meaning unless the words are used by the parties in a technical sense or if a special meaning is given
to them by usage. (Civil Code § 1644) Technical words are to be interpreted as usually understood
by persons in the profession or business to which they relate, unless clearly used in a different sense.
(Civil Code § 1645)
32.1.2 All applicable laws in existence when the agreement is made become a part of the contract as fully
as if incorporated therein. (Mulder v. Casho (1964) 61 Cal.2d 633, 637; 39 Cal.Rptr. 705) stands for
the proposition that the applicable statute is an “implied- in-law” term in the contract and cannot be
waived or defeated by agreement of parties; Lockheed Aircraft v. Superior Court (1946) 28 Cal.2d
481, 171 P.2d 21: a contract of employment is deemed to include applicable provisions of the Labor
Code.
32.1.3 Inconsistencies. Where general and specific provisions are inconsistent, the specific provision will
control (Code of Civil Procedure § 1859) However, the main purpose of the parties is to be given
effect and words which are wholly inconsistent with its nature, or with the main intention of the
parties are to be rejected. (Civil Code § 1653)
32.1.4 Usage Or Custom may be utilized to explain the meaning or imply terms where no contrary intent
appears from the terms of the contract. (Civil Code § 1655)
32.1.5 Where ambiguous, extrinsic (external of the contract) evidence may be used to show the meaning
of the term “compensation for services.” (Ranier Credit v. Western Reliance (1985) 171 Cal.App.3d
255; 217 Cal.Rptr. 291)
32.1.6 In cases of ambiguity not resolved under the rules of interpretation, the language of a contract should
be interpreted most strongly against the party who caused the uncertainty to exist. (Civil Code
§ 1654) The rule applies with particular force in the case of a contract of adhesion. (Graham v.
Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 819)

32.2 Contract Interpretation: Adhesion Contracts, Unconscionability. Contracts of adhesion are
contracts which are drafted by one party usually reduced to a standardized form which uses
“boilerplate” language and is presented to the other party without any real opportunity for
negotiation. Such contracts are not automatically void, voidable, or unconscionable, but are subject
to greater scrutiny in interpretation and enforcement in order to modify or nullify harsh terms which
defeat the reasonable expectations of the parties. (See, Wheeler v. St. Joseph Hospital (1976) 63
Cal.App.3d 345, 356, 133 Cal.Rptr. 775,
783)
32.2.1 In Graham v. Scissor -Tail, Inc. (1981) 28 Cal.3d 807, 820, 171 Cal.Rptr.604, 612, the Supreme
Court stated that there were two judicially imposed limitations on the enforcement of adhesion
contracts or provisions therein.

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32.2.2 First, an adhesion contract which does not fall within the reasonable expectations of the weaker or
“adhering” party is not enforceable against him.
32.2.2.1 Example: Insurance company refused to defend insured in civil case for willful assault due to
exclusion in policy for defense of actions for damages caused intentionally or at the direction of the
insured. Judgment was obtained by injured party against the insured. The insurance company is
liable for cost of defense and amount of judgment rendered against insured on grounds of adhesion
contract since policy deemed to require defense in suit which potentially seeks damages covered by
the policy. No one could tell until the suit was over whether the liability is covered or not (e.g., the
injured party may only prove negligence which is covered by the policy ). Gray v. Zurich Insurance
Co. (1966) 65 Cal.2d 263, 54 Cal.Rptr. 104.*
32.2.3 Second, a principle of equity applicable to all contracts generally - is that a contract or provision,
even if consistent with the reasonable expectations of the parties will be denied enforcement, of it
is unduly oppressive or “unconscionable.” Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 819,
171 Cal.Rptr. 604 .
32.2.3.1 Example: In Graham, a concert promoter was required to sign (artist’s) union form contract which
designated union as sole arbitrator of all disputes. The court held the arbitration provision
unconscionable as a matter of law since the provision did not achieve minimum levels of integrity
required of a contractually structured substitute for judicial proceedings. The court found that the
designation of one whose interest is closely al lied with one of the parties as the arbitrator (not
neutral) was to such extent illusory. In Graham v. Scissor -Tail, Inc., the Supreme Court provided
that among the factors which would have a profound impact on the reasonable expectations of the
“adhering party” is the extent to which the contract in question may be said to be one affecting the
public interest. Since the payment of wages is a matter affecting the public interest, a provision on
an adhesion contract which adversely affects, impedes, or contravenes the prompt payment of wages
would be suspect. (See also, Labor Code § 219 which provides that the provisions of § 200 et seq.
cannot, in any way, be contravened or set aside by private agreement whether written, oral, or
implied)
32.2.4 Legislation Regarding Unconscionable Provisions In Contracts. Civil Code § 1670.5 applicable to
actions regarding unconscionable contracts or provisions therein which are so one -sided. If a court
determines, as a matter of law, that a contract or provision therei n is found to have been
unconscionable at the time it was made, the court may refuse to enforce the contract, or it may
enforce the remainder of the contract without the unconscionable clause, or it may limit the
application of the unconscionable provision as to avoid any unconscionable result. (Civil Code §
1670.5)
32.2.4.1 More recently, an attempt to harmonize the doctrine of unconscionability adopted in Civil Code §
1670.5 (based upon the UCC doctrine) and Graham v. Scissor -Tail has provided that the
unconscionability doctrine has both “procedural” and “substantive” elements. Both elements must
be present in order for the doctrine to apply. Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519,
60 Cal.Rptr.2d 138.

*The Gray case has been distinguished by many cases but is basically still good law.

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32.2.4.2 Procedural element. Focuses on two factors - “oppression” and “surprise.” Oppression arises
from an inequality of bargaining power which results in no real negotiation and the absence of
meaningful choice. Surprise involves the extent to which the supposedly agreed upon terms of
the bargain are hidden in the form drafted by the party seeking to enforce the disputed terms.
32.2.4.3 Substantive element. Some cases focus on whether the terms of the contract are so harsh or one-
sided as to “shock the conscience”; other cases focus on whether the terms are overly harsh and
not justified by the circumstances. ( Cf. American Software, Inc. v. Ali (1996) 46 Cal.App.4th
1386, 54 Cal. Rptr.2d 477 and Ellis v. McKinnon Broadcasting Co. (1993) 18 Cal.App.4th 1796;
23 Cal.Rptr.2d 80.)
32.2.5 Illustrations Of Unconscionability.
32.2.5.1 A binding arbitration clause in employment agreement of vice-president which restricts remedies
to contract damages is unconscionable within meaning of Civil Code § 1670.5. Stirlen v.
Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 60 Cal.Rptr.2d 138.
32.2.5.2 An arbitration clause in consumer loan contracts made in California which requires that
participatory hearings to resolve disputes be held in Minnesota, and which requires advance
payment of substantial hearing fees is unconscionable. Patterson v. ITT Consumer Financial
(1993) 14 Cal.App.4th 1659, 18 Cal.Rptr.2d 563.
32.3 Contract Interpretations – Forfeitures. Contracts which contain forfeitures are not favored by the
courts, and if an agreement can be reasonably interpreted to avoid it, the court should do so.
Universal Sales Corporation, Ltd. v. California Press Mfg. Co. (1942) 20 Cal.2d 751, 128 P.2d
665.
32.3.1 A condition involving a forfeiture must be strictly interpreted against the party whose benefit it
was created. (Civil Code § 1442.)
32.3. 2 Neither law nor equity looks with favor upon forfeitures and will not enforce them unless the
right thereto is clear and certain. Unless no other interpretation is reasonably possible, a contract
should not be construed so as to effect or provide for a forfeiture. Milovich v. City of Los Angeles
(1941) 42 Cal.App.2d 364, 373-374, 108 P.2d 960, 965.
32.4 Use Of Good Faith And Fair Dealing. An employer having the unilateral right to modify an
employment contract would be required to use good faith and fair dealing when exercising its
discretion to modify the contract of employment. (Perdue v. Crocker National Bank (1985) 38
Cal.3d 913)
32.4.1 In the case of Hansen v. E. M. Hundley Hardware (1963) 220 Cal.App.2d 409, wherein the
employer did not require the customer to pay, the selling salesman was still entitled to recover
the commission. The court applied common law contract principles and held that the implied
covenant of good faith and fair dealing imposes upon the employer the duty not to do anything
which would deprive the employee of the benefit of the contract.

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33 CONTRACTS, IMPLIED-IN-LAW (QUASI-CONTRACTS)
33.1 Under rare circumstances, courts will apply equitable principles in order to prevent inequity or
unjust enrichment by one party at the expense of another. This may occur where there is an
insufficient basis for enforcing an agreement under ordinary contract principles.
33.1.1 Under a special equity doctrine, the law implies a promise to pay for benefits or services rendered
even though no such promise was ever made or intended. McCall v. Superior Court (1934) 1
Cal.2d 527, 531, 36 P.2d 642; Kossian v. American Nat. Ins. Co. (1967) 254
Cal.App.2d 647, 651, 62 Cal.Rptr. 255. These implied in -law contracts, also called quasi -
contracts, are distinct from true contracts since they lack an essential element such as consent,
either express or implied. Additionally, unlike the contractual remedy for damages, e.g., wages,
a quasi-contractual remedy is in the nature of restitution, or quantum meriut, for the reasonable
value of the benefit or services.
33.1.2 A benefit to another is ordinarily required (cf., Unilogic v. Burroughs Corp. (1992) 10
Cal.App.4th 612, 627, 12 Cal.Rptr.2d 741). However, the mere fact that a person’s acts benefit
another is not itself sufficient to require the other to make restitution. Marina Tenants Association
v. Deauville Marina Development Co. (1986) 181 Cal.App.3d 122, 134, 226 Cal.Rptr. 321.
33.1.3 Ordinarily, it must appear that the benefits were conferred by mistake, fraud, coercion, or
request, since these factors can make the benefit unjust. Conversely, in the absence of these
factors, although there is enrichment, it may not be unjust. Dinosaur Development v. White
(1989) 216 Cal.App.3d 1310, 1316, 265 Cal.Rptr. 525.
33.1.4 Quasi-contractual recovery for services rendered under the quasi-contractual theory is restricted.
Some fault on the part of the defendant is necessary to make him liable for the value of the
(un)wanted services. For example, fraud or innocent material misrepresentation, or acceptance
of the services after knowledge of the mistake without informing the plaintiff of it may be
sufficient to invoke the doctrine. See Wal-Noon Corp. V. Hill (1975) 45 Cal.App.3d 605, 611,
119 Cal.Rptr. 646.
33.1.5 When encountering the terms and concepts discussed above, both careful examination of the
facts and consultation with the assigned attorney are necessary.

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34 COMMISSION WAGE PROVISIONS.
34.1 Definition Of “Commission Wages”. The term “commission wages” has been defined in the case
of Keyes Motors, Inc. v. DLSE (1988) 197 Cal.App .3d 557; 242 Cal.Rptr. 873, which held that
commissions arise from the sale of a product, not the making of a product or the rendering of a
service. The court further held that in order to be a commission, the compensation must be a
percentage of the price of the product or service which is sold. (See also, O.L. 1983.11.25; see also
Section 2.5.4 of this Manual.) Alternatively, a commission may be based proportionally on the
number of products or services sold. ( See Areso v. Car Max (2011) 195 Cal.App.4th 996 (fixed
uniform payment for each vehicle sold constituted “commissions”). The California Supreme Court
in Ramirez v. Yosemite Water Co. , Inc. (1999) 20 Cal.4th 785, r eiterated that the definition of
commissions in Section 204.1 applies to all employees receiving commissions. Labor Code §2751
requires that commission plans be in writing and set forth the method by which the commissions
shall be computed and paid. The employer is required to give a signed copy of the contract to every
employee who is a party to the contract and obtain a signed receipt for the contract from each
employee.
34.1.1 This chapter is limited to addressing certain salient legal matters pertaining to compensation
arrangements involving commissions. The multitude of commission pl ans precludes an exhaustive
treatment of the subject, and the failure to address various matters germane to commission
arrangements is not intended to be and should not be construed as exclusionary.
34.1.2 Variations Sometimes Confused With Commission Plans. A plan which simply relies upon a
“percentage” of some sum such as the cost of the goods sold or the services rendered by an
establishment does not constitute a “commission wage”; the worker receiving the commission must
be principally involved in selling the goods or the services upon which the commission is measured.
Many of the plans which simply equate “commission” with “percentage” are, if carefully reviewed,
revealed to be nothing more than piece rate plans. Other plans which call for the employees to share
in a percentage of the gross (or net) profits of the store are usually found to be nothing more than a
hybrid hourly pay plan whereby the hourly rate is based on a percentage of the profit and may, for
that reason, vary from week to week. These pay plans, based on percentages, are not per se, illegal*
34.1.3 Bonus Plans Distinguished. Bonuses are sometimes confused with commission wages. In order to
qualify as a “commission”, the scheme must meet the requirements of a “commission wage” as set
out in the Keyes Motors case. Bonuses are not predicated upon the price of a particular product or
service, but are usually based on reaching a minimum amount of sales or making a minimum number
of pieces, and can be distinguished from a commission by that fact. Many times a bonus is paid to
individuals who are not engaged in sales at all and is also, distinguishable by that fact.
34.1.4 Commission Pool Arrangements . Arrangements where the commission payable to the worker is
based upon a “pool” arrangement whereby a group of employees, all of whom are engaged
principally in selling the products or services upon which the commission percentage is based, share
in the “pool” constitute a valid commission plan.

*Any pay plan which i s based upon profit should be reviewed within th e parameters set out by the court in
the case of Quillian v. Lion Oil (1979) 96 Cal.App.3d 156; 157 Cal.Rptr. 740, which disallows certain
deductions from employee's wages for losses considered to be in the regular course of business.

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(But see, Hudgins v. Neiman Marcus (1995) 34 Cal.App.4th 1109, which discusses illegal
deductions from such plans.)
34.2 Draws Against Commissions. If an employee receives a draw against commissions to be earned at
a future date, the “draw” must be equal at least to the minimum wage and overtime due the employee
for each pay period (unless the employee is exempt, i.e., primarily engaged in outside sa les).
Although the draw may be reconciled ag ainst earned commissions at an agreed date or when the
commission is earned, the draw is considered the basic wage and is due for each period the employee
works even though commissions do not equal or exceed the amount of the draws, unless there is a
specific agreement to the contrary. ( Agnew v. Cameron (1967) 247 Cal.App.2d 619; 55 Cal.Rptr.
733.) Advances may only be recovered at termination if there is a specific written agreement to
that effect and only to the extent that the advances exceed the minimum wage and overtime
requirements. (Agnew, supra, and IWC Orders; see also O.L. 1987.03.03, 1991.05.0 7)
34.2.1 Reconciliation Of Draws A gainst Commissions. Reconciliation of draws against commissions are
to be construed according to the contract of employment but must be completed within a reasonable
time depending upon the transactions involved.

34.3 Computation Of Commissions. Commission computation is based upon the contract between the
employer and the employee. The commission may be based on either gross sales figures or net sales
figures. As discussed below, certain criteria cannot be considered when reaching the “net” sales
figures. If the element upon which the deduction from the gross sales is based is predicated upon a
cost which is attributable to the employer’s cost of doing business, the element may not be used.
34.3.1 Computation of commissions frequently relies on such criteria as the date the goods are delivered
or the payment is received. Sometimes, the commission of the selling salesperson is subject to
reconciliation and chargebacks if the goods are returned. If these conditions are clear and
unambiguous, they may be utilized in computing the paymen t of the comm issions. (O.L.
1993.03.08 )
34.4 Commission Plans Which Provide Forfeitures. Hudgins v. Neiman Marcus Group, Inc. (1995) 34
Cal.App.4th 1109, 41Cal.Rptr2d 46, reviewed a commission plan which provided that the
salesperson’s commission was based on a calculation of a percentage of the individual’s gross sales
less returns, taxes, gift wrap and alterations. The court found nothing wrong with the commission
plan until it was explained that “Returns consisted of all merchandise originally sold by the
salesperson and returned during the pay period with adequate documentation to ascertain the identity
of the original salesperson, plus the ‘prorated unidentified returns’ received back by Neiman Marcus
in the salesperson’s ‘home base’”. It was the “prorated unidentified returns” which the court found
were a forfeiture. (O.L. 1990.10.0 1)

34.4.1 Commission Plans May Not Involve Calculation Which Includes Costs Attributable To Doing
Business. “Unidentified returns” included, among other categories, all returns for which the absence
of identification could have been the result of customer negligence or misconduct;

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returns for which the original salesperson can be identified but had not been employed by Neiman
Marcus in the past six months; returns of merchandise that was purchased at another Neiman Marcus
store where the salesperson cannot be identified, and returns on defective merchandise, customer
abuse, etc. The court held such a commission program was illegal in California, citing Kerr's
Catering v. DIR (1962) 57 Cal.2d 319; 19 Cal.Rptr. 492 and Quillian v. Lion Oil (1979) 96
Cal.App.3d 156; 157 Cal.Rptr. 740. (see also O.L .
1990.10.01 , 1993.02.22 )
34.4.2 Commission Plans May Not Pro vide For Deductions From Wages Earned. The Neiman Marcus
court held that Labor Code § 221 has been interpreted by the California courts to prohibit deductions
from an employee’s wages for cash shortages, breakage, loss of equipment, and other business losses
that may result from the employee’s simple negligence. The court also cited Barnhill v. Saunders
(1981) 125 Cal.App.3d 1; 177 Cal.Rptr. 803, which held that deductions of this nature would, as the
DLSE has long held, “unjustifiably provide employers with self-help remedies that are not available
to other creditors.” Such deductions, the court further noted, contravene the public policy expressed
in sections 400 through 410 of the Labor Code.
34.5 Commission Forfeitures Found To Be Illegal. Dana Perfumes v. Mullica (9th Cir.1959) 268 F.2d
936. In this case th
e contract provided no commissions for “sales or shipments on orders”
subsequent to termination. The employee made large sales in the fall for Christmas and the employer
terminated him before delivery. The contract was prepared by the employer and, thus, was most
strictly construed against the employer. The court found that the commissions were due. An
ambiguous contractual provision which an employer asserts establishes a partial or total forfeiture
of post-termination commissions will be strictly interpreted against the forfeiture.(Cal. Civ. Code
Section 1442.) Two recent California cases have considered challenges to explicit post -
termination forfeiture provisions in commission agreements on the ground of unconscionability. A
holding of unconscionability requires findings of both procedural and substantive unfairness. Ellis
v. McKinnon Broadcasting Co. (1993) 18 Cal. App.4th 1796,1803- 04. In McKinnon the court
found procedural unconscionability where the employer did not present the written commission
agreement to Ellis until 2 weeks after he had commenced employment and after he had moved in
reliance on an oral offer of employment which did not mention the post -termination forfeiture
provision. The McKinnon court also found substantive unconscionability on the basis that the
amount of earnings forfeited by Ellis under the provision indicated it to be commercially
unreasonable. By contrast, in American Software Inc. v. Ali (1996) 46 Cal.App.4th 1386, no
procedural unconscionability was found where: (1) the proposed written commission agreement was
presented to Ali prior to her acceptance of employment;(2) Ali had the agreement reviewed by an
attorney; and (3) Ali successfully renegotiated several terms of the proposed agreement, but did
not propose modification to the forfeiture provision of which she was aware of at the time she
signed the negotiated agreement. The American Software court, under these circumstances, found
that the forfeiture of all commissions 30 days after termination did not “shock the conscience” and
held that the agreement was not unconscionable*.

*The cases cited (American Software and Ellis v. McKinnon) appea r to be irreconcilable but, in fact,
turn on the question of
what each of the courts viewed as unconscionable.

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34.6 Common Law Of Contracts Also Supports Payment Of Commission. There are a number of
contract cases based on the common law as adopted in California which hold that if the employee is
the procuring cause of the sale, he or she is entitled to the commissions. The term, “He who shakes
the tree is the one entitled to gather the fruit” is used to describe the concept. (See Willison v.
Turner Resilient Floors (1949) 89 Cal.App.2d 589; 201 P.2d 406) The court in Wise v. Reeve
Electronics, Inc. (1960) 183 Cal.App.2d 4; 6 Cal.Rptr. 587, held that where the employee was the
procuring cause of a sale, he is entitled to the commission “irrespective of the fact that the principal
himself, or through others, may have intervened.”
34.7 Commissions Where Employee Terminates. Generally, if the contract for the commissions is clear
and unambiguous and there are substantial duties which must be performed in order to complete the
sale, the employee who voluntarily terminates without accomplishing those tasks is not e ntitled to
recover. ( Hudgins v. Neiman Marcus Group, Inc. , supra, 34 Cal.App.4th 1109, 1120 ) Note that
non-recovery is limited to cases involving questions of when a commission has been earned by a
terminated employee on a “sale” transaction that is not an instantaneous event (as in the context of
retail sales) but, rather, is “completed” over a relatively long period of time during which the sales
agent may be required to perform additional services for the customer. ( Hudgins v. Neiman Marcus
Group, Inc., supra, 34 Cal.App.4th 1109, 1121)
34.8 Commissions Where Employer Terminates Employee. Where the termination is not a quit, but a
discharge, the employee has been prevented from completing the duties and may be able to recover
all or a pro rata share of the commissions. (O .L. 1993.03.0 8)
34.8.1 The use of common law doctrines such as “prevention” and “impossibility of performance”
may be asserted by any employee as a basis for recovering commissions despite having failed to
perform all of the conditions precedent otherwise required.
34.9 Payment Of Commissions Upon Termination Of Employment. A commission is “earned” when the
employee has perfected the right to payment; that is, when all of the legal conditions precedent have
been met. The provisions of any contract notwithstanding, California courts will not enforce
unlawful or unconscionable terms and will construe any ambiguities against the person who wrote
the contract (usually the employer) to avoid a forfeiture. (See O.L.
1999.01.0 9)

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35 BONUSES.
35.1 Bonus Defined. A bonus is money promised to an employee in addition to the salary, commission
or hourly rate usually due as compensation. The word has been variously defined as “An addition to
salary or wages normally paid for extraordinary work. An inducement to employees to procure
efficient and faithful service.” Duffy Bros. v. Bing& Bing, 217 App.Div. 10, 215 N.Y.S. 755, 758
(1926). Bonuses may be in the form of a gratuity where there is no promise for their payment; or
they may be required payment where a promise is made that a bonus will be paid in return for a
specific result.
35.2 Voluntary Termination Before Vesting Where Bonus Is Consideration For Continued
Employment. An employee who voluntarily leaves his employment before the bonus calculation
date is not entitled to receive it if the employer has expressly qualified its promise of a bonus on a
requirement of continued employment. Lucien v. All States Trucking (1981) 116 Cal.App.3d 972,
975. This has been the rule ever since Peterson v. California Shipbuil ding Corp. (1947) 80
Cal.App.2d 827, 831, 183 P.2d 56. The California rule is in accord with the prevailing view that
where a definite bonus or profit-sharing plan has been established and forms part of the employment
contract, the employee is not entitled to share in the proceeds where he leaves the employment
voluntarily prior to vesting. (See cases collected at 81 A.L.R.2d 1062, at p. 1082, et seq. ; see also,
O.L.
1993.01.1 9)
35.3 If Employer Has Not Conditioned Bonus On Employment At Time Of Payment. Where the promise
of a bonus is not expressly conditioned on continued employment an employee who voluntarily
leaves employment may be entitled to the bonus if other applicable condi tions have been satisfied.
Thus, in Hill v. Kaiser Aetna (1982) 130 Cal.App.3d 188, an employee who resigned on January 3,
1978, was held to be vested in his right to a bonus for calendar year 1977 where: (1) the bonus plan
did not expressly require continued employment, and (2) the bonus was an inducement for continued
employment. Id., at 196.
35.4 The Promise Of A Bonus Becomes A Unilateral Contract. The California courts ( Lucien v. All
States Trucking , supra) have adopted the view explained by the Oregon courts in Walker v.
American Optical Corporation (Or.1973) 509 P.2d 439, 441: that a specific bonus plan normally
becomes binding as a unilateral contract when the employee begins performance, in the sense that
the plan then cannot be revoked by the employer. (See discussion of unilateral contract at Section
31.2.10.1 of this Manual)
35.4.1 In Chinn v. China Nat. Aviation Corp. (1955) 138 Cal.App.2d 98, 291 P.2d 91 the court held that if
the bonus is part of the inducement for the initial or continuing employment (see also Sabatini v.
Hensley (1958) 161 Cal.App.2d 172, 326 P.2d 622; Hunter v. Ryan (1930) 109 Cal.App. 736, 293
P. 825) and where the employer, in announcing the plan, did not expressly qualify his promise to
pay on any requirement of continued employment, the bonus is earned by the employee remaining
in the employment of the employer.

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35.4.2 Illegal Conditions. Ware v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1972) 24 Cal.App.3d 35,
100 Cal.Rptr. 791, involved a profit -sharing plan containing a provision that an employee who
voluntarily terminated his employment and went to work for a competitor forfeited his rights to
benefits under the plan. The court held that the forfeiture clause was invalid as it was contrary to the
strong public policy against contracts by which anyone is restrained from engaging in a lawful
profession, trade or business. (See Business & Professions Code § 16600)
35.4.3 Implied Contra ct For Bonus. The regular payment of the bonus in past years may ripen into an
implied contract for compensation in the absence of a specific contract. ( D.L.S.E. v. Transpacific
Transportation Co. (1979) 88 Cal.App.3d 823; cf. Simon v. Riblet Tramway Co., 8 Wash.App. 289,
505 P.2d 1291, 66 A.L.R.3d 1069, cert. den. 414 U.S. 975, 94 S.Ct. 28 9, 38 L.E d.2d 218). However,
in order to be actionable, there must be some objective criteria upon which the bonus is based.
35.4.4 Discretionary Bonus. Bonuses which are completely discretionary, based on no objective criteria
and are not routine, would not, of course, give rise to an implied bonus contract.
35.5 Termination Of The Employment By The Employer. Common law contract theories will not
allow one party to the contract to prevent the other party from completing the contract. If the
employee is discharged before completion of all of the terms of the bonus agreement, and there is
not valid cause, based on conduct of the employee, for the discharge, the employee may be entitled
to recover at least a pro-rata share of the promised bonus. (O.L. 1987.06.0 3)
35.6 Criteria Used To Establish Bonus. As discussed in Sections 17.3.3, 17.3.4 of this Manual, the courts
have held that shortages or other ingredients not within the control of the employee and which are
usually considered a cost of doing business may not be deducted when calculating a bonus. (Quillian
v. Lion Oil (1979) 96 Cal.App.3d 156; 157 Cal.Rptr. 740)
Calculation Of “Regular Rate Of Pay” Where Bonus Is Involved. When calculating the regular rate
of pay for purposes of overtime calculation under the IWC Orders, non -discretionary bonuses must
be calculated into the formula. This is discussed in detail in the Section of this Manual dealing with
calculation of regular rate of pay. (See Section 49 of this Manual; see also O.L . 1991.03.06 )

35.7

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36 EFFECT OF ARBITRATION AGREEMENTS.
36.1 California Law. Section 229 of the Labor Code addresses the effect of arbitration agreements on
the right of individuals to invoke state law remedies to collect unpaid wages due under state law.
Section 229 provides:
Actions to enforce the provisions of this article for the collection of due and unpaid wages
claimed by an indivi
dual may be maintained without regard to the existence of any private
agreement to arbitrate. This section shall not ap ply t o claims involving any dispute
concerning the i nterpretation or application of any collectiv e bargaining agreemen t
containing such an arbitration agreement.
36.2 Collective Bargaining Agreements With Arbitration Clauses: The second sentence of section
229 takes statut
ory cognizance of the collective bargaining process by explicitly recognizing that
in certain contexts the existence of a collective bargaining agreement with an arbitration clause
will qualify an employee's right to insist upon a judicial or administrative forum for the resolution
of a claim for unpaid wages. The exact scope of that restriction on the right to access the Labor
Commissioner’s office or the courts was delineated by the United States Supreme Co urt in
Livadas v. Bradshaw (1994) 512 U. S. 107 (“Livadas”).

36.2.1 In Livadas, the Supreme Court held that, as a matter of federal law, where an employee covered
by a collective bargaining agreement with an arbitration clause invokes the jurisdiction of the
Labor Commissioner to enforce a state law claim for wages, the Commissioner may not withhold
the jurisdiction the Commissioner would otherwise exercise in the case of non-union employees
unless the claim is preempted by federal law under the provisions of Section 301 of the federal
Labor Management Relations Act (“LMRA”). The Court thus construed the abstention policy of
the second sentence of sentence 229 as coextensive with the grounds for preemption under
LMRA
.
36.2.2 In the aftermath of Livadas, and to implement its directives, the Labor Commissioner agreed to
a published consent decree of the United States District Court for the Northern District of
California, which sets out the procedure to be followed by the Commissioner in determining
whether preemption under LMRA §301 deprives the Labor Commissioner of jurisdiction. (The
consent agreement can be found at Livadas v. Bradshaw (N.D. Cal.1994) 865 F.Supp.642). The
procedural steps are the following:

(1) Initially, applying federal precedents, the Labor Commissioner must inquire whether the
claim has its sou
rce in state law independent of the collective -bargaining agreement
(Hawaiian Airlines, Inc. v. Norris (1994) 512 U.S. 24 ; Lingle v. Norge Division of Magic
Chef, Inc. (1988) 486 U.S. 399), or whether it is grounded on the provisions of and
obligations imposed by the collective bargaining agreement ( Allis-Chalmers Corp. v. Lueck
(1985) 471 U.S. 202). In the latter eventuality, the claim is entirely preempted.
(2) Next, if the claim is based on an independent state law right, the Labor Commissioner
must ascertain wh
ether the right being asserted has an “opt out” provision (e.g. Labor Code
§ 227.3) which has been invoked by the parties pursuant to the collective bargaining process.
If so, once again there is complete preemption.

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(3) Assuming no “opt- out” provision exists or that it has not been invoked, the Labor
Commissioner
must then determine whether processing the claim will require a reference to the
collective-bargaining agreement and, if so, whether the claim can be resolved by merely
consulting the agreement to obtain undisputed information, or whether an interpretation or
application of the agreement will be require d before the claim may proceed.
36.2.2.1 As explained in the consent decree, a state law claim for waiting time penalties under Labor Code §
203 may first require interpretation of the collective bargaining agreement in order to determine the
correct rate of pay, e.g., $10.00 per hour or $12.00 per hour, for purposes of accurately calculating
the amount of penalties due. In such a case, there is partial preemption and the claim will be held in
abeyance pending a grievance or arbitral resolution of the contract matter in dispute. Once the matter
has been resolved, the Commissioner will proceed to process the claim, and for that purpose will
rely on the interpretation reached through the grievance or arbitration procedure.

36.2.2.2 If, as in Livadas, simply consulting the collective -bargaining agreement will provide the needed
information, i.e., the undisputed rate of pay for purposes of calculating waiting time penalties, there
is no preemption and the Commissioner will proceed with immediate processing of the claim.
36.3 Federal Arbitration Act Restrictions. The first sentence of Labor Code § 229 provides that an
agreement to a
rbitrate statutory wage claims will not deprive an employee of the right to resort to
the Labor Commissioner or the courts to enforce a claim for unpaid wages. If, however, such an
agreement is covered by the provisions of the Federal Arbitration Act (“FAA” ), 9 U.S.C. § 1 et seq.,
then the first sentence of section 229 is preempted and cannot be invoked by the employee. ( Perry
v. Thomas (1987) 482 U.S. 483.) The FAA does not apply to contracts involving intrastate or local
activities which do not “affect” interstate commerce. (Bernhardt v. Polygraphic Co. of America
(1956) 350 U.S. 198)
36.3.1 An agreement covered by the FAA will displace the provisions of the first sentence of section 229
only if the statutory claim for unpaid wages is subject to arbitration under the terms of the arbitration
clause contained in the agreement. (Gilmer v. Interstate/ Johnson Lane Corp. (1991) 500 U.S. 20)
Thus, an examination of the arbitration clause must be made in order to determine its scope and
coverage with respect to the specific claim.
36.3.2 Federal Arbitration Act Covers Most Employment Situations. The United States Supreme Court has
determined that the FAA exclusion for “contracts of employment” (9 U.S.C. §1) extends only to
employees engaged in the transportation of goods or services across state or international boundaries.
(Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105) Thus, most employment contracts would
be subject to the provisions of the FAA and agreements to arbitrate are valid.
36.3.2.1 Revocable Arbitration Agreements. The U.S. Supreme Court has held that arbitration agreements
are enforceabl
e “save upon such grounds as exist at law or in equity for the revocation of any
contract.” Gilmer, supra; First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938; Doctor’s

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Assocs., Inc. v. Casarotto (1996) 517 U.S. 681. On remand from the Supreme Court in the Circuit
City case, the Ninth Circuit at 279 F.3d 889 (9th Cir.2002) reiterated that revocable arbitration
agreements include those which, under California state law, are found to be both
procedurally and substantively unconscionable. The Ninth Circuit cited the California Supreme
Court’s decision in Armendariz v. Foundation Health Psyhcare Services, Inc. (2000) 24 Cal.4th 83,
89.
36.3.2.2 Current Law Regarding Arbitration Clauses. Unless the arbitration agreement is found to be
both procedurally an
d substantively unconscionable and, thus, unenforceable under California law,
the federal law requires that the arbitration agreement be adhered to. Under California law, a contract
is unenforceable if it is both procedurally and substantively unconscionable. Armendariz, supra.
When assessing procedural unconscionability, the trier of fact is to consider the equi librium of
bargaining power between the parties and the extent to which the contract clearly discloses its terms.
Stirlen v. Supercuts, Inc. (19 97) 51 Cal.App.4th 1519. A determination of substantive
unconscionability, on the other hand, involves whether the terms of the contract are unduly harsh or
oppressive.
36.3.2.3 California courts have found a number of arbitration clauses to be unconsciona ble and, based
thereon, have refused to enforce such clauses:
Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83. Arbitration
clause that curtailed employee’s remedies under California Fair Employment and Housing Act,
by precluding the recovery of punitive damages, prospective damages, and attorney fees, was
contrary to public policy in that it rendered arbitral forum inadequate for the vindication of
employee’s statutory rights. In addition, fact that arbitration obligation was not mutual but
applied only to claims of employee made arbitration clause unconscionable. Agreement to
arbitrate was therefore unenforceable as unconscionable.
Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519. Binding arbitration clause in employment
agreement of
managerial employee which restricted remedies to contract damages was an
unconscionable contract within the meaning of Civil Code § 1670.5 and, therefore, void under
state law and the Federal Arbitration Act.
Patterson v. ITT Consumer Financial (1993) 14 Cal.App.4th 1659. Arbitration clause contained
in consumer loan
contracts in California which required that participatory hearings to resolve
disputes be held in Minnesota and which also required advance payment of substantial hearing
fees was unconscionable and would not be enforced.

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37 LEGAL ENTITIES
37.1 In order for an action to be prosecuted, there must be some entity aimed at by the processes of
the law, and against whom the court’s judgment is sought. Tanner v. Estate of Best (1940) 40
Cal.App.2d 442, 445. Administrative “actions” or “proceedings” are not self -executing and
require ultimate judicial action in the form of an appeal or clerk’s judgment for enforcement.
Legislative and judicial rules regarding entities and their designations are aimed at satisfying due
process considerations, and thus, ma ke it critical that the proper entity be ascertained and
designated in any action taken by an agency.
37.1.1 The various forms of business entities may be analyzed by closely examining their respective
characteristics and formalities required for formation/management. Once identified after an
examination under a specific situation, the business entity must be properly designated.
Designating a party on a pleading or citation requires naming the “legal entity” being sued
followed by an identification of the entity’s “legal capacity” to be sued.
37.1.2 “Employer”. Initially, it is important to note that there may be mo re than one entity responsible
for the payment of wages or other benefits. The broad definition of “employer” for purposes of
wage and hour law (see Section 2.2 of this M anual) potentially allows more than one person to
be liable for unpaid wages and penalties. Courts have found joint liability for unpaid wages
against multiple employers in various contexts. Real v. Driscoll Strawberry Association (9th
Cir. 1979) 603 F.2d 748, 754 (wage claim against joint employer decided under the Federal
FLSA wage and hour laws); Bonnette v. California Hea lth and Welfare Agency (9th Cir. 1983)
704 F.2d 1465, 1470 (wage claim decided in favor of employees against joint employer under
the Federal F.L.S.A. wage and hour laws); Michael Hat Farming Co. v. Agricultural Labor
Relations Bd. (1992) 4 Cal.App.4th 1037, 6 Cal.Rptr.2d 179. (“It is established that some farming
operations have multiple, joint agricultural employers”, citing Rivcom Corp. v. Agricultural
Labor Relations Bd. (1983) 34 Cal.3d 743, 768-769).
Under California law , the language of
the Industrial Welfare Commission Orders’ “employer”
definition is more protective than the federal Fair labor Standards Act definition. “The language
of the IWC’s ‘employer’ definition has the obvious utility of reaching situations in which
multiple entities contr ol different aspects of the employment relationship, as when one entity,
which hires and pays workers, places them with other entities that supervise the work.” Martinez
v. Coombs (2010) 49 Cal.4th 35, 59. In Guerrero v. Superior Court (2013) 213 Cal.App.4th
912, 945-47, the court quoted from Martinez in explaining that joint liability attaches where a
purported joint employer suffers and permits an employee to work by its knowledge of and
failure to prevent the work from occurring . “[W]hile they do not directly hire, fire or supervise
providers, through their ‘power of the purse’ and quality control authority, real parties have the
ability to prevent recipients and providers from abusing IHSS authorizations both as to the type
of servi ces performed and the hours worked. Real parties exercise effective control over the
eligibility determination and the authorization of particular services for recipients. They can
investigate instances of suspected fraud or abuse of the program and can terminate payments
where fraud is demonstrated.” Id. at 950.
In addition to joint liability under Martinez and its progeny, the Le
gislature has enacted statutes
imposing joint liability in particular circumstances. Labor Code section 2810.3 imposes joint
liability on a “client employer”. A client employer is defined as a business entity with a
workforce of 25 or more workers either directly hired or obtained from or provided by one or
more labor contractors. A labor contractor supplies, ei ther with or without a contract, a client

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employer with workers to perform labor wit hin t he client employer’s usual course of busines s
on their work site or premises. One or more labor contractors must supply more than 5 workers
to the client employer for liability to attach. Unless a specific exclusion applies, the client
employer shares all civil legal responsibility and civil liability for the payment of wages and any
failure to secure valid workers compensation insurance with the labor contractor for all workers
supplied by that labor contractor.
Labor Code section 238.5 imposes joint libility for individuals or business entities that contract
for services in the pro
perty services or long-term care industries. Such individuals or businesses
are joint and severally liable for any unpaid wages, including interest. Property servi ces is
defined as janitorial, security guard, v alet parking, landscaping and g ardening services. Long-
term care means the operation of a skilled nursing facility, intermediate care facility, congregate
living health facility, hospice facility, adult residential facility, residential care facility for
persons with chronic life-threatening illness, residential care faci lity for the elderly, continuing
care retirement community, home health agency or home care organization.
See section 37.4.1 for discussion of liability for individuals under Labor Code sections 558 ,
558.1 and 1197.1.
37.2 Sole Proprietors. This term refers to a natural person who directly owns a business and who is
responsible for its debts. All profits belong to the business owner (sole proprietor) and there
is general unlimited personal liability for losses. The business owner has total management
autho rity but may act through agents or employees. If the owner is married, community property
is also put at risk because community property is liable for the contract obligations of either
spouse incurred during the marriage. Family Code § 910(a).
37.2.1 Formalities: Except for complying with any applicable licensing requirements, no formalities
are required to engage in business as a sole proprietor. If the business is conducted under a
name which does not show the owner’s surname or implies additional owners, the owner is
required to file a certificate of fictitious business name and publish the notice as required under
Business & Professions Code § 17900, et seq. The only consequence of failing to comply is that
the owner is barred from maintaining any legal action to enforce an obligation owing to the
business until the certificate is filed. B&P § 17918.

37.2.2 Designation: A sole proprietor should be designated in an administrative action in his or her
individual name, rather than solely in the business name. A fictitious business name is not a
separate legal entity. Although it is sufficient to state only the name of the individual in a sole
proprietorship, it is common practice to show the business name following the individual’s
name:
-JOHN SMITH, individually doing business as JOHN’S BAR-B-Q, or
-JOHN SMITH, individu
ally dba JOHN’S BAR-B-Q,
-JOHN SMITH, an individual dba JOHN’S BAR-B-Q
But not, JOHN SMITH, individually and dba JOHN’S BAR-B- Q (This is not correct
because a “dba” is not a separate l
egal entity such that John Smith can be sued as a
“dba”)
37.2.3 General Partnerships. A general partnership is an association of two or more persons (or other
business entities) to carry on as co -owners in a business for profit. Corp. Code § 16202(a).
Partners can be in dividuals, other partnerships, associations, or corporations. As a legal

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entity, it can hold and convey legal title to real property in its own name. It can sue and be sued
in the partnership name. CCP § 369.5; Corp. Code § 16307(a). In most other respects, however,
it is simply a form of co-ownership by several persons who together own the business assets and
who are personally liable for all business debts. Corp. Code § 16306(a). Each partner is jointly
and severally liable for the debts and obligations of the partnership and each partner is deemed
the agent of the partnership in dealing with third persons while carrying on partnership business.
And while partners may agree to share loses or pay debts in differing proportions, third persons
are not bound by such agreements and are entitled to recover in full from anyone or more partners.
(Such partner would then be entitled to contribution or indemnification from the others) Corp.
Code § 16401(b).
37.2.4 Generally, each partner has equal right to participate in the management and control of the
business. No partner has the right to receive compensation for services performed for the
partnership (they, however, share business profits) unless the partners otherwise agree in
writing or by conduct. Corp. Code § 16401(h).
37.2.5 Formalities: No particular formalities are required to form a general partnership and may be even
based upon an oral agreement (provable under a preponderance of the evidence standard of
proof). If the partnership name does not include the name of each general partner, or whose name
suggests the existence of additional owners, it must comply with the fictitious business name
statute (B&P 17900, et seq.)
37.2.6 Designation: A&B Enterprises, a general partnership; John Smith and Joe Brown, each
individually and as general partners of A& B Enterprises, a general partnership - B&C
Transport, a general partnership dba B&C Trucking; John Smith, an individual and general
partner of B&C Transport, a general partnership Note: If only the partnership is named, the
personal assets of the individual partners may not be able to be reached in the enforcement of
the judgment. Cavaet: The California prevailing wage statutes provide that all workers
employed on a public works project must be paid the prevailing wage. That provision does not
differentiate between partners (general or limited) and employees. (O.L. 1997.12.0 4)

Limited Partnerships. A limited partnership consists of one or more general partners who manage
the business who are personally liable for partnership debts, and one or more “limited” partners
who contribute capital and share in profits but who do not generally participate in the day- to-
day management of the business. The limited partners do not incur liability with respect to
partnership obligations beyond their capital investment. Corp. Code § 15611, et seq. The general
partners are co-owners of the partnership assets. The limited partners have no direct ownership
interest therein. The limited partners’ sole rights are to a return of their capital and a share of the
profits.

37.3.1 Except as otherwise provided by law or agreement, general partners of a limited partnership
share the same liabilities as a partner in a general partnership. Corp. Code §§ 16306, 15643(b).
Every general partner is an agent of the limited partnership and thus can bind the partnership.
Limited partners are primarily passive investors, do not run the business, and not liable for
partnership debts beyond their investment. However, a limited partner who participates in
control of the business may be held personally liable to creditors who actually knew of such
participation and who reasonably believed the limited partner was a general partner. Actions
such as the limited partner acting as an employee for the limited partnership or gener al partner,
consulting/advising a general partner, being an officer, director, shareholder of a corporate
general partner, being a partnership creditor or debtor, voting, or acting to wind up the
partnership after dissolution do not constitute “participation in the control” of the business. See

37.3

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Corp. § Code 15632(b).

37.3.2 Formalities: A limited partnership exists upon the filing of a certificate of limited partnership
with the Secretary of State. Corp. Code § 15621. The certificate must contain the names and
addresses of the general partners but the names of the limited partners and amounts of their
investments need not be disclosed. Partners are not required to execute a written agreement to
form a limited partnership. Corp. Code 15611(w), 15621(a).
37.3.3 Designation: Same as for general partnership except that the word “limited” is placed in front of
the word “partnership” (instead of “general”) and only general partners are named individually:
- A&B Enterprises, a limited partnership; John Smith and Joe Brown, each individually and
as general partners of A& B Enterprises, a limited partnership-B&C Enterprises, a limited
partnership dba B&C Trucking; John Smith, an individual and general partner of B& C
Enterprises, a limited partnership
37.4 Corporations. A corporation has all of the powers of a natural person in carrying out its business
activities except when barred by its articles or other provisions of law. Witkin, Calif. Procedure,
Pleading, 4th Ed., § 7; Corp. Code § 207. A corporation is a separate legal entity existing under
authority granted by state law with its own identity separate and distinct from the persons who
created it and from its shareholders. As a separate legal entity, a corporation is responsible for
its own debts. Generally, shareholders, directors and officers of the corporation are not legally
responsible for corporate liabilities. Exceptions may exist holding one personally liable for
corporate obligations when an individual personally guaranteed the obligation or when “alter
ego” liability (a drastic remedy) is imposed.
37.4.1 Employer, Defined: See Section 55.2 of this Manual for discussion. In addition, Labor Code §
558 provides for liability not only for the employer but also for “any other person acting on behalf
of an employer who violates, or causes to be violated, a section of this chapter or any provision
regulating hours and days of work in any order of the Industrial Welfare Commission”. Such
person may be held liable for overtime, meal period, rest period and reporting time pay. Labor
Code §1197.1 provides for minimum wage restitution, liquidated damages and Section 203
waiting time penalties against any employer “or other person acting either individually or as an
officer, agent, or employee of another person, who pays or causes to be paid to any employee a
wage less than the minimum fixed by an applicable state or local law, or by an order of the
Commission”. Labor Code § 558.1 provides liability for “any employer or other person acting on
behalf of an employer, who holds the position of owner, director, officer, or managing agent of
the employer, who violates, or causes to be violated, any provision regulating minimum wages or
hours and days of work in any order of the Industiral Welfare Commission or violates, or causes
to be violated Sections 203, 226, 226.7, 1193.6, 1194 or 2802. Labor Code §§ 558, 558.1 and
1197.1 greatly expands the ability to pursue claims against individuals that violate or cause to be
violated wage and hour laws which were limited prior to enactment of these laws only against a
corporation or an LLC. These sections hold individual agents of businesses liable for these certain
wage violations. Alter ego liability and liability for a corporate agent acting outside the scope of
his or her agency provide alternate theories of recovery against individuals.

37.4.2 Management and control is vested in the board of directors elected by the shareholders. The board
makes policy and other major decisions. Dealings with third persons are generally conducted
through the officers and employees. In smaller companies, the same persons may be stockholders,

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directors and officers. Shareholders elect the board of directors, but they do not directly control
the board’s activities or decisions. Although corporations have many constitutional protections,
they are not “citizens” nor do they have the privilege against self -incrimination to prevent the
disclosure of incriminating corporate records. ( United States v. Kordel (1970) 397 U.S. 1, 7, 90
S.Ct. 763, 767, fn. 9) Nor may individuals assert such privilege to avoid producing corporate
records in a representative capacity as officer/director of the corporation. (Braswell v. U.S. (1988)
487 U.S. 99 108 -109, 108 S.Ct. 2284, 2290) Except in limite d circumstances (small claims
cases and administrative procedural filings), a corporation must be represented by an attorney in
court proceedings. (Merco Const. Engineers, Inc. v. Municipal Court (1978) 21 Cal.3d 724)
37.4.3 Foreign corporations: A foreign corporation has the same capacity to be sued as a domestic
corporation. The main issue for non -registered foreign corporations is whether it has subjected
itself to the jurisdiction of the state. Conducting significant or regular business in the state
will suffice. The capacity to be a defendant and to defend a suit is unaffected by failure to comply
with the statutory requirements of filing with the secretary of state and appointment of an agent
for service of process. Witkin, Calif. Procedure, Pleading, 4th Ed., § 76.
37.4.4 Suspended corporations: The powers of a domestic corporation may be suspended, and those
of a foreign corporation forfeited, for failure to pay corporate franchise taxes. Revenue Code §
23301. The effect of suspens ion or forfeiture is drastic - the corporation may be sued but
it cannot sue or defend suit and cannot appeal an adverse action.
37.4.5 Dissolved corporations: A corporation which is dissolved nevertheless continues to exist for the
purposes of winding up its affairs, prosecuting or defending actions by or against it but not for
the purpose of continuing business except so far as for the winding up of its affairs. No action or
proceeding to which a corporation is a party abates by the dissolution of the corporation or by
reason of proceedings for winding up and dissolution thereof. Corp. Code § 2010. Summons or
other process against a dissolved corporation may be served on an officer, director, or person
having charge of its assets, or if no such person is found, to any agent up on whom process might
be served at the time of dissolution. If none of such persons can be found, application can be
made to the court for service upon the Secretary of State. Corp. Code § 2011 (a)(4).

37.4.5.1 Causes of action against a dissolved corporation, whether arising before or after the dissolution
may be enforced against (1) the corporation to the extent of its undistributed assets,
including without limitation any insurance assets available to satisfy cla ims, (2) if any of the
assets of the dissolved corporation have been distributed to shareholders, to the extent of their
pro rata share of the claim or to the extent of the corporate assets distributed to them upon
dissolution of the corporation, whichever is less -- but a shareholder’s total liability may not
exceed the total amount of assets of the dissolved corporation distributed to the shareholder upon
dissolution of the corporation. Corp. Code § 2011(a)(1 ).
37.4.6 Formalities: A corporation must comply with the state’s corporation law which requires filing
of articles of incorporation containing certain essential provisions, payment of fees, and
designation of officers including listing an agent for service of proc ess.
37.4.7 Designation: ABC, Inc., a corporation
XYZ Co., a California corporation
AZ, a foreign corporation
L&M, Inc., a corporation dba Super Sam’s Sandwiches

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37.5 Limited Liability Companies (LLC). A hybrid between a partnership and a corpor ation
combining the “pass through” treatment for taxes (partnership) with the limited liability
accorded to corporate shareholders. Corp. Code § 17000 et seq. A business required to be
licensed under the Business & Professions Code cannot operate as an LLC unless expressly
authorized by statute. An LLC requires two or more “members” (owners) and is a recognized
legal entity separate and apart from its members. See Corp. Code §§ 17003, 17101.
37.5.1 Subject to narrow exceptions, LLC members are not personally liable for the entity’s obligations
and liabilities and thus enjoy the same “limited liability” as corporate shareholders. Exceptions
exist where the LLC member personally guaranteed the obligation (see Corp. Code § 17101(b)
and/or may be personally liable for LLC obligations “under the same or similar circumstances
and to the same extent as a shareholder” may be liable for a corporation’s liabilities, i.e., “alter
ego liability” may be imposed. Corp. Code § 17101 (b).
37.5.2 LLC profits, losses, and distributions (of money or property) are distributed among its members
as allocated under the operating a greement; otherwise, they are allocated in proportion to each
members capital contributions. Corp. Code § 17202. Management of an LLC’s business is vested
with all its members unless the articles of organization provide otherwise. LLCs thus have an
option as to whether it operates under centralized management. Corp. Code § 17150 et seq.
37.5.2.1 Where articles of organization do not provide for managers, LLC members’ operate the business
more akin to general partners of a general partnership. Each member is deemed an agent of the
LLC in dealings with third persons and can bind the LLC in the same way as a general partner
can bind a partnership. Corp. Code § 17157.
37.5.2.2 Where articles provide for centralized management, the LLC may allow its business and affairs
to be managed by or under the authority of one or more designated managers, much like a
corporation. No member has the right to receive compensation for acting in the limited liability
company’s business except as provided in the operation agreement or other agreement among
the members. Corp. Code § 1700 4(b).
37.5.2.3 Formalities: The existence of an LLC requires the filing of articles of organization with the
Secretary of State on a form prescribed by the Secretary of State. Corp. Code § 17050. The
persons w ho execute and file the articles need not be members. The articles must designate a
qualified initial agent for service of process and a statement as to whether it will be managed by
one manager, more than one manager, or the members. Corp. Code § 17051. The articles need
not disclose the managers’ names, the members’ names or capital contributions. Additionally,
the members must enter into an operating agreement either before or after the filing of the
articles which may be in writing or oral. Corp. Code §§ 17001(b), 17050(a).
37.5.3 Designa tion : DEF, a limite d liability company
XYZ, a limite d liability company , dba Sams Subs
37.6 Unincorporated Associations. Covers any group whose members share a common purpose and
who function under a common name, including churches, unions, political parties, professional
and trade associations, social clubs, homeowners associations, etc. An unincorporated
association has the capacity both to sue and be sued in the entity name, and to defend any action
against it. CCP § 369.5. Like a corporation, it can only appear in court (except small claims
court) through an attorney. Clean Air Transport Systems v. San Mateo Co. Transit Distr. (1988)
198 Cal.App.3d 576, 578-579.

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37.6.1 Any member of the association may be joined and served as an individual defendant. § CCP
369.5(b). An association (as well as individuals and partnerships) who are doing business under
a fictitious name which does not disclose the personal names of every member and which has
not filed with the county clerk a certificate of fictitious business name lack the capacity to sue
on transactions entered into under the fictitious name. B&P § 17918.
37.6.2 Designation: - ABC Association, an unincorporated association
- ABC Association, an unincorporated association; Jim Smith, an
individual
37.7 Joint Ventures. A joint venture is an undertaking by two or more persons for the purpose of
carrying out a single business enterprise for profit. It is normally formed for a particular time
period or single transaction with limited duration and scope, e.g., construction projects. Much
like a partnership, its members are co -owners who share profits and losses. Due to its similarity
with partnerships, the rights and liabilities of joint ventures are largely controlled by the rules
applicable to partnerships.
37.7.1 Designation: - Smith-Jones Enterprises, a joint venture; Smith Construction Co., Inc., a
corporation; Jones Development Company, a corporation.
37.8 Other Miscellaneous (Less Common) Entities:
37.8.1 Professional Corporations. A corporation organized under the general corporation law that is
engaged in rendering professional services in a single profession which, unless specifically
exempted, conducts its business pursuant to a certificate of registration issued by a governmental
agency regulating the profession and designates itself as a professional corporation (or other
corporation as may be required by statute). Corp. Code § 1340(b). “Professional services” means
any type of services that may be lawfully rendered only pursuant to a license, certification, or
registration authorized by the Business and Professions Code or the Chiropractic Act. Corp.
Code § 13401(a). A common example is a law office which operates with the designation of “a
professional law corporation.” In addition to the requirements of the general corporations law,
such professional law corporation is subject to the requirements for “law corporations” in Bus.
& Prof. Code § 6160 et seq.
37.8.1.1 A shareholder, officer, director, or professional employee of a professional corporation must be
licensed, certified, or registered to render the professional services that the particular
professional corporation renders. Corp. Code § 13401(d). The corporation may employ persons
not so licensed so long as such persons do not render any professional services rendered by that
professional corporation. (e.g., clerical staff, etc .) Corp. Code § 13405. The articles of
incorporation must specifically state that the corporation is a professional corporation and no
professional corporation can render professional services without a currently effective certificate
of registration issued by the government agency regulating the profession. Corp. Code § 13404.
37.8.1.2 professional corporation may adopt any name permitted by law expressly applicable to the
profession in which such corporation is engaged or by a rule or regulation of the governmental
agency regulating the profession. Corp. Code § 13409(a). The name cannot be substantially
similar to another domestic corporation nor a foreign corporation qualified to render
professional services in this state, nor use a name under reservation for another corporation.
Corp. Code § 13409.

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37.8.1.3 Designation: Sylvester & Holmes, a professional law corporation, or
Sylvester & Holmes, a professional corporation
Robertson’s Dentistry, a professional corporation
37.9 Limited Liability Partnerships (LLP). A partnership, other than a limited partnership, formed
and registered to provide professional limited liability partnership services in which each of the
partners is a licensed person to engage in the practice of architecture, public accountancy, or the
practice of law. Corp. Code § 16101 (6)(A) & 16951.
37.9.1 An LLP must register with the Secretary of State indicating, among other things, an agent for
service of process, a statement of the business in which it engages in, and its name which must
contain the words “Registered Limited Liab ility Partnership,” “Limited Liability
Partnership,” or one of the abbreviations “L.L.P.,” LLP, “R.L.L.P.,” or “RLLP” as the last words
of its name. Corp. Code § 16953(a) & 16952.
37.9.2 An LLP must maintain security for acts, errors, or omissions arising out of the practice of the
LLP in the form of insurance, bank or escrow accounts, and maintain a net worth for an amount
depending on the type of professional practice. If the LLP fails to comply with the net worth
requirement, each partner automatically guarantees payment of the difference between the
maximum amount of security and the security otherwise provided. Corp. Code § 16956.
37.9.3 Designation: Witkin & Moore, LLP, a limited liability partnership, or
Witkin & Moore, L.L.P., a limited liability partnership, or
Money Manager Accountants, RLLP, a registered limited liability
partnership
37.10 Business Trusts. A rare business entity, a business trust is formed pursuant to a trust document
naming trustee(s), beneficiaries, and trust property. The trustee has full and complete control
over trust property (business assets and operations) w hich is conveyed to them. The objective
of a business trust is not to hold and conserve property (as in a regular trust), but is to provide a
medium for the conduct of a business and sharing its gains. Koenig v. Johnson (1945) 71
Cal.App.2d 739.

37.10.1 Historically, the issue has often been whether a business is a bona fide business trust (an earlier
form of a business trust was called a “Massachusetts Trust” common to that state) with more
than one trustee or a partnership. If the principals are free from control of certificate holders
(transferable certificates to which a beneficial interest is held and issued much like shares of
stock) in the management of the property, a trust would exist; but if the certificate holders are
associated together in control of the proper ty as principals and the trustees are m erely their man
aging agents, a partnership relation between the certificate holders would exist. Bernesen v. Fish
(1933) 135 Cal.App. 588, 599 -600.
37.10.2 Under general trust rules, unless otherwise provided in a contract, a trustee is not personally
liable on a contract properly entered into in the trustee’s fiduciary capacity in the course of
administration of the trust unless the trustee fails to reveal the trustee’s representative capacity

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and identify the trust
in the contract. Prob. Code 18000. A trustee is personally liable for
obligations arisin
g from ownership or control of trust property only if the trustee is personally
at fault. However, a third person with claims against the tr ust or trustee can bring an action
against the trustee in the trustee’s representative capacity, whether or not the trustee is personally
liable on the claim. Prob. Code 18004. The question of liability as between the trust estate and
the trustee personally may be determined in a proceeding brought by the trustee or beneficiary
concerning the trust (Prob. Code 18005) or may be settled internally amongst the trustees and
beneficiaries. Witkin, Summary of Calif. Law, Vol. 11, Trusts, §265-266.
37.11 For purposes under the Labor Code, a “business trust” is a person (Labor Code 18), and an
employer may be a “person” (IWC Orders, §2, Definitions). Accordingly, an action may
appropriately be designated against both the business trust and the trustee(s).

37.11.1 Designation: Smith Development Trust, a business trust; John Day, individually and as
trustee of Smith Development Trust (if it can be established that liability was
through the fault of the trustee).
Vinters USA Trust, a trust; James Martin, trustee o f Vinters USA Trust.

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38 BANKRUPTCY.
38.1 Assisting claimants with bankruptcy claims falls within the expertise of the Labor Commissioner’s
Office.
38.1.1 Bankruptcy is a remedy established by Congress to permit insolvent parties, whether individual,
corporate or other, to discharge or limit their obligations to creditors. A claimant who files a claim
for wages against an employer, who has filed or subsequently files a bankruptcy action, becomes a
creditor. The information below is needed for filing claims and this information should be relayed
to the wage claimant so that they may file their claim with the bankruptcy court. The claimant
should be advised to obtain the information needed in order to file the claim, including the name
under which the petition was filed, which bankruptcy court it was filed in and the case number in
the bankruptcy court. The following summary is based on information gleaned from NORTON
BANKRUPTCY LAW AND PRACTICE, 2d.
38.1.2 The automatic stay. When a debtor files a petition for bankruptcy relief, an “automatic stay”
is usually impos
ed by the bankruptcy court. This is an injunction that prohibits creditors
from attempting to collect any debt from the person or entity that filed the bankruptcy, except
through collection using the bankruptcy court’s own processes. The automatic stay applies
to Labor Commissioner and other state agencies. As a result, federal law typically prohibits
attempts to collect a wage claim (including a judgment or ODA) from an employer outside
the bankrutpcy court while the bankruptcy case is pending. The automatic stay prohibits
attempts to enforce a judgment, such as filing of a lien or execution of a levy. It also prevents
creditors from even asking the debtor to pay voluntarily or even the sending of a demand
letter. This does not necessarily mean the creditor will be forever barred from enforcing the
judgment. The automatic stay usually only applies while a bankruptcy case is pending.
Moreover, the automatic stay does not apply to jointly liable parties who have not filed for
bankruptcy protection. Thus, judgment enforcement usually may continue against non-
bankrupt co-defendants.

38.1.3 Pre-Petition Earnings. A priority exists for certain “wages, salaries, or commissions” earned by an
individual shortly before the filing of the bankruptcy. The amount entitled to priority is now set at
$12,850.00 as of 2018* . The federal law expressly extends its coverage to include vacation,
severance, and sick
leave pay. The pre-petition priority is limited: The employee must earn the wages
within 180 days before (1) the filing of the bankruptcy petition or (2) the cessation of the debtor's
business whichever occurs first. An employee must file a proof of claim with the bankruptcy court
to obtain any money, including any priority claim of wages. Any amounts owed above the cap or
outside the 180-day period is typically treated as a non-priority claim in the same category as general
unsecured debts.
38.1.4 The Underlying Policy of allowing a wage priority claim is to “enable employees displaced by
bankruptcy to secure, with some promptness, the money directly due to them in back wages, and
thus to alleviate in some degree the hardship that unemployment usually brings to workers and
their families.” Judge Learned Hand, in a case under the Bankruptcy Act, observed that “the statute

*11 USC § 104(a) provides that the Judicial Conference is to propose a recommendation (which is usually adopted) for a
uniform percent
age adjustment of each dollar amount set out in the Bankruptcy Code.

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was intended to favor those who could not be expected to know anything of the credit of their
employer, but must accept a job as it was.” Besides the goal of protecting unwary employees, the
wage priority is designed to encourage employees not to abandon a failing business, thus enhancing
the business’ prospects for financial recovery.
38.1.5 Assignment. Individual employees may assign their wages and assignees “are ent itled to the wage
priority position of their assignors.” A different rule would deprive individual employees of the full
value of their claim by impairing its transferability.
38.2 What Pre -Petition Wages Are Eligible. Bankruptcy courts generally follow th e rule that the
employee earns wages within the meaning of the priority at the time the services are performed,
rather than at the time the right to payment vests. Hence, if an event triggering a right to payment
occurs post-petition (after the filing of the bankruptcy), the employee’s claim for wages for services
rendered during the 180 -day pre-petition (before filing for bankruptcy) period is not transformed
into an administrative expense (claim for wages earned after filing for bankruptcy.)
38.2.1 Vacation Pay Accrual. The above rule likewise applies to vacation wages. Although the right to
collect vacation wages may vest on the day the employee takes vacation or upon termination of
employment, the employee continuously earned the vacation wages as the employment progressed.
Thus, the pro rata amount of vacation wages earned during the 180 days of pre-petition employment
qualifies as a priority claim. The majority of Bankruptcy courts hold that vacation wages accrue on
a daily basis. Hence, the claimant may receive administrative priority only for the amount of
vacation wages that accrued during post-petition service. Unpaid vacation pay attributed to pre-
petition service may be entitled to priority status. Claims for vacation pay earned before the 180-
day period preceding the filing of the bankruptcy or the cessation of business are simply general
unsecured claims.
38.2.2 Severance Pay Claims. The Bankruptcy courts also apply the above rule to severance pay, provided
that the amount of earned severa nce pay relates to the employee's length of service. In such a
situation, only the portion of severance pay earned during the 180-day pre-petition period is entitled
to priority status. The fact that the right to severance pay “matures” upon termination wi thin the
priority period is irrelevant for priority allocation in length-of- service severance pay arrangements.
However, if the employer offers the severance pay as a substitute for required notice of termination
during the priority period, then the entire amount of severance pay is immediately earned upon
termination. In this situation, the entire amount may qualify as a priority claim.

38.2.3 Severance Pay falls into one of two categories: 1) severance pay agreements that provide for
severance pay solely as a substitute for notice. The courts agree that a claim for this type of severance
pay is entitled to first priority treatment if the employee is terminated post -petition, on the ground
that the claim is “earned” post -petition by the debtor's failure to give notice. 2) severance pay
agreements based on length of service. In this situation, the majority of courts view severance pay
as accruing on a daily basis. Thus, as with vacation wages, the claimant is entitled to administrative
priority only for the amount of severance pay
that may be apportioned to actual post-petition service.
The mere fact that the right to payment arises due to the debtor's post -petition termination does not
automatically entitle the employee to administrative priority for the f ull amount of the severance
pay claim. A small number of courts view severance pay claims as “compensation for the hardship
which all employees, regardless of their length of service, suffer when they are terminated and that
it is therefore ‘earned’ when the employees are dismissed.” Under this view, the employee earns the

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full amount of the severance pay when terminated. If the termination occurs post -petition, then the
severance pay is a cost
of doing business and should be treated as an administrative expense.
38.3 Post-Petition Wages. It is important to note that wages earned after the petition for bankruptcy was
filed should not be subject to the 11 USC § 507(a)(4) $12,850.00 pre -petition priority wage limit.
These post-petition wages generally fall into the category of administrative claims. Under the federal
Bankruptcy Code wages, salaries, or commissions for services rendered after the commencement of
the case (post-petition earnings) are an allowable administrative expense. Whether wages are earned
pre-petition or post-petition depends on when the service for which the wages are paid was rendered,
not when the right to payment matures or falls due. As will be discussed below, this timing issue
has been especially critical in fringe benefits cases but also is important in many Chapter 11 cases
where the business continues and the wages of the employees are a typical cost of doing business.

38.3.1 The necessity of affording first priority for post -petition wage claims is apparent: After the
bankruptcy petition is filed, the trustee or debtor in possession may require the services of regular
or new employees for either continued operation of the business or for winding up the estate. Those
needed employees would of course be reticent to work if they did not have significant assurance of
prompt payment. The types of services compensable as an administrative expense will vary,
depending on the nature of the debtor’s business.
38.3.1.1 The “wages, salaries, or commissions” associated with these post- petition services will receive
administrative priority only if the services are necessary and beneficial to the estate. Wages are listed
in the Code as an “included” type of actual, necessary cost and expense of preserving the estate. In
Chapter 11 cases, where the debtor’s business normally is continued, administrative allowance of
wages will be fairly routine.

38.3.2 No Numerical Statutory Limit On Post-Petition Wage Claims. The court must find that the amount
claimed as compensation for the services is reasonable. Unlike pre -petition priority wage claims,
which are limited to $12,850.00 per claimant, the Bankruptcy Code does not impose a statutory
maximum on administrative wage claims. Courts insure against excessive wage claims by
demanding that the claim not be disproportionate to the value of the services rendered.
38.3.3 The Bankruptcy courts have interpreted the phrase “wages, salaries, or commissions” to include
vacation and severance pay. These courts disagree, however, as to whether the claim ant is entitled
to administrative priority for the entire amount of vacation or severance pay if the right to payment
matures during the administration of the estate, or whether the claimant should receive
administrative priority only for an amount apportioned to post -petition services. In general, the
courts’ decisions hinge on the nature of the vacation or severance pay as defined by an employment
contract, a collective bargaining agreement, or general corporate policy.

38.4 Please Note: In a Chapter 7 bankruptcy, any debts (cf., involuntary gap expenses) incurred after the
filing of the petition can be adjudicated against the debtors without regard to the bankruptcy case.
This is because the Bankruptcy laws do not anticipate protection of the debtor for debts incurred
after the bankruptcy estate has been created. The automatic stay, however, will preclude collection
of the judgment until it is lifted i.e. after the close of the bankruptcy.
38.4.1 Referral to Legal Section. There are times when a referral to legal may be appropriate to
protect legitimate state interests under the police powers exception to the automatic stay. Some
examples of this are non-payment of minimum wages, overtime, and to compel restitution of sums
improperly withheld from employees. Filing of a bankruptcy petition will generally not affect the
issuance of a citation by field personnel.

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38.5 Contact DLSE Legal Section. In bankruptcy cases where these issues exist, deputies should consult
the Legal Section for guidance.
38.6 The discharge of debts. Distinct from the automatic stay, a bankruptcy court may issue a
discharge of debts. This discharge eliminates the bankruptcy debtor’s liability for certain
debts. The discharge is a permanent injunction on attempts to collect those debts from the
person or entity that was discharged.
38.6.1 Exceptions. In chapter 7 (and typically in chapter 13) the discharge applies to wage debts
incurred prior to the date of the filing of the bankruptcy case, but not to debts incurred while
the bankruptcy is pending or after it is closed. See section 38.4 above. In chapter 11, the
discharge often applies to debts incurred while the bankruptcy case was pending (but prior
to confirmation of the reorganization plan). The discharge only applies to the person or entity
who sought bankruptcy protection. Thus, even after discharge, it may be possible to collect
the debt from someone else, such as a joint employer, client-employers, a bond or restitution
fund. The discharge does not apply to all cases or to all debts. Debts owed by a corporation
or LLC are not discharged in a chapter 7 bankruptcy. (They may, however, be discharged in
a chapter 11.) In addition, certain types of debts may not be dischargeable. Under certain
circumstances, wage debts can be excepted from discharge if the employee (or Labor
Commissioner) files a lawsuit (via an “adversary proceeding”) in bankruptcy court and shows
the wage debt arose from malicious or fraudulent behavior by the employer.
38.6.1 Further Exceptions - Liens and Non-dischargeable Claims.
Liens. Liens often survive bankruptcy even when the underlying debt is discharged. Thus,
Labor Code section 98.2 certificates of lien, recorded in the appropriate counties, will survive
bankruptcy (absent a bankruptcy court order removing them or stripping them). These liens,
as long as they are recorded prior to the bankruptcy petition date, should not be removed
without approval from Legal.

Non -dischargeable Claims. Certain debts are not dischargeable. If a non -dischargeable debt is
listed by the debtor, an objection to the dischargeability must be made based upon one or more of
the grounds for objections specified in the Bankruptcy Code. In an individual’s Chapter 7 or 11
bankruptcy, state fines, penalties or forfeitures, whether civil or criminal (except certain tax
penalties), are non -dischargeable, as long as (a) they are payable to or for the benefit of a
governmental unit and (b) they are not compensation for actual pecuniary loss. The Legal Section
will be concerned with making this objection when a debtor lists a fine, penalty or forfeiture due to
the State of California which is non-dischargeable. Should the deputy determine that the objections
are significant, the case should be referred to the Legal Section following the standard referral
procedures. See the glossary and forms section for an example. Consult with your assigned Legal
Section to ascertain whether an objection should be filed.

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38.7 Glossary of Bankruptcy Terms.

38.7.1 Adjudication - The order or act of the court decreeing the debtor a bankrupt upon the petition.
38.7.2 Administrative Claim - See Post-Petition Claim, above.

38.7.3 Allowable Claim - One which the court permits to be paid, if and when funds are available, in the
correct order of payment.
38.7.4 Bankrupt - Describes the entity after the adjudication.

38.7.5 Debtor - Describes the entity (individual, corporate, etc.) before the adjudication; or is the entity in
the other types of proceedings.
38.7.6 Debtor In Possession - In Chapter 11 proceedings, the bankrupt entity which continues the
business pending resolution of the bankruptcy.
38.7.7 Discharge - The step in the bankruptcy proceeding at which point, by the order of discharge, the
bankrupt is released from legal liability for those obligations known as dischargeable debts.
38.7.8 Exempt Property - That property generally described by California Civil Procedure §§ 690 to
690.25, and Code of Civil Procedure §§ 704.10 to 704.995, homesteads belonging to the debtor or
bankrupt.

38.7.9 General Claim - A claim with neither an order of priority nor a lien securing it.

38.7.10 Involuntary Gap Expenses - In an involuntary bankruptcy case (that is , a case where the debtor is
forced into the bankruptcy by his creditors filing a petition), there will usually be a period of time
between the filing of the creditors’ petition and the date of the order for relief. It is sometimes
referred to as the "involuntary gap." If these debts are incurred "in the ordinary course of the debtor’s
business or financial affairs," they are entitled to the involuntary gap priority.
38.7.11 Non-Dischargeable Claims - These debts are not discharged by the bankruptcy action. A few of
these are: certain tax claims, debts not scheduled by the debtor in the bankruptcy case, a fine, penalty
or forfeiture payable to a government unit for an event occurring within three years of the filing of
the petition (this could include DLSE c itation penalties), and for fraud while acting as a fiduciary,
etc.
38.7.12 Objections - Reasons (or alleged reasons) why a claim should not be allowed, i.e., proof of claim
alleging a non-existent priority status; or, proof of claim does not clearly prove the debt was one of
the bankrupt’s; or other reasons. The trustee has the duty to object to claims not entitled to proof or
allowance. As a rule, substantial objections to wage claims may be overcome by the deputy’s
preparation and filing of a declaration and exhibits supporting the claim.
38.7.13 Petition - The form of pleading prescribed for filing with the court, the proposal that a debtor be
adjudicated a bankrupt or that one of the types of debtor -proceedings be approved by the court.
These are filed in the United States Bankruptcy Court having jurisdiction over the area or location.

38.7.14 Priority Claim - One that ranks ahead of others and must be paid before non-priority claims.
The priority an
d sequence of priority are set by the Act. Wage claims (i.e., wages, salaries,
commissions, vacation, severance, sick leave pay) may be the priority if earned within 90
days before the filing of the petition (or within 180 days of the business closing if that
occurred before the petition was filed). Not more than $12,850.00 of the wage claim can be
classified in this priority. However, wages earned post-petition are also entitled to a priority.

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38.7.15 Pre-Petition Wage Claim - A priority claim which arises for services rendered before the
bankruptcy petition is f
iled. There is a cap on the amount of wages and benefits which are
subject to this priority claim. Note that the claim is based on the time the services are
rendered, not on when the payment for the services becomes due.
38.7.16 Post-Petition Wage Claim - Sometimes an Administrative Claim. A claim which arises for
services rende
red after the bankruptcy petition has been filed. There is no cap on the amount
of wages which may be claimed, but, in some instances, the court may limit the claim in
Chapter 11 cases if it appears the services were not needed or the wage was inflated. The
administrative claim is not to be confused with debts incurred (other than by a debtor -in-
possession in a Chapter 11 case) after the filing of a bankruptcy.
38.7.17 Proof of Claim - Form for presentation of claim reciting facts to establish the claim as being
allowed. Forms di
ffer, depending on the type of claim.
38.7.18 Provable Claim - Money debt due and owing at and prior to the petition date and for which
no security is hel
d.
38.7.19 Receiver - A person who is appointed by court order to conserve the estate during a period
before a trustee i
s qualified.
38.7.20 Schedules - The detailed listings of the debts, assets, identity of creditors, claims of
exemption and othe
r information which is filed with the petition.
38.7.21 Secured Creditor - One who possessed a lien on some of the debtor’s property perfected prior
to the filing of the
petition. The lien must be satisfied before any proceeds of the sale of that
property become part of the “estate” and usable for dividend payments.
38.7.22 Trustee - A person who is elected by the creditors to administer the estate through liquidation
to closing.

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39 ASSIGNMENTS FOR BENEFIT OF CREDITORS, RECEIVERSHIPS, ETC.

39.1 Code of Civil Procedure Sections 1204, 1205, 1206. A general assignment for the benefit
of creditors is
a process available in the State of California set out in Code of Civil
Procedure 493.010, et seq. The procedure involves a conveyance by a debtor (usually a
business entity) of substantially all property to a party (usually a credit management
company or an attorney) in trust to collect all amounts owing to the debtor, to sell and
convey the property transferred, distribute the proceeds of all the property and administer
collection among creditors of the debtor, and to return the surplus, if any, to the debtor.
39.1.1 The Assignment for the Benefit of Creditor Remedy is usually used by small businesses
which find themse
lves in financial problems and do not wish to file bankruptcy; but
instead agree with their creditors to pay off the indebtedness. The procedure, if used
correctly, is usually more efficient than the bankruptcy court procedures in that money is
available to the creditors sooner. It also avoids the stigma sometimes attached to
bankruptcy proceedings.
39.2 Contact the Legal Section Regarding Exemptions. The assignment is subject to certain
restrictions
and exemptions which are found at Code of Civil Procedure § 1800, et seq.
Deputies should contact the assigned legal section for guidance on restrictions and
exemptions.
39.2.1 The Deputy’s main concern should, of course, be the remedies available to wage earners
who were em ploye
d by individuals or entities which file general assignments for the
benefit of creditors. Bulk sale of intellectual property can also be of concern. (See Bulk
Sale discussion at Section 40, infra)
39.2.2 The provisions of Code of Civil Procedure § 120 4 enumerate the priorities allowed by
law in all proc
eedings involving assignments for the benefit of creditors, receiverships,
or like actions. The unsecured wages (those not reduced to judgment) earned within 90
days before the date of the making of the assignment or the taking of the property or the
commencement of a court proceeding (in the case of a receivership) or the date of the
cessation of the debtor’s business have a priority over most other claims to the extent of
$4,300.00 (Note: California has not yet conformed the amount to the latest bankruptcy
maximum). Examples and exceptions are as follows:
1. Claims of
the United States government for taxes are paramount to preferred lien
claims under thi
s section. United States v. Division of Labor Law Enforcement (9th
Cir. 1953) 201 F.2d 857.
2. Preferred
wage claims are paramount to the claim of the assignee for his fees and
expenses. Divi
sion of Labor Law Enforcement v. Stanley Restaurant, Inc. (9th Cir.
1955) 228 F.2d 420.

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3. Preferred wage claims are paramount to most state tax claims. (See Cal. Rev. &
Taxation Code §§ 2191.5, 6756, 19253, 30321, 32386, 38531, 40157)
39.2.2.
1 Corporate officials, such as the president, vice -president, and secretary, are not entitled
to a preferential
claim f or salary due them for services rendered in these positions.
(Carpenter v. Policy Holders Life Ins. Ass’n (1937) 9 Cal.2d 167.) However, the fact that
an officer of the corporation is also employed by that corporation as a worker in some
other capacity does not prevent him or her from participating in the benefits of the statute
allowing preference to workers, but the preference is allowed only insofar as wages as a
worker are concerned. ( Clark v. Marjorie Michael, Inc. (1939) 34 Cal.App.2d Supp.
775). Also, of course, amounts due to a partner or a sole proprietor are not recoverable
and such claims should not be taken.
39.2.3 Processing the Claim. The Labor Commissioner is authorized to file preferred or priority
wage claims pur
suant to the authority granted under Labor Code § 99. It should be noted
that such claims are to be filed only after an investigation has been completed and the
facts established to support the claim.
39.2.3.1 Wage claimants will not always know at the time of filing of the claim that the employer
is in an insolvency
proceeding. Upon being notified of the pendency of the assignment
for benefit of creditors or receivership proceedings, all wage claims against the same
employer should be consolidated. As with bankruptcy claims, no further proceedings
may be taken either by way of a hearing pursuant to Labor Code 98(a) or court action.
The Deputy should have the claimant(s) complete declarations under penalty of perjury
stating all the facts necessary to establish the right to the wages claimed.
39.2.3.2 The trustee, receiver or assignee has the right to demand such sworn statements and
further has the ri
ght to refuse to pay any such claim in whole or in part if he has reasonable
cause to believe that such claim is not valid. However, the trustee, receiver or assignee
must pay any part of the claim that is not disputed without prejudice to the claimant’s
rights, as to the balance of his claim.
The truste e must withhol d sufficient mone y to cover the dispute d balance unti l
the claiman t h as had a reason abl
e opportunity to establ ish the val idit y of his
claim by cour t action. In the even t tha t the Deputy has establishe d that the balance
of the claim is valid and enforceable, the claims shoul d be refe rred to the assigne d
Legal Sectio n as soon as possible . The referral document (DLS E Form 1 24)
shoul d be marked so that it will be cl ear to the Legal Sectio n that the matter is to
be give n pr iorit y handli ng. In add ition , the For m 124 shoul d set forth a complet e
history of the case and detail the facts found by the Deputy to suppor t the unpai d
clai m balance.

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39.2.3.3 Any clai m for wage s which does not meet the require ments set out in Co de of
Civil Procedur e 1204(a
)(1) and (2) shoul d nonethe less be filed wit h the truste e,
receiver or assign ee as a general claim . For instance, all claim s for wages whic h
were earned outsid e o f the 90-day perio d described in 1204(a )(1) and all wage s
in exces s of $4,300.00 shoul d be file d as genera l claims in the proceeding.

39.2.3.4 The clai m filed in the proceeding s shoul d include vacatio n prorate d for the 90-
day per iod as a priori
ty claim and any ad ditional va cation accrual filed as a general
claim.
39.2.3.5 Calculation s for each clai m shoul d be attache d to the individual’ s origina l claim
form and shoul d hav e explana tory not
es whic h may be needed late r in the even t the
claim is challenged.
39.2.3.6 A “Notice o f Pre ferre d Wage Claim” form is available; however , the claim need not
be in any special f orm. A le
tter clearl y settin g forth each indivi dual claim is
sufficient . The notic e form or lette r shoul d be sent certifie d mail , r etur n receipt
requested.
39.2.3.7 It shoul d be note d that only wages (includin g vacation wages) may be filed as a
priority claim. Do n
ot attempt to file waitin g time penalties , expense s or othe r
sums which woul d not fit within the de fini tion of wag es found at Labo r Cod e
Section 200.
39.2.3.8 Receivership s occur infre quently, but the foregoin g outlin e applie s in most
situations. How
ever, since a receivershi p involve s a court proceeding it is advised
that the Deputy consul t with the assigned Legal Sectio n attorne y rega rding what
actio n to take.

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40 BULK SALE TRANSFERS, LIQUOR LICENSE TRANSFERS, ETC.
40.1 A priority wage lien is provided for at Code of Civil Procedure § 1205 and covers:
1. All wages earned within ninety (90) days;
2. Of the sale or transfer of:
a) any business, or
b) the stock in trade of any business
1) in bulk
2) a substantial part of such stock in trade when the sale or transfer of the stock in
trade is not in the ordi
nary and regular course of business.
40.1.1 Definition of Terms. See Commercial Code § 6102 for a thorough discussion of the
definitions; below a
re definitions which may be useful to the Deputy:
40.1.1.1 Sales: A contract whereby property is transferred from one person to another for a
consideration of valu
e.
40.1.1.2 Transfer: An act of the parties by which the title to property is conveyed from one person to
another.
40.1.1.3 Busines
s: Any form of activity which is designed to bring a profit to the owner.

40.1.1.4 Stock In Trade: Inventory and the tools, goods, wares and raw materials used to produce
inventory normally
sold in the particular trade.
40.1.1.5 In Bulk; Substantial Part: The definitions found in the “Comments” following Commercial
Code Section 6102 which dea
l with bulk sales would indicate that these terms would have to
be defined on a case- by-case basis depending upon whether the transfer is of inventory of
goods regularly held out for sale or inventory of machinery, etc. which are a part of the
business but not regularly held out for sale. In the case of Myzer v. Emark Corp. (1996) 45
Cal.App.4th 884 the court noted that Section 1205 refers to “the sale or transfer of any
business or the stock in trade, in bulk, or a substantial part thereof....” Section 1205 therefore
encompasses, in addition to bulk transfers, transfers of “a substantial part” of a business or
its stock in tr ade. The foreclosure proceedings and subsequent sale characterized as a sale
of the business itself, amounts to a transfer of a substantial part of the business or stock in
trade. Consult your assigned Legal Section if there are any questions regarding the scope of
the sale.
40.1.1.6 Ordinary or Regular Course of Business: Marked by the normal according to the usage and
customs of the trade
.
40.1.1.7 Escrow: A deposit with a third person to be delivered on performance of a condition, and, on
delivery by the thir
d-party depository, the title passes. The sale or transfer may be through
an escrow or by auction. The purpose of bulk sale laws such as Code of Civil Procedure
Section 1205 are to protect the creditors of the business from the disposition of invent ory
outside the normal course of business. The seller of the business is under an obligation to
satisfy creditors and the buyer does not take clear title unless the bulk sale transfer laws are
complied with. (See California Uniform Commercial Code Section 6100 et seq.)
40.1.2 No Limit on Wage Preference. There is no monetary limit on the amount of wages for

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which a preference may be claimed under Section 1205, but the preference may only be
claimed for wages earned within the 90- day period prior to the sale, transfer or opening of
an escrow for the sale. For wages which were not earned within the 90 day period, the claim
should be made, but preference may not be claimed. For guidance, see the description of
general and priority wages and how to calculate them in the section on bankruptcy.
40.2 Processing a Claim. Again, it should be noted that the right of the Labor Commissioner
to file a preferred lien or wage claim is contained at Labor Code 99 and the provisions of that
statute regarding investigation and determination must be met before the claim may be filed.
40.2.1 The claim must be filed with the person listed in the bulk sale notice no later than the date
set out in that notice.
40.2.2 The bulk sale notice must be contained in a newspaper of general circulation available within
the judicial district where the property subject to the sale is located. Note that it is not
necessary that the newspaper be delivered in the specific area where the property is located.
40.2.3 The claim should be made by certified mail, return receipt requested. A follow-up letter sent
requesting status of the claim. In the event that the claim is either disputed or ignored, the
matter should be discussed with the Legal Section without delay.
40.2.4 Additional Concerns. In this age of computer science, the sale of intellectual property has
become a concern when so -called “dot-coms” are liquidated. Deputies are cautioned to be
aware of sales of such properties the assets of which could be utilized to pay the wages of
the workers.
40.2.4.1 Shifting Of Assets From One Firm To Another To Avoid Payment. Deputies should be aware
of this practice and, if found after investigation, bring the facts to the attention of the Legal
Section.
40.3 Liquor License Transfers: In the event of a sale of a restaurant or bar, the liquor license is
transferred as a part of the transfer of the ownership of the business.
40.3.1 Business and Professions Code § 24073. Transfer of licenses; application; notice of intention;
contents; filing. No retail license limited in numbers, off-sale beer and wine license, on-sale
beer and wine license, on -sale beer and wine public premises lic ense, on-sale ge neral
license for seasonal business , shal l be transferred unles s befo re the filing of the transfe r
application with the department the license e or the intende d transfer ee record s in the
offic e of the County Recorde r of the count y or countie s in which the premise s to which
the license has been issue d are situa ted a notic e of the intend ed transfer, stating all of
the following:
(a) The name and addres s of the licensee.

(b) The name and addres s of the intende d transferee.

(d) The address or addresses of the premises to whic h the licens e or licens es have been
issued.
(e) An agreement between the p arties to the transfe r that the considera tion for the

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transfe r of the busines s and licens e or l icenses , if any there be, is to be paid only
after the tr ans fer is app rove d by the departmen t. (ABC)
(f) The place where the purchas e pric e or considerati on for the transfe r of the business
and licens e or licenses is to be paid,
the amount of such purchas e price or
considerat ion, and a descriptio n of the entire consideration , includin g a designat ion
of cash , check s, promissor y notices , and tangibl e and in tangibl e property , and the
amount of each thereof .
(g) The name and addres s of the escro w holde r referre d to in Sect ion 24074, or of the
guarantor referre d to in Se
ction 24074.4, as the case may be.
A cop y of the noti ce of intende d transfer , certif ied by the count y recorder , shall be filed
with the depa rtmen t toge ther with a trans
fer appl ication.
40.3.2 Discretio n. Ther e are occasion s whe n the li cen se is onl y for beer and wine and t he
licens e is not worth transferri n g becaus e a new licens e is relativ ely inexpensi ve and easy
to procure . However , when the sale cover s a locatio n wher e a licens e to dispens e hard
liquor is involved, an escro w unde r Business and Profe ssion s Code S ectio n 2407 4 is
almos t alway s opened.
40.3.3 The Deputy should check w ith th e loc al offic e of the D epartmen t of Alcoholic
Beverag e Control (ABC) and ask if
an escro w has been opene d for the transfe r of the
license . It is necessar y to hav e the addres s of the busines s location s for the ABC to be
able to give you any informati on. ABC will be able to provide the nam e and address of
the escrow holder and the probable date of the transf er of the licen se. ABC can also be
of grea t as sistan ce in providin g informatio n r egardin g ownershi p of the licensed
establish ment. ABC also provides information about liquor licenses and liquor license
sales on its website. The ABC website has a specific section where searches can be made
on liquor licenses.
40.3.4 If the wage claim or claims have been investigated and the Depu ty has established that the
wages are due, demand shoul
d be made upon th e employer and a copy of the demand sent
by certified m ail to the escrow holder.
40.3.5 The escrow holder may either pay the sum demanded including all wages earned and
accruing prior to the sale
, transfer or opening of the escrow (the demand should include any
penalties found due but such penalties or other demand s aside from w ages should be listed
separately because their priority for payment purposes from the escrow is not the sa me as
wages), or may notify the Deputy that the claim is denied, either in whole or in part.

40.3.6 In the event that the claim is denied by the escrow holder and the Deputy disagrees with the
denial, an immediate refer
ral to the Legal Section is necessary because the Legal Section has
only twenty-five (25) days from the denial of the claim to file an action, secure an attachment,
and serve it upon the escrow holder.
40.3.7 All of the information regarding the wages including the investigative notes and the reasons
for the finding that the wa
ges are due, must be submitted to the Legal Section at the time of

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the referral. The Deputy is to call the assigned Attorney (if the assigned Attorney cannot be
reached within t
wo days, the Senior Deputy should contact the Chief Counsel or Assistant
Chief Counsel) and inform the Attorney of the fact that the referral is on the w ay or has been
sent. The referral should be marked on the face of the DLSE Form 124 indicating that the
matter is of a priority nature. The assigned Attorney must review the referral within three
days after receipt in the Legal Section and either accept or reject the case within seven days
of its receipt.
40.3.8 In the event the case is rejected by the Legal Section, the Deputy must notify the claimant(s)
and advise them of the
ir right (if they so desire) to bring an action in an appropriate court and
secure an attachment pursuant to B&P Code Section 24074.
40.3.8. 1 If There Are Any Questions Regarding The Filing Of Any Type Of Preferred Wage Liens,
The Deputy Is En
couraged To Call The Assigned Attorney.

40.3.9 In Summary, after ascertaining that wages are owed, the Deputy is to follow these steps:
1. Ascertain name of escrow holder, account number, and date escrow opened. Note, the
claimant may ha
ve this information, or the Deputy can contact the Department of
Alcoholic Beverage Control, the County Recorder’s office, or check local newspaper for
published notice of liquor license transfer.
2. Send Notice of Claim letter to escrow holder.
3. If claim is disputed, prepare a DLSE Form 124 and send to Legal immediately.

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41 TIME RECOR D RE QUIRE MENTS.

41.1 Labo r Code § 1174
Every person employing labor in this state shall:
(a) Furnish to the commission, at its request, reports or information which the commission
requires to carry out
this chapter. The reports and information shall be verified if required by the
commission or any member thereof.
(b) Allow any member of the commission or the employees of the Division of Labor Standards
Enforcement free acce
ss to the place of business or employment of the person to secure any
information or make any investigation which they are authorized by this chapter to ascertain or
make. The commission may inspect or make excerpts, relating to the employment of employees,
from the books, reports, contracts, payrolls, documents, or papers of the person.
(c) Keep a record showing the names and addr esses of all employees employed and the ages of all
minors.
(d) Keep, at a central location in the state or at the plants or establishments at which employees
are employed, payroll records showing the hours worked daily by and the wages paid to, and the
number of piece-rate units earned by and any applicable piece rate paid to, employees employed
at the respective plants or establishments. Thes e records shall be kept in accordance with rules
established for this purpose by the commission, but in any case shall be kept on file for not less
than three years.
41.1.1 It is the employer’s responsibility to keep accurate records of the time that employees work. If the
employer fails to maintain accurate time records, the employee’s credible testimony or other credible
evidence concerning his hours worked is sufficient to prove a wage claim. The burden of proof is
then on the employer to show that the hours claimed by the employee were not worked. Time records
must be kept whether it is customary in the area or industry. (Anderson v. Mt. Clemens Pottery
(1946) 328 U.S. 680; 90 L.Ed. 1515; 66 S.Ct. 1187 (rhg. den. 329 U.S. 822)) The leading California
case on this issue is Hernandez v. Mendoza (1988) 199 Cal.App.3d 721; 245 Cal.Rptr. 36, which
follows the rationale set out in the Anderson v. Mt. Clemens Pottery case.

41.1.2 Labor Code § 226 Requirements. As discussed in more detail at Section 14 of this Manual, Labor
Code § 226 requires specific information be provided to employees on the wage statement which
must be available with their periodic wage payment. Labor Code § 226 reads, in part, as follows:
(a) An employer, semimonthly or at the time of each payment of wages, shall furnish to his or
her employ
ee, either as a detachable part of the check, draft, or voucher paying the employee’s
wages, or separately if wages are paid by personal check or cash, an accurate itemized statement
in writing showing (1) gross wages earned, (2) total hours worked by the employee, except as
provided in subdivision (j), (3) the number of piece- rate units earned and any applicable piece

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rate if the employee is paid on a piece-rate basis, (4) all deductions, provided that all deductions
made on written or
ders of the employee may be aggregated and shown as one item, (5) net
wages earned, (6) the inclusive dates of the period for which the employee is paid, (7) the name
of the employee and only the last four digits of his or her social security number or an employee
identification number other than a social security number, (8) the name and address of the legal
entity that is the employer and, if the employer is a farm labor contractor, as defined in
subdivision (b) of Section 1682, the name and address of the legal entity that secured the
services of the employer, and (9) all applicable hourly rates in effect during the pay period and
the corresponding number of hours worked at each hourly rate by the employee and, beginning
July 1, 2013, if the employer is a temporary services employer as defined in Section 201.3, the
rate of pay and the total hours worked for each temporary services assignment. The deductions
made from payment of wages shall be recorded in ink or other indelible form, properly dated,
showing the month, day, and year, and a copy of the statement and the record of the deductions
shall be kept on file by the employer for at least three years at the place of employment or at a
central location within the State of California. For purposes of this subdivision, “copy” includes
a duplicate of the itemized statement provided to an employee or a computer -generated record
that accurately shows all of the information required by this subdivision.

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41.2 More Stringent Requirements Contained in The IWC Orders at Section 7 :
(A) Every employer shall keep accurate information with respect to each employee includin g
the following:
(1)
Full name, home address, occupation and social security nu mber.
(2) Birthdate, if under 18 years, and designation as a m inor.
(3) Time records showing when the employee begins and ends each work period. Meal periods,
split shift inter
vals and total daily hours worked shall be recorded. Meal periods during which
operations cease and authorized rest periods need not be recorded.
(4) Total wages paid each payrol l period, including value of boa rd, lodging, or other
compensation actually furnished to the employee.
(5) Total hours worked in the payroll period and applicable rates of pay. This information shall
be made readily availabl
e to the employee upon reasonable request.
(6) When a piece rate or incenti ve plan i s in operati on, piece rates or an expla nation of the
incentive plan formula shall be provided to employees. An accurate production record shall be
maintained by the employer.
(B) Every employer shall semi-monthly or at the time of each payment of wages furnish each
employee, either as a detachable par t of the check, draft, or voucher paying the employee's
wages, or separately, an itemized statement in writing showing: (1) all deductions; (2) the
inclusive dates of the period for which the employee is paid; (3) the name of the employee or
the employee's social security number; and (4) the name of the employer, provided all
deductions made on written orders of the employee may be aggregated and shown as one item.
(C) All required records shall be in the English language and in ink or other indelible form,
properly dated, sh
owing month, day and year, and shall be kept on file by the employer for at
least three years at the place of employment or at a central location within the State of California.
An employee' s records shal l be available for inspection b y the employee upon reasonabl e
request.
(D) Clocks shall be provided in all major work areas or within reasonable distance thereto
insofar as practicab
le.
41.2.1 Salaried Employees Who Are Non -Exempt And Paid Semi -Monthly. DLSE has opined that the
confusion caused by an employer’s use of semi -monthly instead of bi -weekly pay periods “cannot
be ameliorated by non -compliance with the explicit requirements of Labor Code § 226.” (O.L.
2002.05.17 )
41.2.2 Piece Rate And C ommission Plans. Labor Code § 226 requires that in the event the employee is
paid by the piece rate basis, the employer must list the piece rate formula and the number of pieces
completed. Section 7(A)(6) of the IWC Orders expands on this requirement and provides that in the
event any “piece rate or incentive plan” is used in calculating the wages due, “an explanation of the
incentive plan formula shall be provided to the employees.” Section 7(A)(6) also provides that the
employer must keep an accurate production record (including commission or piece rate calculation)
and make that record available to the employee upon reasonable request.

41.2.3 Electronic Methods of Records Keeping. DLSE has taken the position that the use of electronic
timecard systems, under certain circumstances, will meet the requirements of the California law
(O.L. 1994.02.03-1 and 1995.07.20 )

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42 RIGHT TO INSPECT PERSONNEL FILE.

42.1 An employee’s right to inspect the personnel records that an employer maintains may be found in
Labor Code § 1198.5. Section 1198.5 was amended effective January 1, 2001 to include, with
numerous limitations, all public employees in California. The statute was again amended effective
January 1, 2013, to clarify that former employees also had the right to inspect as did representatives
of either current or former employees. In addition to other changes, a $750.00 penalty was added
for violations of the right to inspect personnel records no later than 30 calendar days from receipt of
a written request unless an agreed upon date was selected not to exceed 35 days from the employer’s
receipt of the written request. Injunctive relief and costs and attorney’s fees are available to obtain
compliance. Certain employees covered by a valid collective bargaining agreement are excepted as
are employees who have filed a lawsuit that relates to a personnel matter during the pendency of the
lawsuit. Impossibility of performance may be asserted as an affirmative defense.

42.2 An employee has the right, pursuant to Labor Code §1198.5, to inspect his/her personnel records
that the employer maintains relating to the employee’s performance or to any grievance concerning
the employee.
42.3 The employer must do all of the following in order to comply with the statute:

1. Keep a copy of each employee’s or former employee’s personnel records for a period of
three years aft
er termination of employment;
2. Make current employee personnel records available for inspection and, if requested, provide
a copy, at the place where the employee reports to work, or another location agreed upon (so
long as no loss of compensation to the employee results) . If the employee is t he requestor
the employer is not required to make the records or a copy of them available at a time when
the employee is required to render service to the employer . Current employees may be
limited to 50 requests in one calendar month;
3. Make former employee personnel records available or provide a copy where the employer
stores the recor
ds or another location agreed upon . A former employee may receive a copy
by mail if he or she reimburses the employer for actual postal expenses. If the former
employee was terminated for a violation of law, or an employment-related policy, involving
harassement or workplace violence, the employer may comply with the request by making
the records available at a location other than the workplace that is within a reasonable driving
distance of the former employee’s residence or provide a copy by mail. Former employees
may be limited to one request per year.
42.4 The statute does not apply to (1) records relating to the investigation of a possible criminal offense,
(2) letters of reference or (3) ratings, reports or records that were obtained prior to the employee’s
employment; obtained in connection with a promotional examination, or prepared by examination
committee members who can be identified.

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42.5 By reason of the exception for those agencies under the Information Practices Act, most employees
of the State of California are not covered. Most public agency* employees are covered; but if a
public agency has esta
blished an independent employee relations board or commission, the public
agency employee must first seek relief through that body before pursuing relief before the Labor
Commissioner or the courts.
42.6 The Division may use its subpoena process to co mpel the production of an employee’s personnel
files where the employer fails to provide them to an employee. (O.L. 1998.08.27 )

*“Local agency” is defined, for purposes of this statute, at Govt.Code § 53060.3(b) and includes cities,
counties, cities and co unties, special districts, authorities, community development agencies or other
political subdivision of the state.

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43 ENFORCEMENT OF WAGES, HOURS AND WORKING CONDITIONS REQUIRED
BY THE INDUSTRIAL WELFARE COMMISSION ORDERS.
43.1 Minimum Wage And Overtime. Article XIV, Section I of the Constitution of the State of
California stat
es: “The Legislature may provide for minimum wages and for the general
welfare of employees and for those purposes may confer on a commission legislative ,
executive, and judicial powers.”
43.2 The Legislature has conferred on the Industrial Welfare Commission (IWC) the power to
regulate minimum
wages, maximum hours and working conditions for employees in “every
industry, trade, and occupation” as specified in Labor Code sections 1171 through 1205.
43.3 Overtime Requirements Of IWC Orders Do Not Apply To Some E mployees. The IWC’s
orders apply t
o employees in private industry, including those of non- profit organizations.
Public employees are expressly excluded from most of the provisions of the Orders. (Note,
however, that Orders 14 and 15 contain no exclusion for public entities.) MW-2001, extends
minimum wage coverage to most public employees. Labor Code section 1182.12 expressly
provides that employer means “any person who directly or indirectly, or through an agent or
any other person, employs or exercises control over the wages, hours, or working conditions
of any person. For purposes of this subdivision, ‘ employer’ includes the state, political
subdivisions of the state, and municipalities.” Labor Code sectio n 1171 exempts outside
salespersons (see Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785, for definition) and
individuals participating in a national service program pursuant to 42 U.S.C. 12571 (also
known as A meriCorp). See Section 50, et seq. o f this Manual for a further list of ex empt
employees.
43.4 Eight-Hour-Day Restoration And Workplace Flexibility Ac t Of 1999. The Legislature
adopted AB 60 and made the
following findings:
“The Legislature hereby finds and declares all of the following: (a) The eight-hour workday is the
mainstay of protection for California's working people, and has been for over 80 years. (b) In
1911, California enacted the first daily overtime law setting the eight-hour daily standard, long
before the federal government enacted overtime pro tections for workers. (c) Ending daily
overtime would result in a substantial pay cut for California workers who currently receive daily
overtime. (d) Numerous studies have linked long work hours to increased rates of accident and
injury. (e) Family life suffers when either or b oth parents are kept away from home for an
extended period of time on a daily basis. (f) In 1998 the Industrial Welfare Commission issued
wage orders that deleted the requirement to pay premium wages after eight hours of work a day
in five wage orders regulating eight million workers. (g) Therefore, the Legislature affirms the
importance of the eight-hour workday, declares that it should be protected, and reaffirms the
state's unwavering commitment to upholding the eight-hour workday as a fundamental protection
for working people. (1999, ch. 134)

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43.4.1 Any Exception From The 8-Hour Norm Must Be Clearly Provided. Adoption of this
language ev
idences the Legislature’s intent that the 8-hour day is to be considered the
norm in California and any exception to that norm must, as with any exception to remedial
legislation, be very narrowly construed.

43.5 The Federal Fair Labor Standards Act Does Not Pre-Empt The California Law.
The Fair Labor Standards Act (“FLSA”) provides minimum wage and overtime protection
to workers throughout
the United States. The FLSA contains many exceptions and, most
importantly provides for an overtime premium for hours in excess of forty in a workweek
but without providing for a daily overtime premium. However, the FLSA is designed as a
floor, not a ceiling, and provides that where an employer is covered by both federal and state
laws and the applicable minimum wage or working conditions are different, the higher
standard prevails (29 U.S.C. Section 218(a); see also, Pacific Merchant Shipping v. Aubry
918 F.2d 1409, 1417 (9th Cir. 1990))

43.6 Coverage Or Applicability Of IWC Orders. In addition to those specific employee
classifications and
positions which are exempt (see Section 50 of this Manual) there are a
number of employee classifications which have been determined to be exempt either by case
law, federal pre-emption doctrines or policy.
43.6.1 Workers Employed Exclusively On Most Federal Military Reservations Or Ships Are
Not Covered. The
question of applicability of state law on federal enclaves is a dif ficult
issue. Assistance
from DLSE Legal Section should be sought. (O.L. 1994.08.04 )
43.6.2 Determining Whether The Work Was Performed On A “Federal Enclave.” Employees
of a private emp
loyer who perform their work on military installations may or may not be
subject to state wage and hour law (including the provisions of the Labor Code and any
applicable IWC order), depending on the status of the property where the work is performed,
and also, on the nature of the claim.
43.6.2.2 Role Of California State Lands Commission. In order to determine whether certain land is a
federal enclave,
and if so, whether there has been a reservatio n o r retrocession o f state
jurisdiction, and the date of the cession or retrocession, contact the State Lands Commission,
located at 100 Howe Avenue, Ste. 100, Sacramento 95825 (telephone: 916-574-1900).

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43.6.2.1 Definition Of Federal Enclave. The first question that must be asked is whether the
military ins
tallation is a “federal enclave.” A federal enclave is land over which the federal
government exercises legislative jurisdiction under article I, section 8, clause 17 of the
United States Constitution. An enclave is created when the federal government purchases
land within a state with the state's consent. Not every federal facility is a federal enclave;
the federal government’s proprietary interest in a piece of land does not create a federal
enclave. But the voluntary cession of land by a state to the federal government will result in
an actual transfer of sovereignty, unless the purchase is conditioned on the retention of state
jurisdiction consistent with the federal use. Also, the federal government can make an
“express retrocession” of land that is federally owned so that the state obtains jurisdiction to
enforce its laws.

43.6.2.3 Determining Whether DLSE Has Jurisdiction Over The Claim If The Work Was
Performed On
A Federal Enclave. If the land where the work was performed is not a
federal enclave,
or if state civil law jurisdiction has been reserved or retroceeded, then all
state labor law (including the IWC orders) would apply. If the land is a federal enclave, and
state jurisdiction hasn’t been reserved or retroceeded, then federal law will apply, and also
some state laws will apply while other laws will not. The following state law will apply: 1)
State law that was in effect at the time of the cession, and which is not inconsistent with
federal law, will continue to apply within the enclave unless it is abrogated by Congress, and
2) State law which did not exist at the time of cession will also extend to the enclave when
the state regulation has been expressly permitted by Congress. All other state law will not
apply. See Taylor v. Lockheed Martin Corp. (2000) 78 Cal.App.4th 472, 92 Cal.Rptr.2d
873 [holding that Labor Code § 631 0 (which prohibits discrimination for complaining about
occupational health and safety matters) covered employees working on a federal enclave
(Vandenberg AFB) while the California Fair Employment and Housing Act (FEHA) does
not.]

43.6.3 Workers Employed by Indian Tribes or Businesses Owned by Tribes. Indian tribes,
and businesses
owned by tribes, enjoy sovereign immunity which deprives DLSE and non-
tribal courts of jurisdiction to enforce or adjud icate claimed violations of wage and hour
laws, including claims for unpaid wages, against Indian tribes, business entities owned by
tribes, and officers or agents of a tribe acting in their official capacity and within the scope
of their authority for work performed on a federal enclave or where state civil law
jurisdiction has been reserved or retroceeded.

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43.6.3.1 Geographic Location of the Employment Not Determinative. The doctrine of tribal
immunity extends
beyond the geographic borders of a tribe’s reservati on and covers
commercial activities with persons who are not members of a tribe. Tribal immunity
applies unless specifically abrogated by Congress or waived by the tribe. Thus, even
though substantive state law may apply to off-reservation tribal conduct, tribal immunity
operates to deprive the state of the means to enforce such law, at least as to actions or
claims for monetary damages. Kiowa Tribe v. Manufacturing Technologies, Inc (1998)
523 U.S. 751, 118 S.Ct. 1700.

43.6.3.2 Limitations on Tribal Immunity. Indian sovereign immunity does not preclude actions
for declaratory or
injunctive relief against tribal officials. TTEA v. Ysleta Del Sur Pueblo
(5th Cir. 1999) 181 F.3d 676. A tribe waives immunity from suit by agreeing to an
arbitration clause which provides for court enforcement of an arbitration award. Smith v.
Hopland Band of Pomo Indians (2002) 95 Cal.App.4th 1, 115 Cal.Rptr.2d 455; C&L
Enterprises v. Potawatomi Indian Tribe (2001) 532 U.S. 411, 121 S.Ct. 1589. Under the
rationale set forth in these cases, DLSE could enforce wage and hour requirements
prospectively, through actions for injunctive and declaratory relief. DLSE could process
the wage claim of a person employed by a tribe or tribal entity if that person’s employment
is governed by an arbitration agreement. Of course, the tribe or tribal entity might seek to
enforce the arbitration agreement, in which case DLSE’s jurisdiction over the claim would
cease if a court ordered arbitration.

43.6.3.3 Tribal Immunity Extends to Certain Individuals. A tribal entity, including tribal owned
businesses, are t
reated as the tribe for immunity purposes. This immunity extends to
individual tribal officials and agents acting in their representative capacity and within the
scope of their authority. Trudgeon v. Fantasy Springs Casino (1999) 71 Cal.App.4th, 84
Cal.Rptr.2d 65; Redding Rancheria v. Superior Court (2001) 88 Cal.App.4th 384; 105
Cal.Rptr.2d 773.

43.6.3.4 Tribal Immunity Does Not Extend Generally to Tribal Members. Congress, at 28 U.S.C.
§1360, expressly con
ferred California with civil jurisdiction over Indian territory within the
State’s boundaries. But this jurisdiction only applies to individual Indians; not to tribes or
tribal entities. Great Western Casinos, Inc. v. Morongo Band of Mission Indians (1999) 74
Cal.App.4th 1407, 88 Cal.Rptr.2d 828; Bryan v. Itasca County (1976) 426 U.S. 373, 96 S.Ct.
2102. Because tribal sovereign immunity does not protect individual tribal members, DLSE
may enforce and adjudicate claims for unpaid wages against businesses owned by persons
who are tribal members, as long as the business is not owned by the tribe or an entity created
by the tribe.

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43.6.3.5 No Jurisdiction to Enforce Civil Penalty Provisions in Labor Code Against Tribes or Tribal
Business Entitie
s. California can enforc e “criminal/prohibitory” laws, but not “civil/
regulatory” laws against tribes and tribal entities. Middletown Rancheria v. Workers Comp.
Appeals Bd. (1998) 60 Cal.App.4th 1340, 71 Cal.Rptr.2d 105, held that despite a criminal
sanction, workers compensation laws are “civil/regulatory”, so the State lacks jurisdiction
over the tribe for the purpose of enforcing California workers’ compensation insurance laws.
The same analysis would apply to other citable civil offenses. As with wage and hour claims,
DLSE has jurisdiction to enforce these laws as to businesses owned not by the tribe but by
tribal members.
43.6.3.6 Specific Laws Governing Indian Casinos. The governing federal statute, the Indian Gaming
Regulatory Act of
1988 (25 U.S.C. §2701, et seq.) set s out a comprehensive schem e for
regulating gaming on Indian lands, but also provides for the application of state law to a
significant degree. The Act requires compacts between tribes and states to govern the scope
and conduct of Indian casino gaming, and these compacts may further allocate jurisdiction
between the tribe and the state. The Indian Gaming Compact adopted by California, under
which Indian casino gambling is now regulated, is completely silent as to wage and hour
issues. The Compact expressly allows tribes to maintain their own workers’ compensation
insurance systems, while requiring independent contractors doin g business w ith a tribe to
comply with state workers’ insurance compensation laws.
43.6.3.7 Applicability of Federal Wage and Hour Law to Tribes and Tribal Entities. The issue of the
applicability of the
Fair Labor Standards Act to tribes and tribal entities remains unsettled.
In Reich v. Great Lakes Indian Fish & Wildlife Comm. (7th Cir. 1993) 4 F.3d 490, the court
held that law enforcement officers employed by an Indian agency were exempt from the
overtime requirements of FLSA, finding that they should be treated in the same manner as
other law enforcement officers who are subject to an exemption under FLSA. The court did
not reach any conclusion on the broader issue of FLSA’s applicability to Indian tribes and
tribal entities.

43.6.3.8 Contractual Right to Wage Payment May Be Enforceable Even Though Work
Performed On A
“Federal Enclave.” Finally, we must note that another source of
coverage could be t
he contractual agreement between the federal entity and the
contractor If that agreement requires the contractor to comply with California wage
and hour law, the employees would be entitled to enforce their rights under that contract
as third party beneficiaries, or DLSE could bring an action on their behalf.

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43.6.4 Public Employees’ Partial Exemption From IWC Orders . Prior to January 1, 2001, public
employees were expressly excluded from the Minimum Wage Order, and from Orders 1 -13.
Thus, those workers were not covered by minimum wage or overtime requirements. In the
case of Andrews v. Central California Irrigation District (E.D. Cal. 1999), the federal district
court, in an unpublished decision, ruled that because there is no provision excluding public
employees from Order 14 coverage, an irrigation district’s employees are covered by that wage
order and its overtime requirements. The IWC, though made aware of this decision, declined
to amend Order 14; consequently, public employees are treated the same as private employees
under that Order.
43.6.4.1 Public Employees Are Now Covered By State Minimum Wage Requirements.
With the enactment of MW-2001, on January 1, 2001, public employees (“employees directly
employed by the State or any political subdivision thereof, including any city, county, or
special district”) are now expressly covered by minimum wage requirements. Also, Orders 1-
13 were amended effective January 1, 2001 to specify that Sections 1 (Applicability), 2
(Definitions), 4 ( Minimum Wage), 10 ( Meal and Lodging credits) and 20 (Penalties for
Underpayment) of these orders are applicable to public employees, while all other sections of
these orders (e.g., overtime, meal and rest period requirements) are not. (But see Order 9
concerning meal and rest periods for commercial drivers employed by governmental entities
unless a collective bargaining opt -out is met) Order 16 contains similar provisions. Public
employees are, therefore, entitled to payment of not less than the minimum wage for all “hours
worked” within the meaning of the applicable wage order. (O.L. 2002.01.29) In addition,
Labor Code section 1182.12, setting forth the minimum wage scale for 2017 through 2023,
in scaled increments to reach $15. 50 and for incre ases thereafter, expressly provides that
employer means “any person who directly or indirectly, or through an agent or any other
person, employs or ex ercises control over the wages, hours, or working conditions of any
person. For purposes of this subdivision, ‘employer’ includes the state, political subdivisions
of the state, and municipalities.”
43.6.5 Only Employees Are Covered. The coverage of the IWC Orders extends only to employees.
If the individual is not an “employee,” there is no employment relationship with an employer
and the wage orders do not apply. (O.L. 1988.10.27)
43.6.6 I ndependent Contractors are not employees. (See Section 28 of this Manual for a full
discussion).
43.6.7 Volunteers, who intend to donate their services to religious, charitable, or similar non- profit
corporations without contemplation of pay and for public service, religious, or humanitarian
objectives, are not employees. (O.L. 1988. 10.27).
43.6.8 Students who perform work in the course of their studies, as part of the curriculum, are not
employees if they receive no remuneration or credit toward school fees. (O.L.1993.10.21,
1993.01.07-1). (But see section 46.6.4 for discussion of student interns.)
43.6.9 Members of Religious Orders. In the past, DLSE has followed the rule that members of religious
orders and clergy in general are not employees unless they work in
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43.6.10 Applicants for Relief who exchange labor for aid or sustenance received from a charitable
organization are not
employees and, thus, not subject to the IWC orders. (Labor Code § 3352
(b))
43.6.11 Territorial Scope of Wage Orders . In the absence of a conflict with federal law, California
residents who are employed ex
clusively within the boundaries of California as that boundary
is defined by state law, including residents employed on ocean waters located within such
boundaries, are covered by the IWC Orders. ( Tidewater Marine v. Bradshaw (1996) 14
Cal.4th 557) Federal law does not preempt the application of the IWC Orders to seamen,
who are exempt from the provisions of the Fair Labor Standards Act. (Tidewater Marine,
supra; Pacific Merchant Shipping v. Aubry 918 F.2d 1409 (9th Cir. 1990); see also O.L .
1987.09.08, 1987.06.13 , 1993.02.02 )
43.6.12 Absent a conflict with federal law, and subject to proper interpretation of the IWC Orders in
light of the existen
ce of territorial boundaries and potential conflicts with the laws of other
jurisdictions, the IWC Or ders presumptively cover individual s who are domicile d in
California but who work partly or, under some circumstances, even principally, outside the
state. (Tidewater Marine, supra; United Air Lines, Inc. v. Industrial Welfare Com. (1963)
211 Cal.App.2d 729)
43.6.13 Determining Classification of Employees: Industry or Occupation Order. To determine
which IWC industry o
rder applies to an em ployee or group of em ployees it is necessary to
first determine whether the employer’s business is covered by one of the industry orders of
the Commission. In the event the employer’s business is not covered by an industry order,
the employee’s occupation is used to determine coverage.
43.7 Industry Orders. Except as provided in the occupational orders, if the employer’s business
is covered by
one of the industry orders, that industry order applies to all classifications of
employees, regardless of the kind of work the employee performs, unless the employee is
specifically exempted by the applicability section of the industry order. Industry orders
include Orders 1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 12, and 13 as well as wage orders (i.e., MW-01)
which provide only for the minimum wage requirement.

commercial establishments which serve the general public. (For purposes of this proviso,
DLSE followed the conclusions reached by the U.S. Supreme Court regarding enforcement
of the FLSA in the case of Alamo Foundation v. Secretary of Labor (1984) 471 U.S. 290.)
However, in view of the broad inclusion of the provisions of AB60 (Labor Code §§ 500, et
seq.) this agency is reluctant to continue to take that view. There is no specific exemption
for clergy in the California law. The federal rule, obviously, relies on the conclusion that the
FLSA was adopted as part of Congress’ commerce clause powers and, since churches are not
engaged in commerce (except with some limited “employee” exceptions noted by the DOL
in Opinion Letters) clergy are easily excluded from the FLSA coverage. It should be noted,
however, that many clergy have advanced degrees in theology and would be exempt as a
result of the “learned professional” exemption.

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43.7.1.1

43.7.2 If the employer’s business does not fall within the definition of any covered industry order,
the employee's o
ccupation must be examined to see which of the occupation orders to apply.
43.7.2.1 Examples: Employee is a nurse. The nurse may be employed by an employer in a particular
industry (i.e., indus
trial nurse in a manufacturing plant – Order 1) or may be employed by a
weight-control establishment under Order 2, or by a hospita l under Order 5. If the nurse
worked as a private duty nurse in a private home, she would come under Order 15, an
occupational order; or if the nurse was employed by a large contractor on a job site, under
Order 4, again an occupational order.
43.8 Occupation Orders of The IWC Include:

43.8.1 Order 4, Covering “Professional, Technical, Clerical, Mechanical, and Similar Occupations”.
This “catch-all” order co
vers all Professional, Technical, Mechanical and Similar Employees
and, until the release of the 2001 Orders, contained the proviso that the provisions would
cover “unless such occupation is performed in an industry covered by an industry order...”*
43.8.1.1 Most Employees Not Covered by Industry Orders. Several major types of businesses do
not have industry-wid
e orders covering their operations and their employees are treated

*The quoted language was deleted with the 2001 Wage Order. However, DLSE will continue to read
into the Applicability section of Order 4 the language “unless such occupation is performed in an industry covered
by an industry order...” To do otherwise would lead to ludicrous results.
Example. A large supermarket chain also owns a bakery. The supermarket chain does not
exercise control over the day- to-day operations of the bakery. The baker y is in direc t
competition with other bakers in the area which are subject to Order 1 (manufacturing).
Since the bakery is not subject to the day-to-day control of the parent corporation (which
would be under Order 7, Mercantile) the employees of the subsidiar y bakery would be
covered by Order 1 (Manufacturing). (See also, O.L. 1993.11.03, 1994.10.0 3)
43.7.1.3
A subsidiary of a large corporation may be
covered by the order that the parent corporation is covered by if the parent corporation
exercises control over t he day-to-day operations of the subsidiary; but if the subsidiary is
simply a part of a corporate ownership but not subject to the day-to-day control of the parent
corporation as to the operations of the subsidiary, the business of the subsidiary will be the
focus of the test to determine which Order applies.
Determining Industry Order Coverage.43.7.1.2
Examples: a clerical worker employed by a maker of toys works in the ma nufacturing
company covered by Order 1; a driver who delivers supplies for a chain of beauty shops is
employed in Order 2, the personal service industry, and a mechanic who works for a retail
tire chain is covered by Order 7.

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on the whole as employed in Order 4. Some of the classes of occupations covered by Order
4 include all non-exempt employees in banks, utilities and insurance companies.
43.8.2 Order 14, Covering the “Agricultural Occupations”. This order covers all work defined in
the order as “agricultural”, but does not apply to any employee working in the industries
handling products after h arvest.
43.8.3 Order 15, Covering the “Household Occupations”. I t is very important to note that Order
15 only applies to employees of a “private householder” and not to employees of firms
contracting services to private households.
“Household Occupations” means all services related to the care of persons or maintenance of a
private household or its premises by an employee of a private householder. Said occupations shall
include, but not be limited to, the following: butlers, chauffeurs, companions, cooks, day workers,
gardeners, graduate nurses, grooms, housecleaners, housekeepers, maids, practical nurses, tutors,
valets, and other similar occupations.

But, See Section 2(J) of Order 15 which provides that personal attendants may be employed
by a private householder or by any third party employer recognized in the health care
industry to work in a private household…”
43.8.4 Order 16, Covering Occupations i n Onsite Construction, Mining, Drilling and Logging
Operations. It had long been the enforcement position of the DLSE that Order 4 did not cover
onsite construction, logging, drilling and mining operations, based on comments made by the
IWC in various public meetings. Despite this interpretation, the DLSE took the position that
certain tradespeople not employed on construction sites in maintenance or repair, were
covered by Order 4. The IWC, in wording the applicability section of the new Order 16
as they did, quite clearly specifically intended to cover all employees in onsite construction
and also move any tradespeople in the construction area who DLSE previously found had
been covered by Order 4 to coverage under Order 16.
43.8.4.1 Note: Employees who are not engaged in onsite construction, mining, drilling and logging
operations but are employed by employers engaged in these types of work, would be covered
by Order 4. ( See Harris Feeding Co v. Department of Industrial R elations (1990) 224
Cal.App.3d 464)

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44. MINIMUM WA GE OBLIGATION.
44.1 Th
e chart below sets forth the minimum wage and annual increases until January 1, 2023 when the
minimum wage increased to $15.50 for all employees. From 2017 through 2022 employers who
had 25 or fewer employees were subject to payment of a lower rate. New provisions in Labor Code
1182.12 provide for increases based on specified economic factors.
California’s Scheduled Wage Increase
Effective Date 26 Employees or More 25 Employees or Fewer
January 1, 2017 $10.50 per hour $10.00 per hour
January 1, 2018 $11.00 per hour $10.50 per hour
January 1, 2019 $12.00 per hour $11.00 per hour
January 1, 2020 $13.00 per hour $12.00 per hour
January 1, 2021 $14.00 per hour $13.00 per hour
January 1, 2022 $15.00 per hour $14.00 per hour
January 1, 2023 $15.50 per hour2 $15.50 per hour
44.1.2
44.1.3
Labor Code Section 1182.12 provided for an increase in the mini mum wage beginning July
1, 2014 to $9.00, January 1, 2016, $10.00 and beginning January 1, 2017, Senate Bill 3
provided for the scaled increases referenced above. The definition of employer in
1182.12(b)(3) “means any person who directly or indirectly, or through an agent or any other
person, employs or exercises control over the wages, hours, or working conditions of any
person. For purposes of this subdivision, ‘employer’ includes the state, political
subdivisions of
the state, and municipalities.”
Mini
mum Wage Covers O ther F o rmerly E xempt Employees. In MW -2001, the IWC
specifically included the following employees who previously had been subject to “non-
s
tatutory full and partial exemptions from the minimum wage”:
1. sta
te and local government employees;
2. full-time carnival ride operators;
3. professional actors;
4. personal attendants in private homes other than babysitters under the
age of eighteen (18) employed as babysitters for a minor child of the
employer in the employer’s home;
2 The rate may be adjusted upward for inflation.

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5. student nurses, and
6. minors.
44.1.4 Learners. The IWC, in wage orders issued after January 1, 2001, amended the exceptions
for “Learners
” to include minors. Thus, learners (regardless of age) may be paid not less than
85% of the minimum wage rounded to the nearest nickel during their first one hundred sixty
(160) hours of employment in occupations in which they have no previous similar or related
experience.
44.1.5 Federal Minimum Wage Requirements Differ From California Requirements.
Federal Courts
, in construing the obligation of the employer under the FLSA, have
consistently held that the obligation is met if an employee receives, for each pay period, an
amount not less than the minimum wage for the total number of hours worked. Blankenship
v Thurston Motor Lines (4th Cir. 1969) 415 F.2 d 1193, 1198; United States v. Klinghoffer
Bros. Realty Corp. (2nd Cir. 1960) 285 F.2d 487, 490; Dove v. Coupe (D.C. Cir. 1985) 759
F.2d 167, 171; Hershey v. MacMillan Bloedel Containers (8th Cir. 1986) 786 F.2d 353, 357.
44.2 In California, Employer With Obligation To Pay Contract Wage Amount Cannot Offset That
Contract Amount Wit
h The Minimum Wage Obligation. California law differs dramatically
from the FLSA in a crucial way -- the FLSA does not provide a mechanism for the
enforcement of non-overtime, contract based wages which exceed the minimum wage, while
California law provides a statutory basis, under the Labor Code, for the enforcement of non-
overtime contract based wage claims in excess of the minimum wage. (Labor Code § 1195.5)
California law also explicitly prohibits employers from paying employees less than the wages
required under any statute or less than the wages required under any contract or CBA.
44.2.1 Statutory Requirements. Labor Code §221 provides: “It shall be unlawful for any employer
to collect or re
ceive from an employee any part of the wages theretofore paid b y said
employer to said employee.” Section 222 provides: “It shall be unlawful, in case of any wage
agreement arrived at through collective bargaining, either wilfully or unlawfully with intent
to defraud an employee, a competitor, or any other person, to withhold from said employee
any part of the wage agreed upon.” Finally, Section 223 provides: “Where any statute or
contract requires an employer to maintain the designated wage scale, it shall be unlawful
to secretly pay a lower wage while purporting t o pay the w age designated by statute or
contract.”
44.2.2 All Hours Must Be Paid At Agreed Rate And No Part Of Agreed Rate May Be Used As
Credit Agains
t Minimum Wage Obligation. The above cited statutory scheme prevents an
employer who ope rat
es under a contrac t that expressly pays employee s less than the
minimum wage for certain activities (e.g., washup time, recordin g time, etc.) that would
constitute “hours worked” within the meaning of state law, from using any part of the wage
payments that are required under that contract for activities that are compensated in an

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amount that equals or exceeds the minimum wage, as a credit toward satisfying minimum
wage obligation
s for those activities that under the contract terms, ar e to be compensated at
less than the minimum wage. Instead, all hours for which the employees are entitled to an
amount equal or greater than the minimum wage pursuant to the provisions of the contract
must be compensated precisely in accordance with the provisions of the contract; and all
other hours (or parts of hours) which the contract explicitly states will be paid at less than the
minimum wage, but which constitute “hours worked” under state law, must be compensated
at the minimum wage. (O.L. 2002.01.29 )
44.2.2.1 Federal Enforcement Provision Not Allowed In California. Averagin g of all wages pai d
under a contract w
ithin a particular pay period in order to determine whether the employer
complied with its minimum wage obligations is not permitte d unde r the circumstances
outlined above, for to do so would result in the employer paying the employees less than the
contract rate for those activities which the contract requires payment of a specified amount
equal to or greater than the minimum wage; such a payment scheme would violate Labor
Code §§ 221-223.

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45 WORKING CONDITIONS UNDER THE IWC ORDERS.
45.1 Reporting Time Pay. Section 5 of each of the Orders provides:
(A) Each workday an employee is required to report for work and does report, but is not put to work or
is furnished less t
han half said employee’s usual or scheduled day’s work, the employee shall be
paid for half the usual or scheduled day’s work, but in no event for less than two (2) hours nor more
than four (4) hours, at the employee’s regular rate of pay, which shall not be less than the minimum
wage.
(B) If an employee is required to report for work a second time on any one workday and is furnished
less than two (2)
hours of work on the second reporting, said employee shall be paid for two (2)
hours at the employee’s regular rate of pay, which shall not be less than the minimum wage.
(C) The foregoing reporting time pay provisions are not applicable when:
(1) Operations cannot commence or continue due to threats to employees or
property; or when recomme
nded by civil authorities; or
(2) Public utilities fail to supply electricity, water, or gas, or there is a failure in the public
utilities, or sewer s
ystem; or

(3) The interruption of work is caused by an Act of God or other cause not within the
employer’s control
(D) T
his section shall not apply to an employee on paid standby who is called to perform assigned
work at a time ot
her than the employee’s scheduled reporting time.

45.1.1 Reporting time pay constitutes wages. (Murphy v. Kenneth Cole Productions, Inc. (2007) 40
Cal. 4th 1094). Thus, failure to pay all reporting ti me pay due at the time of employm ent
termination may be the basis for waiting time penalties pursuant to Labor Code § 203.

45.1.1.1 Purpose and M eaning of “R eport” T he IWC’s purpose in adopting reporting time pay
requirements w
as two-fold: “to compensate employees” and “encourag[e] proper notice and
scheduling”. Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1111-1112.
In Ward v. Tilly’s, Inc. (2019) 31 Cal.App.5th 1167, the court held physical reporting was not
required in order to come within the reporting time pay provision. In reviewing the history
and purpose behind reporting time pay, the court described a wage board hearing conducted
by the IWC as evidence of the need for reporting time pay:
“Allowing a large number of workers to come to the plant when there is little or no work
for them is serious
abuse. The testimony [to the wage board] showed that able employers
through the information collected by their organization eliminated this evil almost
entirely. Incompetent employers are able, however to make the worker pay for their
incompetency. It is an obvious advantage to the employer to have plenty of workers
around for all emergencies if he does not have to pay for them….” Ward v. Tilly’s, supra,
31 Cal.App.5
th at p. 1181. [O]n-call shifts significantly limit employees’ ability to earn
income, pursue an education, care for dependent family members, and enjoy recreation
time.” Id at p. 1183.
Types of situations that trigger reporting time pay include:
1. Physically appearing at the workplace at the shift’s start;
2. Presenting themselves for work by logging on to a computer remotely;

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3. Appearing at a client’s job site;
4. Setting out on a trucking route;
5. Or in this case, by telephoning the store two hours prior to the start of a shift.
Id. at . p 1185.

45.1.2 Employee
Reports To Work And Told To Return Later. The DLSE has been asked what
the reporting ti
me pay requirements are when an employee is told to report at a specific time
and is then told tha t there is no work available at that time but that he or she is to report
again, say, two hours later. The language of the r egulation clearly requires that the
applicable premium be paid if, at the first reporting of the day, the employee is not put to
work or is provided less than one -half the scheduled or usual num ber of hours; this would
be the r esult des pite the f act that the em ployee mi ght, eventually, work more than the
scheduled hours in the day in a subsequent reporting. At the second reporting of the day the
same plain language of the regula tion would require that in the event the employee is
furnished with less than two hours of work, the employee is, nevertheless, entitled to recover
two hours at the employee’s regular rate of pay.

45.1.2.1 Paid Standby Time. If the employee is on a paid standby and is called to work, the reporting
time pay provisions do n
ot apply. In order to qualify as paid standby, the hourly wage for
the standby time which has been agreed to or, absent a specific agreement, at the employee’s
regular rate of pay must be paid. If the employee was not simply told to report later, but the
employee’s activities were restricted by the employer pending the second reporting time, the
time spent would be compensable as paid standby time. (See also Section 45.1.6.1, below)

45.1.3 “Employee’s Usual Or Scheduled Day’s Work .” If an employee has no regularly scheduled
shift, then the usua
l shift worked by the employee (but in no event less than two or more than
four hours) must be paid. However, if an employee has a regularly contracted “scheduled”
relief shift* of less than two (2) hours the reporting time penalty is not applicable. However,
in such a situation the
employee must be paid for the regularly scheduled contracted amount.

*There is an Attorney General Opinion (AG Opn. NS-5108, September 21, 1943, p age 235-236) regarding the
reporting time penalty as it appeared in 1943 (“each day an employee is required to report to work and does report
for work but is not put to work or works 4 hours or less the employer shall pay the employee for not less than 4
hours at $.50 per hour”). In the opinion, the AG concluded: “where an employee is called to report and does report
expectin g to re ceive the usual day’s work with the prescribed pay therefor she is denied the opportunity to
earn a living wage if she is not compensated for at least a portion of the time she makes available to the proposed
employer. This would not be true in connection with regularly contracted relief for part- time work...Should a
woman be employed regularly to work a lunch hour to relieve the full-time clerk and reports to work expecting and
knowing that she is to receive but one hour’s employment per day and this is the regular part-time arrangem ent,
we are of the opinion that is was not the intention of the mercantile order to apply to such an arrangement and
that the employee may be paid the minimum w age at the hourly rate for the time actually employed.”
(Emphasis added)

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45.1.3.1 Example: Assume a worker is scheduled to work four days of two hours each and one day of
one hour. The regularl
y contracted relief shifts are not subject to the reporting time penalty.
Note the emphasis on regularly contracted part-time relief (see AG Opinion in footnote). This
exception would not apply unless the shift is regularly scheduled and is less than two (2)
hours.
45.1.4 Required “Training” Or “Staff” Meeting Attendance. DLSE has been asked on a number of
occasions how the Rep
orting Time provisions of the Orders affect a situation where the
employer requires employees to attend a short training meeting, staff meeting or similar
gathering under a variety of circumstances. Most common are:
1. Required meeting is scheduled for a day when the worker is not usually
scheduled to work. The
employer tells all of the workers that attendance at the
meeting is mandatory and a one- or two-hour shift is “scheduled” for this meeting.
Under Aleman v. Air Touch Cellular (2012) 209 Cal.App.4th 556, when an employer
regularly scheduled a meeting several days in advance, specifying the duration of such
meeting, and the meeting lasted at least half the scheduled time, reporting time pay
was not triggered.
Under Price v. Starbucks Corp. (2011) 192 Cal.App.4th 1136, when an employer
scheduled several
days in advance a meeting of unspecified duration on a day when
an employee was not otherwise scheduled to work, the employee was entitled to
reporting time pay, the amount of which was based on the expectation of how long the
meeting was scheduled to last.
2. Required meeting is scheduled on the day a worker is scheduled to work, but after the
worker’s scheduled shi
ft ends.
a. If there is an unpaid hiatus between the end of the shift and the meeting, the
employee must be
paid, pursuant to Section 5(B) (see above) at least two hours for
reporting a second time in one day.
b. If the meeting is scheduled to immediately follow the scheduled shift, there is no
requirement for the pa
yment of reporting time no matter how long the meeting
continues.

45.1.5 Interruption O f Work. You will note that reporting time pay is not required when “th e
interruption of wor
k [requiring the second reporting time] is caused by an Act of God or other
cause not within the employer’s control.” DLSE has recently concluded that rain or other
inclement weather that makes it impossible or unsaf e to work falls into the category of “an
Act of God or other c ause not with in the employer’s control.” This means that if workers
are sent home (either immediately upon reporting to work or during the workday) because
of rain or other inclement weather, there is no obligation to pay reporting time pay.
45.1.5.1 However, employees must be paid for all time they are restricted to the employer’s premises,
or worksite, while
“waiting out” a delay caused by rain or other inclement weather, if they
are not free to leave the premises or worksite during that time, even i f the employees are
relieved of all other duty during the period of time they are waiting for weather conditions to

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improve. The reason for this is that under the IWC orders, employees must be paid for all
“hours worked,” and th
e term “hours worked” inc ludes both “all time the employee is
suffered or permitted to work, whether or not required to do so,” and all “time during which
an employee is subject to the control of an employer.” Restricting employees to the
employer’s premises, or worksite, means that the employee is subject to the employer’s
control so as to constitute “hours worked .” See Morillion v. Royal Packing Co. (2000) 22
Cal.4th 575, and Bon o Enterprises v. Labor Commissioner (1995) 32 Cal.App.4th 968.
Under such circumstances, the employees must be paid their regular rate of compensation
(which cannot be less than the minimum wage), or any overtime rate, if applicable. (O .L.
1998.12.28 )

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45.1.6 Restrictions Placed On Employee In Situations Involving Weather Delays. Even if the
employee is give
n some limited freedom to leave the employer’s premises or worksite while
“waiting out” a delay caused by rain or inclement weather, there will still be an obligation to
pay the employee for such time if the employee is so restricted geographically and/or
temporally that the worker is deprived of effective use of his own time.
45.1.6.1 Example: If a worker is told that he can go across the street to a café during a rain delay, but
that he must repor
t back to work within five minutes of being notified that work is starting,
the entire time that the worker is waiting in the café will constitute “controlled stand-
by time”, which is treated as “hours worked”. (See generally, Berry v. County of Sonoma
(9th Cir.1994) 30 F.3d 1174)

45.2 Meal Periods. Labor Code § 512(a) provides:
An employer may not employ an employee for a work period of more than five
hours per day without providing the employee with a meal period of not less than
30 minutes, except that if the total work period per day of the employee is no more
than six hours, the meal period may be waived by mutual consent of both the
employer and employee. An employer may not employ an employee for a work
period of more than 10 hours per day without providing the employee with a
second meal period of not less than 30 minutes, except that if the total hours
worked is no more than 12 hours, the second meal period may be waived by
mutual consent of the employer and the employee only if the first meal period was
not waived.

Section 11 of Wage Order 4-2001 provides:

(A) No employer shall employ any person for a work period of more than five (5)
hours without a mea
l period of not less than 30 minutes, except that when a work
period of not more than six (6) hours will complete the day’s work, the meal period
may be waived by mutual consent of the employer and the employee. Unless the
employee is relieved of all duty during a 30 minute meal period, the meal period
shall be considered an “on duty” meal period and counted as time worked. An “on
duty” meal period shall be permitted only when the nature of the work prevents an
employee from being relieved of all duty and when by written agreement between
the parties an on-the-job paid meal period is agreed to. The written agreement shall
state that the employee may, in writing, revoke the agreement at any time.
(B) If an employer fails to provide an employee a meal period in accordance with
the applicable pr
ovisions of this order, the employer shall pay the employee one (1)
hour of pay at the employee’s regular rate of compensation for each workday that the
meal period is not provided.

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(C) In all places of employment where employees are required to eat on the premises,
a suitable place for t
hat purpose shall be designated.
(D) Notwithstanding any other pr ovision of this order, e mployees in the he alth care
industry who work s
hifts in excess of eight (8) total hours in a workday may voluntarily
waive their right to one of their two meal periods. In order to be valid, any such waiver
must be docum ented in a written agree ment that is voluntarily signe d by both the
employee and the e mployer. The employee m ay revoke the waiver at any ti me by
providing the employer at least one (1) day’s written notice. The employee shall be fully
compensated for all working ti me, including any on-the-job meal period, while such a
waiver is in effect.

45.2.1 Employers Must Provide Meal Periods.
In Brinker Restaurant Corporation v. Superior Court of San Diego (2012) 53 Cal.4th 1004,
the California Supreme Court interpreted the meal period provisions of Labor Code section
512(a) and Section 11 of Wage Order 5-2001 holding that in order to “provide” a meal
period, employers must relieve employees of all duty. During that time, employees must
be ‘free to come and go as they please.” If an employer has relieved an employee of all
duty and if work does continue, the employer, although not liable for meal period premium
pay, must pay for the time worked. In addition, the employer must relinquish control over
their activities, permit them a reasonable opportunity to take an uninterrupted 30-minute
meal period and not impede or discourage an employee from doing so. It is not enough
just to make the meal period “available”. Even if an employer has a formal policy of
providing meal periods, it will be a violation if the employer creates incentives to forego,
or otherwise encourages skipping of, meal periods.
45.2.1.1 Payment for Work Performed During Meal Period.
An employee who elects to work during a meal period must be paid for all hours worked and
be compensated f
or all hours worked with payment of the appropriate overtime premium if
work performed during a meal period results in accrual of daily or weekly overtime. An
employer has the obligation to accurately record all hours worked, including those worked
during a meal period, and must properly report all such time on wage statements, as required
by Labor Code section 226(a).
45.2.1.2 Where an employee – although relieved of al l duties – is not free to leave the work place
during the time allo
tted to such employee for eating a meal, the meal period is on duty time
subject to the control of the employer, and constitutes hours worked. Bono Enterprises v.
Labor Commissioner (1995) 32 Cal.App.4th 968.
Caveat: Orders 4 and 5 contain a “Health Care Industry” exception which provides that “hours
worked” is to be interpreted in accordance with the provisions of the Fair Labor Standards Act.
This means that for the employees engaged in the “health care industry” the provisions of 29
CFR § 785.19(b) would apply and the Bono Enterprises case would have no applicability.

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45.2.2 Note: Labor Code § 512, requiring an employer to provide a meal period, does not exclude any
class of employee
. Consequently, it would appear that exempt employees are also entitled to
meal periods in accordance with that section. H owever, the premium pay provided in Labor
Code § 226.7 for failure to provide the meal period only applies if the meal period is required
by the applicable IWC Order. The IWC Orders specifically excluded exempt employees from the
coverage of the IWC meal period requirement. Thus, no pre mium pay may be i mposed on a
employer who fails to provide a meal period to an exempt employee.

45.2.3.1 Limited Waiver Of Meal Period Requirement Allowed In Two Situations:
1. If a work period of not more than six hours will com plete the day’s work, the m eal
period may be waived ent
irely by mutual consent of the employer and employee. 1
a. Note, there is no requirement that the waiver be in writing in this situation.
b. There is no requirement in this situation that the employee be able to eat while
on duty as is the ca
se with an “on-duty” meal period described below.
c. An employer may not employ an employee for a work period of m ore than 10
hours in a workday w
ithout providing a second m eal period. This second m eal
period may be waived if the total hours of work are no m ore than 12 hours and
the first meal period has not been waived.
d. In Ehret v. Winco Foods, LLC . (2018) 26 Cal.App.5th 1, the w aiver in the
CBA was upheld as
a matter of state law when working more than five
hours but not more than six hours. Labor Code § 512 does not prohibit an
agreement that waives the meal peri od on shifts of more than five hours
but not more than six hours .
2. An on-duty meal period may be provided if the employee agrees in writing, and such
on- duty meal is
allowed “only when the nature of the work prevents an employee from
being relieved of all duty.”
a. The test of whether the nature of the work prevents an employee from being
“relieved of all duty”
is an objective one. An employer and employee may not
agree to an on-duty m eal period unless, based on objective criteria, any
employee would be prevented from being relieved of all duty based on the
necessary job duties.
b. The written agreement for an on-duty meal period must contain a provision that
the employee m
ay, in writing, revoke the agreement at any time.
c. DLSE does not have the jurisdiction to exe mpt an e mployer from the meal
period provisions in t
he Orders or those of Labor Code §§226.7, 512.

1 Labor Code Section 512 which requires the meal periods, allows the IWC to adopt a working condition permitting a meal
period to commence after six hours of work – however, the IWC has not done so. Consequently, the employer and
employee must agree to the waiver under the conditions set out in the Orders.

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45.2.3.2 Collective Bargaining Exceptions.
Labor Code section 512 has been amended to except certain employees in specified
industries and occ
upations from the meal period requirements of Section 512(a) where
collective bargaining agreements meet certain requirements.
1. Wholesale Baking Industry. Section 512(c) provides that Section 512(a) does not
apply to employe
es in the wholesale baking industry who are: (a) subject to an
Industrial Welfare Commission Order and (b) covered by a valid collective bargaining
agreement (CBA) that provides (i) for a 35- hour workweek consisting of five seven -
hour days and (ii) payment of 1 and ½ the regular rate of pay for time worked in excess
of seven hours per day and (iii) a rest period of not less than 10 minutes every two
hours. This amendment was effective 1/1/2003.
Motion Picture and Broadcasting Industries. The meal period provisions of Section
512(a), Section 226.7, a
nd IWC Wage Orders 11 and 12 do not apply to employees in
the motion picture industry and the broadcasting industry that are covered by a valid
collective bargaining agreement that: (i) provides for meal periods and (ii) includes a
monetary remedy if the employee does not receive a meal period required by the
agreement. This amendment was effective 1/1/2006.

2. Construction Occupation, Commercial Drivers, certain Security Services Industry
employees, and e
mployees of certain Utilities. The meal period provisions of Section
512(a) and (b) do not app
ly to a limited sector of employees that are covered by a valid
collective bargaining agreement. This amendment was effective 1/1/2011.
The CBA exception provided by LC 512(e)&(f) applies only to employees in a
construction occupa
tion, commercial drivers, certain employees of security firms
registered pursuant to Chapter 11.5 of the Business & Professions Code, and employees
of electrical, gas, and publicly owned electric utilities.
The Section 512(e)&(f) exceptions to the Section 512(a)&(b) meal period requirement
apply only if: (1)
The employee is covered by a valid collective bargaining agreement;
(2) The valid collective bargaining agreement (i) expressly provides for the wages, hours
of work, and working conditions of employees; (ii) expressly provides for meal periods
for those employees; (iii) final and binding arbitration of disputes concerning application
of its meal period provisions; (iv) premium wage rates for all overtime hours worked;
and (v) a regular hourly rate of pay of not less than 30 percent more than the state
minimum wage rate.

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Other Collective Bargaining Agreements. There is no exception to the requirement for
meal periods for
employees on account of a CBA other than those provided above. Labor
Code § 514 was amended effective January 1, 2002, to repeal the statutory exemption
from th e meal period requirement in the case of workers covered by a collective
bargaining agreement. The Legislature adopted a statement that this amendment was
declarative of existing law and shall not be deemed to alter, modify or otherwise affect
any provision of any IWC Order. IWC Orders 1-15 and 17 do not provide, and never have
provided, a CBA opt-out for meal period requirements. Presently, the only CBA opt-outs
are those contained in Section 512 (1)(c-g). [Historical note: In 2006 the Court of Appeal
declared the Order 16 opt -out provision to be unenforceable due to its having been
adopted in violation of the express provisions of Labor Code § 516 which does not allow
the IWC to adopt meal period requirements that are inconsistent with Labor Code § 512.
Bearden v. Borax, 138 CA 4th 429 (2006). The enactment of AB 569, amending Labor
Code section 512 effective January 1, 2011, created an opt-out which varies in substance
from the provision in Wage Order 16. There are two additional requirements not provided
for in Wage Order 16, making the opt -out contained in 512 more restrictive than the
previous opt-out in wage Order 16 that was found to be unenforceable.]

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45.2.4.1 Order 1-2002 Amendment Allowing Parties To Collective Bargaining Agreements To
Agree To A Meal P
eriod After Six Hours Of Work.
Effective July 1, 2002, IWC Order 1- 2002 allows a limited e xception to the r ule that no
employer shall em
ploy a worker for a period of more than five hours without a meal period
to workers employed under the terms of a collective bargaining agreement. The IWC added
a second sentence to Paragraph A that provides: “In case of employees covered by a valid
collective bargaining agree ment, t he p arties to the colle ctive bargaining agreement may
agree to a meal period that commences after no more than six (6) hours of work.” Note that
this CBA exception only applies to Order 1.
45.2.4.2 There is, of course, language in the Orders which allows an employee to waive the meal
period by accep
ting an on-duty m eal period if all of the re quired circumstances exist.
California law has always allowed a union, as the coll ective bargaining representative,
to act on behalf of its members where such waiver is allowed. (Porter v. Quillin (1981)
123 Cal.App.3d 869). However, as is the case where there is no CB A, it m ust be
established by objective criteria that the conditions for the on-duty meal period are met
before the waiver is allowed. T he parties m ay not agree to the on-duty m eal period
because it is desired or helpful.
45.2.5 “On-Duty Meal Period”. Even if all of the circumstances exist to allow an on-duty meal
period, the employ
ee must be provided with the opportunity to eat his or her meal while
performing the duties required and any on-duty meal period must, like any off-duty meal
period, be at least 30 minutes long. L’Chaim House, Inc. v. DLSE (2019) 38 Cal.App.5th
141.
45.2.6 Meal Time Training Or Client Meetings. If an employee is required by the employer
to attend a luncheon, di
nner or other work related meal, or training accompanied by a
meal, the employer must pay for the cost of the meal and the employee must be paid at
the employee’s regular rate of pay. As the ti me is work ti me, it mus t be counted as
hours worked for overti me purposes. In addition, covered e mployees continue to be
entitled to a duty free 30 minute m eal period in accordance with the ter ms of the
applicable Wage Order.
45.2.7 Premium For Failure Of The Employer To Provide The Meal Peri od. For each
workday that the e mpl
oyer fails to provide the required m eal period, the employer shall
pay the employee one (1) hour of pay at the employee’s regular rate of compensation. This
premium pay is a “wage” under Labor Code § 200.
45.2.8 Premium For Missed Meal Period Is Only Imposed Once Each Day. No matter how
many meal periods
(rest period penalties are separate) are missed, only one meal period
premium is imposed each day. Thus, if an e mployer employed an employee for twelve
hours in one day without any m eal period, the penalty would be only one hour at the
employee’s regular rate of pay.
45.2.9 Limited Timing Requirement for certain drivers transporting animal nutrients and
byproducts in rural
and remote areas. Legislation passed in 2018 adds new Labor
Code section 512(b)(
2) which provides that commercial drivers transporting animal
nutrients and byproducts from a commercial feed manufacturer in rural or remote areas
who receive at least 1.5 times the state minimum wage may have until the end of the 6 th
hour to be provided with the first meal period.

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45.2.10 Proposition 11 passed in 2018 allows private emergency ambulance employees to be
“on-call” during all meal and rest periods. Such employees must be paid their regular
rate of pay during all on-call meal and rest periods, but are not entitled to a meal or rest
period premium for being required to stay on- call during such on- call periods. The
Proposition enacts new Labor Code sections 880 -890 and applies to all actions pending
on or commenced after October 25, 2017. This new chapter applies to privately employed
emergency medical technicians, dispatchers, paramedics or other licensed or certified
ambulance transport personnel who contribute to the delivery of ambulance services
employed by an emergency ambulance provider, that provides ambulance services but
not including the state or political subdivision of the state.
45.2.11 SB 1334 enacted in 2022 extends the right to meal and rest periods to public sector
employees who provide direct patient care or support direct patient care, in a hospital,
clinic, or public health setting through the enactment of new Labor Code Section 512.1.
45.2.12 Premium Is Imposed For Failure To Provide Meal Period In Accordance With
Applicable IWC Order. No employer shall require any employee to work during any
meal period mandated by an applicable order of the Industrial Welfare Commission. If an
employer fails to provide an employee a meal period in accordance with an applicable
order of the Industrial Welfare Commission, the employer shall pay the employee one
additional hour of pay at the employee’s regular rate of compensation for each work day
that the meal period is not provided. (Labor Code § 226.7)
45.2.13.1 Relationship Between Record-Keeping Requirement And Meal Period. The employer
has an obligation under the record-keeping requirements set forth in the Wage Order to
track meal periods unless “all work ceases.”
45.2.13.2 Wage Order 16 -2001 Meal Period Requirements. In addition to the requirements
contained in the other Orders, Order 16-2001, Section 10(C), requires that the employer
furnish “an adequate supply of potable water, soap, or other suitable agent and single use
towels for hand washing.”
45.3 Rest Periods. Section 12 of each of the Orders (except Order 16) provides:
Every employer shall authorize and permit all employees to take rest periods, which
insofar as practicable shall be in the middle of each work period. The authorized rest period
time shall be based on the total hours worked daily at the rate of ten (10) minutes net rest
time p er four (4) hours or major fraction thereof. However, a rest period need not be
authorized for employees whose total daily work time is less than three and one-half (3
½) hours. Authorized rest period time shall be counted as hours worked for which there
shall be no deduction from wages.
(A) If an employer fails to provide an employee a rest period in accordance with the
applicable provisions of this order, the employer shall pay the employee one (1) hour of pay
at the employee’s regular rate of compensation for each workday that the rest period is not
provided.
45.3.1 “Major Fraction”. In Brinker Restaurant Corporation v. Superior Court of San Diego
(2012) 53 Cal.4th 1004, the California Supreme Court upheld DLSE longstanding policy
regarding rest periods, (time in excess of two (2) hours to be a major fraction mentioned
in the regulation. ( O.L. 1999.02.16), concluding that rest periods must be provided for
shifts of over two hours, unless an employee’s total daily work time is less than three and
one-half (3 1/2 hours). The amount of time required is 10 minutes for shifts lasting more
than two hours up to six hours, 20 minutes for shifts lasting more than six hours up to 10
hours, 30 minutes for shifts of more than 10 hours up to 14 hours, and so on. ( Brinker,
December 2022
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53 Cal.4th at 1029.)
Em
ployers are subject to a duty to make a good faith effort to authorize and permit rest
breaks in the middle of each work period, but may deviate from that preferred course
where practical considerations render it infeasible. The court rejected the employee’s
assertion that employers have a legal duty to permit their employees a rest period before
any meal period, but did not disagree with DLSE Opinion Letter No 2001.09.17 which
states that absent truly unusual circumstances where there is a meal period at the five hour
mark of an eight hour shift, “placing both rest breaks before the meal break, and none
after, would not comport with the wage order requirement that rest breaks ‘insofar as
practicable, shall be in the middle of each work period.’ “[I]n the context of an eight -
hour shift, ‘as a general matter,’ one rest break should fall on either side of the meal
break…. Shorter or longer shifts and other factors that render such scheduling
impracticable may alter this general rule.” ( Id. at 1032.) The one example given by the
court where a rest break might come before or after the meal period is for a six-hour shift
where there is no waiver, and there is one rest break.
45.3.2 Rest Period Is Paid And Counted Toward Hours Worked.
The regulation requires that the rest period time shall be counted as hours worked for
which there shall be no deduction from wages. In Augustus v. ABM Security Services,
Inc., (2016) 5 Cal.5
th 257, 269, the Califonia Supreme Court held that the rest period
requirement “obligates employers to permit—and authorizes employees to take —off-
duty rest periods. That is, during rest periods employers must relieve employees of all
duties and relinquish control over how employees spend their time.” The court further
held that on- call rest periods are prohibited. “[O]ne 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 to relieve employees of al l
work duties and employer control during 10- minute rest periods.” ( Id.) The court
reasoned that the rest period had its own inherent limits based on the fact that it was only
10 minutes long. Any more restrictions are impermissible. “Several options nonetheless
remain available to employers who find it especially burdensome to relieve their
employees of all duties during rest periods —including the duty to remain on call.
Employers may (a) provide employees with another rest period to replace one that was
interrupted, or (b) pay the premium pay set forth in Wage Order 4, subdivision 12(B)
and section 226.7.” (Id. at p. 272.)
45.3.2.1 See section 45.2.10 exception for private ambulance employees who may be required to
have on-call rest periods in addition to on-call meal periods.
45.3.2.2 Wage Order 1 Petroleum Facility Employees in Safety Sensitive Positions. Labor
Code section 226.75 creates an exception for certain employees who are subject Wage
order 1 and subject to a collective bargaining agreement that expressly provides for a
regular hourly rate of pay of not less than 30% more than the state minimum wage rate,
premium wage rates for overtime hours, rest periods, and binding arbitration of disputes
concerning rest periods who are required to carry and monitor a communication devise
such as a radio or pager and respond to emergencies or are required to remain on the
premises to monitor and respond to emergencies. Such employees may be required to
remain on call. If a rest period is interrupted by an emergency, the employee is entitled
to another rest period “reasonably promptly” after the emergency is resolved. If the rest
December 2018
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period cannot be rescheduled, the employer must pay the employee one hour of pay at his
or her regular rat
e for the missed rest period. In such a situation the pay stub must separately
include the total hours or pay owed to the employee on account of a rest period that was
interrupted and that the employee was not authorized or permitted to make up “reasonably
promptly” after the circumstances that led to the interruption passed.
45.3.3 The Rest Period Is A “Net” Ten Minutes . The IWC has provided that t he rest period is
net – in other words
, the rest period begins when the employee reaches an area away from
the work station that is appropriate for rest. The employee is entitled to one rest period per
work period. This means than an employer may not (except in the case of certain workers
in extended care homes under Order 5) count periods of less than 10 minutes as rest periods
meeting the requirements of Section 12 of the IWC Orders. (O.L. 2002.02.22; 1986.0l.03)
45.3.4 Rest Period Is Not Limited To Toilet Breaks . The intent of the Industrial W elfare
Commission rega
rding rest periods is clear: t he rest period is not to be conf used with or
limited to breaks taken by employees to use toilet facilities. The conclusion is required by a
reading of the provisions of IWC Orders, Section 12, Rest Periods, in conjunction with the
provisions of Section 13(B), Change Room s and Resting Facilities which requires that
“Suitable resting facilities shall be provided in an area separate from the toilet room s and
shall be available to employees during work hours.”
45.3.4.1 Allowing employees to use toilet facilities during working hours does not meet the employer’s
obligations to provi
de rest periods as required by the I WC Orders. This is not to say, of
course, that em ployers do not have the right to reasonably li mit the a mount of ti me an
employee may be absent from his or her work station; and, it does not indicate that an
employee who chooses to use the toilet facilities while on an authorized break may extend the
break ti me by doing so. DLSE policy si mply prohibits an e mployer from requiring that
employees count any separate use of toilet facilities as a rest period.

45.3.5 Order 16, Exceptions. Order 16 covering the on-site occupations contains some exceptions
which allow the employer
to “stagger” the rest periods to avoid an interruption in the flow of
work and maintain continuous operations. The DLSE has opined that an employer subject to
Order 16 still may not schedule a rest period at the very beginning or very end of the w orkday.
The very idea of a “rest period” is to provide the worker with needed rest time during the
workday. (O.L. 2001.09.17)
45.3.6 Opt-Out Clause In CBA’s. Under Order 16 only, the IWC Orders provide that parties to
collective bargai
ning may chose to opt-out of the rest period provisions if the CBA provides
“equivalent protection” for the workers.
45.3.6.1 Equivalent protection has been held to mean that the CBA must contain the same substantive
requirements both
as to the right to rest periods and the right to premium pay for rest perio d
violations. (O.L. 2001.09.1 7)
45.3.6.2 In addition, if the CBA specifically provides final and binding arbitration for resolving
disputes regarding the re
st period provisions of a CBA, the collective bargaining agreement
will prevail. The IWC announced in its Statement As To The Basis for Order 16-2001, that
this language was intended to mean that the premium does not apply in the event that the
CBA provides for final and binding arbitration of disputes involving the enforcement of the

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rest period provisions.
45.3.7 Premium For Failure To Provide Rest Periods is the same as that imposed for failure to
provide meal periods. Note that only one hour for failure to provide a rest period may be
imposed in each day regardless of the number of rest periods missed.
45.4 Meals and Lodging Costs.
45.4.1 The credit associated with meals and lodging contained at Section 10 of each of the Orders
have been increased:
EFFECTIVE: JANUARY 1, 2020 JANUARY 1, 2021 JANUARY 1, 2022 JANUARY 1,
2023
For an employer who employs: 26 or More
Employees
25 or Fewer
Employees
26 or
More
Employees
25 or
Fewer
Employees
26 or
More
Employees
25 or
Fewer
Employees
All Employers
regardless of
number of
Employees
LODGING
Room occupied alone $61.13
/week
$56.43
/week
$65.83
/week
$61.13
/week
$70.53
/week
$65.83
/week
$72.88
/week
Room shared $50.46
/week
$46.58
/week
$54.34
/week
$50.46
/week
$58.22
week
$54.34
/week
$60.16
/week
Apartment — two thirds (2/3) of the ordinary
rental value, and in no event more than:
$734.21
/month
$677.75
/month
$790.67
/month
$734.21
/month
$847.12
/month
$790.67
/month
$875.33
/month
Where a couple are both employed by the
employer, two thirds (2/3) of the ordinary
rental value, and in no event more than:
$1086.07
/month
$1002.56
/month
$1169.59
/month
$1086.07
/month
$1253.10
/month
$1169.59
/month
$1294.83
/month
MEALS
Breakfast $4.70 $4.34 $5.06 $4.70 $5.42 $5.06 $5.60
Lunch $6.47 $5.97 $6.97 $6.47 $7.47 $6.97 $7.72
Dinner $8.68 $8.01 $9.35 $8.68 $10.02 $9.35 $10.35
45.4.2 Only Actual Meal and Lodging Costs May Be Used As Credit Against The Employer’s
Minimum Wage Obligation. The actual costs of meals and lodging (in no event to exceed
the amounts set out above) may be offset against the minimum wage obligation of the
employer. If the actual cost of the meal or the lodging is less than the rate shown in the
Orders, only the actual amount may be credited.
45.4.3 Meals must be “an adequate, well -balanced serving of a variety of wholesome, nutritious
foods...consistent with the employee’s work shift.”
45.4.4 Lodging means “living accommodations available to the employee for full-time
occupancy which are adequate, decent, and sanitary according to usual and customary
standards. Employees shall not be required to share a bed.”

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45.4.5 Written Agreement Required For Credit Against Minimum Wage: Meals or lodging may
not be credited agains
t the minimum wage without a voluntary written agreement between
the employer and the employee which explicitly references that such credits are being applied
toward the minimum wage obligation of the employer. In addition, “Deductions shall not be
made for meals not received nor lodging not used.”
45.4.6 Employer Ma y Not Force Purchase On The Employee. As the Califor nia courts have
determined, deduc
tions by employers which amount to coerced purchases from the employer
are forbidden by the provisions of Labor Code § 450. (See California State Restaurant Assn.
v. Whitlow (1976) 58 Cal.App.3d 340) Consequently, while the offer may be made by the
employer, it may not be couched in terms of a requirement that the employee purchase the
meal or the lodging.
45.4.6.1 Prior History. IWC Orders prior to 1976 had contained language which was silent on the
question of the em p
loyer’s r ight to credit meals towar d the employer’s minimum wag e
requirement. It had been the established practice in the restaurant industry up until 1976 to
credit the minimum wage obligation if meals were “furnished or reasonably made available”
to the employee. The Whitlow court noted that “In light of the prohibition against compelled
purchases in section 450, the implied power of the commission to authorize in kind payments
must be limited to situations in which such manner of payment is authorized by specific and
prior voluntary employee consent. This limitation is consistent with the strong public policy
favoring full payment of minimum wages, which the Legislature has effectuated by making
payment of less than the minimum wage unlawful.” ( Id., at 58 Cal.App.3d p. 348)
45.4. 7 Labor Code § 1182.8. Labor Code § 1182.8 permits employers of apartment managers to
charge up to two-thirds of
the fair market rental value of an apartment if:
1. ther e is a voluntar y written agr eement , and
2. no portion of the rental charge is used to meet the minimum wage obligation.
45.4.7.1 This means that the manager must be paid at least the minimum wage for all of the hours
worked and none of the apart
ment value may be credited toward tha t minimum wag e
obligation. Note the “hours worked” definition for these types of employees is different
under Order 5. (See Brewer v. Patel (1993) 20 Cal.App.4th 1017.)
45.4.7.2 Calculating Overtime. In situations involving either charging two-thirds of the fair market
value or use of the
credits allowed in Section 10 of the Orders, if it becomes necessary to
establish what the regular rate of pay i s for purposes of overtime computation, the
difference between the amount paid for rent or the amount taken as credit and the actual fair
market value of the apartment must be figured into the calculation. (See discussion at Section
49.1.2.2 of this Manual)
45.5 Unifor m And Tool R equirem ents.
45.5.1 The IWC Orders, Sectio n 7, Se ction 9(A), provides , inter alia:
When un iforms are required by the employer to be worn by the employee as a condition of
employment, such uniforms shall be provided and maintained by the employer. The term
“uniform” includes wearing apparel and accessories of distinctive design or color.

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45.5.2 Color And/Or Design. The Division has historically taken the position, based upon notes of
the Commission, that
nurses can wear their white uniforms wherever they work, and the
employer, conseq uently, need not pay for them . Other workers in occupations for which the
particular white uniform is generally useable would fall into the same category. (See,
generally, O.L. 1994.02.16-1 )
45.5.3 If, instead of being professional nurses, the individuals were house- keepers or clerical
employees, the rationale con
tained in the Statement of Basis would not be applicable since a
uniform would not be “generally usable in the occupation”. Consequently, any unifor m
(regardless of color) which is required to be worn by an individua l in an occupation which
would not generally wear that particular uniform, must be paid for by the employer. (See,
generally, O.L. 1991.02.13 )
45.5.4 If, for instance, given a choice of pastel or white uniforms, a pastel uniform w ere freely
chosen by a nurse or
other health care professional in an occupation which generally wears a
white uniform, it is the opinion of the Division that it need not be paid for by the employer
because the employer would not have been required to pay for the standard white uniform.
The employee could not take advantage of the option and thereby create an obligation for the
employer. Such would not be the case, of course, if the choice of wearing a standard white
uniform were not available.
45.5.5 In the Stat emen t of Basi s for the Order s beginning in 1980, the IWC accepted DLSE
enforcemen t policy:
The definition and [DLSE] enforcement policy is sufficientl y flexible to allow the employer to
specify basic wardrobe items which are usual and generally usable in the occupation, such as white
shirts, dark pants and black shoes and belts, all of unspecified design, without requiring the em-
ployer to furnish such items. If a required black or white uniform or accessory does not meet the
test of being generally usable in the occupation the employee may not be required to pay for it.*
45.5.6 Clothing And Accessories Of A Distinctive Design. DLSE has taken the position that clothes
of a particular desi
gn (e.g., tropical shirts) would be so distinctive as to require that the
employer pay the cost of such clothes. (O.L. 1990.09.18) In the case of DIR v. UI Video
(1997) 55 Cal.App.4th 1084, the dress
code imposed by the employer which was found to be
a uniform consisted of a blue shirt and tan or khaki pants.
45.5.7 Tools. When tools or equipment are required by the employer or are necessary to the
performance of a job, suc
h tools and equipment shall be provided and maintained by the

*This language appeared in the Statement As to The Basis for the 1980 and subsequent Orders and inasmuch as
no substantive changes were made to the language dealing with uniforms, the basis for the language remains valid.

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the employer, except that an employee whose wages are at least two (2) times the minimum
wage provided here
in may be required to provide and maintain hand tools and equipment
customarily required by the trade or craft. This subsection (B) shall not apply to apprentices
regularly indentured under the State Division of Apprenticeship Standards.∗
45.5.8 Remedy. Failure of an employee to receive two times the minimum wage while still obligated
to purchase the tool
would result in the employer being liable for the cost of the tool or
equipment under Labor Code § 2802.
45.5.8.1 Definition Of “Hand Tools And Equipment”. DLS E has opined that the term “hand tools
and equipment” is
to be given its literal meaning. Such hand held tools and hand held
equipment do not include power driven tools or equipment. The IWC intended that the term
be limited to hand held tools such as hammers or screw drivers. The word equipment is meant
to encompass hand held measuring instruments or like apparatus. Th e IWC Statement As
To The Basis of the 2000 Orders states: “This exception is quite narrow and is limited to
hand (as opposed to power) tools and personal equipment, such as tool belts or tool boxes,
that are needed by the employee to secure those hand tools.”
45.5.9 Deduction From Wages For Non-Return Of Uniforms Or Tools. The IWC, except in Order
16-2001, continues the langua
ge whic h ostensibly allows e mployers to deduc t from an
employee’s final wages for the cost of uniforms or tools provided by the employer and not
returned. The Orders require that the deduction be authorized by a prior written authorization
by the employee.
45.5.10 Caveat: It is important that Deputies note that the DLSE must enforce the IWC Orders as
written; however, e
mployers should be warned that the deduction language i s not in
compliance with Labor Code Section 224, 300 and 400-410. Also, of course, the IWC Orders
specifically prohibit deductions for normal wear and tear.
45.5.11 Even if there is a deduction made, the deduction may only represent the reasonable cost of
the equipment or
tool provided by the employer and not returned. The burden is on the
employer to establish the reasonable cost.

∗ The exception for apprentices regularly indentured under the State Division of Apprenticeship Standards does not apply to
employees covered under Wage Order 16. Section 8 of Wage Order 16 does not contain the exception that appears in Section
9 of the other Wage Orders.

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46 HOURS WORKED.
46.1 Basic Definition of Hours Worked. Under the basic definition set out in all of the IWC Orders,
except for c
ertain limited exceptions in IWC Orders 4, 5 and 9, discussed below, “hours
worked means “the time during which an employee is subject to the control of an employer ,
and includes all of the time the employee is suffered or permited to work, whether or
not required to do so.” (e.g., Order 1-2000, section 2.(H).) Where it is determined that
the employee’s time is subject to the control of the employer, as in the contexts
delineated below, the time constitutes “hours worked.”

46.1.1 Illustrationof Basic Definitionof Hours Worked: Travel Time. In Morillion v. Royal Packing
Company (2000) 22 Cal
.4 575, the Supreme Court analayzed whether the time agricultural
employees spend traveling to and from the fields on employer-rovided buses was compensable as
“hours worked.” The Supremem Court examined the language in Wage Order 14 and held that
the two phrases, “time during which an employee is subject to the control of an employer” and
“time the employee is suffered or permitted to work, whether or nto required to do so.” Are
“independent factors, each of which defines whether certain time spent is compensable as ‘hours
worked’.” (Id at 582.)
th

The Court reasoned that “[W]hen an employer directs, commands or restrains an employee from
leaving the wor
k place… and thus prevents the employee from using the time effectively for his
or her own purposes, that employee remains subject to the employer’s control. According to
[the definition of hours worked], that employee must be paid.’” (Id. at 583.)
If an employee is required to report to the employer’s business premises before proceeding to
an off-premises w
ork site, all of the time from the moment of reporting until the employee is
released to proceed directly to his or her home is time subject to the control of the employer,
and constitutes hours worked. (O.L. 1994.02.16; Morillion v. Royal Packing Co., supra.)

Extended Trav
el Time. The California rule requires wages to be paid for all hours the
employee is e
ngaged in travel. The state law definition of “hours worked” does not distinguish
between hours worked during “normal” working hours or hours worked outside “normal”
working hours, nor does it distinguish between hours worked in connection with an overnight
out-of-town assignment or hours worked in connection with a one-day out-of-town assignment.
These distinctions, and the treatment of some of this time as non- compensable, are purely
creatures of the federal regulations, and are inconsistent w ith state law. (O.L. 2002.02.21).
Under state law, if an employer requires an employee to attend an out-of-town business meeting,
training session, or any other event, the employer cannot disclaim an obligation to pay for the
employee’s time in getting to and from the location of that event.

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Time spent driving, or as a passenger on an airplane, train, bus, taxi cab or car, or other mode
of transport, in tr
aveling to and from this out-of-town event, and time spent waiting to purchase
a ticket, check baggage, or get on board, is under such circumstances, time spent carrying out
the employer’s directives, and thus, can only be characterized as time in which the employee is
subject to the employer’s control. Such compelled travel time therefore constitutes compensable
“hours worked.” On the other hand, time spent taking a break from travel in order to eat a meal,
sleep, or engage in purely personal pursuits not connected with traveling or making necessary
travel connections (such as, for example, spending an extra day in a city before the start or
following the conclusion of a conference in order to sightsee), is not compensable. If the
employee’s travel from his home to the airport is the same or substantially the same as the
distance (and time) between his home and usual place of reporting for work, the travel time
would not begin until the employee reached the airport. The employee must be paid for all
hours spent between the time he arrives at the airport and the time he arrives at his hotel. No
further “travel” hours are incurred after the employee reaches his hotel and is then free to choose
the place where he will go. (O.L. 2002.02.21).

Different Pay Rate for Travel Time Permissible. The employer may establish a different pay
scale for travel t
ime (not less than minimum wage) as opposed to the regular work time rate.
The employee must be informed of the different pay rate for travel before the travel begins. For
purposes of determining the regular rate of pay for overtime work under the circums tances
where a different rate is applied to travel time, the State of California adopts the “weighted
average” method. (See Section 49.2.5 of this Manual; see also O.L. 2002.02.21).

Compensability of travel time has also been analyzed by two federal cases interpreting the
definition of “hour
s worked” according to California law (as applied in Morillion v. Royal
Packing Co. (2000) 22 Cal.4th 575). The two cases are Rutti v. Lojack (9th Cir. 2010) 596 F.3d
1046 and Burnside v. Kiewit Pacific Corp. (9th Cir. 2007) 491 F.3d 1053. In Rutti, the employee
was required to drive the company vehicle from home to various job sites and then back home
at the end of the day from the last work site. This time was deemed compensable due to the
employer’s control over the travel time as there were restrictions on Rutti during his mandatory
travel time, including that he “could not stop off for personal errands, could not take passengers,
was required to drive the vehicle directly from home to his job and back, and could not use his
cell phone while driving except that he had to keep his phone on to answer calls from the
company dispatcher.” ( Rutti, supra, at 1060-61.) In Burnside , the court applied the specific
Reporting Time Language of Wage Order 16 to determine the travel time was under the
employer’s control where an employer required that employees meet at specified locations from
which they traveled to jobsites. Wage Order 16 provides that employees must be compensated
from the location where they are first required to report.

46.1.2 Illustration of Basic Definition of Hours Worked: On -Call (or “Stand -by”) Time. In
Mendiola v. CPS Sec. Sol
utions, Inc. (2015) 60 Cal.4th 833, the Supreme Court held that

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security guard employees in that case were subject to the control of the employer. The Court
found that guards that were required to reside in a trailer provided by CPS, and required to
remain within certain geographical boundaries, were entitled to compensation for on-call time.
The Supreme Court in Mendiola considered the following factors in concluding that the on call
time was under the control of the employer:

California courts considering whether on-call time constitutes hours worked have
primarily foc
used on the extent of the employer’s control. (E.g., Ghazaryan v. Diva
Limousine, Ltd. (2008) 169 Cal.App.4th 1524, 1535 (Ghazaryan); Bono Enterprises,
Inc. v. Bradshaw (1995) 32 Cal.App.4th 968, 974-975 (Bono), disapproved on other
grounds in Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 573-
574.) Indeed, we have stated that “[t]he level of the employer’s control over its
employees . . . is determinative” in resolving the issue. (Morillion, supra, 22 Cal.4th
at p. 587.) “ ‘When an employer directs, commands or restrains an employee from
leaving the work place . . . and thus prevents the employee from using the time
effectively for his or her own purposes, that employee remains subject to the
employer’s control. According to [the definition of hours worked], that employee
must be paid.’ ” (Id. at p. 583.)
Courts have identified various factors bearing on an employer’s control during on -call
time: “ ‘(1) whether t
here was an on -premises living requirement; (2) whether there
were excessive geographical restrictions on employee’s movements; (3) whether the
frequency of calls was unduly restrictive; (4) whether a fixed time limit for response
was unduly restrictive; (5) whether the on- call employee could easily trade on -call
responsibilities; (6) whether use of a pager could ease restrictions; and (7) whether the
employee had actually engaged in personal activities during call -in time.’ ([ Owens v.
Local No. 169 (9th Cir. 1992) 971 F.2d 347,] 351, fns. omitted.)” ( Gomez v. Lincare,
Inc. (2009) 173 Cal.App.4th 508, 523- 524 ( Gomez).)
3 Courts have also taken into
account whether the “[o]n-call waiting time . . . is spent primarily for the benefit of the
employer and its business.” (Gomez, at p. 523; see Madera, supra, 36 Cal.3d at p. 409;
Ghazaryan, supra, 169 Cal.App.4th at p. 1535.) Here, the Court of Appeal properly
concluded that the “guards’ on-call hours represent hours worked for purposes of Wage
Order No. 4.”

The guards here were required to “reside” in their trailers as a condition of employment
and spend on-call hours
in their trailers or elsewhere at the worksite. They were obliged

3 Gomez also identified the parties’ agreement as a factor to consider when determining whether on -call time constitutes
hours worked. (Go
mez, supra, 173 Cal.App.4th at p. 523.) The court in Ghazaryan came to a contrary conclusion. “[U]nder
California law ‘the existence of an “agreement” regarding the understanding of the parties [as to the compensation policy]
is of no importance. The ultimate consideration in applying t he California law is determining the extent of the “control”
exercised.’ ” (Ghazaryan, supra, 169 Cal.App.4th at p. 1535, fn. 10; see Lab. Code, § 1194, subd. (a) [“[n] otwithstanding
any agreement to work for a lesser wage . . .”].) We need not resolve that conflict here.

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to respond, immediately and in uniform, if they were contacted by a dispatcher or
became aware of su
spicious activity.
Guards could not easily trade on- call responsibilities. They could only request relief
from a dispatch
er and wait to see if a reliever was available. If no relief could be secured,
as happened on occasion, guards could not leave the worksite. CPS exerted control in a
variety of other ways. Even if relieved, guards had to report where they were g oing,
were subject to recall, and could be no more than 30 minutes away from the site.
Restrictions were placed on nonemployee visitors, pets, and alcohol use.

Additionally, the Court of Appeal correctly determined that the guards’ on-call time was
spent primarily for the benefit of CPS. The parties stipulated that “CPS’s business
model is based on the idea that construction sites should have an active security presence
during the morning and evening hours when construction workers arrive and depart the
site, but that theft and vandalism during the night and weekend hours can be deterred
effectively by the mere presence of a security guard in a residential trailer.” Thus, even
when not actively responding to disturbances, guards’ “mere presence” was integ ral to
CPS’s business. Indeed, the parties also stipulated that CPS would have been in breach
of its service agreement had a guard or reliever not been at the worksite during all
contracted for hours.4 Mendiola, supra at p. 841.

46.2 The DLSE Interpretation of the Basic Definition of Hours Worked The DLSE enforcement
policy has consi
stently held that hours for which an employee has been hired to do nothing or
merely to wait for something to happen are hours subject to the control of the employe r, and
constitute hours worked. ( Armour & Co. v. Wantock (1944) 323 U.S. 126; Skidmore v. Swift
(1944) 323 U.S. 134.) This longstanding interpretation is based on U.S. Supreme Court case
law and consistent with the California Supreme Court’s holdings in Morillion and Mendiola. If,
in the case of “standby” or “on call” status, the restrictions placed on the time of the employee
are such that the employee is unable effectively to engage in private pursuits, the time is subject
to the control of the employer and constitutes hours worked. (Mendiola, supra, at 841; see also
Madera Police Officers Association v. City of Madera (1984) 36 Cal.3d 403 and O.L.
1998.12.28).

46.3 Exceptions to Basic Definition of Hours Worked . Certain exceptions exist to the gener al
applicability
of the basic definition of hours worked. These exceptions apply only in very
limited circumstances. These exceptions include:

4 Employees sent to a worksite to relieve an on-call guard were paid even if events did not require that they investigate a
disturbance.
This policy meant that an on-call guard who performed no investigation, and had not asked to be relieved,
was not paid, but a reliever doing the same was paid. This reality supports the conclusion that guards were “engaged to
wait, [not] . . . wait[ing] to be engaged.” (Skidmore v. Swift & Co., supra, 323 U.S. at p. 137.)

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46.3.1 Wage Orders 4 and 5 state that “Within the health care industry, the term ‘ hours worked’
means the time
during which an employee is suffered or permitted to work for the employer,
whether or not required to do so, as interpreted in accordance with the provisions of the [federal]
Fair Labor Standards Act.” (Wage Orders 4 and 5, subd. 2(K).)

• “[W]ithin the health care industry, the term ‘hours worked ’” is to be interpreted in accordance
with the provisions
of the Fair Labor Standards Act. However, the term “hours worked” in the
definition is applied to employees, not employers. Consequently, it is the position of the DLSE
that the IWC, in adopting this exemption to the narrow California definition of “hours worked”,
only intended that the broader definition contained in the federal law was to apply to those who
are defined at subsection 2(G) of those Orders as “employees in the Health Care industry”. The
Court in Mendiola v. CPS Sec. Solutions, Inc. (2015) 60 Cal.4th 833 also confirmed that this is
a narrow exception. Consequently, employees in hospitals, etc. who do not meet the criteria of
“employees in the health care industry” as defined at IWC Order 5-2001, Section 2(G) will not
be subject to the federal definition of “hours worked.” Also, note that the definition of hours
worked for certain employees in the health care industry does not mean that other provisions in
the Labor Code or Wage Orders do not apply unless specifically affected by this alternate
definition of hours worked. See for example the general rule for meal periods where an
employee- although relieved of all duties – is not free to leave the work place during the time
allotted to such employee for eating a meal, the meal period is on duty time subject to the control
of the employer, and constitutes hours worked. Bono Enterprises v. Labor Commissioner
(1995) 32 Cal.App.4
th 968. For employees engaged in the “health care industry” the provisions
of 29 CFR §785.19(b) would apply and the Bono Enterprises case would have no applicability.
Wage Order 5 Section 11(c) provides that under certain circumstances employees in group
homes may be required to work “on duty” meal periods. If the employee under this provision
is required to eat on premises, the meal period must be paid.

46.3.2 Wage Order 5 states that “in the case of an employee who is required to reside on the
employment pre
mises, that time spent carrying out assigned duties shall be counted as hours
worked.” (Wage Order 5, subd. 2(K).). The First District Court of Appeal in the case of Brewer
v. Patel, (1994) 20 Cal.App.4th 1017 defined the IWC Order 5 language which requires that
employees required to reside on the premises need only be paid for that time when they are
performing assigned duties to allow employers to pay employees who are required to remain on
the premises only for the actual time they are “performi ng physical, mental or other specified
tasks.” Mendiola noted that the language in Wage Order No. 5 is akin to the language in 29
C.F.R. sec. 785.23, which only requires compensation when the employee is actually carrying
out assigned duties and is an on -call employee who is required to reside on the premises. This
specific rule concerning hours worked under Wage Order 5 does not apply to employees in the
Health Care Industry (as defined above under Wage Orders 4 and 5) who are subject to the
federal regulations concerning the definition of “hours worked”.

46.3.3 Federal Regulations At Odds With California Case Law . The Patel court’s definition is at
odds with federal
law which is to be applied to employees in the “Health Care Industry”. The
federal regulations require an employer to pay for all the hours the employee is required to be
on the premises when such requirement is a condition of the employment. For the past fifty
years, federal courts have interpreted the FLSA to require payment for time in which the

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employee is required to remain on the premises of the employer in order to respond to
unscheduled contingenc
ies. As the Court explained in Armour & Co. v. Wantock (1944) 323
U.S. 126, 133:

“Of course an employer, if he chooses, may hire a man to do nothing, or to do nothing
but wait for something to happen. Refraining from other activity often is a factor of
instant readiness to serve, and idleness plays a part in all employments in a stand-by
capacity...Readiness to serve may be hired, quite as much as service itself.”

Thus, unlike the interpretation of the term by the Patel court, under federal rules, “hours worked
are not limited to the
time spent in active labor but include time given by the employee to the
employer.” (Skidmore v. Swift & Co. (1944) 323 U.S. 134, 138.) Instead, federal case law, and
DLSE enforcement policy, has focused on how close an on- call employee must remain to the
employer’s premises to be considered entitled to compensation. This case law is summarized at
29 CFR sec. 785.17, which states, “An employee who is required to remain on call on the
employer's premises or so close thereto that he cannot use the time effectively for his own
purposes is working while ‘on call’.”
46.3.4 Wage Orders 5 and 9 contains exclusions from “ hours worked ” that apply to ambulance
drivers and atte
ndants who work 24-hour shifts. These employees may agree in writing to
exclude three one-hour meal periods and one eight -hour uninterrupted sleep period from their
hours worked. Oral agreements by such employees to exclude sleep time may only be valid if
excluded from compensable hours worked, not overtime hours worked. Currently, an employer
and an employee working as an ambulance driver or attendant on a 24-hour shift may enter into
an agreement to exclude up to three one -hour duty-free meal periods and up to eight hours of
uninterrupted sleep time from “hours worked” provided adequate sleeping facilities are
furnished by the employer. ( Monzon v. Schaefer Ambulance Service (1990) 224 Cal.App.3d
16.) (See also Mendiola limiting the holding in Monzon and noting that “[i]t is sufficient to note
that Monzon's holding is limited to its facts.” Mendiola, supra, at 845.) (See also O.L.
1994.02.03-4.)
46.3.5 Except for employees in the “Health Care industry” under Wage Order Nos. 4 and 5, where the
hours worked is det
ermined under the FLSA, DLSE cannot utilize the federal test in its entirety
because of the obvious differences in the statute for employees required to reside on the
premises under Wage Order No. 5, and ambulance drivers and attendants under Wage Order
No. 9. The test applied under the California law is also “highly fact -driven.” The difference is
that the California test places no reliance on whether the individual is engaged in “work” and,
thus, the existence of an “agreement” regarding the understanding of the parties is of no
importance. The ultimate consideration in applying the California law is determining the extent
of the “control” exercised. . “[U]nder California law ‘the existence of an “agreement” regarding
the understanding of the parties [as to the compensation policy] is of no importance. The
ultimate consideration in applying the California law is determining the extent of the “control”
exercised.’ ” ( Ghazaryan, supra, 169 Cal.App.4th at p. 1535, fn. 10; see Lab. Code, § 1194,
subd. (a) [“[n]otwithstanding any agreement to work for a lesser wage . . .”].)
The bottom-line consideration is the amount of “control” exercised by the employer over the
activities of
the worker. In some employment situations, the employer can be said to be

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exercising some limited control over his employee at all times. For instance, by statute the
employee must give preference to the business of his employer if it is similar to the personal
business he transacts. (Labor Code § 2863 ). However, immediate control by the employer
which is for the direct benefit of the employer must be compensated. (O.L. 1993.03.31,
1992.01.28, 1994.02.16, 1998.12.28, 2001.03.22.)

46.4 Basic Definition of Uninterrupted Sleep Time. Sleep time is defined as a period of rest during
which the employ
ee is permitted to sleep without any interruptions. Generally, sleep time may
not be deducted from hours worked. (See Mendiola v. CPS Sec. Solutions, Inc. (2015) 60 Cal.4th
833, where the Supreme Court held that CPS Security Solutions, Inc. could not exclude “sleep
time” from 24-shifts of on-call security guards under Wage Order 4 and that this is the general
rule.).

46.5 Exceptions to Basic Definition of Uninterrupted Sleep Time. Federal sleep time exclusions
do not apply unless the
exclusion is incorporated in the Wage Orders. Certain employees under
Wage Order Nos. 4 and 5 and ambulance drivers and attendants under Wage Order No. 9,
however, can have a period of sleep time deducted from their work shifts. Employees in the
“Health Care Industry” under Orders 4 and 5 who are subject to federal regulations and are
required to live on the employer’s premises (residential care facilities, for instance) or working
24 hour shifts, must be paid for all hours they are required to remain on the employer’s premises,
subject to the sleep time exclusions, only if they meet the definition of employees in the health
care industry and only if the criteria set forth for such an exclusion in the federal regulations is
met. The federal proviso at 29 CFR sec. 785.22 provides, inter alia:

(a) Where an employee is required to be on duty for 24 hours or more, the employer and the
employee may
agree to exclude bona fide meal periods and a bona fide regularly scheduled
sleeping period of not more than 8 hours from hours worked, provided adequate sleeping
facilities are furnished by the employer and the employee can u sually enjoy an uninterrupted
night’s sleep. If sleeping period is of more than 8 hours, only 8 hours will be credited. Where
no expressed or implied agreement to the contrary is present, the 8 hours of sleeping time and
lunch periods constitute hours worked.

(b) Interruptions of sleep. If the sleeping period is interrupted by a call to duty, the interruption
must be counted as
hours worked. If the period is interrupted to such an extent that the employee
cannot get a reasonable night’s sleep, the entire period must be counted. For enforcement
purposes, the Divisions have adopted the rule that if the employee cannot get at least 5 hours’
sleep during the scheduled period the entire time is working time.”

“1. An employee is entitled to compensation whenever he or she is on duty;
2. An employee is deemed to be ‘on duty’ when he or she is required to be on the
employer’s pr
emises; however
3. If an employee is deemed to reside on the premises at a group care home because
a. the employee is on duty at the group home and is compensated for at least
eight hours in eac
h of five consecutive 24-hour periods; and

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b. the employee sleeps on the premises for all sleep periods between the
beginning and end of
this 120-hour period;
4. Then and only then, an employer may deduct sleep time from the compensable
hours if and only if
a. Employee is provided private quarters in a homelike environment; and
b. Reasonable agreement reached in advance to deduct sleep time; and
c. ([Which is] Normally) [an] agreement [] in writing.”
This test is also fact intensive and requires detailed analysis of the nature of the living quarters
and sleep time exclusion agreement.

46.5.1 Wage Order 5 sleep -time exclusion: Wage Order No. 5 provides that, for “[employees with
direct responsi
bility for children who…are receiving 24 hour residential care,” “[t]ime spent
sleeping shall not be included as hours worked.” (Wage Order 5, subd. 3(A)(2), (2)(d).), and
states that for employees who are required to reside on the employment premises, hours worked
includes “that time spent carrying out assigned duties,” which would exclude time spent
sleeping. (Mendiola at 364, citing Wage Order 5, subd. 2(K).) Mendiola noted that the language
in Wage Order No. 5 is akin to the language in 29 C.F.R. sec. 785.22, which addresses sleep
time exclusions for employees who reside on the employment premises.

46.5.2 Because federal sleep time regulations are not incorporated into Wage Order 15, which is the
applicable state l
aw that covers work performed in the home, all on-call hours spend at assigned
worksites under the employer’s control are compensable under California law. Under state law,
provisions in the federal Department of Labor Regulations relating to sleep time only a pply to
certain employees in the health care industry working under Wage Order Nos. 4 and 5 and
certain ambulance drivers and attendants under Wage Order No. 9
. “[F]ederal law does not control
unless it is more beneficial to employees than the state law. (29 U.S.C. § 218.)” Aguilar v. Association
for Retarded Citizens (1991) 234 Cal.App.3d 21, 34 (holding 17 hour shifts with release time do not
equate with 24 hour shifts and are not subject to federal sleep time provisions for group home relief
workers.).

46.6.1 Changing Uniforms or Washing Up at Work. Time spent changing clothes or washing up
on the employer
’s premises is compensable if it is compelled by the necessities of the
employer’s business. (O .L. 1994.02.03-3; 1998.12.23) It should be noted, however, that for
enforcement purpos
es, the Division utilizes a de minimis test concerning certain activities of
employees (See Lindow v. United States 738 F.2d 1057 (9th Cir.1984)) Under this test the
Division will consider (1) the practical administrative difficulty of recording the additional
time; (2) the aggregate amount o f compensable time, and (3) the regularity of the additional
activity. (O.L. 1988.05.16 )
46.6.2 The only federal definition of the term “hours worked” is contained in the FLSA at 29 U.S.C.
§ 203(o) which simply
excludes “any time spent in changing clothes or washing at the
beginning or end of each work day.” Federal case law, however, has limited this exception
and has held that any actions which are an integral and indispensable part of the employee’s
principal activity task are compensable. (Steiner v. Mitchell, 350 U.S. 247 (1956) holding that
time spent showering and changing at the beginning and end of each day in a battery plant is
compensable.)

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46.6.3 Training Programs, Lectures, Meetings. The Division utilizes the standards announced by
the U.S. Department of Labor contained at 29 CFR §§ 785.27 through 785.31 in regard to
lectures, meetings and training programs:
Time spent by employees attending training programs, lectures and meetings are not
counted as hours worked if the attendance is voluntary on the part of the employee and
all the following criteria are met:
1. Attendance is outside regular working hours;
2. Attendance is voluntary: attendance is not voluntary if the employee is led to believe
that present working conditions or the continuation of employment would be adversely
affected by nonattendance;
3. The course, lecture, or meeting is not directly related to the employee’s job: training
is directly related to an employee’s job if it is designed to make the employee handle
his job more effectively as distinguished from training him for another job or to a new
or additional skill; and
4. The employee does not perform any productive work during such attendance.

46.6.4 Intern Programs. In California there is no state statute or regulation which expressly
exempts persons participating in an internship from wage and hour laws. The federal
courts have noted, as well, that the federal FLSA itself provides little guidance in
distinguishing between trainees/interns and employees. ( Reich v. Parker Fire Protection
District, 992 F.2d 1023, 1025 (10th Cir. 1993) The federal Department of La bor (DOL)
has articulated six criteria, derived from the Supreme Court’s Walling v. Portland
Terminal Co. 330 U.S. 148 (1947), for the purpose of distinguishing an exempt intern
from an employee, which are (1) the training, even though it includes actual operation of
the employer’s facilities, is similar to that which would be given in a vocational school;
(2) the training is for the benefit of the trainees or students; (3) the trainee or students do
not displace regular employees, but work under their close supervision; (4) the employer
derives no immediate advantage from the activities of trainees or student, and on occasion
the employer’s operations may be actually impeded; (5) the trainees or students are not
necessarily entitled to a job at the conclusion of the training periods; and (6) the employer
and trainee or students understand that the trainees or students are not entitled to wages
for the time spent in training See O.L. 2010.04.07 ; See also O.L. 2000.05.17 comparing
culinary students to a published case that found X -ray students in a hospital to be
employees. ( Marshall v. Baptist Hospital, Inc . (D.C.M. d. 1979) 473 F.Supp. 465
(overruled on other grounds 668 F.2d 234). The Letter noted, that “X -ray students were
found to be employees of the hospital and entitled to be paid wages because the students
performed administrative and clerical work in addition to their x -ray training, received
little or no supervision, displace regular workers, and functioned as an integral part of the
operation of the hospital. Thus, the students work went beyond a mere training experience

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which resulted in economic benefit to the hospital.” O.L. 2000.05.07 used an 6 -factor
economic reality t
est and O.L 2010.04.07 adopted the above different six-factor federal
test noting that the 5 additional factors identified in Wilcox, California Employment Law,
§ 104[1](e) previously used would have made no difference in the conclusion. (See also,
O.L. 1996.12.3 0)

46.6.5 All Training Programs, Lectures, Meetings, Etcetera Whic h Do Not Meet The Above
Criteria Are Hours Wor
ked. If any one of the above listed criterion is not met, the time is
to be considered “hours worked”.

46.6. 6 Independent Training. If an employee on his own initiative attends an independent school,
college or independent t
rade school after hours, the time is not hours worked for his
employer even if the course is related to his or her job.
46.6.7 Special Situations. If an employer were to establish a program of instruction for the benefit
of his employees wh
ich corresponds to courses offered b y independent, bona fide
institutions of learning (e.g., English lessons, literacy training), voluntary attendance b y
an employee at such courses outside of working hours would not be hours worked even if
they are directly related to his or her job or the course were paid for by the employer.
46.8 Try Out Time. There may arise situations where an employer may wish to have a
prospective employee ex
hibit skills such as typing, shorthand, or operation of machinery,
before employment. The DLSE will accept such “try out time” as non-compensable if:
1. This time is not, in fact, training as opposed to testing skills;
2. there is no productivity derived from the work performed by the prospective
employee, and
3. the p
eriod of time is reasonable under the circumstances.
46.8.1 Each case must be reviewed on its facts. For instance, the period of time to test skills of a
sewing machine oper
ator will be much less than that needed to test the skills of a computer
programmer. While no particular time frame can be given, the rate of pay for the
occupation can usually be used as a guide to determine the amount of time necessary for
a “try out”.
46.8.2 Reporting Time Pay. The IWC Orders provide that if an employee is required to report for
work and does report, but i
s not put to work or is furnished less than half the employee’s
usual or scheduled day’s work, the employee shall be paid half of his or her regularly
scheduled work, but in no event less than two hours nor more than four hours a t the
employee’s regular rate of pay. (See discussion at Section 45 of this Manual)
46.8.3 Reporting time pay, split shift differential, meal period premium pay, and rest period
premium pay, although p
aid to employees in hourly increments as required under Wage
Orders, do not constitute “hours worked” for purposes of calculating whether overtime is
owed.
46.8.4 “Act Of God”. There are exceptions from the above requirements in the Orders one of
which is in the event of a
n “act of God” or beyond the employer’s control.

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47 CALCULATING HOURS WORKED.

47.1 All Hours Must Be Compensated Regardless Of Method Used In Computation.
“[A]n employee m
ust be paid for ‘all hours worked’ (Wage Order No. 5, subds. 3(A), 4(A))
or ‘[a]ny work’ beyond eight hours a day (Lab. Code, § 510, subd. (a) ).” Troester v.
Starbucks (2018) 5 Cal.5th 829, 840.

47.2 Recording Insignificant Time Periods . “The de minimis doctrine is an application of the
maxim de minimis non c
urat lex, which means ‘[t]he law does not concern itself with trifles.’
(Black’s Law Dict. (10th ed. 2014) p. 524.) Federal courts have applied the doctrine in some
circumstances to excuse the payment of wages for small amounts of otherwise compensable
time upon a showing that the bits of time are administratively difficult to record. We
approach the question presented in two parts: First, have California’s wage and hour statutes
or regulations adopted the de minimis doctrine found in the federal Fair Labor Standards
Act (FLSA)? We conclude they have not. There is no indication in the text or history of the
relevant statutes and Industrial Welfare Commission (IWC) wage orders of such adoption.
Second, does the de minimis principle, which has operated in California in various contexts,
apply to wage and hour claims? In other words, although California has not adopted the
federal de minimis doctrine, does some version of the doctrine nonetheless apply to wage
and hour claims as a matter of state law? We hold that the relevant wage order and statutes
do not permit application of the de minimis rule on the facts given to us by the Ninth Circuit,
where the employer required the employee to work “off the clock” several minutes per shift.
We do not decide whether there are circumstances where compensable time is so minute or
irregular that it is unreasonable to expect the time to be recorded.” Troester, supra, 5 Cal 5
th
at 835.
47.2.1. DLSE Enforcement Policy. When auditing payroll records, Division personnel will
ascertain the fa
cts regarding the time keeping requirements (i.e., the true work patterns of the
workers and whether these patterns are accurately reflected by the time records). The Labor
Commissioner has long recognized that an employer may not rely on a de minimis doctine
to arbitrarily fail to count as hours worked any part, however small, of the employee’s fixed
or regular working time or practically ascertainable period of time he is regularly required to
spend on duties assigned to him. See Glenn L. Martin Nebraska Co. v. Culkin, 197 F.2d 981,
987 (C.A. 8, 1952), cert. denied, 344 U.S. 866 (1952), rehearing denied, 344 U.S. 888 (1952),
holding that working time amounting to $1 of additional compensation a week is “not a trivial
matter to a workingman,” and was not de minimis; see also Addison v. Huron Stevedoring
Corp., 204 F.2d 88, 95 (C.A. 2, 1953), cert. denied 346 U.S. 877, holding that “[T]o
disregard workweeks for which less than a dollar is due will produce capricious and unfair
results;” and Hawkins v. E. I. du Pont de Nemours & Co., 12 W.H. Cases 448, 27 Labor
Cases, para. 69,094 (E.D. Va., 1955), holding that 10 minutes a day is not de minimis.
47.3 Rounding Practices. Rounding practices may be accepted for enforcement purposes by the
Labor Commiss
ioner, provided that such a practice is used in a manner that will not result,
over a period of time, in a failure to compensate employees properly for all the time they
have actually worked. The Labor Commissioner utilizes the practice of the U.S. Department

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of Labor of “rounding” employee’s hours to the nearest five minutes, one -tenth or quarter
hour for purposes of calculating the number of hours worked pursuant to certain restrictions.
(29 CFR § 785.48(b)). The federal regulations allow rounding of hours to five m inute
segments. R ecording the employees’ starting time and stopping time to the nearest 5
minutes, or to the nearest one -tenth or quarter of an hour has been the practice in some
industires for many years . However, under such practices an employee must be fully
compensated for all the time they actually work.
47.3.1 In See’s Candy Shops, Inc. v. Superior Court (2012) 210 Cal.App.4th 889, the Court agreed
with the employer
’s claim that its nearest-tenth wage rounding policy is consistent with state
and fed eral laws “permitting employers to use rounding for purposes of computing and
paying wages and overtime” and that the nearest -tenth rounding policy did not deny
employees “full and accurate compensation.” The Court held that the DOL regulation
adopted by the DLSE recognizes “that time -rounding is a practical method for calculating
work time and can be a neutral calculation tool for providing full payment to employees.”
“Assuming a rounding-over-time policy is neutral, both facially and as applied, the practice
is proper under California law because its net effect is to permit employers to efficiently
calculate hours worked without imposing any burden on employees.” In rejecting the
plaintiff’s argument that the rounding policy violated Labor Code § 204, the court stated that
§ 204 relates only to the timing of the payment of wages and creates no substantive right to
wages. Silva v. See’s Candy Shops, Inc . (2016) 7 Cal.App.5th 235, reaffirmed the earlier
case on a motion for summary judgment.
47.4 Differences Between Clock Records And Actual Hours Worked . Time clocks are not
required but in those
cases where time clocks are used, employees who voluntarily come in
before their regular starting time or remain after their closing time, do not have to be paid for
such periods provided, of course, that they do not engage in any work. Actual facts must be
investigated. Unless the employee is either performing work during the period or has been
directed by the employer to be on the premises, an early or late clock punching may be
disregarded. Minor differences between the clock records and actual hours worked cannot
ordinarily be avoided, but major discrepancies should be investigated since they raise a doubt
as to the accuracy of the records of the hours actually worked .
47.5 Special IWC Provision For Hours Worked – Recess Periods: A special provision i n
Orders 3, 8, and 13 allows employe
rs to exclude from “hours worked” recess periods
occurring during the workday, provided the following conditions are met:
1. the recess must be at least 30 minutes long;
2. the employer must notify the employee of the time to report back to work;
3. the employee must be allowed to leave the premises;
4. no more than two work recesses can occur in a single shift; and
5. the duration of the recesses must not exceed two hours.

47.6 May Be Subject To Different Rate Of Pay. Generally, on -call or standby time at the work
site are hours worked t
hat must be paid for. It is possible, however, that the hourly rate of pay

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for the call time can be different from the regular rate paid for working time so long as the rate
is set before the work is performed and the amount of the remuneration does not fall below the
applicable minimum wage for any hour working standing alone. (O.L. 2002.02.21). For
purposes of overtime computation, the weighted average of such rates is to be utilized in
determining the regular rate of pay.

47.6.1. Uncontrolled Standby. An employee who has the choice of being available or not available
to respond to a r
equest by the employer to return to work for an emergency ma y be on
uncontrolled standby if the employee is completely unrestricted to use his or her time for
their own purposes. Such “free” standby time is not under the control of the employer and,
thus, need not be paid.
47.6.2 Stipend For Uncontrolled Standby . Under some circumstances, employers may pay an
employee a st
ipend for being a vailable in an uncontrolled standby situation to return to work
if called. In these situations, the employee agrees to be available to return to work, but is
otherwise free to pursue personal interests without restriction. The stipend paid for this
uncontrolled standby agreement is included, for purposes of California law, in calculating
the regular rate of pay for overtime purposes; but the hours for which the stipend is paid is
not to be calculated on a weighted average basis. In other words, the stipend is simply added
to the wage earned for actual hours worked and prorated among those hours.
Example: Employee is paid $15.00 per hour for all hours worked and is also paid a stipend
of $20.00 per day for remaining available to return to work after hours. The employee works
five days of eight hours each and is entitled to $600.00 plus $100.00 stipend for the
uncontrolled standby. In the event the employee actually works 42 hours he is entitled to
$752.50. The stipend is added to the regular rate ($600.00 + $100.00 = $700.00) and divided
by the non -overtime hours worked (40) to reach the regular rate for ov ertime purpose s
($17.50 ). For the overtime hours, the employee is entitled to $17.50 (regular hourly rate) x
1.5 x 2 (overtime hours) =$52.50. Total compensation due =$600.00 + $52.50=$752.50.

47.7 Hours Worked — Unscheduled Overtime.

47.7.1 The California Industrial Welfare Commission Orders generally provide that “hours worked”
means “the time during
which an employee is subject to the control of an employer, and
includes all the time the employee is suffered or permitted to work, whether or not required
to do so.”
47.7.2 Employer’s Reasonable Duty to Ascertain . The courts have found that if employer had
“constructive”
knowledge of the fact that employees are working overtime, the wages must
be paid. (Brennan v. GMAC (5th Cir.1973) 482 F.2 d 825; see also, Burry v. National Trailer
(6th Cir.1964) 338 F.2d 422; Kappler v. Republic Pictures (S.D. Iowa, 1945) 59 F.Supp. 112
[duty to inquire regarding overtime, employer may not escape duty by delegating].
47.7.3 Employee’s Duty to Disclose. Forrester v. Roth, 646 F.2d 413 (9th Cir.1981). This
case holds that “
suffer or permit” means work the employer knew or should have known of.
But, if employee deliberately prevents the employer from obtaining knowledge of overtime
worked, the employee cannot later claim recovery. The employer must have the opportunity

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to obey the law. (See also, Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785, 802,
concerning requirement that exempt employee has duty to meet employer’s “realistic
expectations” concerning duties.)
47.7.4 It must be noted, as the IWC stated in the Statement As To The Basis of the Wage Orders,
that the Supreme Court in
Ramirez stated tha t in determining realistic expectations,
consideration must be given to “whether the employee’s practice diverges fro m the
employer’s realistic expectations, whether there was any concrete expression of employer
displeasure ove r an employee’s...performance , and whether these expression s were
themselves realistic given the actual overall requirements of the job.” I n other words, an
employer may not choose to ignore the fact that it would not be reasonable to expect an
employee to perform the duties assigned without working overtime.
47.8 Commission and Piece Rate. The requirement to be paid at least the minimum wage for all
hours worked req
uires that if, as a result of the directions of the employer, the compensation
received by piece rate or commissioned workers is reduced because they are precluded, by
such directions of the employer, from earning either commissions or piece rate compensation
during a period of time, the employee mus t be paid at least the minimum wage (or contract
hourly rate if one exists) for the period of time the employee’s opportunity to earn
commissions or piece rate.
47.8.1 As an example, if piece rate workers are required to attend a meeting during which, of course,
they would not be a
ble to earn compensation at the piece rate, the employer would be required
to pay those workers at least the minimum wage (or the contract hourly wage, if one exists)
during such period. (For discussion of the legal rationale underlying this enforcement policy,
see O.L. 2002.01.29)

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48 BASIC OVERTIME INFORMATION.

48.1.1 Minors. Labor Code § 1391 provides that no minor (any person under the age of 18 years) shall be
employed more than 8 hours in any workday. Minors 15 years or younger may not be employed
more than 40 hours in any one week. However, Labor Code § 1391(a)(3) provides that a minor 16
or 17 years of age may work up to 48 hours in a workweek. Therefore, one and one -half times the
minor’s regular rate of pay shall be paid for all work over 40 hours in any workweek. Additionally,
the wage orders provide that minors 15- 17 years old who are not require d by law to attend school
may be employed for the same hours as an adult, and are subject to the same overtime pay
requirements as adults. (See e.g., Order 4, Section 3)
48.1.2 Definition Of Workday. “Workday” is defined in the Industrial Welfare Commission Orders and
Labor Code § 500 for the
purpose of determining when daily overtime is due. A workday is a
consecutive 24-hour period beginning at the same time each calendar day, but it may begin at any
time of day. The beginning of an employee’s workday need not coincide with the beginning of
that employee’s shift, and an employer may establish different workdays for different shifts.
However, once a workday is established it may be changed only if the change is intended to be
permanent and the change is not designed to evade overtime obligations. Daily overtime is due
based on the hours worked in any given workday; and, of course, the averaging of hours over two or
more work days is not allowed. (O.L. 1993.12.09 )

48.1.2.1 Example: 1. A factory worker whose usual shift is 7 a.m. to 3 p.m. has an established workday
beginning at 7 a.m. On Tuesday night she is asked to work a special extra shift from 11 p.m. to 7
a.m. W ednesday. Since she has already worked eight hours on Tuesday, she is due time and a half
beginnin at 11 p.m. on Tuesday night until 3 a.m. and double time from 3 a.m. to 7 a.m. However,
because her workday begins at 7 a.m. she may be paid straight time wages from 7 a.m. to 3 p.m. (her
regular shift) on Wednesday regardless of the fact that the time worked is continuous.
48.1.3 Definition Of Workweek . “Workweek” is defined in the Industrial Welfare Commission
Orders and Labor C
ode § 500 for the purpose of determining when weekly overtime is due. A work
week is any seven consecutive 24 -hour periods, starting with the same calendar day each week,
beginning at any hour on any day, so long as it is fixed and regularly recurring. An employer may
establish different workweeks for different employees, but once an employee’s workweek is
established, it remains fixed regardless of his working schedule. An employee’s workweek may be
changed only if the change is intended to be permanent and the change is not desi gned to
evade overtim e obligations . (O.L. 1986.12.01 )
48.1.3.1 Normally the workweek is the seven -day period used for payroll purposes. If it is not otherwise
established in the record, for enforcement purposes DLSE will use the calendar week, from 12:01
a.m. Sunday to midnight Saturday, with each workday ending at midnight. Daily and weekly
overtime is due based on the hours worked in the workday and workweek; the averaging of hours
over two or more work weeks is not allowed. The only exception to the rule concerning

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calculation on the work week basis is the work period of 14 consecutive days available to employers
engaged in the operation of licensed acute care or extended care facilities covered by Order 5. Note,
however, that in the case of an employer using the 14-day calculation, daily overtime for all hours in
excess of eight is required.
48.1.3.2 Example: If an employee’s workweek begins on Monday morning, but she is not called in to work
until Wednesday to work seven consecutive 8-hour days, until Tuesday, she is not due any overtime.
His or her workweek ends Sunday night and she has only worked 40 hours with no daily overtime
Wednesday through Sunday. Monday begins a new workweek, and she could work 8 -hour days
through Friday without any overtime due, thus having worked 10 consecutive days without overtime.
48.1.4 Fluctuating Workweek Compensation Arrangement Not Allowed . The Fourth District Court of
Appeal held th
at the use of the fluctuating work week method of calculating overtime is not permissible
in California. (Skyline Homes, Inc., etc. et al v. Department of Industrial Relations, et al. (1985) 165
Cal.App.3rd 239, 166 Cal.App.3rd 232 (Hrg.den. May 26, 1985 ), 212 Cal.Rptr. 792.) The court in
Skyline explained in detail and fully analyzed the issues concerning the use of the fluctuating
workweek. The Skyline court concluded that the federal “fluctuating workweek” method of calculation
(i.e., dividin g salary wages by total hours) reduces the employee’s regular hourly rate with each
overtime hour worked, and is incompatible with the state law restrictions on U ncompensated daily
overtime imposed by the IWC wage orders *. (Skyline, 165 Cal.App.3d at 245-2 49.) One of the
major diffe
rences between federal and state law in this area is the requirement in California that the
premium pay for overtime is to be a penalty which creates a disincentive to employers to impose
overtime on employees. (See Industrial Welfare Commission v. Superior Court (1980) 27 Cal.3d 690;
Skyline, supra, see also O.L. 1991.01.07-1 ) Additionally, the enactment of Labor Code § 515(d)
indicates tha
t the California Legislature also concluded that the “fluctuating workweek” is not allowed.
48.1.5 The continuing validity of the Skyline decision has been reaffirmed by the California Supreme Court
in Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575.

48.1.5.1 Fluctuating Workweek Compensation Arrangement Defined. Under this method, an employee is
compensated by
a fixed weekly salary which by agreement between the employer and employee is
designed to provide basic non-overtime compensation for all hours worked. The employee’s regular
rate of pay, for purposes of overtime compensation, is determined by dividing the number of hours
actually worked in a particular workweek into the amount of the fixed weekly salary. The

*Recent research in IWC archives has disclosed that in 1963 “Findings”, the Commission stated: “In defining its
intent as to the regular rate of pay set forth in Sectio n 3(a)(3)(A) and (B) to be used as a basis for overtime
computation, the Commission indicated that it did not intend to follow the ‘fluctuating work week’ formula
used in some computations under the Fair Labor Standards Act. It was the Commission’s intent that in establishing
the regular rate of pay for salaried employees the weekly remuneration is divided by the agreed or usual hours of
work exclusive of daily hours over eight.” Thus, the DLSE positio n (and the Skyline court) is correct.

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result of this method is that the more hours worked, the lower the regular rate and the
greater the incen
tive to the employer to work employees overtime. In California, the law
requires that there be a “penalty” for utilizing workers in overtime situations. (Industrial
Welfare Commission v. Superior Court, supra 27 Cal.3d 690) No penalty is involved in a
fluctuating workweek because the rate of pay actually decreases.
48.1.5.2 Example Of Illegal Fluctuating Workweek Computation. Fixed weekly salary of $500
for all hours worked.
If the employee worked 50 hours in the week, the overtime, using
the illegal fluctuating workweek method, would be computed as follows:

$500/week divided by 50 hours = $10 ("regular rate of pay")
50 hours minus 40 hours = 10 overtime hours
10 hours times $5 (½ regular rate of pay) = $50
$ 50 - overtime compensation
+500 - fixed weekly salary (straight time compensation for all hours worked)
$550 - Total compensation for one week
48.1.5.3 Correct California Computation. Using the legal maximum regular hours – 40 – the
overtime in this case
would be computed as follows:
$500/week divided by 40 hours = $12.50 (“regular rate of pay”)
50 hours minus 40 hours = 10 overtime hours
10 hours times $18.75 (1½ of regular rate of pay) = $187.50
$187.50 - Overtime Compensation
+500.00 - Fixed weekly salary
$687.50 - Total compensation
48.1.5.4 Salary. In California, in a situation where a non- exempt employee is paid a salary, the
regular hourly rate
of pay for purposes of computing overtime must be determined by
dividing the salary by not more than the legal maximum regular hours (in most cases
40 hours, but this may be less than 40 hours where daily overtime is being computed) to
determine the regular hourly rate of pay. (See Labor Code § 515(d)) The contracted hours
may be less than the legal maximum regular hours in one workweek, in which case the
contracted hours must then be used as the divisor and the salary as the dividend to
establish the regular hourly rate of pay. All hours over the legal maximum regular hours
in any one workweek or in any one workday must be compensated at overtime rates.

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48.1.6 Belo Contracts Illegal In California. “Belo” contracts do not meet the overtime requirements of the
California
Industrial Welfare Commission Orders or the provisions of Sections 515(d) of the Labor
Code. (O.L. 2000.09.29; 1991.01.07-1)*
48.1.7 Belo Contract Defined . A Belo contract is one in which a specific hourly wage is set but the
employer prom
ises a weekly guarantee. In the case of the original Belo contract, the arrangement was
for an hourly rate of 67 cents with a weekly guarantee of $40.00. Overtime at the regular hourly rate
was not paid until the worker was employed 54½ hours in a workweek.
48.1.8 As stated above, DLSE has historically refused to accept Belo plans. That position is now reinforced
by the adoption of Labor Code Section 515(d), discussed above. The concept flies in the face of the
very reasons that the IWC adopted premium pay for overtime – premium pay was to provide a
“penalty” to discourage employers from requiring overtime. (See Skyline Homes v. DIR (1985) 165
Cal.App.3d 239) Adopting a contract which provides for paying an individual on a regular basis to
work overtime simply encourages the working of overtime. The system provides no penalty to the
employer for employing the employee over eight hours in a day or forty hours in a week; in fact, the
system encourages the employer to so employ the worker because the overtime has, according to the
plan, already been paid for.

48.1.9 Overtime Compensation Is Not Due for Negligible Work : In Lindow vs. United States (9th Cir.
1984) 738 F.2d 1057, the Court
held that under the “de minimis rule,” employers are not required to
compensate employees for negligible overtime work. DLSE utilizes this view for enforcement
purposes. (See Section 46.6.4 of this Manual)

In supporting its holding, the court
noted that paying the employees for this negligible amount of
compensable time would be administratively difficult for the employer, the aggregate amount of
compensable time was insignificant, and that the additional work was not done on a regular basis.
However, the court held, if the amount of time was significant or if the regularity of occurrence made
the time significant, a different result would be had. Lindow v. U.S., supra, 738 F2d 1057. (See
discussion of policy at O.L. 1994.02.03-3.)

*The “Belo” contract type of payment has been recognized by the United States Congress since 1949 for purposes
of the FLSA. Congress adopted the language in 29 U.S.C. §207(f) with the express purpose of giving statutor y
validity, subject to prescribed limitations, to a judicial “gloss on the Act” by which an exception to the usual rule
as to the actual “regular rate” had been recognized by a closely divided Supreme Court. (See 29 CFR §778.404,
“Purposes of Exemption” ) As the Regulation states, “The provisions of section 7(f) set forth the conditions
under which, in the view of Congress, [guaranteed wage plans may be adopted]. Plans which do not meet these
conditions were not thought to provide sufficient advantage to the employee to justify Congress in relieving
employers of the overtime liability [of] section 7(a).” No similar provision is found in California law. The Supreme
Court's ruling in the original case of Walling v. Belo, 316 U.S. 624 (1942) does not interpret the FLSA as it stands
today. Congress felt that the interpret ation of the Belo court was less than satisfactory and reluctantly felt
compelled to change the FLSA in response to that interpretation so as to limit the so-called Belo Contract
exception. The same is true as to the Regulations a dopted by the Department of Labor. Those regulations
are based on a specific exception in the FLSA (§207(f)) which, to repeat, does not exist in California law.

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48.1.9.1 In the Lindow case, although the employer did not require its employees to report to work early,
employees sometimes came to work before their shift to read the log book and exchange
information. The appellate court ruled that the trial court improperly categorized the employees’
pre-shift activities as preliminary since reading the log book and exchanging information were
compensable activities. However, it determined that the trial court co rrectly applied the de
minimis rule, finding that since the work time was overl apped with time compensated and was
therefore difficult to calculate, the time was not compensable under the Fair Labor Standards Act.
48.2 “Makeup Work Time” Provisions Adopted By Legislature Are Now Part of IWC Orders
Promulgated in 2000. The IWC incorporated the language of Labor Code § 513 into each of the
orders except 14*:
I
f an employer approves a written request of an employee to make-up work time that is or
would be lost as a result of a personal obligation of the employee, the hours of that make-up
work time, if performed in the same workweek in which the work time was lost, may not be
counted toward computing the total number of hours worked in a day for purposes of the
overtime requirements, except for hours in excess of eleven (11) hours of work in one (1) day
or forty (40) hours of work in one (1) workweek. If an employee knows in advance that he or
she will be requesting make-up time for a personal obligation that will recur at a fixed time
over a succession of weeks, the employee may request to make-up work time for up to four
(4) weeks in advance; provided, however, that the make-up work must be performed in the
same week that the work time was lost. An employee shall provide a signed written request for
each occasion that the employee makes a request to make up a work time pursuant to this
section. While an employer may inform an employee of this make-up time option, the
employer is prohibited from encouraging or otherwise soliciting an employee to request the
employer’s approval to take personal time off and make-up the work hours within the same
workweek pursuant to this section.
48.2.1 Makeup work exceptio n requires:
1. Written request by the employee to make up time which would be lost by the employee
due to a personal o
bligation
2. Makeup hours worked in one day may not exceed eleven (11) nor, of course, may the
number of makeup hour
s worked in one workweek exceed forty (40).
3. Request may be made for ma keup time for a recurring personal obligation which is
“fixed in time over a succession of weeks” provided a written request is made every four
(4) weeks.
48.2.1.1 Note: The employer is prohibited from soliciting or encouraging employees to make a request for
makeup hours, but informing employee of this right is permitted.
48.2.1.2 Personal Obligation. As an enforcement policy DLSE will not review the reason for the make-up
time, so as to allow any employee to determine whether the need to take time off constitutes a
“personal obligation” within the meaning of the statute.

___________
*Pursuant to AB 1066(2016), as stated in Labor Code § 861, all overtime provisions in Labor Code
division 2, Part
2, Chapter 1 (commencing with section 500) not subject to the overtime phase-in
began to apply to agricultural workers covered by Order 14 on January 1, 2017. This includes the
“makeup work time” provisions of Labor Code § 513.

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48.3 Work On Seventh Day In Workweek. Formerly the IWC orders had language permitting
employment of 7 days
in a workweek, “with no overtime pay required” provided the total of
hours of employment do not exceed 30 in the week or 6 in any one day. In other words, such
employees were exempt from the seventh day of rest requirement and the seventh day of work
premium pay requirement if the 30 in the week or 6 in any one day test was met. Such
exemptions, unless repealed, remained valid despite the provisions of Labor Code § 510(a) by
virtue of the language of Labor Code § 515(b)(2).
48.3.1 In all the new orders except 14 and 15, the IWC deleted the phrase “no overtime pay required”
permitting employment of 7 days in a workweek provided that total hours for the week do not
exceed 30 with no more than 6 hours worked in any one day but requires the payment of premium
pay on the seventh day of work. Additionally, Labor code § 556 now provides that the seventh
day of rest requirement does not apply if the total hours of employment do not exceed 30 in the
week or 6 in any one day. Consequently, all employees (except those employed under Orders 14
and 15) meeting the hours criteria could be employed for seven days in a week if they were paid
the applicable premium pay including for all of their hours worked on the seventh consecutive
day of the workweek pursuant to Section 510(a). Pursuant to AB 1066 (2016), as stated in Labor
Code § 861, all overtime provisions in Labor Code Division 2, Part 2, Chapter 1 (commencing
with section 500) not subject to the overtime phase-in began to apply to agricultural workers
covered by Order 14 on January 1, 2017. This includes the seventh day overtime premium pay
provisions of Section 510(a), which now apply under Order 14.

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49 COMPUTATION OF REGULAR RATE OF PAY AND OVERTIME.

49.1 Labor Code § 200 defines wages as “...all amounts for labor performed by employees of every
description, whe
ther the amount is fixed or ascertained by the standard of time, task, piece,
commission basis or other method of calculation.”
49.1.1 In California, as with the federal FLSA, overtime is computed based on the regular rate of pay.
The regular rate of
pay includes many different kinds of remuneration, for example: hourly
earnings, salary, piece work earnings, commissions, certain bonuses, and the value of meals and
lodging.
49.1.2 Items of Compensation Included in Calculating Regular Rate of Pay. In not defining the
term “regular rat
e of pay”, the Industrial Welfare Commission has manifested its intent to adopt
the definition of “regular rate of pay” set out in the Fair Labor Standards Act (“FLSA”) 29 USC
§ 207(e):
“...the ‘regular rate’ at which an employee is employed shall be deemed to include all remuneration
for employment paid to, or on behalf of, the employee...” (29 USC § 207(e)).
In determining what payments are to be included in or excluded from the calculation of the
regular rate of pay, California law adheres to the standards adopted by the U.S. Department of
Labor to the extent that those standards are consistent with California law.
49.1.2.1 Piece Rate, Production Bonus. The Department of Labor has interpreted § 207(e) of the FLSA
to include piec
e rate and production bonuses in determining the regular rate of pay. (29 CFR §§
778.110 (“production bonus”) and 778.111 (“piece-rate”))
49.1.2.2 All Goods Or Facilities Received By Employee Are To Be Utilized In Determining Regular
Hourly Rate For Over
time Computation. Following the long-established enforcement policy
of the DLSE (which clos
ely tracks the federal regulations in this regard) housing benefits, meals,
etc., are added to the cash wage paid for purposes of determining the “regular rate” of pay. The
federal courts have addressed this issue and the U.S. Supreme Court in the case of Walling v.
Youngerman-Reynolds Hardwood Co. (1945) 65 S.Ct. 1242, 1245 noted:
“The regular rate by its very nature must reflect all payments which the parties have agreed shall be
received regularly during the workweek, exclusive of overtime payments. It is not an arbitrary label
chosen by the parties; it is an actual fact. Once the parties have decided upon the amount of wages
and the mode of payment the determination of the regular rate becomes a matter of mathematical
computation, the result of which is unaffected by any designation of a contrary ‘regular rate’ in the
contracts.” (See also, Walling v. Alaska Pacific Consolidated Mining Co. (9th Cir.1945) 152 F.2d
812, 815)

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49.1.2.3 What Must Be Included In Calculating Regular Rate. Any sum paid for hours worked must,
of course, be inc
luded in the calculation. Also, any payment for performing a duty must be
included. For example, an employment contract may provide that employees who are assigned
to be available for calls for specific periods will receive a payment of $25 for each 8-hour period
during which they are “on call” in addition to pay at their regular (or overtime) rate for hours
actually spent in making calls. If the employees who are thus “on call” are not confined to their
homes or to any particular place, but may come and go as they please, provided that they leave
word where they may be reached, the hours spent “on call” are not considered as hours worked
(See discussion at Section 46.6.3, et seq. of this Manual). Although the payment rec eived by
employees for such “on call” time is, therefore, not allocable to any specific hours of work, it is
clearly paid as co mpensation for perfor ming a duty involved in the e mployee’s job and,
therefore, the payment must be included in the e mployee’s regular rate in the sam e manner as
any payment for services, such as an attendance bonus, which is not related to any specific hours
of work.

49.1.2.4 Payments That Are To Be Excluded in Determining “Regular Rate”:

(1) Sums paid as gifts; payments in the nature of gifts made at Christmas time or on other
special occasions, as a reward for service, the amounts of which are not measured by
or dependent on hours worked, production, or efficiency; (Discussed in 29 CFR §
778.212).

(2)

Payments made for occasional periods when no work is per formed due to vacation,
holiday, illness, failure of the employer to provide sufficient work, or oth er similar
cause; reasonable payments for traveling expenses, or other expenses, incurred by an
employee in the furtherance of his employer's interests and properly reimbursable by
the em ployer; and other similar paym ents to an e mployee which are not m ade as
compensation for his hours of employment; (Discussed in 29 CFR §§ 778.216 through
778.224).

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(3)

Sums paid in recognition of services per formed during a given period if either, (a) both
the fact that payment is to be made and the amount of the payment are determined at the
sole discretion of the employer at or near t he end of the period and not pursuant to any
prior contract, agreement, or prom ise causing the e mployee to expect such pay ments
regularly; or (b) the pay ments are made purs uant to a bona fide profit -sharing plan or
trust or bona fide thrift or savings plan, m eeting the requirements of the Ad ministrator
set forth in appropriate regulations which he shall issue, having due regard among other
relevant factors, to the extent to which the amounts paid to the employee are determined
without regard to hours of work, production, or efficiency; or (c) the payments are talent
fees (as such talent fees are defined and delimited by regulations of the Admi nistrator)
paid to performers, including announcers, on radio and television progra ms; (Discussed
in 29 CFR §§ 778.211 and 778.213).

(4)

Contributions irrevocably made by an employer to a trustee or third person pursuant to
a bona fide plan for providing old-age, retirement, life, accident, or health insurance or
similar benefits for employees; (Discussed in 29 CFR §§ 778.214 and 778.215).

(5)

Extra compensation provided by a pre mium rate paid for certain hours w orked by the
employee in any day or workweek because s uch hours are hours worked in excess of
eight in a day or in excess of the maximum work-week applicable to such employee under
subsection (a) of this section or in excess of the em ployee's normal working hours or
regular working hours, as the case may be; (Discussed in 29 CFR §§ 778.201 and
778.202).

(6) Extra compensation provided by a premium rate paid for work by the employee on
Saturdays, Sundays, holidays, or regular days of rest, or on the sixth or seventh day of
the workweek, where such premium rate is not less than one and one-half times the rate
established in good faith for like work performed in nonovertime hours on other days;
(Discussed in 29 CFR §§ 778.203, 778.205 and 778.206).

(7)

Extra compensation provided by a premium rate paid to the employee, in pursuance of
an applicable employment contract or collective-bargaining agreement, for work outside
of the hours established in good faith by the contract or agreement as the basic, nor mal,
or regular w orkday (not exceeding eight hours) or workweek (not exceeding the
maximum workweek applicable to such e mployee under subsection (a) of this section,
[FN2] where such premium rate is not less than one and one-half times the rate established
in good faith by the contract or agreement for like work performed during such workday
or workweek; (Discussed in 29 CFR §§ 778.201 and 778.206).

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Any value or income derived from employer-provided grants or rights provided pursuant
to a stock option, s tock appreciation right, or bona fide e mployee stock purchase
program which is not otherwise excludable under any of paragraphs (1) through (7) if—
(A) grants are made pursuant to a program, the ter ms and conditions of which are
communicated to participating e mployees either at the beginning of the
employee's participation in the program or at the time of the grant;

(B) in the case of stock options and stoc k appreciation rights, the grant or right
cannot be exercisable for a period of at least 6 months after the ti me of grant
(except that grants or rights may become exercisable because of an employee's
death, disability, retire ment, or a cha nge in corporate ownership, or other
circumstances perm itted by regulation), a nd the exercise price is at least 85
percent of the fair market value of the stock at the time of grant;

(D) Any determinations regarding the award of, and the amount of, employer-
provided grants or rights that are based on performance are—

(i) made based upon m eeting previously established perfor mance criteria
(which may include hours of work, efficiency, or productivity) of any
business unit consisting of at least 10 e mployees or of a facility, except
that, any determinations may be based on length of service or minimum
schedule of hours or days of work; or

(ii) made based upon the past performance (which may include any criteria)
of one or more employees in a given period so long as the determination
is in the sole discretion of the employer and not pursuant to any prior
contract.
(9) Reporting time pay, extra hour for failure to provide m eal period, extra hour for failure to
provide break and split
shi ft pay need not be included. In Murphy v. Kenneth Cole
Productions, Inc. (2007) 40 Cal.4th 1094, the Court indi cated that m eal period pay, rest
period pay, reporting time pay and split shift premium are all forms of pay similar to overtime
premium. Because these payments are in the nat ure of premiums required by law, they are
not included in computing the regular rate of pay on the sa me basis that overtime premium
is not included in regular rate calculations. (See 29 CFR §§ 778.201,778.202 and 778.224).

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49.1.3 (section deleted – reformatted as 49.1.2.4, No. 9).

49.1.4 Hours Used In Computation. Ordinarily, the hours to be used in computing the regular
rate of pay m ay not exceed the legal maximum regular hours which, in m ost cases is 8
hours per day, 40 hours per week. This maximum may also be affected by the number of
days one works in a week. It is important to deter mine what maximum is legal in each
case. The alternate method of scheduling and co mputing overtime in m ost Industrial
Welfare Commission Orders, based on four 10-hour days or three 12-hour days does not
affect the regular rate of pay, which in this case also would be computed on the basis of
40 hours per week. ( Skyline Homes v. Department of Industrial Relations (1985) 165
Cal.App.3d 239, 245-50). 1

49.1.5 Salaried Non-Exempt – Explicit Written Agreement No Longer Allowed. In the past,
California law has been construed to allow the employer and the employee to enter into
an explicit mutual wage agreement which, if it met certain conditions, would permit an
employer to pay a salary to a non-exempt employee that provided compensation for hours
in excess of 40 in a workweek. (See, Ghory v. Al-Lahham (1989) 209 Cal.App.3d 1487,
257 Cal.Rptr. 924). Such an agreement (backing in the regular rate) is no longer allowed
as a result of the specific language adopted by the Legislatur e at Labor Code § 515(d).
To determine the regular hour rate of pay for a non-exempt salaried employee, one must
divide the weekly salary paid by no more than forty hours.

1 It is important to note that the Skyline Homes case was not overturned by the Supreme Court in the case of Tidewater
Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, as some labor attorneys have suggested. What the Court said was
that to the extent that the Skyline court had justified reliance on DLSE internal documents which were “underground
regulations,” the case was disapproved. The Skyline court had adopted the DLSE approach, but used an independent
analysis to reach that decision. Thus, the rationale of the court concerning the fluctuating workweek method is valid. The
case is still regularly cited by the Supreme Court in its decisions. (See, Morillion v. Royal Packing Co. (2000) 22 Cal.4th
575).

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49.2 Methods Used in Computing Regular Rate of Pay:

49.2.1.1 Salaried Workers: Multiply the monthly remuneration by 12 (months) and divide by 52
(weeks) = weekly
remuneration. Divide the weekly remuneration by the number of lega l
maximum regular hours worked = regular hourly rate. (See Labor Code § 515(d))

49.2.1.2 Piece Workers, Production Bonus Workers or Commission Workers : (See O.L.
1993.02.22-1, 1988.06.15, 1988.03.28, 1994.06.17-1; 1988.07.14, 19
87.02.17). Either of
the following two methods can be used to determine the regular rate for purposes of
computing overtime compensation:

1. Compute the regular rate by dividing the total earnings for the week, including
earnings during
overtime hours, by the total hours worked during the week, including
the overtime hours. For each overtime hour worked, the employee is entitled to an
additional one-half the regular rate for hours requiring time and one-half and to an
additional full rate for hours requiring double time. This is the most commonly used
method of calculation.

2. Using the piece or commission rate as the regular rate and paying one and one-half
times this rate f
or production during overtime hours. This method is rarely used.
49.2.1.3 It is recognized that the method outlined in alternative 1, above, resembles the computation
used in the illegal f
luctuating workweek plans. However, there is a distinct difference:
Under that federal method the salaried employee is not given the opportunity to increase
his or her basic rate; in fact, it is always the case that the longer the employee on a
fluctuating workweek works, the lower the basic hourly rate of the salaried employee
becomes. Under the DLSE method for piece workers, production bonus workers or
commission workers, it is recognized that these employees are actually given additional
time to make more pieces or earn more commission in the overtime hours so that the basic
hourly rate may increase. Therefore, the Skyline analysis for computing the regular rate of
pay is inapplicable to computing the regular rate for piece rate and commission employees.
The Skyline court recognized this at 165 Cal.App.3d 239, 254.
49.2.1.4 Employees compensated by a piece-rate compensation formula must be separately
compensated for r
est and recovery periods, which means payment of additional
compensation separate from any piece-rate compensation; the rate of compensation for
rest and recovery periods shall be the higher of:
An average hourly rate determined by dividing the total compensation
for the work week, e
xclusive of compensation for rest and recovery
periods and any premium compensation for overtime, by the total hours
worked during the workweek, exclusive of rest and recovery periods or
the applicable minimum wage. See, Labor Code § 226.2(a)(1) and (3).
One exception to this requirement was enacted by the Legislature under
certain conditions for licensed barbering and cosmetology employees
who are paid what are deemed in the new statute, Labor Code section
204.11, “commissions” if all the following requirements are met:

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The barbering and cosmetology employee is licensed;
The barbering and cosmetology employee is providing services for
which such a license i
s required;
The employee received wages which include amounts paid as a
percentage or a fla
t sum portion of the sums paid to the employer by the
client recipient of such serve; and
The barbering and cosmetology employee is paid in every pay period in
which hours are worked a
regular base hourly rate of at lest two times
the state minimum wage for all hours worked in addition to
commissions paid.
In addition, employees must be compensated for other non-productive
time separate from any
piece-rate compensation at an hourly rate that is
no less than the applicable minimum wage. This means for “other non-
productive time” employees paid by piece-rate must be paid additional
compensation that is separate from their piece -rate compensation. See,
Labor Code § 226.2(a)(4).
49.2.1.5 For a workweek of piece-rate compensation and overtime hours:

• An employee works a 6-day, 47-hour workweek, for which 7 hours constitute overtime.
• The employee has two 10-minute rest periods authorized and permitted per day, for a total
of 120 minutes (2.0 hours) of rest periods for the workweek.
• The employee earns a total of $800 in piece-rate compensation for the workweek.
The average hourly rate to be paid for the rest periods for this employee is calculated as follows:
$800 Compensation for the workweek, exclusive of rest and recovery periods and premium pay for
overtime.
÷ 45 hours Hours worked, not including the rest and recovery periods.
$17.78/hour = x 2.0 hours Compensation for
rest and recovery periods for this workweek.
= $35.56
The overtime premium compensation for this employee is:
$800 Piece-rate compensation

+ $35.56 Compensation for rest and recovery periods
= $835.56
÷ 47 hours
= 17.78/hour Regular rate of p
ay
x .5
= $8.89 Premium pay due for ov ertime hours
x 7 hours Overtime hours

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= $62.23
Total compensation for the workweek:
$800 Piece-rate compensation
+ $35.56 Compensation for rest and recovery periods
+ $62.23 Premium pay for overtim e hours
= $897.79
As an alternative, (see 2 above) piece work performed during overtime periods may be paid
by paying for each piece made during the overtime period at the appropriate rate, i.e., time
and a half (1 ½) for 8 to 12 hours, or double time (2) over 12 hours.

49.2.2 Group Piece Work Rates : A group rate for piece workers is an acceptable method of
computing pay. In t
his method the total number of pieces produced by the group is divided
by the number of p ersons in the group and each is paid accordingly. The regular rate for
each worker i s determined by dividing the pay received by the number of hours worked.
Again, of course, the regular rate cannot be less than the minimum wage and rest and
recovery periods must be separately compensated and included in the regular rate
computation.

49.2.3 Note: If notice is given to all workers before the performance of the work, the ratio among
the various workers may d
iffer (i.e., one may receive 7% while another receives only 5.5%).
This is typical on some construction sites and fishing vessels where the experience of the
workers is taken into consideration when calculating the shares.
49.2.4 Computing Regular Rate and Overtime on a Bonus . When a bonus is based on a
percentage of
production or some formula other than a flat amount and can be computed and
paid with the wages for the pay period to which the bonus is applicable, overtime on the
bonus must be paid at the same time as the other earnings for the week, or no later than the
payday for the next regular payroll period. (See Labor Code § 204) Since the bonus was
earned during straight time as well as overtime hours, the overtime “premium” on the bonus
is half-time or full-time (for double time hours) on the regular bonus rate. The regular bonus
rate is found by dividing the bonus by the total hours worked during the period to which the
bonus applies. The total hours worked for this purpose will be all hours, including overtime
hours. (See previous section)
49.2.4.1 Example Involving Overtime and Bonus: First, find the overtime due on the regular hourly
rate, computing for
salaried worker and piece workers as described in the sections above.
Then, separately, compute overtime due on the bonus: find the regular bonus rate by dividing
the bonus by the total hours worked throughout the period in which the bonus was earned.
The employee will be entitled to an additiona l half of the regular bonus rate for each time
and one-half hour worked and to an additional full amount of the bonus rate for each double
time hour, if any.

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Regula r hourl y rate of pay $ 20.00
.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tota l hour s worke d in workwee k = 52
Tota l overt ime hour s at ti
me and one -hal f = 12
Overtim e due on regula r hourly rat e = 12 x $ 30.00 $36 0.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonus attr ibutabl e to the workwee k $138.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regula r bonus rate = $138.0 0 ÷ 52 = $2 .653 8 ÷ 2 = $1.3 3 x 12 Overtim e H our s $ 15.92 . . . . . . . . . . . . . . .
Tota l earn ings due for the workweek:
Straigh t time : 40 hour s
@ $20.0 0 $800.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overtime : 12 hour s @ $30.0 0 $360.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonu s $138.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overtim e on bo nu s $ 15.92 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tota l $1,313.92 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49.2.4.2 If the bonus is a flat sum, such as $300 for cont inuin g to the end of the season, or
$5.00 for each day worked , the regular
b onus ra te is determine d by dividing the bonus
by the maximu m legal regula r hour s worke d durin g the perio d to whic h the bonus
applies . This i s so becaus e the bonus is not designe d to be an incen tive for increased
production fo r each hour of work; but, instea d is designed to insur e that the employee
remai n in th e emplo y of the employer . To allow this bonus to be calcula ted by dividing
by the tota l (instea d of the stra ight time hours ) would encourage, rather than discourage ,
the use of overtime . Thus, a premiu m based on bonus is require d for each overtim e hour
durin g the perio d in orde r to compl y with publi c policy. This enforcement postion
was adopted by the California Supreme Court in Alvarado v. Dart Container Corp.
(2018) 4 Cal.5th 542.

49.2.4.3 Example: Involving Overtime, Double Time and Bonus. The bonus of $300.00 for
remaining to the end of the s
eason paid to a pieceworker who worked 640 regular hours, 116
time and one-half overtime hours and 12 double time hours:
Bonus $300.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regular Bonus rate=$300.00
divided by 640 $ 0.469 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
1½ x regular
bonus rate = 1½ x $0.469 $ 0.703 . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
Double regular
bonus rate = 2 x $0.469 $ 0.938

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
Overtime due
on bonus for time
and one-half hours = $0.
703 x 116 $ 81.56 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overtime due on bonus for double time hours = $0.938 x 12 $ 11.25 . . . . . . . . . . . . . . . . . . .
Bonus $300.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overtime
on bonus $ 92.81 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total due on bonus $392.81
(Plus other properly computed earnings)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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49.2.5 Weighted Average Meth od. Wher e two rates of pay are pai d during a workweek , the
Californi a metho d for
dete rminin g the regular rate of pay for ca lculatin g overti m e in
that workwee k mirrors the federal method, based upon the weighte d averag e of al l
hourl y rates paid. ( See 29 CFR § 778.115 ) Initially , therefore , it must be pre dicated
upon the findin g that there are established hourl y rates bein g paid. The rat e will be
established by addin g all hours worke d in the week and dividin g that numbe r into the
total compensat ion for the week . This is co nsisten t w ith the provisions of Skyline v. DIR
(1985) 165 Cal.App.3d 239, since the hourl y rates hav e alread y been establishe d and
what need s to be establishe d now is the weighte d averag e of thos e rates for purposes
of over time pa ymen t.
49.2.6 Exceptio n to Weighte d Ave rage . In the situation whe re an employ ee is pai d two
rates durin g the co
urse of the day and one of those rates is a statutorily- mandated rate
(i.e., p revailin g wage) the regula r rate for calculatin g the overtim e rate for work
performe d on the publi c works project must be based on the highe r of eithe r the
wei ghted averag e or the prevailin g w age rate in effect at the time that the w ork is
performe d. (It would be very unusal for the weighted average to be higher than the
prevailing wage rate, but it is possible.)
49.2.6.1 Example: If an employee is employed in a workweek for some hours on a private construction
job at $14.00 per hour and the
n employed other hours on a public work project at $28.00,
any overtime performed on the public work site must be compen sated at the ov ertime rate
required by the prevailing wage determination in effect on that project for the craft.

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50 IWC ORDERS EXEMPTIONS.
50.1 The California Industrial Welfare Commission Orders apply to all employees in the
State of California except those specifically exempted.
50.2 Employer Bears Burden Of Proof To Show Exemption . The employer bears the
responsibility of proving this or any other exemption from the requirements of the IWC
Orders. Walling v. General Industries Co., 330 U.S. 545, 67 S.Ct. 883 (1947)
50.3 Employees Exempted From Orders Generally:
1. Empl
oyees primarily “engaged in” administrative, executive, or professional capacities
are exempt from Section 3 through 12 of the Orders. (IWC Orders, Section 1,
Applicability of Order)
a) In determining which activities constitute exempt work and for examples of
exempt and non-exempt job duties, the IWC has chosen to utilize the provisions
of certain specified federal regulations. These regulations are discussed below.
It is very important to note that not all of the sections of the federal
regulations are specified and, thus some are not applicable. Care must be taken
to determine which federal regulations may be relied on.
2. Sheepherders wer e entirely exempt from the Orders until Wage Order 14-2001 became
effective on July 1, 2001. After that date, Sections 3, 4 (A)-(D), 5 6, 9, 11, 12 and 13 do
not apply to sheepherders. Note, however, that this exemption is only effective while the
person is engaged for the entire workweek in sheepherding as that term is defined in
the Order (Order 14-2001, Section 2(N)). Pursuant to AB 1066 (2016) beginning January
1, 2019, sheepherders are subject to the same overtime phase- in that applies to all other
agricultural workers covered by Wage Order 14. See
O.L. 2019.7.26 concerning computation of overtime for sheeph erders subject to the special
monthly minimum wage contained in Labor Code section 2695.2(a) and Wage Order 14.
Effective September 27, 2022, goat herders became subject to the same provisions as
sheepherders by passage of AB 156.
3. Outside salespersons (IWC Orders, Section 1(C)).
4. Effective January 1, 2001, any individual participating in a national service program,
such as AmeriCorps, carried out using assistance provided under 42
U.S.C. § 12571, are entirely exempt from the Orders. (IWC Orders, Section1(E)
[generally]; see also, Labor Code § 1171)
5. Parent, spouse, child, or legally adopted child of the employer are entirely exempt
from the Orders. (IWC Orders, Section 1(D)) Note that all other relatives of the employer
would be covered by the IWC Orders.

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6. Employees in computer software fields will be exempt from the overtime
requirements* of the Orders if they:
a. for 2023, earn fift y-three dollars and eighty cents ($53.80) per hour for each hour
worked, a minimum monthly salary of $9,339.78 and a minimum annual salary of
$112,065.20, to be adjusted annually by the Office of the Director, Research ( ODR) o n
O
ctober 1 of each year to become effective January 1 of the following year by an amount
equal to the percentage increase in the California Consumer Price Index for Urban W age
E
arners and Clerical Workers. This adjustment is posted on the ODR website annually here:
Overtime Exemption for Computer Software Employees (ca.gov)
and
are primarily engaged in work that is intellectual or creative and requires the exercise
of discretion and independent judgment, and
b. meet the duties test set out at Section 2(h)(ii) of the Orders, and
c. are highly skilled and proficient in the theoretical and practical application of highly
specialized information to computer systems analysis, programming, and software
engineering within the meaning of Labor Code § 515.5 and exceptions thereto as
defined in Labor Code § 515.5(b).
7. Physicians, like computer software workers, are exempt from overtime provisions
of the Code and IWC Orders, if they:
a. earn at least $97.99 per hour for each hour worked for 2023 posted on the ODR
website annually here:
Overtime Exemption for Physician/Surgeon Employees
(ca.gov)
and
b. their primary duties require licensure pursuant to Business and Professions Code
§2000.
8. Generally, employees covered by a valid CBA that expressly provides for the wages,
hours of work, and working conditions of the employees, and if the agreement provides
premium wage rates for all overtime hours worked and a regular hourly rate of pay for
those employees of not less than 30 percent more than the state minimum wage, are
exempt from overtime requirements contained in Section 3 of the Orders (Hours and
Days of Work) except for provisions concerning premium pay for minors.
a. Order 4 limits the number of hours in a workweek to seventy-two and a CBA may
not change that limit
b. except for the provisions of Sections 4, 10, 11, 12 and 20, Order 9 exempts all
employees covered by a CBA under the Railway Labor Act. This exception was
contained in prior Orders and is extended as a result of the provisions of Labor Code
§ 515(b)(2).
*The IWC Orders simply state that “employees in the computer software field...shall be exempt” if they
meet the listed criteria. The provisions of Labor Code § 515.5 only exempt these employees from the overtime
requirements if they meet that same criteria. It is the position of the DLSE, therefore, that the computer software
exemption is limited only to the overtime exemption; but that they remain covered by the other protections in the
Orders.

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9. Other exemptions from the overtime provisions of the Orders but not from the
minimum wage an
d other provisions:
a. truck drivers subject to 49 CFR §§ 395.1 to 395.13 or 13 C.C.R §§ 1200, et seq.;
(Order 16 does not cont
ain this exemption; see complete discussion, below)
b. a mbulance drivers and attendants scheduled for twenty -four (24) hour shifts of duty
who have agreed in wr
iting to exclude from daily time worked not more than three (3)
meal periods of not more than one hour each and a regularly scheduled uninterrupted
sleeping period of not more than eight (8) hours (provided the employer provides
adequate dormitory and kitchen facilities for employees on such a schedule);
c. Full-time carnival ride operators employed by traveling carnivals. Note this does not
apply to pick-up or
part-time operators, only to employees employed on a full-time
basis by the traveling carnival and whose duties require that they spend their full time
operating a carnival ride;
d. Professional actors;
e. Personal attendants (See definition at IWC Order 5-2001, Section 2(N) which
includes babys
itters for purposes of that Order) who are employed by a non-profit
organization* covere d by Wage Order 5-2001. But see special overtime rules for
personal attend
ants who are employed in private homes who meet the definition of
domestic worker and personal attendants. (See 55.3 below)
f. Student nurses;
g. Employees directly employed by the State or any county, incorporated city or town
or other municipal
corporation (except Order 14);
h. Organized camp counselors who are not employed more than 54 hours within six
days in a week
(provided they receive time and one -half premium for hours in
excess of 54); note, however, that under Labor Code § 1182.4 a camp counselor paid
a salary based on 85% of the minimum wage, is not subject to the IWC minimum
wage or overtime provisions.
i. Until December 31, 2001, adults (or minors permitted to work as adults) who have
direct responsi
bility for children under the age of eighteen receiving 24- hour care
(had to be paid time and one -half premium for all hours in excess of 40); see
discussion at Section 50.5 of this Manual regarding changes in IWC Order 5-2002.
j. Resident managers of homes for the aged having less than eight beds must be paid
time and one-half p
remium for all hours in excess of 40.

*Non-profit organizations are listed with the State Attorney General.

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10. In addition, learners (defined as employees during their first one hundred and sixty
(160) hours of employ
ment in occupations in which they have no previous similar
or related experience), may be paid not less than eighty -five percent (85%) of the
minimum wage rounded to the nearest nickel. Note that this provision does not
exempt learners from the overtime provisions of the Orders.
50.4 Other Exemptions . While not totally exempting employees from either the overtime or
minimum wage req uir
ements, there are other exceptions to the 8- hour day overtime
provisions contained in the Orders.
50.4.1 The “Alternative Workweek” arrangements which are Discussed in detail in Section 56 of
this Manual, are, of course, al
so an exception to the 8-hour requirement.
50.4.2 Hospital And Rest Homes Exemption . Order 5-2002, Section 3(D) provides that in the
operation of a
hospital or an establishment which is an institution primarily engaged in the
care of the sick, the aged, or the mentally ill or defective who reside on the premises, the
employer and employee may enter into an agreement or understanding , before the
performance of the work, which provides a work period of fourteen (14) consecutive days in
lieu of the workweek of seven consecutive days for the purposes of overtime c omputation
and the employee receives compensation of time and one-half (1½) times the employee’s
regular rate of pay for all hours in excess of eighty (80) hours in the 14-day period.

50.4.3 Important Note. This provision, which has been part of the IWC Orders for many years, had,
in past Orders, specif
ically required overtime after eight hours in any one day within the 80-
hour extended workweek. That language is no longer required because the Labor Code now
specifically requires premium pay after eight in any one day (Labor Code § 510) and any
deviation from that norm w ould have to be specified in the regulation. Since there is no
exemption fro m the eight-hour provision in the language of Section 3(D), the eight-hour
requirement, together with the double time requirement after twelve hours, no longer need
be mentioned but are applicable to said employees.
50.4.4 There Is No Longer An Overtime Exemption For Personal Attendants In For- Profit
Care Homes. IWC Order
5, Section 2(N) provides an exemption for personal attendants as
defined. That de
finition only applies to those employed by a non-profit organization.
50.5 Employees With Direct Responsibility For Children Under 18 Years Of Age
Receiving 24-Hou
r Residential Care. Effective January 1, 2002 (See IWC Order 5-
2002), employees with d
irect responsibility for children (1) under the age of 18, (2) who
are not emancipated from the foster care system, and (3) are receiving 24-hour residential
care, are exempt from the normal daily overtime requirements of the California law. Such
employees must be paid as follows:
1. Time and one-half for all hours in excess of 40 in a workweek;
2. Double time for all hours in excess of 48 hours in the workweek;
3. Double time for all hours in excess of sixteen (16) in a workday.

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50.5.1 The employees defined above may not be required to work more than 24 consecutive hours
without an 8-hour per
iod off. However, the IWC provided further that “time spent sleeping
shall not be included as hours worked.
50.6 Commissioned Salespeople. Certain commissioned salespersons covered either by Order 4-
2001 or 7- 2001 are exem
pted from overtime requirements by Subsection 3(D) of those
Orders (O.L. 1994.02.0 7):
The provisions of subsections (A), (B) and (C) above shall not apply to any employee whose earnings
exceed one and one-half (1½) times the minimum wage, if more than half (½) of that employee’s
compensation represents commissions.
50.6.1 It is important to note that certain requirements must be met in order to comply with
California law
and meet the exemption criteria:
1. In order to comply with the requirements of the exemption and of L.C. § 204, for
each workweek in the pa
y period the earnings of the employee, whether actual
commissions or a guaranteed draw for the work week against commissions to
be earned within such work week, must exceed 1.5 times the minimum wage for
each hour worked during the pay period.
2. As stated above, the payment of the earnings of more than 1.5 times the minimum
wage for each hour w
orked must be made in each pay period. Therefore, it is not
permissible to defer any part of the wages due for one period until payment of the
wages due for a later period.
3. Compliance with the requirements of the exemption is determined on a workweek
basis. The minimum compensat
ion component of the exemption must be satisfied
in each workweek and paid in each pay period.
4. The second component of the exemption, namely at least 50% of earnings from
commissions, must
also be satisfied in each workweek. However, the actual
determination of compliance can be deferred until the reconciliation date following
the end of the second pay period. Overtime will be due for any week in which the
second component is not met. To test for whether the compensation arrangement
is a bona fide commission plan, California law also uses a period of at least one
month. Consistent commission earnings below, at, or near the draw are indicative
of a commission plan that is not bona fide. If the commission plan is found to be
invalid, overtime will be due for all weeks in which the exemption was claimed.

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50.6.2 Use Of Federal Definitions. To the extent not inconsistent with California’s overtime laws
and policies, Cal
ifornia in applying the provisions of Subsection 3(D) of Order 4- 2001 and
7-2001, has adhered to the federal government’s interpretation of the provisions of 29 U.S.C.
§ 207( i) (See also, Hermann v. Suwanee Swifty Stores, Inc. 19 F.Supp.2d 1365 (N.D.
Ga.1998) However, the definition of commissions adopted by the U.S. Department of Labor
and the definition of that term in California law differ. (See Keyes Motors v. DLSE (1987)
197 Cal.App.3d 557; 242 Cal.Rptr. 873) Thus, the provisions of 29 CFR § 779.413, et seq.
to the extent that they discuss the definition of commissions and what constitutes
commissions are not instructive for purposes of explaining DLSE enforcement policy in this
area.
50.6.3 What Constitutes “Commissions” In California. In order to be a commissioned employee,
the employee m
ust be principally involved in selling a product or service and the amount of
compen sation received as commission must be based on a percentage of the sale price of the
product or service. (Ramirez v. Yosemite Water Co., Inc. (1999) 20 Cal.4th 785, and Keyes
Motors v. DLSE, supra.)

50.6.4 Advances, Draws, Guarantees. Many employment arrangements provide for the payment
at a regular
pay period of a fixed sum which bears a more or less fixed relationship to the
commission earning which could be expected , on the basis of experience, for an average
period of the same length. Such periodic payments are referred to as “advances,” “draws,”
or “ guarantees” and are keyed to a time base and must be paid under California law at time
intervals of not less than twice a month. These advances, draws or guarantees are normally
smaller in amount than the expected commission earnings for the period and if they prove to
be greater, a deduction of the excess amount from commission earnings for a subsequent
period is made when reconciliation is accomplished. In California, unless there is a specific
agreement to repa y advances other than out of future commissions, those advances are
considered payment in lieu of salary and fix the employee’s minimum compensation. (Agnew
v. Cameron (1967) 247 Cal.App.2d 619; 55 Cal.Rptr. 733) This does not alter the fact that
an advance or draw is intended to be linked to commissions and is recoverable during the
employment from future commissions.
50.6.4.1 To satisfy the exemption, however, for each workweek the employee must be paid a
guaranteed draw
that exceeds 1.5 times the minimum wage and that can be recovered only
from commissions earned in that workweek and not from commissions earned i n futur e
workweeks. This is so because every workweek must stand alone for purposes of minimum
wage and overtime computation.
50.6.4.2 The stipulated sum may not be considered to be a draw against commissions if the
circumstances
show that it was simply paid as a salary; but if the draw actually functions as
an integral part of a tru e commission basis of payment, then the actual commissions paid,
even though less than the draw, will qualify as compensation which represents commissions
on the sale of goods or services. Each case must be reviewed separately.

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50.6.4.3 Representative Period. Whether compensation representing commissions constitutes most
of an employee’s
pay so as to satisfy the exemption must be determined by testing th e
employee’s compensation for a “representative period” of not less than 1 month. While there
is no specific period and no bright- line test can be drawn, DLSE has determined tha t the
federal FLSA is consistent with California law in this regard and utilize s the federal
guideline. DLSE will accept a period “described generally as a period which typifies the total
characteristics of an employee’s earning pattern in his current employment situation, with
respect to the fluctuations of the proportion of his commissio n earnings to his total
compensation.” (See 29 CFR § 779.417(a) and O.L.1994.02.07 .)
50.6.4.4 Note : The represen tativ e period can not be les s than one month.
50.6.4.5 Records. The employer bears the responsibility of proving this or any other exemption from
the requirements of
the IWC Orders. Walling v. General Industries Co., 330 U.S. 545, 67
S.Ct. 883 (1947) Fourth is reason, adequate records must be kept which clearly indicate the
amount paid and the nature of the payments made to the employee. A copy of the agreement
between the employer and employee or, if not a written agreemen t, a summ ary of the
agreement including the basis of compensation, the applicable representative period and the
date the agreement was entered into and how long it remains in effect is required. (This is
consistent with 29 CFR § 516.16)

50.6.4.6 Earnings Must Exceed One And One -Half Minimum Wage. The exception will not be
met unless the emp
loyee receives earnings for each period (not exceeding a weekly period)
of more than one and one-half times the applicable minimum wage. These earnings would
include a guaranteed draw against commissions earned during the weekly period so long as
that guaranteed draw was part of a bona fide commission plan.
50.7 Employees Covered By Collective Bargaining Agreements . The IWC Orders exemp t
employees from overtime if
they are covered b y a collective bargaining agreement
which provides certain safeguards:
Except as provided in subsections [dealing with hours of minors, days of rest and refusal to work
more than 72 hours in any one workweek] this section shall not apply to any employee covered
by a valid collective bargaining agreement if the agreement expressly provides for the wages, hours
of work, and working conditions of the employees, and if the agreement provides premium wage
rates for all overtime hours worked and a regular hourly rate of pay for those employees of not
less than 30 percent more than the state minimum wage.
50.7.1 This section is an opt-out provision which allows parties to collective bargaining agreements
to provide any prem
ium wage over the regular rate for any overtime work performed as long
as the cash hourly rate of pay provided to the employee is at least thirty percent over the
current minimum wage.

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50.7.1.1 Overtime Hours Defined. For purposes of this section, DLSE interprets the term “overtime
hours” to mean any
hours which the collective bargaining agreement treats as overtime hours
payable at a premium rate. It is not necessary, however, that the collective bargaining
agreement provide the same premium rates (time and one -half or double time) as required
by the California law. (See discussion at The Statement As To The Basis, page 16)
50.7.1.2 The provisions of the IWC Orders in this regard have been tested and found to be valid opt-
out provisions not
subject to pre-emption by the National Labor Relations Act. The case of
NBC v. Bradshaw, 70 F.3d 69, 70-71 (9th Cir.1995) quoted the DLSE policy in the text of
the case:
On April 2, 1991, counsel for the then acting Labor Commissioner sent a letter to NBC that
explained that the NABET-members’ claims had been handled in accordance with the
Commission’s long-standing practice of waiting until the parties enter into a new agreement and
then applying Wage Order 11-80’s provisions to the interim period only if the overtime provisions
of the successor contract are not made retroactive to the date of the old contract's expiration.
The letter stated in relevant part:
[T]he division has a long-established policy that provides that the mere expiration of a collective
bargaining agreement will not operate to remove the worker from coverage by the collective
bargaining agreement. Absent some other unilateral action by the parties to the expired CBA, the
terms and conditions of the agreement (except for arbitration and union recognition) continue. In
the vast majority of cases the parties reach agreement and retroactively implement the newly
negotiated terms and conditions.
....
It is because of this history of collective bargaining that the Division has taken the position that
mere expiration of the agreement will not suffice to trigger the requirement that the employer
comply with the overtime obligations contained in the IWC Orders....[I]f the division were to
measure the date the obligation of the employer arises to meet the overtime requirements simply
from the date of expiration of the CBA, the state would be needlessly inserting itself into the
collective bargaining process . It is for this r eason that the Division measures the date the
employer’s obligation arises from the date of the expiration of the contrac t only if subsequent
events indicate that such date did, actually, mark the cessation of the protections contained in that
contract. Implementation of unilate ral conditions by the employer without subsequent
negotiation s which result in contract terms which are retroactive to the date of the expiration
would make the term ‘agreement’ meaningless for there would be no mutual assent.
50.7.1.3 The above statement remains the enforcement position of DLSE regarding the
provisions o f the CBA
opt-out language in the IWC Orders. (O.L. 1991.04.02 )
50.8 Certain Truck Drivers. The provisions of the some IWC Orders (not Order 16, see below)
exempt certain dri
vers from the overtime requirements of the Orders. The exemption applies
if the hours of service of the drivers ar e regulated either by the U.S. Depart ment of
Transportation or the regulations of the California Highway Patrol.

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50.8.1 Overtime Exemption Under Section 3 Of The IWC Orders For Two-Axle Trucks Of
26,000 lbs. Or Less Whi
ch Are Regulated By The CHP, The PUC, Or The DOT. Most of
the Industrial Welfare Commission Orders provide that the overtime provisions:
...are not applicable to employees whose hours of service are regulated by (1) the United States
Department of Transportation Code of Federa l Regulations, Title 49, Section 395.1 to 395.13,
Hours of Service of Drivers, or (2) Title 13 of the California Code of Regulations, Subchapter
6.5, Section 1200 and following sections, regulating hours of drivers.
50.8.1.1 This sectio n will addres s and attemp t to clarif y the exemption for drive rs of two-axle
truck s of not mo
re tha n 26,000 l bs. gros s vehicl e weigh t*. (See O.L. 1996.07.10 for
discussio n an d
O.L. 1997.05.16 for clarification.)
50.8.2 U.S. Dept. Of Transportation Regulations: The IWC Order exempts those drivers whose
hours of service a
re regulated by Code of Federal Regulations, Title 49, Section 395.1 to
395.13 . Those regulations apply to vehicles of 10,000 lbs. gross vehicle weight rating** or
more and who travel in interstate com merce. Both of these requirements, the weight of
more than 10,000 lbs. and the interstate commerce requirement must be present.

*Three-axle trucks and two-axle trucks of over 26,000 lbs. are clearly r egulated by the CHP and
therefore exempt under Section 3 of the IWC Order. Therefore, the only grey area for purposes of applying the
exemption are certain two-axle trucks of between 10,000 lbs. and 26,000 lbs., unless it is a for hire vehicle regulated
by the PUC or transports hazardous material, then it may be exempt even if under 10,000 lbs.

**"Manufacturer's gross vehicle weight rating" means the weight in pounds of the chassis of a truck or
truck tractor with lubricants, radiator full of water, full fuel tank or tanks plus the weights of the cab or driver's
compartment, body, special chassis and body equipment and pay load as authorized by the chassis manufacturer.
In the event a vehicle is equipped with an identificatio n plate or marker bearing the manufacturer's name a nd
manufacturer's gross vehicle weight ra ting, the rating stated thereon shall be prima facie evidence of the
manufacturer's gross vehicle weight rating." Vehicle Code § 390.

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50.8.3 The U.S. Dep artmen t of Transportatio n defines interstate commerc e as “[T]rade,
traffi c or transpo
rtat ion in the Unite d State s whic h is betwee n a plac e in a Stat e and a
place outsid e of s uch S tat e (inc luding a plac e outside of the U nited States ) or is
between two place s in a Stat e throug h anothe r State or a plac e outsid e of the Uni ted
States. ” (49 CFR § 390.5.) The Departmen t of Transportatio n has concisely explained
how interstat e commerce is to be define d for purpose s of the Motor Carrier Act*:
“A motor carrier is engaged in ‘interstate commerce’ when transporting goods either originating
in transit from beyond the State or ultimately bound for destination beyond the State, even though
the route of a particular carrier is wholly within one State. Merchants Fast Motor Lines, Inc. v.
Interstate Commerce Commission, 528 F.2d 1042 (5th Cir. 1976). Traffic need not physically
cross state lines to be in interstate commerce if the goods carried are in the course of through
transit. ‘Through Transit’ is not to be confused with purely ‘local’ traffic not destined for points
outside the state of origin. Id. For example, though the transportation by a carrier may be between
points wholly in the same state, if the shipment originated outside of the state and was part of a
continuous movement, then the in-state movement would be considered to be in interstate
commerce.” Shew v. Southland Corporation (Cabell's Dairy Division), 370 F.2d 376 (1966).
See United States v. Western Pacific Railroad Co., 352 U.S. 59, 77 S.Ct. 161 (1956).
50.8.3.1 Thus, the firs t inquir y whic h shoul d be addres sed in determin ing whethe r the drive r is
exemp t or non-ex empt un
d er the IWC Order s is wh ether the opera tion of the veh icle i s
subjec t to the Unite d States Departmen t of Transporta tion' s regulatio ns. The operativ e
questions to ask are:
1. Is the truck weight between 10,000 and 26,000 lbs.?

a. If the truck is less than 10,000 lbs., the DOT does not regulate its activities
and the inquiry rega
rding regulation may end except for the limited
regulatory areas covered by state agencies explained below. If the truck
weighs more than 10,000 but less than 26,000 the inquiry regarding DOT
coverage must continue with numbered paragraphs 2 and 3, below.
b. As explained below, if the truck weighs more than 26,000 lbs. it is subject
to regulation by st
ate authorities in any event.

*It is important to note that the term “interstate commerce” is given different interpretations
depending on the context within which the term is used. For instance, for purposes of the Fair Labor Standards
Act, the term interstate commerce is measured very broadly and looks to the question of whether any of the goods
being manufactured or sold impact on interstate commerce. Under the FLSA interpretation of the term, if the
goods being manufactured are produced from goods coming from another state, interstate commerce is involved.
This interpretation insures that the employment which may be subject to the Act covers more workers. Such is not
the case when the Transportation Act is i nvolved since the rationale for regulating transportation in interstate
commerce is to insure the smooth flow of commerce between the states, not, as in the case of the FLSA, to insure
that a remedial public policy (protecting the rights of workers engaged in the flow of interstate commerce) is being
enforced.

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2. Does the carrier cross state lines?
3. If the carrier does not cross state lines, has the cargo crossed state lines? That is, are the
goods in the course of through transit as opposed to purely local traffic not destined for points
outside the state of origin?
a. See the explanation of interstate commerce cited above.
50.8.4 If the truck does not cross state lines, and if the goods the truck is carrying do not constitute goods in
interstate commerce as described above, the driver is not exempt under the federal regulation s.
However, the inquiry must continue to determine if any state regulation of hours of service of drivers
is involved.
50.9 State of California: California Code of Regulations, Title 13 The scope of the regulations defined
in §1200 of Title 13, C.C.R., indicates that the regulations in chapter 6.5 of those regulations regulate
the hours of drivers of:
1) farm labor vehicles;
2) vehicles listed in Vehicle Code Sections 34500 and 34500.1, and
3) limited application to two-axle trucks of 26,000 lbs. or less transporting
hazardous materials.
50.9.1 Two-axle trucks are regulated in four subsections of § 34500 of the Vehicle Code.
Those subsections include:
(f) two-axle trucks connected to a regulated trailer or semitrailer so that the combination exceeds
40 feet in length;
(g) two-axle trucks transporting any hazardous material or towing a trailer transporting hazardous
material;
(j) two axle trucks regulated by the PUC, and
(k) two-axle trucks with a gross vehicle weight of 26,001 or more pounds, and any two-axle truck
towing any regulated trailer/semitrailer with a gross vehicle weight rating of more than 10,000
pounds.
50.9.2 Overtime Premium Requirement Applicable To Some Truck Drivers. The Division may enforce the
overtime provisions of the wage orders for workers employed as drivers of two-axle trucks that are
not regulated by the United States Department of Transportation (trucks over 10,000 lbs. and not in
interstate commerce) and two -axle trucks of less than 26,000 lbs. except for those two- axle trucks
that:
1. Transport hazardous material;
2. Tow a regulated trailer or semitrailer with a combined length of 40 feet;
3. Tow a regulated trailer or semitrailer with a gross vehicle weight of 10,000 lbs; or
4. Any other “motortruck” within the meaning of the Vehicle Code, that is regulated by the PUC
or the Interstate Commerce Commission (ICC)

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50.9.2.1 The IWC exemption only applies to employees whose regular duty is that of a driver, not
any other categor
y of worker. The policy would cover employees regularly employed as
relief drivers or as assistant drivers. However, any driver who does not drive or operate a
truck for any period of time during an entire workday is entitled to overtime premium
compensation for all overtime hours worked performing duties other than driving during
that day. (Crooker v. Sexton Motors, Inc. (1972) 469 F.2d 206).

50.9.3 “For Hire” Vehicles Under California La w: An airport or hotel/motel shuttle is not a
“motortruck” wi
thin the meaning of the Vehicle Code, and neither the PUC nor the ICC
regulates the hours of service and logbooks of drivers of such shuttles. Therefore, such
shuttle drivers are not exempt from IWC overtime regulation. (See O.L. 1997.05.16).

50.9.4 Note : It is important to point out that taxi drivers (not limousine drivers) are
exempt from overt
ime (See Order 9, Section 3(M)).

50.9.5 Order 16 And Truck Drivers . Order 16 does not contain any exemption for truck drivers
and, in addition, sin
ce the provisions of Order 16 supersedes any industry or occupational
order for those employees employed in occupations covered by the Order (See Order 16,
Section 1(F)), this can have a far reaching effect.

50.9.6 Logging Truck Drivers . Despite the provisions of Order 16 which are designed to
seemingly cove
r any employee engaged in logging, truck drivers hauling logs who are
employed by firms that engaged in the transportation of logs are under Order 9, and thus,
typically exempt from the overtime provisions for the reasons cited in Section 50.9 of this
Manual.

50.9.7 Truck Drivers Who Are Employed In Any On-Site Occupation set out in the
Applicability se
ction of Order 16, are covered by the overtime provisions contained in Order
16. In an e- mail opinion dated January 29, 2001, the DLSE opined:

“A driver will be subject to Order 16 if he or she operates on or at or in conjunction with a construction,
oil drilling , mining or logging site o r delivers materials or personnel from such a site to a location off
the site which is owned, operated or controlle d by a contracto r or other employer engaged in work at the
construction, oil drilling , mining or logging site or delivers materials or personnel from a location off
site which is owned or operated by such a contracto r or employer to the construction, oil drilling, mining
or logging site. A driver employed by a supplier or manufacturer who is engaged in supplying materials
or personnel to a contracto r or other employer on a construction, oil drilling, mining or logging site from
an off-site location not owned, operated or controlle d by a contracto r or other employer engaged in work
at the construction, oil drilling, mining or logging site will b e covere d by the IWC Order applicabl e to
the industr y in which he or she is employed.”

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50.9.8 Exemption For Ambulance Drivers And Attendants On 24-Hour Duty. Currently, this
exception is only
available under Orders 5 and 9. The exemption is available for amb ulance
drivers and attendants who have agreed in writing to 24-hour shift schedules in which case,
three one- hour meal periods and one eight- hour uninterrupted sleep period may be deducted
from the total of 24-hour shift. This exemption does not cove r worker s employe d for les s
than 24 hours . (See Monzon v. Schaefer (1990 ) 224 Cal.Ap p.3d 16; 273 Cal.R ptr 615
and O .L. 1994.02.03-4 )

50.9.8.1 DLS E has histo ricall y enforce d the exemp tion provis ion coverin g ambulanc e drivers
and attendants
as requi ring, as the provision in the IWC Orders has always sp ecifically
stated , a writte n agreement befor e the e xemptio n from the overtim e requir e ments is
effective. The Seco nd Distric t Co urt of Appeal, Divisio n 6, in the majority opinion in
Monzon v. Shaefer, supra, determine d that the requiremen t by the IW C was not requi red.
50.9.8.2 The provision fo r ambul a nce dr iver s and attendant s was adopte d by the IWC many
years ago based on prov isio
ns in the federal law. The fe deral provi so at 29 CFR
§ 785.22 provides, inter alia :
(a) Where an employee is required to be on duty for 24 hours or more, the employer and the
employee may agre
e to exclude bona fide meal periods and a bona fide regularly scheduled
sleeping period of not more than 8 hours from hours worked, provi ded adequate sleeping
facilities are furnished by the employer and the employee can usually enjoy an uninterrupted
night’s sleep. I f sleeping period is of more than 8 hours, only 8 hours will be credited. Where
no expressed or implied agreement to the contrary is present, the 8 hours of sleeping time and
lunch periods constitute hours worked.
(b) Interruptions of sleep. If the sleeping period is interrupted by a call to duty, the interruption
must be counted as hours worked. If the period is interrupted to such an extent that the
employee cannot get a reasonable night’s sleep, the entire period must be counted. For
enforcement purposes, the Divisions have adopted the rule that if the employee cannot get at
least 5 hours’ sleep during the scheduled period the entire time is working time.”

50.9.8.3 Based on the above, the former DIW (Division of Industrial Welfare) and, subsequently,
DLSE, have h
istorically taken the position that if the employee does not get at least five
consecutive hours of sleep during the eight hour period, the whole of the eight hour sleep
period must be compensated.
50.10 Exemption For Motion Picture Projectionists . IWC Order 10 exempts workers whose
exclusive duty
is that of a motion picture projectionist if they are employed in th e
Amusement and Recreation Industry.
50.11 Announcers, News Editors And Chief En gineers are exempt if they are employed in the
Broadcasting Indust
ry and work i n a radi o or television station i n a tow n which ha s a
population of not more than 25,000 according to the most recent U.S. census. (Order 1 1-
2001, § 3(K ))

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50.12 Irrigators In The Agricultural Occupations ar e subject to the same overtime phase- in that
applies to other a
gricultural workers in any week in which more than half of the employee’s
working time is devoted to performing the duties of an irrigator. (See Order 14, Se ction
3(C))
50.13 Special Rules For Extra Players In Motion Picture Industry . Order 12 exempts
professional acto
rs and actresses; but provides special overtime requirem ents for extra
players at Section 3(D). Hours worked by extra players are computed in units of one-tenth
(1/10) of an hour, and work time is defined in detail. The basic requirement for daily and
weekly overtime is provided except that there is no provision for premium pay on the 7th
day of work in the workweek for extra players.

50.13.1 Extras. In limited cases, persons who are not under the control of film makers and are used
in large crowd s
cenes may not be considered employees of the film company. (O.L.
1997.05.27).

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51 DETERMINING EXEMPTIONS.

51.1 There are a number of factors which go into determining whether an employee may be treated
as exempt for purpo
ses of the California Indust rial Welfare Commission Orders . The
exemption has far-reaching ramifications since that status deprives the employee not only of
the right to overtime compensation, but also to most of the other protections afforded to non-
exempt employees by the Wage Orders. Exempt status deprive s the em ployee of the
protections of the Orders:
Section 3, overtime premium;
Section 4, minimum wage;
Section 5, reporting time pay;
Section 7, requirement of records under IWC Orders (but not records required by the
Labor Code;
Sect
ion 9, requirement that employer furnish uniform (however, Labor Code § 2802
would provide some prot
ection for the exempt employee);
Section 10, requirement that meals and lodging amounts be limited;
Section 11, meal period requirement, and
Section 12, rest period requirement.
51.1.1 Determining The Exemption. Below are the criteria which must be met in order to apply
the exemption to any
employee.
51.2 Primarily Engaged In. Each of the exemptions – administrative, executive or professional
– require that
the employee be “primarily engaged in” the duties which meet the test for the
exemption. The term “Primarily Engaged In” m eans that more than one-half (½) of the
employee’s work time must be spent engaged in exempt work and differs substantially from
the federal test which simply requires that the “primary duty” of the employee fall within the
exempt duties.
51.2.1 The IWC has noted in the Statement As To The Basis of the October 2000 IWC Orders that
this “quantitative
test” continues to be different from, and more protective of employees than,
the federal “qualitative” or “primary duty ” test.
51.3 Activities Constituting Exempt Work And Non-Exempt Work are to be construed in the same
manner as suc
h terms are construed in the listed sections of the Code of Federal Regulations
under the Fair Labor Standards Act effective as of the date of the Order. (October 1, 2000
for all Orders except Order 16 which is effective January 1, 2001) A copy of the applicable
federal regulations is found as an Addendum at the end of this Manual.

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51.3.1 In each instance, the federal regulations listed are the same federal regulations utilized by the
DLSE for at
least the past twenty years to interpret and enforce the IW C Orders. The IW C
has detailed the definitio ns to be used in determining the admin- istrative, executive and
professional exemptions by specifying the specific federal regulations which are to be relied
upon. The IW C recognizes this fact when, in the “Statement As To The Basis” of the newly
promulgated Orders, they state:
“The new regulations in this section of the IWC’s wage orders regarding the
administrative, executive, and professional exemption are consistent with
existing law and enforcement practices.”
51.4 Directly And Closely Related Activities. Among the activities which are to be considered
as exempt include work
that is “directly and closely related to exempt work and work which
is properly viewed as a means for carrying out exempt functions.”
51.4.1 The definitions of the term “directly and closely related to exempt work and work which is
properly viewed as
a m eans for carrying out exempt functions” differ from exemption to
exemption. Specific examples for each of the exemptions are set out at 29 CFR § 541.108
(Managerial), § 541.208 (Administrative), and § 541.308 (Professional).

51.4.2 In assessing the duties of a putatively-exempt employee, it should be borne in mind that it is
not the intent of the de
finitional language of “directly and closely related work and work
which is properly viewed as a means for carrying out exempt functions” to expand the
exemption, but simply to recognize that there are limited instance s when production-type
activities must be utilized to carry out the duties of the otherwise exempt employee.
51.4.2.1 Examples: Such activities as an attorney drafting a brief on a computer or typewriter; a
manager prepari
ng a personal memo to his or her staff on a computer; driving visiting
management to the airport so further discussions regarding management activities can be
carried on.
51.4.2.2 Occasional Tasks. In the Statement As To The Basis for the current Orders, The IWC states
that the Commission “recogni
zes that 29 CFR § 541.110 also refers to ‘occasional tasks’ that
are not ‘directly and closely related’. The IWC does not intend for such tasks to be included
in the calculation of exempt work.” Thus, non- exempt work performed by an otherwise
exempt m anager on an occasional basis may not be counte d toward the 50% time
requirement. This reflects the long- established DLSE enforcemen t policy and any past
enforcement policy statement which may have been interpreted by some to countenance non-
exempt work by exempt employees – even on an occasional basis – is a misinterpretation of
DLSE policy and clearly inapplicable to the current Orders.
51.5 Exercise Of Discretion And Independent Judgment . While the Legislature has stated in
each of the exempt cate
gories that as a condition of the exemption the employe e mus t
“customarily and regularly exercise[s] discretion and independent judgment in performing”
the duties, the IWC Orders provide that the provisions of 29 CFR § 541.107 are to be used
to determine the activities constituting exempt versus non- exempt work. Tha t section,
however, only addresses the term “discretionary powers” and does not address the exercise

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of discretion and independent judgm ent. The confusion arises from the fact that after the
initial draft of the IWC O rders was produced, the California Legislature amended Labor
Code § 515(a) to require, unlike the federal regulations, that in order to meet the criteria
for exempt status, the employe e “customaril y and regularl y exercises discret ion and
independent judgment in performing ” the duties . In the Statemen t As To The Basis , the
IWC cited , inter alia, 29 CFR § 541.207 and specif ica lly m entions that tha t s ectio n
contains a “desc riptio n of what is mea nt by the phra se ‘discretio n and independ ent
judgm e nt’.”

51.5.1 Enforcement Note: For enforcement purposes, therefore, DLSE will disregard the language
of 29 CFR § 541.107 and rely upon the
language of 29 CFR § 541.207 to define the term
“discretion and independent judgment” in each of the exempt classifications.
51.5.1.1 Additionally, the stated intent of the IWC that the “California ‘quantitative test’ continues
to be different from and
more protective of employees than, the federal ‘qualitative’ or
‘primary duty’ test” must be considered in applying the “directly and closel y related”
examples.
51.5.2 Realistic Expectations. The IWC Orders also provide that the work actually performed
by the employee dur
ing the course of the work week must, first and foremost, be examined
and the amount of time the employee spends on exempt work, together with the employer’s
realistic expectations an d the realistic requirements of the job , shall be considered in
determining whether the employee satisfies the requirements to be exempt.
51.5.3 Important Note: As more fully Discussed below, the IWC points out in the Statement As To
The Basis of the W
age Orders that the Supreme Court in Ramirez stated that in determining
realistic expectations, consideration must be given to “whether the employ ee’s practice
diverges from th e employer’s realistic expectations, whether there was any concrete
expression of employer displeasure over an employee’s substandard performance , and
whether these expressions were themselves realistic given the actual overall requirements of
the job.” In other words, an employer may not choose to ignore the fact that it would not be
reasonable to expect an employee to perform the duties assigned without performing work
exceeding the duties test requirements.
51.5.3.1 As an example, when assessing a managerial exemption, a “straw boss” or working foreman
has “duties” which are
designed to be production duties and may, also, have some limited
managerial duties as well. The production duties which the straw boss is assigned would not
be counted toward the “directly and closely related” work because they are designed to fulfill
the production aspect of the worker’s assigned duties. The fact that he is perform ing those
“production-type” duties is not an outgrowth of his limited supervisory role, but is simply a
part of his production duties.

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51.5.3.1.1 The IWC addressed this particular language in the Statement As To The Basis of the
October 2000 Wage Orders
. The IWC noted that:
“...the last sentence of section A(5) comes from the California Supreme Court’s
decision in Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785, 801-802.
Although that case involved the exemption for outside salepersons, the
determination of whether an employee is an outside salesperson is also
quantitative: the employee must regularly spend more than half of his or her
working time engaged in sales activities outside the workplace. In remanding
the case back to the Court of Appeal, the California Supreme Court offered the
following advice:
“Having recognized California’s distinctive quantitative approach to determining
which employees ar
e outside salespersons, we must then address an issue
implicitly raised by the parties that caused some confusion in the trial court and
the Court of Appeal: Is the number of hours worked in sales- related activities to
be determined by the number of hours that the employer, accordin g to its job
description or its estimate, claims the employee should be working in sales, or
should it be determined by the actual average hours the employee spent on sales
activity ? The logic inherent in the IWC's quantitative definition of outside
salesperson dictates that neither alternative would be wholly satisfactory. On the
one hand, if hours worked on sales were determined through an employer's job
description, then the employer could make an employee exempt from overtime
laws solely by fashioning an idealized job description that had little basis in reality.
On the other hand, an employee who is supposed to be engaged in sales activities
during most of his working hours and falls below the 50 percent mark due to
his own substandard performance should not thereby be able to evade a
valid exemption. A trial court, in determining whether the employee is an outside
salesperson, must steer clear of these two pitfalls by inquiring into the realistic
requirements of the job. In so doing, the court should consider, first and foremost,
how the employee actually spends his or her time. But the trial court should also
consider whether the employee’s practice diverges from the employer’s realistic
expectations, whether there was any concrete expression of employer displeasure
over an employee’s substandard performance, and whether these expressions
were themselves realistic given the actual overall requirements of the job.”
51.5.3.2 The IWC quotes the above language from the Ramirez case in order to illustrate the
requirement whic
h has long been a part of the enforcement policy of the DLSE: An employer
may not, through the use of “an idealized job description”, thrust an employee into an exempt
status when the duties imposed on that employee would not “realistically” allow the
employee to perform exempt activities more than 50% of the time. By the same token, an
employee in an otherwise exempt position may not surreptitiously perform non- exempt
duties which are not within the realistic expectations of the employer in order to defeat
the exemption.

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51.5.3.3 Summary Of Test Of Whether Employee’s Performance Did Not Meet Expectations:
As the Supreme Court stated, the test of whether the employee has performed in such a
substandard manne
r that he or she did not meet the “realistic expectations” of the employer
involves an objective review of the following:
1. whether the employee’s practice diverges from the employer’s realistic expectations;
2. whether there was any concrete expression of employer displeasure over an
employee’s
substandard performance, and,
3. whether these expressions were themselves realistic given the actual overall
requirements of
the job.

51.6 Salary Requirement. In order to meet the test for exempt status, an em ployee must, in
addition to the above r
equirements, also earn a monthly salary equivalent to no less than two
(2) times the state m inimum wage for full-time e mployment. Full-time employmen t is
defined in Labor Code § 515(c) as forty (40) hours per week*.
51.6.1 Neither the Legislature nor the IWC has set forth any criteria for determining the
interpretations
of the word “salary” for purposes of the IWC Orders. The fact that the
Legislature provided that the monthly salary was to be “no less than” two times the state
minimum wage indicates that they intended that the salary (as it is with the federal rule) was
not to be subject to deduction unless the employee voluntarily absents himself for personal
reasons. The monthly salary amount requirement of two times the minimu m wage is a
minimum standard which cannot be undercut by an action initiated by an employer (e.g.,
furlough, suspension). (O.L. 2002.05.06, see also Division Policy reflected in memo dated
December 23, 1999, “Under
standing AB 60” posted on DLSE website.)
51.6.2 Differences Between State And Federal Enforcement Required By Inconsistencies Of
Federal Regul
ations With California Law .

A s the Commission has recognized in the
Statement As To T
he Basis of the current Orders, the IWC “chose to adopt regulations for
Wage Orders 1-13 and 15 that substantially conform to current guidelines in the enforcement
of IWC orders, whereby certain Fair Labor Standards Act regulations (Title 29 CFR Part
541) have been used, or where they hav e been adapted to eliminate provisions that are
inconsistent with the more protectiv e provisions of California law...” The DLSE has
recognized these inconsistencies and tailored the federal enforcement policy to fit the
California law.

*There is no requirement under the federal regulation to pay a salary to an exempt employee who has
performed no work during the full workweek which is the measure of the obligation. As of March 1, 2002, the
DLSE announced that it would adopt the weekly standard found in the federal regulations with some
qualifications.

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51.6.3 The Required Salary May Not Be Prorated For Work Less Than Full-Time.
Both the Legislature and the IWC clearly indicated that the salary requirement of two times
the state minimum wage was
the minimum which could be paid and that amount could not
be prorated for part-time work. (Transcript of IWC Hearing, January 28, 2000, pgs. 65-67)

51.6.3.1 No Obligation To Pay Salary To Exempt Employee Who Has Performed No Work In
The Workweek.

Subj
ect to the specifie d exceptions discussed in this Chapter , the
employee must receive the full co
ntract salary for any week in which any work is performed
without regard to the number of days or hours worked , subject also to the general rule that
an employee need not be paid the contract salary for any workweek in whic h no work is
performed.
51.6.3.2 The federal courts have Discussed the requirements of the “salary” requirements under the
Fair Labor Standar
ds Act.

“The conclusio n that an FLSA -exemp t execut ive’s pay may not vary as a function of
the numbe r of hour s worke d is also cons isten t wit h a comm on-sense understandin g
of salarie d employment . Certainl y a layman would understand that a salari ed executiv e
is a perso n paid an amou nt, on a wee kly or less frequ e nt basis, that bear s no relat ionshi p
to the numbe r of hour s worke d in any part icula r week. Th e Ninth Circui t put this point
as follows:
“A salarie d employe e is compensa ted not for the amoun t of time spen t on the job, bu t
rathe r for the gener al value of servi c es perfor m ed. It is precisel y beca use executive s
are thought not to punch a time clock that the salary tes t for “bona fide executives”
requires that an employee’s predetermin ed pay not b e “subjec t to reductio n because
of variation s in the...q u antit y of work perform e d”... Abshire v. County of Kern, 908 F.2d
at 486. Sim ilarly , the Third C ircui t in Brock v. Claridge Hotel and Casino, 846 F.2 d 180,
184 (3d Cir.), cert. denied sub nom. Claridge Hotel & Casino v. McLaughlin , 488 U.S .
925 , 109 S.Ct . 3 07, 102 L.Ed.2d 326 (1988) , explained that [s]alar y is a mar k of
execut ive statu s becaus e the salarie d employ ee mus t decid e for himsel f the numbe r of
h our s to devot e to a particula r task. In othe r word s, the salarie d employe e deci d es
for himse lf how much a particul ar tas k is worth, measured in the num ber of hou rs
he devote s to it. (Thomas v. County of Fairfax, 803F.Supp. 1142 , 114 8 (E.D . Va.1992)

51.6.4 As the California Supreme Court stated in Morillion v. Royal Packing Co., (2000) 22 Cal.4th
575, 94 Cal.Rptr.2d 3, 995 P.2d 139, in determining how much weight to give federal
authority in interpreting a California wage order, it is necessary first to make a comparative
analysis of the two statutory schemes. (Id. at p.588) In making this determination for
purposes of the salary basis test, DLSE has concluded that, to the extent possible, the IWC
intended that the enforcement of the “salary” requirement was to follow the federal
guidelines so far as possible; but that certain of the federal guidelines may not be utilized in
California because they conflict with California statutory law, case law, or public policy.

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51.6.4.1 The important consideration which is shared by both the federal and the state law is that in
order for an employer to be relieved of the obligation to pay the overtime premium required
after eight hours in a workday or forty hours in a workweek, the employer is obligated,
instead, to pay a pre-determined salary to the exempt employee.
51.6.5 Basic Differences Between Federal Law And Regulations And California Law.
While the federal government’s regulations regarding the salary test contained at Title 29 of
the Code of Federal Regulations can be used as a guide, it is clear that there are a number of
distinct differences between the requirements under the federal law and those set out in the
California statute (Labor Code § 515(a)) and the IWC Orders.
51.6.5.1 California Salary Test Based On Multiple Of Current M inimum Wage. The first basic
difference is that the salary found in the California law is based on the California minimum
wage in effect at the time while the federal test continues to be the same fixed amount first
utilized in 1973.
51.6.5.2 Effective January 1, 2023 , the California minimum wage is $15.50 per hour. For the year
2023, the monthly salary paid to an exempt employee must equal or exceed $
5,373.33.
51.6.5.3 Federal Tests. The federal regulations currently require that in order to meet the “short test”
for exemption the employee need only have a pre -determined salary of $250.00 per week
(approximately $1083.33 per month); and in order to meet the so- called “long test”, a salary
of $155.00 per week (approximately $661.66 per month).
51.6.6 California Salary Basis Enforcement Policy. Second, the federal salary regulations
require that an exempt employee be paid a full salary for any week in which he performs any
work. Although the California statute and the IWC orders refer to a minimum “mont hly”
salary, the Division of Labor Standards Enforcement announced on March 1, 2002, that
for enforcement purposes the DLSE will follow the federal regulations which require that
the salary test be based on a weekly salary. Therefore, an employer may deduct a week’s
salary from the monthly salary where the employee performed no work that week. In contrast,
the employer may not prorate the monthly salary for part-time employees. It must also be
noted that deductions for vacation are treated differently under state and federal law. (O.L.
2002.03.01)

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51.6.7 A Reduction In Salary Based Upon A Reduction Of Hours Is Not Permitted.
DLSE has opined that its enforcement policy, in keeping with the stated intent of the
Legislature and the C
alifornia courts interpretation of the California law, will not permit a
reduction in the salary of an exempt employee which is the result of a reduction in the number
of hours in a workday or days in a workweek the employee is required to work. A complete
discussion of this enforcement policy is found at O.L. 2002.03.12.

51.6.8 No Deductions May Be Made From An Exempt Employee’s Salary Based On The
Quantity Or Q
uality Of The Work Performed. An employee will be considered to
be paid “on a salary basi
s” within the meaning of both the California statute and the IWC
Orders, if under his employment agreement he receives on regularl y scheduled paydays
consistent with California law, a predetermined amount constitutin g all of part of his
compensation, which totals at least two times the California minimum wage per month ,
which amount is not subject to reduction because of variations in the quality or quantity of
the work performed.
51.6.9 Pursuant to current DLSE policy and subject to the allowable deductions detailed below, in
order to be eligib
le for the exemption, the employee must receive the pro rata share of his or
her full monthly salary for any week in which he or she performs any work without regard
to the number of days or hours worked in the workweek.
51.6.10 Pro Rata Deduction From Exempt Employee’s Salary For Absences. DLSE has opined
that its position re
garding the proration of an exempt employee’s salary as a result of
absences will follow the announced position of the U.S. DOL. (See DOL Opinion Letter
dated July 21, 1997) Pursuant to that position, DLSE has announced, the proration may be
made based upon the number of days in a workweek which the employee usually works; but
may not be less than five nor more than six. Thus, if the employee usually works a five-day
workweek the pro rata salary reduction may be one -fifth of the employee’s salary. If the
regular workweek is six days, each day of absence would equate to one-sixth of the weekly
salary. In no event, however, may any one day of absence reduce the salary by more than
one-fifth. (O .L. 2002.05.0 1)

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51.6.11 It is the position of the DL E that in determinin g the amoun t of the daily salar y to be
deducte d for ab
sences of a ful l day or more , the calculatio n must be based on th e usual
numbe r of workday s schedule d to be worke d by the exemp t employe e in a workweek
divide d into the pro rata monthly sa lary attribu table to a week . The metho d* used is:
1. The pre-determine d mo nthl y salar y is multip lied by 12 to find the yearl y salary.

2. The produc t of that multipli catio n is divide d by 52 (th e numbe r of week s in a
year ) to find the week
ly salary.
3. The usua l numbe r of days (regardles s of the numbe r of hours usu ally worke d in
any workda y) the e
mplo yee is schedul e d to work in a workw eek is divide d into
the weekl y salary.
51.6.12 Work Performed Outs ide Wor k Site . As wit h the feder al enfor cemen t pol icy, DLSE
takes the positio n t
hat the work nee d not be pe rforme d a t the usual jo b sit e of the
employe r in orde r to qual ify as wor k performed . It is the pos itio n of the DLS E that a
deductio n cannot be mad e from the salar y of an exempt employe e in a situa tion where
the employ e e spend s tim e, for instance, rev iewin g file s at home sinc e the deduction
is onl y allowe d for an “absence of a day of more. ” (See also, Wage and Hou r Opinion
Letter , July 21, 1 997, wh ich agrees with this view. ) (O.L . 2002.04.08 )
51.6.13 Any Wor k By Th e Ex emp t Emp loyee In The Day Prec ludes Reduct io n
Of Salary . As pointe d out in the sectio n directl y above , work off the site of the
employer would sti
ll be compensable . If, for example, an employe r require d an exemp t
employee on vacatio n to b e availabl e on short notic e to retur n to work , or expected the
exempt employe e to call the offic e or check e- mail s while on vacat ion, or the employe r
calls the em ploye e (or authorize s other s to call the employee ) that is work performe d
and a reductio n in the salar y o f the employe e would not b e appropriate . The
exem pt employ e e’s salar y is not subje ct to the dedu ctio n if the emplo yee did not
have a reasonabl e expectatio n that he was free o f all duties . However , the employe e
may not unilaterall y absen t himse lf and simpl y announc e that he will be availa b le.
There m ust be some indicat ion by the emplo yer that the time is not e xpecte d to be
compl e tely duty-free.

*See also, Wage and Hour Division, U.S. Department of Labor, Opinion Letter dated July 21, 1997.
Note, however, that if the workweek actually worked exceeds the agreed workweek more than fifty percent of the
time, the longer workweek will be used as the divisor in the formula.

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51.6.14 No Deduction From The Employee’s Salary May Be Made For Absences Occasioned By
The Employer
Or By The Operating Requirements Of The Business. If the employee is
ready, willing and able to w
ork, deductions may not be made for the time when work is not
available. This rule, too, is subject to the general rule, under the current DLSE enforcement
policy, that no salary need be paid to an exempt employee when no work is performed within
the workweek.

51.6.14.1 Example 1 : If an employer chooses to close his or her business for three days, exempt
employees, in
order to continue to be exempt, would have to be paid for the full week if they
were ready, willing and able to work during that workweek but were prevented from doing so
because of the employer’s action cl osing the business.

51.6.14.2 Example 2: If an employer chooses to close his or her business for a full week, exempt
employees woul
d not be entitled to any salary for that week, providing, of course, that they
performed no work for the employer.

51.6.14.3 Absences Of One Full Day Or More For Personal Reasons :
If an otherwise exempt salaried employee absents himself or herself for a full day or more on
personal busi
ness, such absence may be deducted on a pro rata basis from the salary owed.
A deduction under these circumstances does not affect the salaried exempt worker’s exempt
status. For allowable proration amount see Section 51.6.9 of this Manual.

51.6.15 Any Work Performed In The Time Period Will Preclude Reduction Of The Salary.
If an exempt employee performs any work during the work day, no deduction may be
made from the salary of the
employee as a result of what would otherwise be a “partial
day absence.” (See discussion at Section 51.6.8 of this Manual; also see O.L. 2002.04.08).
However, on June 21, 2005 the First District Court of Appeal, Division 2, decided Conley
v. PG&E . One of the issues decided was whether an employer can deduct for partial day
absences of four hours or more from an employee’s vacation pay bank , when the
employee is salaried exempt. The court held that under the facts of PG&E’s vacation
pay policy, where the company only deducted for absences of 4 hours per day or more,
there was nothing in California law which prohibits this practice. This enforcement
policy is consistent with that of the U.S. Department of Labor. (See, Wage and Hour
Division, U.S. Department of Labor, Opinion Letter dated July 21, 1997). The same rule
would apply in a situation where an employer has chosen to close his or her business or
otherwise failed to provide work for a full week, the exempt employee is entitled to
recover wages for the full week if that employee is suffered or permitted to work anytime
within that workweek.

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51.6.15.1 Example : Assume an exempt employ ee is paid a monthly salary of $3000.00 and has an
agreed schedule
to work a five-day workweek. If an exempt employee’s salary is subject
to reduction for any of the absences discussed in this Chapter, each day’s absence would
result in a reduction of $138.46 ($3000.00 x 12 ÷ 52 = $692.31 being the pro rata weekly
salary; $692.31 ÷ 5 = $138.45).

51.6.15.2 Absence s Occasioned By Sickness Or Accident. No deduction may be made from the
salary of an exempt
employee for absences occasioned by sickness or accident unless the
absence for sickness or accident exceeds the weekly period. Deductions may by made for
absences in increments of full working day occasioned by sickness or disability (including
industrial accidents) if the deduction is made in accordance with a bona fide plan, policy or
practice of providing full compensation for loss of salary occasioned by both sickness and
disability and the employee has exhausted his or her leave under the policy.

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51.6.15.3 Federal Regulations. The U.S. Department of Labor has interpreted its regulations to
allow an employe
r with a bona fide sick leave plan to deduct accrued leave to pay the
salary obligation for “partial day” absences for illness and injury; however, the federal
interpretation does not allow a deduction from the salary for such partial day absences
in the event the employee’s eligibility for the leave has not yet vested or the employee
has exhausted his or her leave.

51.6.15.4 DLSE Enforcement Position. The DLSE adopts the above interpretation by the DOL
regarding parti
al day absences for time off due to sickness taken pursuant to a bona fide
sick leave plan unless the accrual which the employer utilizes provides a vested right to
wages. If a sick leave plan provides for a vested right to wages, as is the case with vacation
and PTO plans, the holding in Conley v. PG&E (2005) 131 Cal.App.4th 260 is applicable
and deductions from accrued sick leave may be made only for absences of at least 4 hours
in duration. If a sick leave plan does not establish a vested right to wages, deductions from
sick leave for increments of less than 4 hours continue to be permissible to the extent that
such leave credits exist at the time of the partial day absence.*

51.6.16 Explanation of Bona Fide Sickness Or Disability Plans, Policies or Practices. It is only
sickness or dis
ability plans which continue the full amount of the salary of the sick or injured
employee which will be recognized for these purposes. There may, however, be reasonable
probationary periods which must be met before the sick leave becomes
effective.

51.6.16.1 Caveat: State required disability insurance benefits do not constitute a “bona fide” sick
leave plan.

51.6.17 Bona Fi
de Defined: 1. Made or carried out in good faith; sincere: a bona fide offer. 2.
Authentic; g
enuine: a bona fide Rembrandt. (AMERICAN HERITAGE DICTIONARY).
There is no definition of the term “bona fide sickness or disability plans, policies or
practices” contained in the federal regulations. In addition, research has disclosed that the
U.S. Department of Labor has never defined or delimited the term in Opinion Letters or
otherwise. DLSE will judge each sickness or disability plan on a case-by-case basis.

* The in terpretatio n of the federal regulatio n which allows sick leave (paid leave time) to be utilized turns on
the fact that the terms “amount ” and “compensation ” containe d in the federal regulatio n refer to “cash” and not to
other types of compensatio n – which the federal courts lump together as “paid leave time.” (See Barne r v. City of
Novato, 17 F.3d 1256, 1261-62 (9th Cir. 1993). The Ninth Circuit did not directly address the question of what would
be the result if what they referred to as a “benefit” was actually vested and could be drawn on as cash. The only
logical legal conclusion would be that such vested “wages” which the employer was obligate d to pay could not be
forfeited for the purpose of meeting the employer’ s obligatio n to pay the salary for absences of at least four hours but
less than one day. Nonetheless , if the sick leave is simply “paid leave time” and cannot vest as wages either at
terminatio n or during the employment , that sick leave accrual may be deduced for partial day absences due to illness.

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51.6.18 Deductions From Other Amounts Owed The Exempt Employee. Inasmuch as the salary
obligation is owe
d to an employee except under the narrow exceptions listed in this Chapter,
any salary payment to an employee from a source designed to pay some benefit to the
employee other than one devoted exclusively to payment for leave due to sickness or
accident would not meet the limited exception allowed.*
51.6.19 Penalties Imposed On Employees . Further, the federal regulations impliedly allow an
employer to i
mpose “penalties” for infractions of safety rules and specifically provide that
imposition of such penalties would not affect the guaranteed salary required. (29 CFR §
541.118(a)(4)) There is no provision in California law which would allow an employer to
deduct “penalties” from an employee’s pay for safety violations. Thus, those federal
provisions may not be utilized.
51.6.19.1 Caveat. Labor Code § 2928 which, while requiring that no deduction be made on account
of an employee c
oming late to work except in the amount proportionate to the amount of
work missed, does allow a deduction of one-half hour as a result of an employee’s tardiness
of less than half hour. However, that section would not apply to salaried exempt employees
because, aside from the fact that there is no safety issue at stake, as explained below, no
deduction may be made from an employee’s salary based on the quantity of work (29 CFR
§ 541.118(a)) unless, with certain exceptions, the employee absents himself for personal
reasons for a period of a working day or more.
51.6.20 Added Payments For Extra Work . On August 15, 1997, the Ninth Circuit held that the
Department of
Labor’s interpretation of the Code of Federal Regulations at 29 CFR §
541.118(a) was correct. That Court held:
“additional compensation besides the required minimum weekly salary guarantee may be paid to
exempt employees for hours beyond their standard workweek without affecting the salary basis
of pay. Thus, extra compensation may be paid for overtime to an exempt employee on any basis.
The overtime payment need not be at time and one-half, but may be at straight time, or at one-
half time, or flat sum, or on any other basis.” Citing D.O.L. Wage & Hour Opinion Letter No.
1738 (April 5, 1995); see also D.O.L. Wage & Hour Division Opinion Letter No. 1737 (April 5,
1995). (Boykin, et al. v. Boeing Company , (9th Cir.1997)128 F.3d 1279,
1281)
51.6.20.1 The Boykin court noted that “the focus of the regulations is to prohibit employers from
claiming that t
heir employees are compensated on a salary basis when the employees are
subject to deductions in pay...As the district court aptly noted: ‘it is difficult to perceive the
alleged injury to a salaried employee who receives some form of hourly overtime
compensation with out fear of having compensation docked on the same basis.’

*So-called “Paid Time Off” (PTO) programs sometimes lump all time off together. In other words,
the program may provide for a total of three weeks of “paid time off” but that time is used for all purposes
including vacation, sick leave or other absences. As Discussed in detail at Section 15.1.12, leave time which is
provided without condition is presumed to be vacation no matter what name is given to the leave by the employer.

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51.6.20.2 Note: The salary paid to the exempt employee, however, must be fixed and certain.

51.6.20.3 It must be noted, that the DOL’s interpretation, which the DLSE has adopted only allows for
an hourly rate for
hours worked in excess of the standard. The DLSE will generally consider
such an hourly rate to be valid if paid for more than eight hours in any one day or more than
40 hours in any one week. This does not mean that an employer is required to pay the
overtime for all hours in excess of eight or forty; but may, instead, choose any number of
hours in a day in excess of eight or in a workweek in excess of forty after which the hourly
“overtime” pay will be paid. If the employer can show that the industry practice is to work a
lesser number of hours, DLSE will accept the payment to an otherwise exempt employee of
an hourly rate in excess of that number of hours which is found to be the industry standard
regarding number of hours in a workday or a workweek.
51.6.20.4 Federal Regulations vs. California Law . DLSE adopts the interpretation of the salary test
made by the U. S. D
epartment of Labor in Opinion Letters dated June 27, 1996, July 11,
1995, and November 8, 1985, with the exception that in California an employee will be
considered to be paid on a salary basis within the meaning of the IWC Orders if under his or
her employment agreement he or she receives, on regularly scheduled paydays which
comply with Labor Code § 204, a monthly predetermined amount which is at least two times
the effective California minimum wage as required by Labor Code § 515 (a).
51.6.21 No Deduction For Jury Duty, Attendance As Witness Or For Temporary Military
Leave. In order to
insure that California law is at least as protective to the interests of
employees as th
e federal law it is patterned on, DLSE will follow the provisions of the
federal regulations conc erning salary basis found at 29 CFR § 541.118 (a)(4) insofar
as those regulations are compatible with California law. Consequently, deductions may
not be made from an exempt employee’s monthly salary for absen ces caused by jury duty,
attendance as a witness, or temporary military leave for periods of less than a full workweek.
51.6.21.1 Pursuant to the enforcement policy adopted by DLSE (See O.L. 2002.03.01) the rule that an
employee must re
ceive his or her full salary is, as with the federal regulation, subject to the
caveat that an employee need not be paid for any week in which he or she performs no work
during that entire week. Thus, any employee who performs no work within the week is not
entitled to a continuation of his salary even if the time lost is due to jury duty, attendance as
a witness, temporary military leave or any other reason.
51.6.22 Result Of Failure To Pay Salary. The effect of making a deduction not permitted by the
California law
, will depend upon the facts in a particular case.
51.6.22.1 Where deductions are willfully made in contravention of the salary requirements, such
behavior indicate
s that there was no intention to pay the employee on a salary basis. In that
case, the exemption would not be applicable to such employee and the overtime requirements
of the Orders would apply.

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51.6.22.2 On the other hand, where a deduction not permitted by these interpretations is inadvertent
or made erroneousl
y – but in good faith – the exemption will not be considered to have been
lost if the employer reimburses the employee for such deductions upon being made aware
of the error and agrees, in writing, to comply in the future.
51.6.23 The Rules Regarding The Duty To Pay The Full Salary Do Not Address And Have No
Impact On Th
e Contractual Duties The Parties May Have Concerning Payment Of
The Salary.

The requirement
that the employee must be paid a salary, without deduction,
is simply a crit
eria which must be met in order that the employe e be exempt from the
overtime requirements of the Orders. The remedy for failure to pay a salary which meets
these requirements is that the employee is not eligible for the exemption and, thus, must be
paid the applicable premium pay for any overtim e hours. However, the contract of
employment would determine whether an employee had a right to recover salary which was
not paid in full.
51.6.23.1 As pointed out, above, the courts have found that utilizing a common-sense understanding
of salaried empl
oyment “...a layman would understand that a salaried executive is a person
paid an amount, on a weekly or less frequent basis, that bears no relationship to the number
of hours worked in any particular week.” Thomas v. County of Fairfax , 803 F.Supp. 1142,
1148 (E.D. Va.1992) As the Ninth Circuit has stated: “A salaried employee is compensated
not for the amount of time spent on the job, but rather for the general value of services
performed. It is precisely because executives are thought not to punch a time clock that the
salary test for “bona fide executives” requires that an employee’s predetermined pay not be
“subject to reduction because of variations in the...quantity of work performed”... Abshire v.
County of Kern, 908 F.2d at 486.

51.6.23.2 Thus, absent an agreement by the parties as to the actual days the worker is to show up in
return for the salary, t
here is no reason to read into an employment contract a requirement
that the worker is to be on the job site or performing any certain number of days or hours per
week.

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52 ADMINISTRATIVE EXEMPTION.

52.1 Administrative Employee mean s any employee whose duties and responsibilities involv e
either:
1. The perform
ance of office or non-manual work directly related to management
policies or genera
l business operations of his employer or his employer’s customers,
or
The performance of functions in the administration of a school system, or educational
establishment or
institution, or of a department or subdivision thereof, in work directly
related to the a cademic instruction or training carried on therein; and
2. Who customarily and regularly exercises discretion and independent judgment;
and
3. Who regularly and d
irectly assists a proprietor, or another employee who is employed
in a bona fide execut
ive or administrative capacity (as such terms are defined for
purposes of this section), or
Who performs, under only general supervision, work along specialized or technical
lines requiring
special training, experience, or knowledge, or
Who executes, under only general s upervision, special assignments and tasks, and
4. Who is primarily engaged in duties which meet the test for the exemption.

52.2 The IWC Orders provide that for purposes of the Administrative exemption, activities
constituting exempt wo
rk and non-exempt work shall be construed in the same manner as
such terms are construed in the following regulations under the Fair Labor Standards Act
effective as of th e date of this order: 29 CFR §§ 541.201-205, 541.207-208, 541.210,
541.215. Exempt work shall include, for example, all work that is directly and closely related
to exempt work and work which is properly viewed as a means for carrying out ex empt
functions. The work actually performed by the employee during the course of the work week
must, first and foremost, be examined and the amount of time the employee spends on such
work, together with the employer's realistic expectations and the realistic requirements of
the job, shall be considered in determining whether the employee satisfies this requirement.
52.3 Types Of Administrative Employees: The following three types of administrative employees
qualify for the
exemption if, and only if, they meet the various other criteria Discussed above
(See O .L. 1998.10.05 ):
1. Employees who regularly and directly assist a proprietor or exempt executive or
administrator. They inc
lude those executive assistants and administrative assistants to
whom executives or high level administrators have delegated part o f their
discretionary powers. Generally, such assistants are found in large establishments
where the official assisted has duties of such scope and w hich require so much
attention that the work of personal scrutiny, correspondence and interviews must be
delegated.

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2. Employees who perform, only under general supervision, work along specialized
or technical lines r
equiring special training, experience or knowledge. Such
employees are often described as "staff employees", or functional, rather than
department heads. They include employees who act as advisory specialists to the
management, or to the employer’s customers. Typical examples are tax experts,
insurance experts , sales research experts, wage-rate analysts, foreign exchange
consultants, and statisticians. Such experts may or may not be exempt, depending
on the extent to which they exercise discretionary powers. Also included would be
persons in charg e of a functional department , which may eve n be a one- person
department, such as credit managers, purchasing agents, buyers, personnel directors,
safety directors, and labor relations directors.
3. Employees who perform special assignments under only general supervision.
Often, such employe
es perform their work away from the employer’s place of
business. Typical titles of such persons are buyers, field representatives, and location
managers for motion picture companies. This ca tegory also includes employees
whose special assignments are performed entirely or mostly on the empl oyer’s
premises, such as customers’ brokers in stock exchange firms and so-called “account
executives” in advertising firms. (29 CFR Section 541.201)
52.3.1 Job Titles Are Not Determinative: As with any of the exemptions, job titles
reflecting adminis
trative classifications alone may not reflect actual job duties, and therefore,
are of no assistance in determining exempt or non-exempt status. The fact that an employee
may have one of the job titles listed above is, in itself, of no consequence . The actual
determination of exempt or non-exempt status must be based on the nature of the actual work
performed by the individual employee. (29 CFR Section 541.2 01(b))
52.3.2 Trainees. The administrative exemption does not include employees training for
employment in
an administrative capacity who are not actually performing the duties of an
administrative employee. (29 CFR Section 541.210) As with any othe r administrative
employee, a trainee is not exe mpt unless the trainee is “engaged in work” which is “primarily
intellectual”, and which involves the exercise of discretion and independent judgment, within
the meaning of the IWC orders.
52.3.3 Office Or Non -Manual Work . This term, used in the federal regulations, is self-
explanatory and rest
ricts the work to “white collar” employees; but does not entirely preclude
work on office machines which is directly related to the performance of the administrative
duties. (See 29 CFR § 541.2 03 for further explanation).

52.3.3.1 Note that the administrativ e work m ay be performed eithe r for the employer d irectly o r
for a custome r o f the emp
loyer . Example s are tax exper ts, labo r relations consultants ,
etc. employ e d by tax firm s, labor relation s firm s, etc., to perform services for custom ers.

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52.3.4 Production Or Sale s vs. Administra tive . The federal interpre tive regula tions
explicitl y exclud e “production” type work from the definitio n of “work direc tly related
to manage ment policie s or general busines s operat ions. ” 29 CFR §541 .205 subsect ions
(a) and (b) provi d e as follows:
(a) The phrase “directly related to management policies or general business operations of his
employer or his
employer’s customers” describes those types of activities relating to the
administrative operations of a business as distinguished from “production” or, in a retailer
or service establishment, “sales” work. In addition to describing the types of activities, the
phrase limits the exemption to persons who perform work of substantial importance to the
management or operation of the business of his employer or his employer’s customers.
(b) The administrative operations of the business include the work performed by so-called white-
collar employees engaged in “servicing” a business as, for example, advising the management,
planning, negotiating, representing the company, purchasing, promoting sales, and business
research and control. An employee performing such work is engaged in activities relating to
the administ rative operations of the business notwithstanding that he is emp loyed as an
administrative assistant to an executive in the production department of the business.

52.3.5 Numerous recent cases have confirmed that the “production” vs. “administration ”
dichotomy applies
not only to manufacturing settings but also to settings in which the
“product” consists of services. If the white -collar employees delivering such ser vices are
engaged in production- type work the employees are not exempt from the overtime
requirements. More specifically, recent appellate decisions make it clear that the
administrative exemption applies only to those employees whose primary duty is
administering the business affairs of the enterprise rather than producing the goods and
services that the enterprise exists to produce and market. In Dalheim v. KDFW-TV (5th Cir.
1990) 918 F.2d 1220 (cited as author ity by the Ca liforn ia Court of Appea l in
Nordquist v. McGraw -Hill Broadcasting (1995 ) 32 Cal.App.4t h 555) the court affirme d
that new s producers , di rectors , and assignmen t edito rs wer e not exemp t as
adminis trati ve emplo yees. In so ruling, the Court h eld that:
“The dist inction §541.205(a ) draws is between those employees whose primary duty is
administering the business affairs of the enterprise from those whose primary duty is producing
the commodity or commodities, whether goods or services, that the enterprise exists to produce
and market.” Id. at 1230.
The Cour t went on to furthe r clarif y the requi sites for establ ishin g the admin istra tive
exemption:
“They [the non-exempt employees] are not responsible for setting business policy, planning the
long- or short-term objectives of thenews department, promoting the newscast, negotiating salary
or benefits with other department personnel, or any of the other types of “administrative” tasks
noted in §541.205(b).” I d. at 1231.

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52.3.6 In the most recent case, the First Distric t C ourt of Ap peal address e d the adminis-
trativ e/production d
istinctio n and h eld that it is important “to determin e whethe r [the
employ e es] carr y out [the employer’s ] day-to-day operations...or whethe r they
administe r the busines s affai rs ... [of the company ].” Bell v. Farmers Insurance
Exchange (2001) 87 Cal.App.4t h 805. On the facts presented in Bell, the cour t
found the insura n ce adjus tors non -exem pt.
52.3.7 Federa l Cases . The Nint h Circui t Cour t of Appeals , a s well , has restr icted the
applicat ion of
the administrativ e e xemptio n to those employees who were invo lved in
servicin g the business , i.e., who had responsibi lity as to how the busines s shoul d be run,
rather than those employee s who provide d informatio n w hich was used by custo mers
in the cours e of its daily busines s activit ies . In Bratt v. County of LA (9th Cir . 1990)
912 F.2 d 1066, 10 70, the court a rticulate d the follo w ing standar d in determin ing
that probat ion offi cers are not exemp t a dminis trator s althou gh the y invest igat e and
make recom mendation s to the court s regardi n g sentencin g and detentio n matters:
In addition, while the regulations provide that “servicing” a business may be administrative, Id.,
§541.205(b), “advising the management” as used in that subsection is directed at advice on matters
that involve policy determinations, i.e., how a business should be run or run more efficiently, not
merely providing information in the course of the customer’s daily business opera tion. Th e
services the Employees provide the courts do not relate to court policy or over-all operational
management but to the courts’ day- to-day production process. Thus, th e Employees are not
engaged in “servicing” a business within the meaning of §541.205(b).... Here, although probation
officers provide recommendations to the courts, these recommendations do not involve advice on
the proper way to conduct the business of the court, but merely provide information which the
court uses in the course of its daily production activities.
52.3.7.1 Directly Relate d To Managemen t Pol icies Or Gen eral Bus iness Operat ions:
The phras e “directl y related to managemen t policies or general busines s operation s of
the employe r or the employer’ s customers ” is limite d to those types of activities that
relate to the administrativ e opera tions of a busines s as distingu ished from “product ion”
or “sales ” work. In additio n to describing these activities , the phrase limits the exemption
to persons who perfo rm work of substant ial importanc e to the managemen t or
operatio n of the busines s of the employer o r the employer's customers . Such wo rk is
not limited, however , to participa tion in the formulatio n of managemen t policies
regardin g the operatio n o f the busines s as a whole . E mploye es whose work is “directly
related ” to managemen t policie s or to genera l busines s operation s includ e th ose who
are responsibl e fo r executin g managem ent policies , a nd those who perform assignments
that have a substantia l effect on the whol e business , even thoug h the assignments
may only be directl y related to a particula r segmen t of the bus iness . ( 29 CFR §
541.205)

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52.3.7.2 Again, it must be noted that “directly and closely related” work is also to be included in
determining the
exemption. Examples of directly and closely related work as that term
relates to the Administrative exemption, may be found at 29 CFR § 241.208.
52.3.8 Right To Exercise Discretion And Independent Judgment . As provided in 29 CFR §
541.207, means “the compari
son and evaluation of possible courses of conduct and acting or
making a decision after the various possibilities have been considered .”
52.3.8.1 The employee must have the authority or power to make an independent choice, free from
immediate direc
tion or supervision and with respect to matters of significance.
52.3.8.2 The term “Discretion and Independent Judgment” has been most frequently misunderstood
and misapplied by e
mployers and employees in cases involving: 1) confusion between the
exercise of discretion and independent judgment, and the use of skill in applying techniques,
procedures, or specific standards and 2) misapplication of the exempt status to em ployees
making decisions relating to matters of little consequence.
52.3.8.3 “Consequence” Distinguished From Risk Of Loss: Exercising discretion and independent
judgment with respe
ct to matters of consequence must be distinguished from making
decisions which can lead to serious loss due to the choice of wrong techniques, the improper
application of skills, failure to follow instructions or procedures, or negligence. An employee
who is entrusted with performing duties which, if not performed correctly, could lead to
serious consequences for the employer would not, based solely on these facts, be an exempt
employee. Some examples of situations which distinguish serious loss through neglect by an
employee from exercise of decisions of significant matters are Discussed at 29 C FR § 54
1.207 (f).
52.3.8.4 Customarily And Regularly Exercise Discretion And Independent Judgment.
The work of an exempt administrative employee may require the exercise of discretion and
independ ent judgment
customarily and regularly. The phrase “customarily and regularly”
signifies a frequency which must be greater than occasional but which may be less than
constant. This requirement will be met by the employee who normally and recurrently is
called upon to exercise and does exercise discretion and independent judgment in the day-
to-day performance of his or her duties. (29 CFR § 541.207(g))
52.3.8.5 Use Of Skill Or Knowledge . The most frequent cause of misapplication of the term
“discretion and i
ndependent judgment” is the failure to distinguish discretion and
independent judgment from the use of skill in various respec ts. An employee who merely
applies his or her knowledge in following prescribed procedures or determining which
procedure to follow, or who determines whether specified standards is not exercising
discretion and in dependent judgment.
52.3.8.5.1 The fact that there is some leeway in reaching a conclusion, (for example, when an acceptable
standard includes a
range or a tolerance above or below a specific standard) does not change
the above outcome.

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52.3.9 Skills. For instance, inspectors performing specialized work along standardized lines
involving well-est
ablished techniques would not be exercising discretion and independent
judgment. These inspectors are merely relying on techniques and skills acquired by special
training or experience. They may have some leeway in the performance of their work
but only within closely prescribed limits.
52.3.9.1 Employees of this type may make recommendations or decisions on the basis of the
information they
develop in the course of their inspections (as for example, to accept or reject
an insurance risk or a product which was to have been manufactured to specifications), but
these recommendations or decisions are based on the development of the facts as to whether
there is conformity with the prescribed standards. In such cases a decision to depart from
the prescribed standards or the permitted tolerance is typically made by the employee’s
superior. The employee is engaged in exercising skill rather than discretion and independent
judgment. For a further discussion of this point see 29 C FR § 541.207(c).

52.3.10 Knowledge And Experience. Often, after continued reference to the written standards,
or through
experience, the employee acquires sufficient knowledge so that reference to
written standards is unnecessary. T he sub stitution of the e mplo yee's memory for the
manual of standards or the instructions under w hich he or she o perate does not convert the
character of the work performed to work requiring the exercise of discretion and independent
judgmen t. The mere f act that the emp loyee uses his knowledge and experience does not
change his decision (i.e., that the product does or does not con form w ith the estab lished
stan dard) into a real decision in a significant matter.
52.3.11 Skill vs. Discretion And Independent Judgment . Skill rather than discretion and
independent judgme
nt is exercised in completing many tasks, but this does not necessarily
mean, however, that all employees who are exercising skill are not also exercising discretion
and independent judgment. Grading of commodities for which there are no recognized or
established standards may require the exercise of discretion and independent judgment. For
instance, in those situations in which an othe rwise administratively exempt buyer does
grading, the grading even though routine work, may be considered exempt if it is directly
and closely related to the exempt buying.

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52.3.11.1 Exa mple: While a personnel manager who makes decisions to hire or fire or take other
actions may be admin
istratively exempt, an employee simply ex ercising skill in th e
application of techniques and procedures would not meet the criteria. As an example, the
“screening” of applicants by a personnel clerk who interviews applicants and obtains from
them data regarding their qualification s and fitness for employment would not meet the
criteria. The data obtained by the personnel clerk is intended to reject all applicants who do
not meet established standards for the particular job or for employment by the company.
Standards are usually set by the employee’s superior or other company officials, and the
decision to hire from the group of applicants who do meet the standards is similarly made by
other company officials. Such a personnel clerk does not exercise discretion and independent
judgment as required by the Orders.
52.3.11.2 Further Example: On the other hand an exempt personnel manager will often perform similar
functions; that is,
he will interview applicants to obtain the necessary data and eliminate
applicants who are not qualified. The personnel manager will then hire one of the qualified
applicants. Thus, when the same interviewing and screening performed by the personnel
clerk are performed by the personnel manager who does the hiring they con stitute exempt
work, even though routine, because this work is “directl y and closely related” to the
employee’s exempt functions.
52.3.11.3 Titles Are Not Determinative. Whil e based on the facts in certain cases insurance
investigators, i
nsurance estimators, comparison shoppers and similar employees have been
found by the courts not to meet the requirements of the administrative exemption based on
the fact that they do not ex ercise discretion and independent judgment sufficient to place
them in that category (e.g., Bell v. Farmers Insurance Exchange, supra, 87 Cal.App.4th 805)
there may be employees with similar titles who could meet the requirements for exemption
based on their duties.
52.3.12 Decisions In Significant Matters . The level or importance of the matters with respect to
which the employee may make d
ecisions is an important criteria. Obviously not all decisions
inde pendently made by employees constitute the exercise of discretion and independen t
judgment of the level contemplated here. The discretion and independent judgment exercised
must be real and substantial, that is, they must be exercised with respect to ma tters of
consequence. This interpretation has also been followed by federal courts in decisions
involving the application of the federal regulations.

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52.3.12.1 Th e term “decisions in significant matters” applies to the kinds of decisions normally made
by persons w ho formu
late or participate in the formulation of policy within their spheres of
responsibility or who exercise authority with in a wide range to commit their employer in
substantial respects financially or otherwise. For a discussion of the meaning given the term
see 29 C FR § 5 41.20 7(d).
52.3.13 Review Of Decisions. The term “discretion and independent judgment” does not necessarily
imply that the deci
sions made by the employee must have a finality that goes with unlimited
authority and a complete absence of review. The decisions made as a result of the exercise
of discretion and independent judgment may consist of recommendations for action which is
given particular weight rather than the actual taking of action. The fact that an employee's
decision may be subject to review and tha t upon occasion the decisions are revised or
reversed after review does not mean that the employee is not exercising discretion and
independent judgment. (See 29 CFR § 541.207(e) for a further discussion of this point).

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53 EXECUTIVE EXEMPTION.

53.1 Executive (Managerial) Employee means any employee whose duties and
responsibilities involve:
1. The management o f the enterprise in which he is em ployed or of a customa rily
recognized department or subdivision thereof; and
2. Who customarily and regularly directs the work of at least tw o or more other
employees therein; and
3. Who has the authority to hire or fire other employees or whose suggestions and
recommendations as to the hiring or firing and as to the advancement and promotion
or any other change of status of other employees will be given particular weight; and
4. Who customarily and regularly exercise s discretion and independent judgment;
and
5. Who is primarily engaged in duties which meet the test of the exemption.

53.2 The IWC O rders provide that for purpose s of the Ex ecutive exemption, activities
constituting exempt work and non-exempt work shall be construed in the same manner as
such terms are construed in the following regulations under the Fair Labor Standards Act
effective as of the date of the Order: 29 CFR §§ 541.102, 541.104-111, 541.115-116.
Exempt work shall include, for example, all work that is directly and closely related to
exempt work and work which i s properly viewed a s a means for carrying out exemp t
functions. The work actually performed by the employee during the course of the work week
must, first and foremost, be examined and the amount of time the employee spends on such
work, together with the employer's realistic expectations and the realistic requirements of
the job, shall be considered in determining whether the employee satisfies this requirement.
53.3 Management Duties Must Be Exercised Over The Entire Enterprise Or A Customarily
Recognized Department Or Subdivision Thereof. The requirement tha t the exempt
employee must exercise the managerial duties over either the entire enterprise in which he
or she is employed or a customarily recognized department or subdivision of that entire
enterprise is Discussed at 29 CFR § 541.104.
53.3.1 It is important to note that the term “customarily recognized department or subdivision”
has a particular meaning. The phrase is intended to distinguish between “a mere collection
of employees as signed from time to time to a specific job or series of jobs” and “a unit with
permanent status and function.” In other words, in order to meet the criteria of a managerial
employee, one must be more than merely a supervisor of two or more em ployees. The
managerial exempt employee must be in charge of the unit, not simply participat e in the
management of the unit.

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53.3.2 An employee who is in charge of a unit or department with a continuing functio n will not
lose the exemption simp
ly because he or she draws the workers under his or her control from
a pool. The important consideration is that the exempt employee is “in charge” of the
operation of the unit or department with a continuing function. (See discussion at 29 CFR §
541.104(e) and (f))
53.4 At Least Two Or More Subordinates Required . The IWC Orders and the federal
regulations both r
equire as a condition of exempt status, that the manager must supervise two
or more employees or the equivalent in the department or unit which the manager is
managing. (29 CFR § 541.106)
53.4.1 The “equivalent” of two employees, as the federal regulations provide, may be one full- time
and two half-time employ
ees. However, note that as the federal regulations concede, it has
been the experience of the U.S. Wage and Hour enforcement unit that an employee with as
few as two employees to supervise usually performs production wor k in excess of that
allowed under the federal regulations. Experience of the DLSE has also shown that the fewer
the employees which the putative exempt employee supervises, the more it is likely that the
“manager” is actually a working foreman or straw boss performing non-exempt work more
than 50% of the time.
53.5 The Manager Must Have The Authority To Hire Or Fire or that his or her suggestions and
recommendations
as to hiring or firing and as to advancement or promotion or any other
change in the status of the supervised employees will be given particular weight. (See also
the discussion of the exercise of discretion and independent judgment, below)
53.5.1 The right to take action involving the status of the employees under his or her supervision
need not be dir
ect nor must it be final. The manager’s actions in this regard may be exercised
through those who actually perform those functions; but the recommendation of the manager
in such decisions must carry particular weight.
53.5.2 As a result of the amendment of Labor Code § 515(a), for enforcement purposes, DLSE will
disregard the langu
age of 29 CF R § 541.107 (see discussion at Section 51.5 of this Manual)
and rely, instead, upon the language of 29 CFR § 541.2 07 to define the term “discretion and
independent judgment” in each of the exempt classifications.
53.6 Right To Exercise Discretion And Independent Judgment . As provided in 29 CFR §
541.207, means “the compari
son and evaluation of possible courses of conduct and acting or
making a decision after the various p ossibilities have bee n considered .” The California
Legislature (and, ultimately, the IWC) specifically added the requirement that in order to
meet any of the tests for exemption an employee must “customarily and regularly exercise[s]
discretion and independent judgment”. This addition indicates tha t there is an intent to
expand the meaning of the term “Discretionary Powers” used in the federal regulations for
purposes of the managerial and professional exemptions. DLSE will continue to use the
long-established meaning it had adopted for enforcement purposes.

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53.6.1 The employee must have the authority or power to make an independent choice, free from
immediate direc
tion or supervision and with respect to matters of significance.
53.6.2 As Discussed above in the section on administrative exemptions (Section 52.3 .8, et seq. of
this Manual), t
he term discretion and independent judgment has been most frequently
misunderstood and misapplied by employers and employees in cases involving the
following:
1. Confusion between the exercise of discretion and independent judgment, and the use
of skill in appl
ying techniques, procedures, or specific standards.
2. Misapplication of the term to employees making decisions relating to matters of
little consequence.
53.
6.2.1 For purposes of the managerial exemption, the experience of the DLSE has been that the
most frequent cau
se of misapplication of the term “discretion and independent judgment” is
the failure to distinguish discretion and independent judgment from the use of independent
managerial skills. An employee who m erely applies his or her memor y in following
prescribed procedures or determining which required procedure to follow is not exercising
discretion and independent judgment.
53.6.2.2 The fact that there is some limited leeway which may be utilized in reaching a conclusion,
(for example, when a
n acceptable standard includes a limited range or a tolerance above or
below a specific standard ) does not allow for the exercise of discretion and independent
judgment.
53.6.2.2.1 Example: A n example of this type of misapplication there are limited examples of the
“manager” of a
chain food operation whose duties are so circumscribed and routinized by
the chain’s operations manual which the manager must follow, that there is no opportunity
to exercise discretion and independent judgment.
53.6.3 Knowledge, Skill And Experience. Often , after continued reference to the written
standards, or t
hrough experience, the employee acquires sufficient knowledge so that
reference to written standards is unnecessary. For instance, employees who have memorized
the firm’s oper ations manual which the firm insists the manager must conform to with little
or no deviation would not be exercising discretion and independent judgment. These
employees are merely relying on techniques and skills acquired by experience or rote. The
substitution of the employee's memory for the manual of standards or the instructions under
which he or she operate does not convert the character of the work performed to work
requiring the exercise of discretion and independent judgment.
53.6.4 Directly And Closely Related . Example s of “directly and closely related” activities
involving manageri
al duties would include use of a computer to type a memo to a
subordinate; hands-on training of subordinates; record-keeping dealing with subordinate’s
activities, or other functions which directly aid in the supervision of subordinates or

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or management of the facility. While it is possible that each of these activities could be
assigned to non- exempt
personnel, performance of these tasks by a n otherwise exempt
managerial employee would not affect the exemption.
53.6.4.1 On the other hand, the use of a computer by a worker to prepare the payroll, or, of course,
performing sales
or production work not connected with training of s ubordinates is not
exempt activity since it has nothing to do with supervision or management. (See discussion
below regarding “emergencies” or “occasional tasks”)
53.6.5 Occasional Tasks. In the Statement As To The Basis for the current Orders, the IWC stated
that the Commission “r
ecognizes that 29 CFR § 541.110 also refers to ‘occasional tasks’ that
are not ‘directly and closely related’. The IWC has specifically stated that it “does not intend
for such tasks to be included in the calculation of exempt work”. Thus, non- exempt work
performed by an otherwise exempt manager even on an occasional basis may not be counted
toward the 50% time requirement. This clearly reflect s the long- established enforcement
policy of the DLSE. As the Commission has pointed out in the same Statement As To The
Basis, the IWC “chose to adopt regulations for Wage Orders 1-13 and 15 that substantially
conform to current guidelines in the enforcement of IWC orders, whereby certain Fair Labor
Standards Act regulations (Title 29 CFR Part 541) have been used, or where they have been
adapted to eliminate provisions that are inconsistent with the more protective provisions of
California law ...”
53.6.5.1 Therefore, any past enforcement policy statement which may have been interpreted by some
to countenance non-ex
empt work by exempt employees – even on an occasional basis – is
an erroneous and inappropriate interpretation.
53.6.6 Emergencies. Under certai n occasional emergency conditions, work which is normal ly
performed by nonexem
pt employees and is nonexempt in nature will be directly and closely
related to the performance of the exempt functions of management and supervision and will
therefore be exempt work.
53.6.6.1 In effect, this means that a bona fide executive who performs work of a normally nonexempt
nature on rare o
ccasions because of the existence of a real emergency will not , because of
the performance of such emergency work, lose the exemption.
53.6.6.1.1 Such activities as the safety of the employees under their supervision, the preservation and
protection of the m
erchandise, machinery or other property of the department or subdivision
in their charge from damage due to unforeseen circumstances , and the preventio n of
widespread breakdown in production, sales, or service operations fall within this category.
For further discussion see 29 CFR § 541.109.
53.6.6.2 Note: The IWC has defined the term “emergency” to mean “an unpredictable or unavoidable
occurrence at
unscheduled intervals requiring immediate action”. Thus, for instance, the fact
that there are insufficient sales personnel on the floor to handle the number of customers is
not to be considered an emergency. Such a contingency i s neither unpredictable nor
unavoidable.

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53.6.7 Working Foremen. As the provisions of 29 CFR § 541.115 provide, working foremen or
straw bosses are not exempt. Employees with dual job functions (i.e., those who, while not
performing the same duties as those of their subordinates, perform routine , recurrent or
repetitive tasks) are not exempt. See discussion at 29 CFR § 541.115(c). This situation
often arises when a lead person with more experience is employed to perform more difficult
tasks and is asked to supervise the crew with whom he or she works.
53.6.7.1 Note: 29 CFR § 541.115(b ) discusses and, in fact, authorizes a finding that if a working
foreman or lead person is engaged in non- exempt work more than 20% of the time , the
employee would be non-exempt. This regulation is inconsistent with the provisions of Labor
Code § 515 and with the definition of “primarily” in the IWC Orders. In addition, of course,
the language refers to 29 CFR § 541.112, a section of the federal rules which was not adopted
by the IWC and is the only reference to less than the “primarily engaged in” test of 50%
found. For enforcement purposes the DLSE will disregard the language concerning 20%
and, instead, require that, consistent with the California law, an employee who is engaged in
exempt activities more than 50% of the time is exempt.

53.6.8 Trainees. Th e managerial exemption is not applicable to employees training to becom e
executives (or any other exempt category) if they are not actually performing the duties
required to meet the test or do not otherwise meet the criteria.

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54 PROFESSIONAL EXEMPTION.

54.1 Professional Employee means any employee whose duties and responsibilities meet the
following crite
ria:
1. Who is licensed or certified by the State of California and is primarily engaged in the
practice of one
of the following recognized professions: law, medicine, dentistry ,
optometry, architecture, engineering, teaching, or accounting; or
2. Who is primarily engaged in an occupation commonly recognized as a learned or artistic
profession. Fo
r the purposes of this subsection, “learned or artistic profession” means
an employee who is primarily engaged in the performance of:
(i) Work requiring knowledge of an advanced type in a field or science or learning
customarily ac
quired by a prolonged course of specialized intellectual instruction
and study, as distinguished from a general academic educatio n and from a n
apprenticeship, and from training in the performance of routine mental, manual, or
physical processes, or work that is an essential part of or necessarily incident to any
of the above work; or
(ii) Work that is original and creative in character in a recognized field of artistic
endeavor (as opposed t
o 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; and
(iii) Whose work is predominantly intellectual and varied in character (as opposed
to routine mental, m
anual, 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.
3. Who customarily and regularly exercises discretion and independent judgment in the
performance of dut
ies set forth above.
4. Who earns a monthly salary equivalent to no less than two times the state minimum wage
for full-time emp
loyment.
54.2 Pharmacists And Most Nurses Are Not Exempt. Pharmacists employed to engage in the
practice of ph
armacy, and registered nurses employed to engage in the practice of nursing ,
are not considered exempt professional employees, and are not to be considered exempt
unless they individually meet the criteria established for exemption a s executive or
administrative employees or fall into one of the three categories of “advanced practice”
nurses listed in subsection (f) of the Applicability Section of the Orders. (See discussion
below.)

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54.3 Certain Nurse Categories Have Been Exempted. The following advanced practice nurses
are to be included
within the professional exemption:
(1) Certified nurse midwives who are pri marily engaged in perfor ming duties for
which certificat
ion is required pursuant to Article 2.5 (commencing with Section 2746)
of Chapter 6 of Division 2 of the Business and Professions Code.
(2) Certified nurse anesthetists who are pri marily engaged in perfo rming duties for
which certifi
cation is required pursuant to Article 7 (commencing with Section 2825) of
Chapter 6 of Division 2 of the Business and Professions Code.
(3) Certified nurse practitioners who are primarily engaged in performing duties for
which certifi
cation is required pursuant to Article 8 (commencing with Section 2834) of
Chapter 6 of Division 2 of the Business and Professions Code.

54.4 Computer Software Workers. Except as listed in the section directly below, an employee
in the computer so
ftware field is exempt if all of the following apply:
1. The employee is primarily engaged in work that is intellectual or creative and that
requires the ex
ercise of discretion and independent judg ment, and the employee
is primarily engaged in duties that consist of one or more of the following:
(i) The application of syste ms analysis techniques and procedures, including
consulting wit
h users, to determine hardware, software, or system functional
specification.
(ii) The design, developm ent, docum entation, analysis, creation, testing, or
modification of
computer systems or programs, including prototypes, based
on and related to, user or system design specifications.
(iii) The documentation, testing, creation, or modification of computer programs
related to the des
ign of software or hardware for computer operating systems.
2. The e mployee is highly skilled and is prof icient in the the oretical and prac tical
application of hig
hly specialized infor mation to com puter syste ms analysis,
programming, and software engineering. A job title shall not be determinative of
the applicability of this exemption.
3. The employee is currently compensated at the hourly rate of not less $46.55 or annual
salary of not l
ess than $96,968.33 for full-time employment, and paid not less than
$8,080.71 per month in 2020. The Division of Labor Stati stics and Research shall
adjust this pay rate on October 1 st of each year to be effective on January 1st of the
following year by an amount equal to the percentage increase in the California
Consumer Price Index for Urban Wage Earners and Clerical Workers. (Labor Code
section 515.5(a)(4)). This adjustment is posted on the DLSR website annually here:

https://www.dir.ca.gov/OPRL/ComputerSoftware.pdf

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54.5 The exemption for comp uter professionals doe s not apply to an e mployee if any of
the following appl
y:
(1) The employee is a trainee or employee in an entry-level position who is learning
to beco me proficient in the th
eoretical and practical application of highly
specialized info rmation to com puter syste ms analysis programming, and
software engineering.
(2) The employee is in a computer-related occupation but has not attained the level
of skill and exp
ertise necessary to work indepe ndently and without clos e
supervision.
(3) The employee is engaged in the operation of computers or in the m anufacture,
repair, or maint
enance of computer hardware and related equipment.
(4) The employee is an engineer, d rafter, machinist, or other professional whose
work is highly dep
endent upon or facilitated by the use of computers and
computer software progra ms and who is skilled in computer-aided design
software, including CAD/CAM, but who is not in a computer systems analysis
or programming occupation.
(5) The em ployee is a writer engaged in writi ng material, including box labels,
product descripti
ons, docum entation, promotional m aterial, setup and
installation instructions, and other si milar written infor mation, either for print
or for on screen m edia or who writes or provides content m aterial intended to
be read by customers, subscribers, or visitors to computer-related media such as
the World Wide Web or CD-ROMs.
(6) The employee is en gaged in creating imagery for effects used in the m otion
picture, televi
sion, or theatrical industry.

54.6 Physicians. As with computer specialists, phys icians earning at l east $84.79 per
hour are exempt. (L
abor Code § 515.6(a)). T his figure, too, is to be reviewed and
revised yearly by the DLS&R as with the computer worker exemption.

54.7 Hourly Rate Required For Each Hour Worked. It is important to remember that for
both the com puter s
oftware employee and the physician exem ption to be effective, the
employee must receive at least the required hourly rate for each hour they are employed
by the employer. The burden is on the employer to prove the exemption and, thus, records
of hours worked must be kept.

54.8 Learned Or Artistic. With the exception of the provisions of Orders 14-2001 and 16-
2001, the definitions c
ontained in the “learned or artistic” exemption are intended to
be construed in accordance with the following provisions of federal law as they existed
as of the date of the Wage Order: 29 CFR §§ 541.207, 541.301(a) -(d), 541.302,
541.306, 541.307, 541.308 and 541.310.

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54.8.1 Particular notice should be given to the fact that the DLSE h as consistently taken t he
position that in orde
r to qualify for the “learned” exem ption, the position must require
one to have an “advanced degree.” This is defined as a person w ho, in order to perform
his or her job, has completed a prolonged course of intellectual instruction in a recognized
field of learning resulting in the attain ment of an advanced degree or certificate.
Knowledge of an advanced type must be knowledge which cannot be attained at the high
school level. (29 CFR § 541.301(b)) (See further discussion at Sect ion 54.8.5 of this
Manual). Of course, even with an advanced degree, the employee must also meet the
other requirements discussed in Section 54.1 of this Manual.
54.8.2 “Professional” Under Order 16-2001. Note that among the many other differences, as
discussed in detail be
low, the Order covering on-site construction, drilling, logging and
mining does not refer to the federal regulations in regard to the definitions for activities
of professional employees. The language used in Order 16 concerning the professional
exemption is the same language as that contained in many of the IWC Orders first
promulgated in 1989 under IWC Orders 1, 4, 5, 9, and 10, which include the “learned
and artistic” exemption. The IWC provided in its “Statement As To The Basis” for
Order 16 that the Commission “chose to adopt regulations that substantially conform to
current guidelines in the enforcement of IWC orders…” Consequently, the DLSE will
continue to interpret and enforce the “learned and artistic” language in the same way it
has since the language was first used in 1989: that interpretation and enforcement policy
will not, as pointed out above, be different from the enforcement policy dictated by the
Commission in the current Orders.

54.8.3 Order 14-2001.
Under the Agricultural Occupations Order there continues to be no mention of the term
“professional”
in the applicability section. Order 14-2001 now provides:
“No provision of this Order shall apply to any employee who is engaged in work which
is primarily intellectual, managerial, or creative, and which requires exercise of
discretion and independent judgment, and for which the remuneration is not less than
two times the monthly State minimum wage for full-time employment.”
However, pursuant to AB 1066 (2016), all overtime provisions in Labor Code Division 2, part 2,
Chapter 1 (commenc
ing with section 500) not subject to the overtime phase-in began to apply to
agricultural workers covered by O rder 14 on January 1, 2017. This includes the executive,
administrative, and professional exemption in Labor Code § 515(a), as a court would likely view
the executive, administrative, and professional exemption as the more protective standard that
should be applied in lieu of the intellectual, managerial, or creative exemption. See Labor Code
§§ 861, 864.
54.8.4 Discretion And Independent Judgment. As with the managerial and
administrative ex
emptions, the employee must “customarily and regularly” exercise
“discretion and independent judgment in the performance of [the] duties.” (See
discussion of this requirement above.)

54.8.4.1 Note. The IWC has not specifically applied the “discretion and independent judgment”

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test to the advanced practice nurse classifications. However, in view of the statutory
requirement (Lab
or Code § 515(a)) that in order to meet the test as an exempt employee
one must “customarily and regularly exercise discretion and independent judgment,”
that requirement must be read into the Order.
54.8.5 “Learned Professions ” are those requiring knowledge of an advanced type [which
cannot be attain
ed at the high school level] in a field of science or learning, customarily
acquired by a prolonged course of intellectual instruction and study as distinguished from
a general academic education and from an apprenticeship and from training in the
performance of routine mental, manual, or physical processes. (29 CFR § 541.301(a)-
(d)) [Example: advanced degree in a specialized field, i.e., B. S. in Chemistry.]

54.9 “Artistic Professions” are defined at 29 CFR § 541.302(a) as work that is “original and
creative in charact
er in a recognized field of artistic endeavor (as opposed to work which
can be produced by a person endowed with general manual or intellectual ab ility and
training), and the result of which depends primarily on the invention, imagination, or talent
of the employee.” The term “recognized field of artistic endeavor” is defined at 29 CFR
§ 541.302(b) to include “such fields as music, writing, the theater, and the plastic and
graphic arts.”

54.10 Artistic Professions; Duties. Work of an artistic type must be original and creative in
character in a r
ecognized 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.

54.10.1 The work must be “in a recognized field of artistic endeavor.” This includes such field s
as music, writing, the th
eater, and the plastic and graphic arts. In considering these
examples of such fields, it is important to evaluate each in connection with all media
utilized in artistic endeavors. These media include not only those that have been
traditionally utilized such as standar d musical instruments [music] and clay, stone,
charcoal, and paint [plastic and graphic arts], but also newer evolving media such as
music synthesizers and computer graphic and art design progr ams.

54.10.2 The work must be original and creative in character, as opposed to work which can be
produced by a p
erson endowed with general manual or intellectual ability and training.

54.10.3 For a detailed discussion of the “Artistic Professions” read 29 CFR § 541.30.

54.10.4 Discretion And Independent Judgment. Unlike the federal regulations which require
that a learned or
artistic professional “must perform work which requires the consistent
exercise of discretion and judgment in its performance,” 29 CFR § 541.305(a), California
law dictated use of the criteria found at § 541.207, requiring that the employee
“customarily and regularly exercise[s] discretion and independent judgment.”

54.10.5 Work That Is Predominantly Intellectual And Varied. In order to meet the test for
exemption as a
Professional under California law, the employee must be “engaged in

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work predominantly intellectual and varied in character as opposed to routine mental,
manual, mechanical, or physical work.” 29 CFR § 541.306(a). This exemption therefore
applies to individual employees, not to broad classes of professions. This is consistent
with the IWC’s intent, expressed in its Statement of Basis when it originally adopted the
exemption in 1989, that “individual situations and actual duties” should be considered
“when applying the exemption.”

54.10.5.1 Examples (but not an exhaustive list) of the type of work which constitutes
“predominantly
intellectual and varied” are discussed at 29 CFR § 541.30

54.10.6 Activities That Are An Essential Part Of And Necessarily Incident To Exempt
Work. Work activities wh
ich are an essential part of and necessarily incident to the
professional
work is also included in the definition of exempt professional work. This
provision recognizes the fact that there are professional employees whose work
necessaril y involve s some of the actual routin e physica l tasks als o performe d
by obviou sly none xemp t emplo yees. (29 CFR § 541.3 07(a))
54.10.6.1 However, it should be noted that unlike the incidental activities “directly and closely related
to” the duties
of an administrative or managerial employee which may be considered exempt
under those categories, the professional exemption requires that such activities be “an
essential part of and necessarily incident” to the exempt professional work. (29 CFR §
541.30 7(b))
54.10.6.2 As with the federal enforcement agency, it has been the experience of the DLSE that some
employers er
roneously believe that anyone employed in the field of accountancy, engineering,
or other professional fields, will qualify for exemption as a professional employee by virtue
of such employment. While there are many exempt employees in these fields, the exemption
of individual depends upon his or her duties and the other listed criteria.
54.10.6.3 The professional exemption does not extend to and exempt all employees of professional
employers, or
all employees in industries having large numbers of professional members,
or all employees in any particular occupation. Nor does it exempt those learning a profession.
(29 CFR § 541.310 ) Moreover, it does not exempt persons with professional training, who
are working in professional fields, but performing subprofessional or routine work. For a
discussion of this point, see 29 CFR § 541.3 08(b).

54.10.7 Teachers. While the Applicability Section of the Orders exempts teachers as
Professionals
, the IWC’s Statement As To The Basis points out that adoption of language
based upon 29 CFR § 541.2 (a) -(c), was not to be construed to “affect the professional
exemption as it relates certificate from the Commission for Teacher Preparation and Licensing
or teaching in an accredited college or university.”
54.10.7.1 DLSE Enforcement Policy : Because of the unchanged definition of “Teacher”, the DLSE
enforcement poli
cy will remain as it has been for the last twenty years. Provisions in
the CFR notwithstanding, under California law a teacher will not qualify for the exemption
unless he or s he (1) is certified by the CTPL, or (2) teaches in an accredited college or
university. The term “college or university” means a school of higher learning and academic
studies, which grants the bachelor's degree (or higher degrees) in liberal arts and/or sciences

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and/or professions. Consequently, a high school or elementary school teacher who is not
certified by the C
TPL cannot be exempt. Likewise, a teacher in a trade school or technical
school who is not certified by the CTPL cannot be exempt. (O.L. 1997.03.05 )
54.10.7.2 Labor Code § 515.8 exempts private school teachers from overtime if they meet specific
conditions. With ame
ndments starting in 2016, new salary thresholds were adopted for
private school teach ers which suspended the twice the minimum wage salary thre shold
requirement, instead tying the requirement to the compensation of public school teachers,
statewide and locally. Effective January, 2018, 515.8 provides the s alary requirement may
be prorated for part time teachers. For example, if the minimum s alary threshold in a
particular private school has been determined to be $50,000, a teacher working 50% a full -
time employee schedule would need to earn at least $25,000. A teacher working 75% of full-
time employee schedule would need to earn $37,500. Also, effective January, 2018 private
school administrators may use public school data from the prior year to calculate the s alary
threshold determinations. Therefore, in addition to the above requirements concerning levels
of professional advancement, spending more than 50% of their hours of employment
engaged in teaching and customaril y and regularl y exercising discretion and independent
judgment in performing the duties of a teacher, the salary -basis test for part -time teachers
must be proportional to that of a full -time teacher. And a private school administrator is
allowed to use public district salary data in effect from the prior school year when setting the
minimum salary requirements for exemption.
54.10.7.3 Labor Code § 515.7 took effect on September 9, 2020, and expands the professional
exemption under Indus
trial Welfare Commission (“IWC”) Wage Orders Nos. 4-2001 and 5-
2001 to include part-time, or “adjunct,” faculty at private, non-profit colleges and universities
in California. Labor Code section 515.7 states that an employee employed to provide
instruction for a course or laboratory at an independent institution of higher education is
classified as employed in a professional capacity, and therefore exempt from Sections 3 -12
of IWC Wage Order Nos. 4 -2001 or 5- 2001, as well as specified provisions of the Labor
Code. These employees are now exempt from paragraphs (2), (3), and (9) of subdivision (a)
of Labor Code section 226. These e mployees are also exempt from overtime provisions
under Labor Code sections 510 and 512. Labor Code § 515.7(a). In order for the exemption
to apply, the employee must meet certain criteria, including being employed in a professional
capacity as prescribed and paid on a salary basis or meeting one of the alternative minimum
compensation requirements. Labor Code § 515.7(a)(1).
The employee is employed in a Professional Capacity. The requirements for classi fication
under the professiona
l exemption under Labor Code section 515.7 mirror those of IWC Wage
Orders 4 and 5. Specifically, section 1(A)(3)(b) of both wage orders:
• The employee is primarily engaged in an occupation commonly recognized as a learned
or artistic profes
sion; and
• The employee customarily and regularly exercises discretion and independent judgment
in the performan
ce of its duties in a learned or artistic profession.
Labor Code § 515.7(a)(1)(C) defines “learned or artistic profession” as an employee who is

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primarily engaged in the performance of:
Work requiring knowledge of an advanced type in a field or science or learning customarily
acquired by a prol
onged course of specialized intellectual instruction and study, as
distinguished from a general academic education and from an apprenticeship, and from
training in the performance of routine mental, manual, or physical processes, or work that is
an essential part of or necessarily incident to any of the above work; or
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; and
Whose work 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.
Next, the employee must be paid on a salary basis as defined by Section 541.602 of title 29 of
the code of federal R
egulations and meet any one of the below mentioned minimum
compensation requirements:
• For a regular salaried employee, the salary must be at least two times the minimum wage for
40 hours of work per week.
Labor Code § 515.7(a)(2)(A).
• For employees paid per course or laboratory, the minimum compensation is based on
classroom hours and i
s paid per the minimum compensation requirements stated in Labor
Code section 515.7(b). Labor Code § 515.7(a)(2)(B).
• If an employee is covered by a collective bargaining agreement, payment is controlled by the
terms of the coll
ective bargaining agreement, so long as the employee is expressly and
unambiguously classified as a professional in the collective bargaining agreement. Labor Code
§ 515.7(a)(2)(C).

When the employee is not paid a salary but rather, per course or laboratory, the rate of pay
per “classroom”
hour spent is specified by the statute according to the following schedule:
(A) For each classroom hour in 2020: one hundred seventeen dollars ($117).
(B) For each classroom hour in 2021: one hundred twenty-six dollars ($126).
(C) For each classroom hour in 2022: one hundred thirty-five dollars ($135).
(D) For each classroom hour in 2023 and each year thereafter: a percentage increase to the
rate described fo
r the year 2022 that is equal to the percentage increase to the state minimum
wage calculated in accordance with subdivision (c) of Section 1182.12.
(Labor Code § 515.7(b)(1).)
“Classroom hour” is defined as “time spent in the primary forum of the course or laboratory,
regardless of w
hether the forum is in- person or virtual.” The minimum payment calculated

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using classroom hours shall encompass payment for all classroom or laboratory time,
preparation, grading, office hours, and other course or laboratory-related work for that course
or laboratory and no separate payment shall be required. For example, if you teach a one unit
one-hour election course you get paid 117 dollars. This payment entails payment for prep
time, emails, grading and all other necessary work for the one-hour lecture.
Labor Code section 515.7(b)(2), addresses disparity between lecture and non-lectured based
courses. Under t
he statute, if a non-lecture course such as a laboratory, art studio course, or
clinical course requires more classroom h ours worked than a lecture based course with the
same number of designated course units, the compensation is equivalent to that of the lecture
based course at the minimum compensation rate under Labor Code section 515.7(b)(1). The
minimum compensation rate of pay for per course or laboratory compensation is for course-
related work only. Employees will be compensated separately for other non-course- related
work on behalf of the employer. This separate compensation does not affect the employee’s
classification as a professional exempt employee.
54.10.8 Registered Nurses And Pharmacists . The special treatment for registered nurses an d
pharmacists is man
dated by the express language of the IWC Orders which provides:
“...pharmacists employed to engage in the practice of pharmacy, and registered nurses employed
to engage in the practice of nursing, shall not be considered exempt professional employees, nor
shall they be considered exempt from coverage for the purposes of this subs ection unless they
individually meet the criteria established for exemption as executive or administrative
employees.”
54.10.9 Thus, generally, provisions in the CFR notwit hstanding, under California law registered
nurses and pharmacis
ts are ineligible for the "learned or artistic" professional exemption.
(See also, Labor Code §§ 515(f)(1); 1186)
54.10.9.1 Advanced Practice Nurses . As mentioned above, however, three classifications of
advanced practice
nurses may no w be exempt if they meet the test for professional
exemption. The amendment of Labor Code § 515 had the effect of allowing certified nurse
midwives, certified nurse anesthetists, and certified nurse practitioners who otherwise meet
the requirements for the “learned professional” exemption, to be exempt. In order to meet
the test for exemption, the three listed categories of nurses must be “primarily engaged in
performing duties” which their particular certification allows, as well as meeting the other
tests for the professional exemption. In other words, simply because a nurse is certified as a
nurse midwife, a nurse anesthetist, or a nurse practitioner under the applicable Business and
Professions Code Sections does not, automatically, exempt the nurse from overtime; he or
she must also be primarily engaged in performing the duties of that exemption and meet the
other requirements of the professional exemption such as the salary test.

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55 IWC DEFINITIONS.

55.1 Sectio n 2 Of The Orders. The IWC has retained the meanin g of most of the well
know n definiti ons from pr
eviou s Orders . However , as outline d below , ther e have been
some add ition s and amendme n ts to the definitions.
55.2 Definitio n Of “Employer”. The definitio n of employe r for purpose s of Californi a’s
labor laws is set forth i
n the Wage Orders promulgate d by the Industria l Welfare
Commission : To employ under the IWC definitions has three alternative definitions.
“It means (a) to exercise control over the wages, hours or working
conditions, or (b) to suffer or permit to work, or (c) to engage, thereby
creating a common-law employment relationship.” Martinez v Combs
(2010) 49 Cal.4th 35

55.3 Codified Definition of “Personal Attendant”
Effective January 1, 2014, AB 241 added Labor Code sections 1450- 1454 which created a
special statuto
ry scheme for regulating protections for domestic work employees, referred
to as the “Domestic Worker Bill of Rights.” More specifically, AB 241:
Modifies the previous law in Wage Order 15 by statutorily providing for
overtime protec
tions for a domestic worker who is a personal attendant.
(Labor Code sec. 1454) This new right provides that “[a] domestic work
employee who is a personal attendant shall not be employed more than nine
hours in any workday or more than 45 hours in any workweek unless the
employee receives one and one -half times the employee’s regular rate of pay
for all hours worked over nine hours in any workday and for all hours worked
more than 45 hours in the workweek.”
Creates a definition of babysitter separate from a personal attendant
Provides specific exclusions from the definition of “domestic work employee,”
and “domestic wo
rk employer.”
The new law imposes personal liability on corporate officers or executives
because it specif
ically defines a “domestic work employer” to include both
corporate officers or executives, “who directly or indirectly, employ or
exercise control over the wages, hours, or working conditions of a domestic
work employee.” (Labor Code sec. 1451(c)(1).)
Domestic Work Defined “ means services related to the care of persons in private
households or mainte
nance of private households or their premises . Domestic work
occupations include childcare providers, caregivers of people with disabilities, sick
convalescing, or elderly persons, house cleaners, housekeepers, maids and other
household occupations.” (Labor Code sec. 1451(a)(1).)

Domestic Work Employee Defined: The definition of a domestic worker for purposes
of California’
s labor laws is “an individual who performs domestic work and includes
live-in domestic work employees and personal attendants.” (Labor Code sec
1451(b)(1).)

EXCLUSIONS: Domestic work employee does not include any of the following:

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a. Any person who performs services through the IHSS program;
b. Any person who is the parent, grandparent, spouse, sibling, child or legally
adopted child of the dom
estic work employer;
c. Any person under 18 years of age employed to care for a minor child of the
domestic work e
mployer in the employer’s home;
d. Any person employed as a casual babysitter for a minor child in the domestic
employer’s ho
me. Casual babysitter is defined as irregular or intermittent
employment not performed by an individual whose vocation is babysitting.
This exemption also retains the right of an adult casual babysitter to payment
of minimum wage for all hours worked, pursuant to wage order 15. This
exemption does not apply to an adult casual babysitter who does a significa nt
amount of work other than supervising, feeding and dressing a child. If the
exemption does not apply, then overtime is due for all hours over 8 in a day
and 40 in a week.
e. Any person employed by a licensed healthcare facility, as defined in Section
1250 of the Health and S
afety Code.
f. Any person employed pursuant to a voucher issued through a regional center
or who is employe
d by, or contracts with, an organization vendored or
contracted through a regional center or the State Department of Developmental
Services pursuant to the Lanterman Developmental Disabilities Services Act
or the California Early Intervention Services Act to provide services and
support for personas with developmental disabilities, when any funding for
those services is provided through the State Department of Developmental
Services.
g. Any person who provides child care and who pursuant to sec. 1596.792 of the
Health and Safety
Code is exempt from licensing requirements of the Health
and Safety Code, if the parent or guardian of the child whom child care is
provided receives child care and development services pursuant to any
program authorized under the Child Care and Development Services Act of
the Education Code or the California Work Opportunity and Responsibility to
Kids Act of the Welfare and Institutions Code.
Domestic Work Employer Defined : “a person, including corporate officers, or
executives, who di
rectly or indirectly, or through an agent or any other person, including
through the services of a third party employer, temporary service, or staffing agency or
similar entity, employs or exercises control over the wages, hours or working condition
of a domestic work employee.” (Labor Code sec. 1451(c)(1).)

EXCLUSIONS: Domestic work employer does not include any of the following:
a. Any person or entity that employs or exercises control over the wages, hours,
or working condit
ions of an individual who performs domestic work services
through the IHSS program or who is eligible for the IHSS program;
b. A referral employment agency who meets all the requirements of the civil
Code as solely
a referral agency;
c. A licensed health facility.

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Personal Attendant Defined: Any person employed by a private householder or by any third-
party employ
er recognized in the health care industry to work in a private household, to supervise,
feed, or dress a child, or person who by reason of advanced age, physical disability, or menta l
deficiency needs supervision. The status of personal attendant shall apply when no significant
amount of work other than the foregoing is required.

Definition of “Significant Amount Of Work ”: For purposes of defining the term “significant
amount of work” as
used in the definition of “personal attendants”, DLSE uses the same
quantitative test as the federal government (20%) but the language of the California definition
concerning the qualitative (duties) test differs from that of the federal regulation. California law
requires that performance of any significant amount of work other than supervising, feeding or
dressing will defeat the exemption. In other words, any cooking, cleaning, laundering, shopping,
etc., will be counted as other work. (O.L. 1994.10.03-2) This enforcement provision has now been
codified at Labor Code Section 1451(d).

Those falling outside Domestic Workers Bill of Rights are subject to the requirements
of the wage ord
ers. IWC Order 5-2001 provides:

N) “Personal attendant” includes baby sitters and means any person employed by a
non-profit organi
zation covered by this order to supervise, feed or dress a child or
person who by reason of advanced age, physical disability or mental deficiency needs
supervision. The status of “personal attendant” shall apply when no significant amount
of work other than the foregoing is required.

While at IWC Order 15-2001 defines personal attendant as follows:
(J) “Personal attendant” includes babysitters and means any person employed by a
private househ
older or by any third party employer recognized in the health care
industry to work in a private household, to supervise, feed, or dress a child or person
who by reason of advanced age, physical disability, or mental deficiency needs
supervision. The status of “personal attendant” shall apply when no significant amount
of work other than the foregoing is required.

55.3.1 Note: Under Order 15, the definition of personal attendant is similar to that in Order 5 except that
it covers “a per
son employed by a private householder or by any third party employer recognized
in the health care industry to work in a private household” instead of “persons employed by non-
profit organizations” as provided in Order 5.

55.3.2. Under Order 5, personal attendants are covered by most of the protections offered by the IWC
Order, but are ex
cluded from the overtime provisions. (See Section 3(E) of Order 5-2001)

55.3.3 Under Order 15, personal attendants who are exempt from AB 241 Labor Code sections 1450 –
1454 “Domestic Wor
ker Bill of Rights are not afforded most of the protections offered by the
Order, except for minimum wa ge and “babysitters” (defined as “any person under the age of
eighteen who is employed as a babysitter for a minor child of the employer in the employer’s
house” ) are not covered at all.

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55.4 “Health Care Emergency”. The IWC defines this term to mean an event which “consists of an
unpredictable or una
voidable occurrence at unscheduled intervals relating to health care delivery,
requiring immediate action.”
55.5 “Health Care Industry”. This term is defined as “hospitals, skilled nursing facilities,
intermediate care an
d residential care facilities, convalescent care institutions, home health
agencies, clinics operating twenty-four (24) hours per day, and clinics performin g surgery, urgent
care, radiology, an esthesiology, pathology, neurology or dialysis.”
55.5.1 Note that the term “clinics” is actually defined in two different ways. The term includes facilities
“operating twen
ty-four (24) hours per day” and facilities “performing surgery, urgent care,
radiology, anesthesiology, pathology, neurology or dialysis.” If either one of the definitions
apply, the clinic would be considered part of the “Health Care industry”.
55.5.1.1 Under the recently adopted definition of “Health Care Industry” the term “clinic” does not apply
to a physician’
s office unless that office meets the requirements of a “clinic” under either of the
definitions listed.

55.6 “Employees In The He alth Care Industry.” To meet the definition of an employee in the
Health Care Industry
, one must (1) provide patient care; or (2) work in a clinical or medical
department (including pharmacists dispensing prescriptions in any practice setting), or (3)
work primarily or regularly as a member of a patien t care delivery team. Th e term also
includes “licensed veterinarians, registered veterinary technicians and unregistered animal
health technicians providing patient care .”
55.7 Hours Worked. The definition of “hours worked” has ramifications not only in dealing
with the question of whether
the employee is eligible to be employed on a 12-hour alternative
workweek applicable only to workers in the Health Care Industry, but also impacts on the
definition of the term “hours worked” which is to be applied to an employee in the Health
Care Industry in Orders 4-2000 and 5-2000. Inasmuch as the definition of “hours worked”
under the less-stringent federal definition is an exception to the common definition of that
term in California, and since exceptions to remedial legislation are to be narrowly construed,
the federal definition of “hours worked” will only be applied to “employees in the Health
Care Industry” as that term is defined by the IWC. (See Section 46 of this Manual for detailed
discussion of “Hours Worked”.)
55.8 “Workday” And “Workweek”. The terms “workday” and “workweek” have been altered;
but the changes are not
substantive. A workday is still a 24-hour period beginning at the
same time each calendar day; and a workweek is still a “fixed and regularly recurring period
of 168 hours, seven consecutive 24-hour periods.”
55.9 “Outside Salesperson”. The IWC concluded that under most of the Orders, there was no
reason to amend the definition
of the term “outside salesperson”. However, for purposes of
Order 16-2000 only, the IWC further narrowed the exemption to explicitl y exclude an y
employee who m akes deliveries or service calls for the purpose of installing, replacing,
repairing, removing, or servicing a product.
55.10 The IWC noted in its Statement As To The Basis of Order 16, that it intended that this

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exception is to be construed narrowly, as a determination that an employee is an outside
salesperson depri
ves that employee of the protections of the wage orders and other provisions
of the Labor Code.
55.11 Order 4-2001 Applicability. The IWC deleted the language in the Applicability Section of
Order 4 which provided
that the provisions of that order apply to the occupations covered
“unless such occupation is performed in an industry covered by an industry order of this
Commission...” No reason was given for the revision of the language and DLSE takes the
position that it was simply an oversight by the Commissio n since that long established
position is the essence of the occupation orders and had the Commission intended that the
provisions of Order 4 apply to those named occupations when the employee is engaged in
work covered by an industr y order, they woul d have so stated (e.g., O rder 16-2001,
Applicability, Section 1(F)).

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56 ALTERNATIVE WORKWEEK ARRANGEMENTS
56.1 Both The Labor Code And The IWC Orders Provide For Alternative Workweek
Arrangements. La
bor Code § 511 and most of the current IWC Orders provide for
alternative wo
rkweek schedules similar to, but not exactly the same as, those provided
in the past wage orders. Note, however, there are differences within the Orders and
among the industries covered by the specific Orders both in the schedules which may be
adopted and in the Election Procedures which are to be utilized. Co nsequently, a very
careful review of the provisions of both the IWC Orders and the Labor Code sections
must be made in order to understand the alternative workweek rules.

56.2 Not All IWC Orders Provide For Alternative Workweek Arrangements.
Alternative workweeks are provided for in Orders 1-13, 16 and 17. Note, however, that
there are different
rules to be applied depending upon which Order is applicable to the
employee(s).

56.2.1 Orders 14-2001 and 15-2001. Alternative workweek arrangements are not provided for
under Orders 14 (Agric
ultural Occupations) and 15 (Household Occupations).

56.2.1.1 Order 14. Order 14 never contained an alternative workweek provision. However, AB
1066 (2016) removed the
previous provision in Labor Code § 544 which provided that
none of the provisions of the Chapter, except Labor Code § 558, applied to agricultural
employees. As stated in Labor Code § 861, all overtime provisions in Labor Code
Division 2, Part 2, Chapter 1 (commencing with section 500) not subject to the overtime
phase-in began to apply to agricultural workers covered by Order 14 on January 1, 2017.
This includes the alternative workweek provisions of Labor Code § 511.

56.2.1.2 Order 15 Employees and Order 14 Employees are now both subjec t to the general
provisions cont
ained in Labor Code § 511. Orders 14 and 15 do not define the term
“alternative workweek schedule” as “ any regularly scheduled w orkweek requiring an
employee to work more than eight (8) hours in a 24-hour period”; the Orders do not
provide any of the procedures for implementing such an alternative, nor do the Orders
further delimit the term. It should be noted that Orders 14 and 15 never provided an
alternative workweek option; however, since Labor Code § 511 now provides that
employers may propose alternative workweek schedules and since Labor Code § 511
does not in any way limit the schedules to any group of employees it would be
permissible to propose an alternative workweek per Labor Code § 511 for employees
covered by Orders 14 and 15.
56.3 All Wage Orders except 14 and 15 specifically allow regularly scheduled alternative
workweek schedu
les.

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56.3.1 12-Hour Day Limit. The alternative workweek arrangements, generally, may comprise
of workdays not exceed
ing twelve (12) hours. However, any work time more than ten
(10) hours per day is subject to overtime premium pay. Mitchell v. Yoplait (2004) 122
Cal.App.4th Supp 8.

56.3.2 Employees In The Health Care Industry: Up To 12-Hour Days. Orders 4 and 5 allow
employees in the H
ealth Care Industry (as that term is defined at Section 2(G) of Orders
4- and 5-2001) to agree to an alternative workweek of up to 12- hour days without the
requirement to pay overtime premium pay for any hours up to 12. (See Section 55.5 of
this Manual for a discussion of the definition of Health Care Industry.)

56.3.3 Except Under Order 16-2001, Workdays Within Alternative Workweek Must Be
At Least Four Hours. The
alternative schedule (except under Order 16-2001 which
does not contain a minim
um number of hours) must provide at least four hours of work
in any scheduled work day in the alternative workweek.

56.4 Requirement That Alternative Workweek Schedule Provide For Two
Consecutive
Days Off Retained In Most Orders . The IWC retained the requirement
contained in pre
vious Orders that alternative workweek schedules must provide for two
(2) consecutive days off in Orders 1, 2, 3, 6, 7, 8, 11, 12, and 13.

56.5 No Requirement For Two Consecutive Days Off For Employees Working An
Alternative Wor
kweek In Orders 4, 5, 9, 10, 14, 15, and 16. These Orders do not
contain the requir
ement that the alternative workweek schedules provide for two (2)
consecutive days off.

56.6 Some Workers Employed In Occupations Covered By Order 16-2001. Employees
working in offshore oil
and gas production, drilling, and servicing occu pations, as
well as employees working in onshore oil and gas separation occupations directly
servicing offshore operations may adopt an alternative workweek schedule of up to
twelve (12) hours per day. (Order 16-2001, Section 3(B) (1) (h)).

56.7 Election Procedures . The IWC has adopted detailed procedures to be followed for
the adoption and repeal
of alternative workweek schedules. (IWC Orders, Section
3(C)). There are slight variations in the election procedures required under Order 16-
2001 and those variations are discussed starting at Section 56.8.4, below.

56.7.1 Alternative Workweek Written Agreement Must Be Proposed By Employer. A
proposal for an alt
ernative workweek must be in the form of a written agreement which
is submitted to the employees by the employer.

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56.7.2. Proposal Must Designate A Regularly Scheduled Alternative Workweek Of A
Specified Number
Of Regularly Recurring Work Days. The employer’s proposal
for an alternat
ive workweek schedule must designate the number of days in the
workweek and the number of hours in the work shift. (IWC Statement of Basis) Section
3(C)(1) of the Orders allows the employer to propose a menu of options which will suit
the employer’s business needs so long as the proposal clearly provides a specified
number of regularly recurring work days and the number of hours in the work shift.
The IWC Orders do not require a proposal to designate the starting and ending time of
the shifts which will be available during the alternative workweek. Two examples of
acceptable regularly scheduled alternative workweeks:
a) a 3/12 and 1/4
workweek;
b) a 4/10
wor
kweek.

56.7.2.1 Choice From Menu Of Options. The IWC recognized that employers with a large
number of employe
es and multiple shifts have the freedom to propose a workweek
schedule to be voted on which provides a menu of options outlining the number of days
and the hours in the work shift in the proposed alternative workweek “from which each
employee in the unit would be entitled to choose. Such choice may be subject to
reasonable nondiscriminatory conditions, such as a seniority -based system or a system
based on random selection for selection of limited alternative schedules, provided that
any limitation imposed upon an employee’s ability to choose an alternative schedule is
approved as part of the two-thirds vote of the work unit.” (Statement As To The Basis)

56.7.2.2 Note: The menu options cannot offer a regular 8- hour day since that is not an alternative
workweek. (Labor
Code § 500(c)). However, accommodation of any employee who is
unable to work the alternative schedule is an option after the vote.

56.7.2.3 Example Of Menu Option: An employer proposes a 4/10 workweek with shifts to cover
an around-the-clock
operation. Employees would have the r ight to choose which shift
they wish to work, “subject to reasonable nondiscriminatory conditions, such as a
seniority -based system or a system based on random selection…” (Statement As To The
Basis)

56.7.2.3.1 Note. Unless the employees are allowed to freely choose the shift they will work, they
would have to
be advised of the fact that each shift is limited as to the number who may
choose that shift and, further, be made aware of the “nondiscriminatory” method to be
utilized in assigning the employees to a particular shift.

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56.7.2.4 An Alternative To A Menu Of Work Schedule Options. If it is impractical to allow
the employees
to choose among work schedule options even with the use of reasonable
nondiscriminatory conditions, the employer may propose more than one alternative
workweek schedule by dividing the workforce into separate work units, and proposing a
different alternative workweek schedule for each unit.
56.7.2.5 Example Of A Proposed Alternative Workweek Without Menu Options: An
employer employ
ing workers seven days a week, may, for instance, propose a number
of 10- hour, four-day work schedules by dividing the employees into separate work
units. “This method would inform each employee of exactly which schedule would be
adopted by the election.” (Statement As To The Basis).
56.7.2.6 (Eliminated 1/30/07)
56.7.2.7 Regular Schedule. The schedule of work options language of Labor Code section 511(a)
does not allow a situ
ation where the employee may opt to work an alternative workweek
or a normal workwee k on an irregular basis for that would not meet the criteria of
“regularly scheduled.”
56.7.3 Regular Alternative Schedules Need Not Always Be Four 10- Hour Days. An
alternative wor
kweek schedule may be any combination of hours up to twelve (12) hours
per day within a workweek as long as the overtime premium is paid for all hours over ten
(10) in a day and over fort y (40) in a workweek. Mitchell v. Yoplait (2004) 122
Cal.App.4th Supp 8. For instance, a workweek of four days of nine (9) hours and one
day of four (4) hours would be valid. Also valid would be a workweek of three (3)
days of twelve (12) hours and one day of six (6) hours as long as the employer paid time
and one-half overtime premium pay for six (6) hours each week. The schedules must be
consistent; but may differ from one workweek to the next if the schedule is a regularly
recurring one. For instance, an alternative workweek schedule which provides that in
the first week the employer works Monday through Thursday and in the second week
works Tu esday through Friday would b e valid so long as the schedule is regular and
recurring.
56.7.3.1 Nine/Eighty Schedule. A common alternative workweek schedul e involve s a
workweek which runs from
Friday at noon to the following Friday at noon (a total of 168
hours) with the daily schedule 8 a.m. to 5:30 p.m. (with a half- hour meal period at
noon). The employee is scheduled for nine (9) hours per day on Monday through
Thursday and eight (8) hours on every other Friday (8:00 a.m. to 4:30 p.m. with a half-
hour meal peri od at noon). This schedule will result in four nine (9) hour days and one
four (4) hour day each week. (O.L. 1991.06.19)
56.7.3.1.1 Note: The 9/80 schedule will not work if any day scheduled is less than four hours.
However, that shoul
d not present a problem since, as discussed below, each of the Orders
except 16-2001 require a four-hour minimum be scheduled for any day within an
alternative workweek.

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56.7.4 Overview Of Alternative Workweek Requirements.
ORDER NUMBER

Alternative Workweek Procedures
Provided in Order

12-Hour Day Limit (Health Care Workers,
Offshore Oil and Gas Workers

Four-Hour Minimum Day Requirement

Two Consecutive Days Off Required in
Workweek

Special Rules for Pre-Existing Alternative
Workweek Arrangements

Special Definition of Unit

x
Special Rules on Repeal

56.7.4.1 Deputies are strongly advised to use the above table as a guide only. A thorough reading
of the Alterna
tive Workweek Arrangement language in each of the Orders and utilization
of the detailed explanations in this Manual are required in order to understand and enforce
the provisions.
56.8 Alternative Workweek Elections Must Meet Criteria Set Out In IWC Orders In
Order To Be Valid.
It is very important to note that the IWC Orders state that:
“[I]n order to be valid, the proposed alternativ e workweek schedule must be
adopted in a secret ballot election, before t he performanc e of work, by at least a
two -third s (2/3) vote of the affected employees in the work unit. The election
shall be held during regular working hours at the employees ’ work site.”
56.8.1 Two -Thirds Of Affected Employees Must Vote In Favor Of Adoption Of The
Alternative W
orkweek. The election is limited to the employees in the affected work
unit and at least two-
thirds of those must vote in favor of the alternative workweek.
56.8.2 Affected Employees. “For purposes of this subsection, ‘affected employees in the work
unit’ may include all emp
loyees in a readily identifiable work unit, such as a division, a
department, a job classification, a shift, a separate physical location, or a recognized
subdivision of any such work unit. A work unit may consist of an individual employee as
long as the criteria for an identifiable work unit in this subsection are met.” (IWC Orders,
Section 3(C)(2)).
56.8.3 Note Regarding Vote: The language of both the statute and the Orders clearly requires
that the number of v
otes in favor of adoption must be two-thirds of the affected workers.
Thus, it is not two-thirds of the affected workers who voted that will determine the result.
A worker not voting in effect votes no.

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56.8.4 Order 16 -2001. The scope of the term “affected employees” is narrowed for workers
employed in occ
upations covered by Order 16-2001. The definition of the term “work unit”
(Order 16-2001, Section 2(U)) for Order 16 purposes only, means affected employees will
only include “all nonexempt employees of a single employer within a given craft who share
a common work site.” Thus, not all carpenters employed by a single employer may be
eligible to vote on an alternative workweek arrangement. The workers must not only share a
craft, but also a work site. Order 16 further provides that “A work unit may consist of an
individual employee as long as the criteria for an identifiable work unit in this subse ction is
met.”

56.8.5 Order 16-2001 Affected Employees Eligible To Vote Includes Workers Not On The Job
Site On Election
Day. Those workers employed in occupations covered by Order 16-2001
who are otherwise
eligible and who are not on the job site on the day of the election must be
notified and allowed to vote in any election for an alternative workweek if such worker has
been employed in the affected work unit within 30 calendar days immediately preceding the
election.

56.8.5.1 Specific Language Regarding Elections Under Order 16 -2001. DLSE is aware of th e
language use
d by the IWC in Order 16-2001 regarding balloting. (IWC Order 16-2001,
Section 3(C)(2)) The language appears to require that ballots must be mailed to the last
known address of any employee who meets the criteria of that section who is not present on
the work site on the day of the election. Literal enforcement of the language as written
would, of course, preclude the electio n from being final on the day se t for the vote. In
addition, the language does not set a date after the ballots have been mailed out to those
workers who were not present for the return of the completed mailed ballots. The IWC does
not explain this seeming inconsistency in the Statement As To The Basis for Order 16-2001.

56.8.5.2 IWC Intended To Address Fluctuating “Manning” Situations In Order 16-2001. DLSE
understands that the
Wage Board which negotiated the language in Order 16 was concerned
that employers might “man-up” or “ man-down” (i.e., hire more help or lay off help) in order
to affect an election for an alternative workweek. (Transcript o f Wage Board meeting of
August 17, 2000, pages 7-17) Significant fluctuations in the number of employees on these
job sites are not uncommon (IWC meeting of January 28, 2000, pages 242-243, comments of
Commissioner Barry Broad in making the charge to the On-Site Wage Board) and it would
be difficult to differentiate between mannin g (or staffing) based on busine ss needs and
manning fluctuations designed to affect an election.

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56.8.5.3 DLSE Finding Regarding Order 16 Requirements . DLSE finds that interpreting the
provisions of Order
16 to require that the employer must wait until the date of the election
to determine who did not vote before sending out notice to all affected employees would not
further any of the objectives the IWC intended. In addition, DLSE finds that reading IWC
Order 16-2001, Section 3(C)(3) along with the provisions of Section 3(C)(2) leads to the
conclusion that the IWC did not intend that the employer must wait until the date of the
election to determine which employees would not vote.
56.8.5.4 Enforcement Policy Concerning Election Under Order 16 -2001. For purposes of
enforcing the provi
sions providing for an election for alternative workweeks under Order 16-
2001, the DLSE will require that the employer must, in good faith and at least 14 days prior
to the scheduled election, notify (at their last known address) all workers wh o would be
eligible to vote under the criteria set out in the Order (i.e., employed on the job site by the
employer within 30 calendar days immediately preceding the election) of the date, time
and place of the election and furnish all such em ployees with a ballot to be brought to the
election site on the date and at the time set for the election. Th e employer shall bear the
burden of proof that good faith efforts have been utilized to effect the notice and the delivery
of ballots. Failure to show that good faith efforts have been utilized in informing all eligible
workers will void the election.
56.9 Election Must Be Held During Working Hours And At The Employees’ Work Site.
The IWC Orders provide that “[t]he election shall be held during regular working hours at
the employees’ work site.”
Recognizing that some employees of a single employer in the on-
site occupations covered by Order 16 may be eligible to vote on one particular job site while
currently assigned to another job site, DLSE concludes that this language requires and it was
the intent of the IWC that each employee currently employed by the employer and eligible
to vote must have the opportunity to vote without loss of pay. If necessary, the employer
must provide any current employee of the employer transportation to the work site where the
election is held and must pay for the time reasonably lost by the employee in voting during
working hours.
56.10 Written And Oral Disclosure Of Effects Of Alternative Workweek . The employer must
advise the empl
oyees, at a meeting held at least fourteen (14) days prior to the voting, of the
effects on the wages, hours, and benefits adoption of the alternative workweek will have up
on the affected employees. In addition, the employer must provide that disclosure in a written
form in both English and, if more than five percent of the affected employees primarily speak
a language(s) other than English then in that/those language(s) as well. The employer must
mail the written disclosure to affected employees who do not attend the meeting referred to
above.

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56.10.1 Failure Of Employer To Meet The Disclosure Requirements Set Out In The IWC
Orders Will Make
The Election Null And Void. An y fa ilure to comply with th e
disclosure requ
irements set out in the IWC Orders will result in the election being null and
void. (IWC Orders, Section 3(C)(3)) If the election is null and void any alternative workweek
established based on that election is void abinitio and the employer must pay the premium
overtime for any hours after eight (8) hours in any workday.
56.11 Employer May Not Reduce An Employee’s Regular Hourly Rate Of Pay As A Result
Of Adoption
, Repeal Or Nullification Of An Alternative Workweek Arrangement. An
employer may
not reduce an employee’s regular rate of hourly pay as a result of the
adoption, repeal or nullification of an alternative workweek schedule. (IW C Orders
generally, Section 3(B)(4); IWC Orders 4-2000 and 5-2000, Section 3(B)(3); IWWC Order
16-2001, Section 3(B)(1)(d)) (O.L. 2002.01.21 and 2002.05.22)
56.11.1 Unilaterally Imposed Alternative Workweek Schedules . DLSE has been asked to
respond to a num
ber of questions regarding the validity of plans unilaterally instituted by
employers which require employees to work regular schedules of more than eight hours in
a day. In these situations, no proposed alternative workweek was presented by the employer
for adoption by the employees; instead, the employer simply instituted a “regularl y
scheduled workweek requiring an employee to work more than eight hours in a 24-hour
period.” (See Labor Code § 500(c) defining “alternative workweek schedule.”) The DLSE
has opined that while there is no prohibition placed on an employer who would require
employees to work extended hours in a workday or workweek so long as th e premium is
paid on the employee’s regular rate of pay for all overtime hours, an employer mandated
“alternative workweek” which requires more than eight hours in a workday and reduces the
regular hourly pay of the worker in order to escape the obligation of paying a premium for
those extra hours is against public policy as announced by the California Legislature. (O.L.
2002.1.21 and 2002.05.22).
56.12 Employer Must Bear The Cost Of Conducting Any Election In Connection With An
Alternative Wo
rkweek. The employer is obligated to bear all of the costs of conducting
any election called for
in connection with an alternative workweek arrangement. This
includes not only the original election proposed by the employer, but any election allowed
by Labor Code § 511 or the Orders to decertify or repeal the alternative workweek.
56.13 Employers Are Prohibited From Intimidating Or Coercing Employees Regarding
Elections . Emp
loyers may not intimidate or coerce employees to vote either in support of
or in opposition
to a proposed alternative workweek. An y discrimination against any
employee for expressing opinions or for opposing or supporting the adoption or repeal of an
alternative workweek is illegal. Any violation of these rights is subject to Labor Code §
98 et seq (IWC Orders generally, Section 3(C)(8)).

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56.13.1 Investigation of allegations involving intimidation, coercion or any other irregularity in the
election process are
handled pursuant to the procedures set out in Labor Code § 98.7 (See
also, Section 56.22 of this Manual).
56.13.2 Note : The employer is not prohibited from exercising his or her free speech in connection
with the alternative wo
rkweek election. So long as the employer does not engage in
coercion or intimidation, he/she is not prohibited from expressing an opinion on the
alternative workweek.
56.14 Existing Alternative Workweek Arrangements Adopted Prior To 1998. Labor Code §
511 provides, inter a
lia, that under certain circumstances Alternative Workweek
Arrangements adopted prior to the effective date of th e statute will remain valid while others
are declared invalid. The IWC adopted these special rules to apply to any Alternative
Workweek Arrangement adopted:
1. In a secret ballot election held pursuant to Orders 1-13 only, and;
2. If the election was held prior to 1998 or conducted since 1998 if the election was held under
the rules in ef
fect prior to 1998, and;
3. The election was held before the performance of any work
Alternative Work week Arrangements meeting these requirements shall remain valid after
July 1, 2000, provided that the results of the election are reported by the employer to the
Division of Labor Statistics and Research by January 1, 2001, in accordance with the
requirements of Section 3(C)(6) of the Orders (Election Procedures). New arrangements
must be entered into pursuant to the provisions of Section (C) of the Orders.
56.14.1 Note: Alternative workweek arrangements adopted between January 1, 2000 (when AB
60 became effective) and
October 1, 2000 (when the new wage orders pursuan t to Labor
Code § 517 became effective) must have complied with the procedures for adoption of
alternative workweek schedules in effect in pre-1998 wage orders. DLSE’s position in this
matter is based on the language used by the IWC in the Statement As To The Basis included
in the Interim Order which states that the Order is consistent wit h previously published
enforcement policies. In addition, the legislative intent which was contained in AB 60 and
published in the Labor Code which states, inter alia, “Sec. 21. Wage Orders number 1-98, 4-
98, 5-98, 7-98, and 9-98 adopted by the Industrial Welfare Commission are null and void,
and Wage Orders 1-89, 4-89 as amended in 1993, 5-89 as amended in 1993, 7-80, and 9-90
are reinstated until the effective date of wage orders issued pursuant to Section 517.”
56.15 Special Rules Covering Alternative Workweek Arrangements Under Orders 4 - and
5-2001. Labor Code § 511(g)
allowed 12- hour alternative workweeks in the Health Care
Industry whic
h had been adopted pursuant to Orders 4 and 5 prior to 1998 or under the rules
contained in Orders 4 and 5 effective prior to 1998, to remain in effect until July 1, 2000.

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The IWC allows these 12 -hour Alternative Workweek Arrangements in the H ealth Care
Industry to continue
(see IWC Orders 4- and 5- 2000, Sections 3(C)(8)). However, the
agreement must meet the following criteria:
1. The 12-hour Alternative Workweek was adopted in a secret ballot election held pursuant to
the rules in Orders 4 or 5, and;
2. If the election was held prior to 1998 or conducted since 1998 if the election was held under
the rules in effect prior to 1998, and;
3. The election was held before the performance of any work, and;
4. The employer makes a reasonable effort to find another work assignment for any employee
who participated i
n the valid election prior to 1998 and who is now unable to work the
alternative workweek schedule, and,
5. If, since October 1, 1999, an employer implemented a reduced pay rate for employees
choosing to work 12-ho
ur shifts, the employer must pay a base rate to each affected employee
in the work unit that is no less than that employee’s base rate in 1999 immediately prior to the
date of the rate reduction.
56.16 Serious Violation Of Election Procedures, Order 16. Under the provisions of Order 16-
2001, the Labor Comm
issioner is specifically granted authority to declare the election null
and void in the event of a “serious violation” involving intimidation, coercion or
discrimination connected with alternative workweek elections. (IWC Order 16-2001, Section
3(C )(7))
56.17 Employee Petition To Repeal An Alternative Workweek Arrangement . Any type o f
alternative workw
eek schedule that is authorized by the Labor Code may be repealed by the
affected employees upon a petition signed by one- third (a) of the affected employees and
presented to the employer.
56.17.1 Note: Th e requirement that only one- third (a) of the affected employees need petition in
order to requi
re an election to repeal the alternative workweek is different from that required
in most of the old Orders (IWC Orders 2, 3, 6, 7, 8, 11, 12 and 13 first promulgated in 1980
required a two-thirds (b) majority) The one-third requirement is now applicable to all Orders.
56.17.2 New Secret Ballot Election Upon The Question Of Repeal. In the event that the requisite
one-third (a) of the affe
cted employees sign the petition the employer must schedul e an
election to be held within thirty (30) days of the date the petition is presented to the employer.
Again, the same procedures apply to the election to repeal the alternative workweek as apply
to the original alternative workweek election.
56.17.3 Two-Thirds Majority Needed To Repeal Alternative Workweek . As with the original
election, a two-th
irds (b) vote of the affected employees is required to reverse the alternative
workweek schedule. (IWC Orders generally, Section 3(C)(5))

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56.17.4 Elections To Repeal May Be Held Not More Often Than Once Every Twelve Months
(Six Months U
nder Order 16 -2001) The election to repeal the alternative workwee k
schedule or t
o adopt a new alternative workweek must be held not more than 30 days after
the petition is submitted to the employer, except that the election shall not be held less than
twelve (12) months (six (6) months under Order 16-2001) after the date that the same group
of employees voted in an election held to adopt or repeal an alternative workweek schedule.
(IWC Orders generally, Section 3(C)(5 ))
56.17.5 Special Rule For Certain Existing Alternative Workweek Arrangements Under
Orders 4-2000 and 5-2000.
Where an alternative workweek schedule was adopted between
October 1, 1999 and the effective d
ate of Orders 4-2000 or 5-2000, a new secret ballot
election to repeal that alternative workweek schedule shall not be subject to the 12-month
interval between elections. (IWC Orders 4-2000 and 5-2000, Section 3(C)(5))

56.17.6 Employer Must Comply With Revocation Or Repeal Of Alternative Workweek Within
Sixty (60) Days. If the alte
rnative workweek schedule is revoked, the employer shall
comply within sixty
(60) days. Upon proper showing of undue hardship, the Division of
Labor Standards Enforcement may grant an extension of time for compliance. (IWC Orders
generally, Section 3(C)(5))
56.17.6.1 In the event an employer seeks a grant of extension from the DLSE, an investigation must
be held to de termine
whether, in fact, a hardshi p exists which would warrant such a n
extension.
56.17.7 Alternative Workweek Schedules Repealed Under Order 16 -2001. Order 16-2001 does
not contain the lan
guage allowing an employer sixty days to comply with the repeal of the
alternative workweek schedule. However, The Statement As To The Basis issued with Order
16-2001 indicates that it was the intent of the Commission to include the language found in
Orders 1 through 13. (Statement As To The Basis, Order 16-2001)

56.17.8 Employee Not Required To Work Adopted Alternative Workweek Schedule Until 30
Days After Ann
ouncement Of Result Of Election . Employees affected by a change in
work hours resulting from the adopti
on of an alternative workweek schedule are not required
to work those new work hours for at least thirty (30) days after the announcement of the final
results of the election. (IWC Orders generally, Section 3(C)(7))
56.18 Religious Beliefs Or Observances Of Employee s Must Be Reasonably Accommodated
When Adoptin
g Alternative Workweek Arrangements. The employer must explore any
available reason
able alternative means of accommodating the religious belief or observance
of an affected employee that conflicts with an adopted alternative workweek schedule in
accordance with Govt.Code § 12940(j) (IWC Orders generally, Section (B)(5))

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56.18.1 Govt. Code § 12940(j) requires that an employer must demonstrate that he has explored any
available reasonable al
ternative means of accommodating the religious belief or observance,
including the possibilities of excusing the person from those duties that conflict with his or
her religious belief or observance or permitting those duties to be performed at another time
or b y another person, but i s unable to reasonably accommodate the religious belief or
observance without undue hardship on the conduct of the business of the employer or other
entity covered by this part. Religious belief or observance, as used in the section, includes,
but is not limited to, observance o f a Sabbath or other religious holy day or days, and
reasonable time necessary for travel prior and subsequent to a religious observance.
56.19 Employer Must Make A Reasonable Effort To Accommodate Current Employees
Who Are Unable T
o Work The Alternative Workweek Schedule For Any Reason . If
an employee who was elig
ible to vote in the election which resulted in the adoption of the
Alternative Workweek schedule finds that he or she is unable to work that schedule, the
employer must make a reasonable effort to accommodate that emplo yee. (IWC Orders
generally, Section 3(B)(6))
56.20 An Employer May Provide Alternate Arrangement For Employee Hired After The
Date Of The Elec
tion. An employer may, but is not required to, provide a work schedule
not to exceed eight
hours in a workday to accommodate any employee who was hi red afte r
the date of the e lect ion and who is un abl e to wor k the al terna tive schedul e
established as a re sult of tha t election . (IWC Order s general ly, Sectio n (B)(7))
56.21 Employer Engaged In Operation Of Licensed Hospital Or Providing Personnel For
Operation Of Lic
ensed Hospital Exception. An employer engaged in the operation of a
licensed hospita
l or in providing personnel for operation of a licensed hospital who adopts
an alternative workweek of no more than three (3) twelve -(12) hour days, is not required to
offer a different work assignment to an employee if such work assignment is not available
or if the employee was hired after the adoption of the twelve -(12) hour, three -(3) day
alternative workweek schedule.
56.22 Labor Commissioner May Investigate Employee Complaints Regarding Conduct Of
Any Election He
ld In Connection With An Alternative Workweek . Th e IWC Orders
provide:
“Upon complaint by an affected employee, and after an investigation by the Labor Commissioner,
the Labor Commissioner may require the employer to select a neutral third party to conduct the
election.” (IWC Orders, Section 3(C)(4))

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POLICIES AND INTERPRETATIONS MANUAL
NOVEMBER, 2005 56 – 13

56.22.1 DLSE Interpretation And Enforcement Policy With Regard To Investigation Of
Conduct Of Elec
tion. Clearly, not all problems with elections can be d etected before the
election is held.
DLSE interprets the above language of Section 3(C)(4) of t he Orders to
allow an employee complaint regarding the conduct of the election (including any required
pre-election obligations of the employer) to be filed by an affected employee either before or
after the election is actually held. In the event the investigation by the DLSE finds that the
procedure surrounding the conduct of the election did not meet the requirements of the law,
the DLSE will notify the employer and the employee s of its findings, void the previous
election, and require, in the event a new electio n is proposed by the employer that such
election be conducted by a neutral third party.
56.22.2 DLSE Does Not Have Authority To Set Aside Elections Except As Specifically Provided
In The Orders. The Orde
rs specifically grant the Labor Commissioner authority, in certain
circumstances, t
o remedy what appears to be an unfair election. Given this specific authority,
the rules of statutory construction generally preclude the extensio n of that authority.
However, in the event that an investigation by the Labor Commissioner reveals serious
violations of any o f the election procedures which violations are such that the election was
nothing more than a subterfuge, the investigating Deputy should contact his or her supervisor.
The burden of proving the validity of the election which adopts an alternative workweek is
on the employer who proposes to institute the alternative to the normal eight-hour day.
56.23 After The Election. In the event the employees adopt the four-day, ten-hour schedule, the
employer must the
n assign each of the employees a regularly-scheduled alternative shift in
which the “actual work days and the starting and ending time of the shift” is provided in
advance. (Statement As To The Basis)

56.23.1 Occasional Changes In Schedule. The IWC has concluded that the employer must provide
the employees wi
th reasonable notice of any changes in the days or hours scheduled.
Changes in the schedule are limited to “occasional” occurrences. (Statement As To The
Basis). More frequent changes will result in the loss of the exemption from the 8-hour day
requirements of California law.

56.23.2 Reasonable Notice Of Change In Regular Alternative Workweek Schedule. The term
“reasonable notic
e” has not been defined by the IWC. For purposes of enforcement the
DLSE will consider a on e-week notice to be reasonable notice.

56.23.3 Required Premium Overtime In Alternative Workweek Arrangement. The alternative
workweek arrangem
ents adopted pursuant to the provisions in the Orders 1-3, 6-13 and 16
(and all employees subject to Orders 4-2001 or 5-2001 except those employed in the Health

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
NOVEMBER, 2005 56 – 14

Care Industry) must provide that all work in excess of the schedule established by the
agreement and up to twelve (12) hours a day or beyond forth (40) hours per week shall be
paid at one and one- half (1 ½) times the employee’s regular rate of pay. All work performed
in excess of twelve (12) hours per day and any work in excess of eight (8) hours on those
days worked beyond the regularly scheduled number of workdays established by the
alternative workweek shall be paid at double the employee’s regular rate of pay.

56.23.3.1 Employee s In The Health Care Industry who have opted for a 12- hour shift in any one
workday provided un
der Order 4- 2001 and 5-2001 need not be paid a premium rate until
after 12 hours in a day. All hours in excess of twelve in any one workday must be paid at
the premium rate of double the employee’s regular rate of pay. Health Care workers would
be entitled to time and one-half the regular rate of pay for all hours over 40 in a workweek.

56.23.3.2 Health Care Industry employees assigned to work twelve (12) hour shifts may not be
required to work more
than 12 hours in a 24-hour period unless there is a “health care
emergency” as defined at Section 2(I) of Orders 4-2001 and 5-2001.

56.23.4 Health Care Emergency. A “health care emergency” may be declared only by the Chief
Nursing Offic
er or authorized executive of the hospital staff. (WC Orders 4-2001 and 5-
2001, Section 3(B)(9). There must be an objective showing that:
1. All reasonable steps have been taken to provide required staffing, and

2. Considering overall operations status needs, continued overtime is
necessary to provide
required staffing.

56.23.4.1 Failure, on a regular recurring basis, to schedule reasonably required staffing will not meet
the “reasonable
steps” requirement under these definitions.

56.23.5 Up To 13-Hour Shift If Relief Employee Is Late . An employee on a 12-hour shift may
be required to work
up to thirteen hours in a twenty -four hour period even if no “health care
emergency” exists if the worker scheduled to relieve him or her does not report for duty as
scheduled and has failed to inform the employer more than two hours in advance that he or
she will not be appearing for duty as scheduled. (IWC Orders 4-2001 and 5-2001, Section
3(B)(11).
56.23.6 16-Hour Overtime Shift. Even during a health care emergency, no employee shall be
required to work more th
an sixteen (16) hours in a 24- hour period unless by voluntary
mutual agreement of the employee and the employer. (IWC Orders 4-2001 and 5-2001,
Section 3(B)(11)).

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POLICIES AND INTERPRETATIONS MANUAL
JANUARY, 2007 56 – 15

56.23.7 24-Hour Overtime Shift. Notwithstanding a voluntary mutual agreement allowing for work
in excess of sixteen ho
urs during a health care emergency, under no circumstances may an
employee in the Health Care Industry work more than twenty -four (24) consecutive hours
until said employee receives no less than eight (8) consecutive hours off-duty immediately
following twenty - four consecutive hours of work. (IWC Orders 4-2001 and 5-2001, Section
3(B)(10)).

56.23.8 Days And Hours Worked Outside Of The Regularly-Scheduled Alternative Workweek.
The language adopted by the California Legislature in Labor Code § 511(b) and that used by
the IWC is the same l
anguage used in the previous Orders concerning Alternative Workweeks.
The DLSE has historically taken the position for enforcement purposes, that the IWC provided
for a regularly-scheduled week of work and there are no “regularly scheduled” hours on those
days in the workweek beyond the “schedule established by the agreement.” The Legislature
has now provided at Labor Code § 511(b) that in addition to the time and one half rate required
for “any work in excess of the regularly scheduled hours established by the alternative
workweek agreement” the employer is required to compensate employees at “[A]n overtime
rate of compensation of no less than double the regular rate of pay of the employee…for any
work in excess of 12 hours per day and for any work in excess of eight hours on those days
worked beyond the regularly scheduled workdays established by the alternative workweek
agreement.” In addition, as discussed below, only the employee may request that he or she be
allowed to substitute one “day of work” for another. The DLSE enforcement policy requires
that if the employee is required to work on any non -scheduled day of an Alternative
Workweek, any hours worked on the unscheduled day would be in excess of the number of
hours agreed to pursuant to the agreement and would have to be paid at the applicable premium
rate. Time and one-half would have to be paid for all work up to eight hours on any employer-
required non-scheduled day. Pursuant to, and consistent with this enforcement policy, the
specific language of the Orders provide a premium of double time after eight hours on those
days.

56.23.9 Substitution of One Shift For Another At Request Of Employee. Section 3(B)(1) of the
Orders allows a
n employer, at the request of the employee subject to an alternative workweek
schedule, to substitute one day of work for another of the same length in the shift. The IWC
states in the Statement Of The Basis that this provision was intended to accommodate “the
personal needs of employees” and, must, therefore, be utilized only at the request of the
employee.

56.23.10 With Approval Of Employer, Employee May Request A Move From One Menu
Option To Another.
In addition to the “occasional” accommodation of an employee to
work a different
day within the alternative workweek, the IWC received inquiries

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JANUARY, 2007 56 – 16

concerning flexibility for employees switching alternative workweek options on a
permanent basis
after an election is held. The IWC concluded that upon the approval of
the employer, an employee may move from one menu option to another. (Statement As
To The Basis)

56.24 Definition Of Alternative Workweek Schedule. The Legislation (Labor Code § 500(c))
provides:
“Alternativ e workweek schedule” means any regularl y schedule d workweek
requiring an employee to work more than eight hours in a 24-hour period.

56.25 Hours In Excess Of Daily Regular Schedule. The IWC notes that an employer who
requires an emplo
yee to work beyond the number of hours established by the alternative
workweek agreement, even if such overtime hours are worked on a recurring basis, does not
violate the law if the appropriate overtime compensation is paid. (Statement As To The
Basis) This allows an employer who has proposed, and whose employees have accepted, a
ten-hour per day alternative workweek, to work employees on such a schedule more than
ten hours in a day and only incur a premium obligation for those hours in excess of ten. This
also allows the employer to propose, and the employees to accept, a twelve (12) hour per
day alternative workweek. However, the employee(s) working on such a schedule would be
entitled to receive a premium for those hours in excess of ten (10). Mitchell v. Yoplait (2004)
122 Cal.App.4th Supp 8.
Note: This would not apply to Health Care Employees subject to Wage Orders 4- and 5-
2001.

56.26 Adoption Of Alternative Workweek Schedules As Subterfuge To Escape Eight-Hour
Day Limitations.
The Legislature repeats in its “Legislative Finding”, following each section
of the “Eight-Hour
-Day Restoration and Workplace Flexibility Act of 1999”, that it considers
the 8- hour day to be the norm in California. Based on the common rules of statutory
construction, any exception which allows a deviation from the historical 8- hour day norm
must, as in the case of any remedial legislation, be narrowly construed.

56.26.1 Eliminated 1/30/07

56.26.2 Eliminated 1/30/07

56.26.3 Eliminated 1/30/07

56.27 Eliminated 1/30/07

56.28

Eliminated 1/30/07

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
MARCH, 2011 OPINION LETTERS INDEX – i

Opinion Letter Index

Letter No. Manual
Section
Description
1983.11.25 34.1 Overtime: Mechanics, flat rate, overtime
1986.01.03 45.3.3 Rest Breaks
1986.05.20 15.1.10 Vacation: Car Allowance
1986.09.15 4.3.1 Termination Pay: Obligation to return in case of
quit
1986.10.28 15.1.4;
15.1.12
Termination Pay: Unearned vacation time
advanced to employee deducted at time of
termination; Differentiation between sick leave and
vacation pay
1986.11.04 15.1.4;
15.1.12
Hours Worked: Vacation, flex time off
1986.11.17 15.1.10 Vacation: Calculation of draw, percentages of
commissions
1985.12.01 48.1.3 Hours Worked: Work week
1986.12.13 15.1.13 Vacation: Sabbatical Leave
1986.12.23 5.2.4 Bonus: Pay day obligations – quarterly bonus
Pay Day Obligations: Quarterly Bonus
1986.12.30 15.1.4;
15.1.6
Vacation: Accrual rate may not decelerate during
employment
1987.01.14-1 15.1.10 Vacation: Personal days off
1987.02.17 49.2.1.2 Wages: Value of prizes calculated in overtime
1987.03.03 34.2 Pay: Minimum wage, draw offsets
1987.03.11 15.1.12.1 Vacation: Sick leave used for personal business
1987.03.16 15.1.5 Vacation: Based on proportionate accrual and no
forfeiture
1987.05.11 15.1.10 Vacation: Pro rata pay case-by-case basis
1987.05.14 15.1.2 Vacation: When not paid, employees allowed
unpaid time off
1987.06.03 35.5 Bonus: Substantial performance rule
1987.06.13 43.6.11 Vacation: Federal Service Contract Act (See also
O.L. 1987.09.08)
1987.07.13 15.1.10 Vacation: Longevity bonuses by temporary service
agencies in lieu of vacation
1987.07.13-1 15.1.13 Vacation: Sabbatical leave (See also O.L.
1987.10.06)
1987.09.08 43.6.11 Vacation: Federal Service Contract Act (See also
O.L. 1987.06.13)

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
MARCH, 2011 OPINION LETTERS INDEX – ii

Letter No. Manual
Section
Description
1987.10.06 15.1.14 Vacation: Sabbatical leave (See also O.L.
1987.07.13-1)
1988.03.28 49.2.1.2 Wages: Calculation salary plus commissions
1988.05.05 5.2.4 Wages: Pay day obligations (LC §204)
1988.05.16 46.6.4 Hours Worked: Uniforms, change time
1988.06.15 49.2.1.2 Wages: Hourly rate plus commissions
1988.07.14 49.2.1.2 Bonus: payment on monthly basis (LC §204)
1988.08.04 15.1.4;
15.1.5
Vacation: Probationary periods, accrual and
acceleration
1988.10.27 43.6.5;
43.6.7
Volunteers: Definition of volunteer vs. employee
Minimum Wage: No exemption for employees of
religious organizations
1990.09.18 45,5,6 Uniforms: tropical shirts
1990.09.24 15.1.3 Vacation: “Paid time off”
1990.10.01 34.4;
34.4.1
Commissions: Reserve accounts, loss
reconciliation;
Overtime: “Belo” contracts; premium pay
1991.01.07 15.1.4;
15.1.4.1
Vacation: Earnings cap
1991.01.07-1 48.1.4;
48.1.6
Overtime: “Belo” contacts; premium pay
1991.02.13 45.5.3 Uniforms: requirements
1991.03.06 35.7 Wages, regular rate: sporadic bonuses; incentive
bonuses included in overtime calculation
1991.04.02 50.7.1.3 Overtime: collective bargaining
1991.05.07 11.3.1;
34.2
Deductions: Discussion of underlying law
1991.06.19 56.7.3.1 Alternative work week: 9.80 schedule
1991.08.30 29.2.3.1 Costs of operating truck; compensable time
1992.01.28 47.5.6.1 Hours worked: pagers; Meal period “on duty”
1992.04.27 15.1.12 Discharge: Pay at termination for holiday
1992.05.14 47.5.1.1 Pay: Regular rate – multiple rates; Overtime –
multiple rates
1993.01.07-1 43.6.8 Employees, Vocations trainees (students)
Minimum wage: Trainees, application, exemption
1993.01.19 35.2 Bonus: Effect of voluntary termination
1993.01.19-2 22.3 Employer must pay for mandated safety training
1993.02.02 43.6.11 IWC – Air charter service (Order 9)

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
MARCH, 2011 OPINION LETTERS INDEX – iii

Letter No. Manual
Section
Description
1993.02.22 11.3.1;
29.2.3.1;
34.4.1;
49.2.1.2
Commissions: Loss reconciliation;
Commissions: Mortgage loan officer commissions
1993.02.22-1 49.2.1.2 Wages: Calculation of regular rate of pay involving
piece rate
1993.02.22-2 11.2.4;
22.3
Deductions: Section 9, IWC Orders
1993.02.22-3 29.2.3.1;
22.3
Deductions: LC § 2802: costs of insurance required
by employer are recoverable
1993.03.08 34.3.1;
34.8
Commissions: Effect of termination
1993.03.31 46.1.1;
47.4.2;
47.5.6.1
Hours worked: On-call Time- Beepers
Compensation: “Control of the employer” test for
compensation to be due to employee
1993.04.19 5.2.4 Pay Day Obligations (LC §204)
1993.04.19-1 11.3.2 Deductions: Unauthorized
Deductions: Section 8, IWC Orders
Gross negligence, simple negligence
Posting of bond: Employer protection against loss
of goods
1993.05.04 3.2.2 Discharge: Lay off
1993.05.04-2 24.3 LC § 973: No advertisement/solicitation of
employees during trade dispute
1993.08.18 15.1.4 Vacation: Earnings cap (reasonableness)
1993.10.21 43.6.8 Student Trainee vs. employee; work permit
requirement
1993.11.03 43.7.1.3 IWC: Printing (Order 1)
IWC: Newspaper Publishing (Order 4)
1993.12.09 48.1.2 Hours worked: work day
Overtime pyramiding
1994.01.07 19.3.5 Overtime: Banquet service charges as bonus
Bonus: Banquet service charges, overtime
1994.01.27 11.2.4;
11.3.1
Deductions: Cost of processing lost or stolen check
1994.02.03-1 9.1.9;
9.1.9.3;
41.2.3
Pay day obligations: Direct deposit

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
MARCH, 2011 OPINION LETTERS INDEX – iv

Letter No. Manual
Section
Description
1994.02.03-3 46.6.5;
48.1.9.1
Hours worked: Uniforms, change time
1994.02.03-4 50.9.8 Overtime Exemption: ambulance drivers
1994.02.07 50.6;
50.6.4.3
Overtime Exemption: Commissioned sales (use of
draw in computing)
1994.02.16 46.2 Hours Worked: On cal time (tests, travel &
training)
1994.02.16-1 45.5.2 Uniforms: Requirement, clothing without metal
1994.03.08 15.1.10 Vacation – cash out at lesser rates prohibited
1994.06.17-1 49.2.1.2 Wages: Regular rate of pay
1994.06.21 31.3.2.1 Employment applications: Release of liability for
disclosure of information
1994.08.04 43.6.1 Jurisdiction: Military bases; Temporary/full time
employees in oil spill cleanup; Employees
temporarily employed in another state
1994.08.14 29.2.3.1 LC § 2802
1994.10.03 43.7.1.3 IWC: Multi-purpose firm with distinctly separate
units
1994.10.03-2 55.3.3 Personal attendant: “Other significant work”
1994.11.17 29.2.3.4 Cost of licensure training not usually payable by
employer
1995.07.20 41.2.3 Paperless time recording system
1996.05.30 3.2.2 Discharge: Layoff (contractual recall rights)
1996.07.10 50.8.1.1 Overtime: Provisions of WO for two-axle trucks
not regulated by DOT
1996.11.12 9.1.9 Pay Day Obligations: Direct deposit
1996.11.20 4.6.2 Waiting Time: “Willfulness” (Inability to pay)
1996.12.30 46.6.6 Exempt trainee intern programs
1997.01.02 22.3 Employer cannot require employee to purchase
truck for use in business
1997.02.21.2 22.3 Credit care requirement by employer where no cost
to employee
1997.03.05 54.10.7.1 Teachers exempt
1997.03.21-2 22.3;
29.2.3.1
Expenses incurred in maintaining bank account to
receive expense reimbursement
1997.05.16 50.8.1.1
50.9.3
Overtime Exemption: “For hire” motor trucks

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
MARCH, 2011 OPINION LETTERS INDEX – v

Letter No. Manual
Section
Description
1997.05.27 50.13.1 Independent Contractors: “Promotional extras”
1997.12.04 37.2.6 Public Works – partner coverage
1998.08.27 42.6 Personnel Files: Obligations of employer to
provide employees access
1998.09.14 9.1.2.1 Wages: Paid in kind
1998.09.17 15.1.4 Vacation: “use it or lose it” clause
Discharge: Pay vacation at termination
1998.10.05 52.3 Overtime: Administrative exemption
1998.12.23 46.6.4 Hours Worked: Uniforms, change time
Hours Worked: Effect of CBA on determining
1998.12.28 45.1.5.1;
46.6.3;
47.5.5.1
Hours Worked
1998.12.28-1 19.3.1 Tip pooling
1999.01.09 4.6;
34.9
Discharge: Payment of commissions upon
termination
1999.02.16 45.3.1 Rest Periods
1999.09.23 3.5 Works: Specific length of employment written
contract but employee quits prior to completion;
LC §§202, 203
2000.09.29 48.1.6 Belo contracts
2000.11.02 19.3.5 Service charge not gratuity
2001.09.17 45.3.5;
45.3.6.1
Rest periods;
Rest periods, CBA exception
2002.01.22 22.1.1 Illegal to require payment to apply for employment
2002.01.29 43.6.4.1;
44.2.2;
47.4.2;
47.7.1
Hours worked: Public transit employees start and
end shifts at different locations; minimum wage
2002.02.21 46.3;
46.3.1;
46.3.2;
47.5.1.1
Hours worked: Whether time spent traveling on
out-of-town business trip constitutes
2002.02.22 45.3.3 Rest period
2002.03.01 51.6.6;
51.6.21.1
Wages: Salary basis test exempt employees

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
MARCH, 2011 OPINION LETTERS INDEX – vi

Letter No. Manual
Section
Description
2002.03.12 51.6.7 Exempt Employee: Reduction of salary in
conjunction with reduction of hours in workday or
days in workweek
2002.04.08 51.6.12;
51.6.15
Exempt Employee: No reduction in salary for day
absent if there is a reasonable expectation that
employee is to perform some duty
2002.05.01 51.6.10 Exempt Employee: Calculation of pro rata
deduction from salary
2002.05.06 51.6.1 Wages: Salary requirement
2002.05.17 41.2.1 Non-exempt salaried employees paid semi-monthly
2002.05.22 56.11;
56.11.1
Alternative work week: reduction of pay not
allowed
2002.06.18 55.2.1.1;
55.2.1.2;
55.2.1.2.1
Employer: Definition of employer

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 FEDERAL REGULATIONS – 1

Following is a compilation of the Federal Regulations which were in effect on July 1, 2000. The entire series of 29 CFR §§
541.102 through 541.602 is included. Only parts of the regulations were adopted by the IWC for purposes of interpreting
the administrative, executive (managerial) and professional exemptions. The portions which are not applicable are in
strikeout and those which are utilized for enforcement without direction are in italics. The inapplicable sections are
reproduced here simply as a guide and aid to enforcement staff in explaining the differences between the federal
interpretations and those allowed under California law.

CODE OF FEDERAL REGULATIONS
TITLE 29—LABOR SUBTITL E B --
REGULATIONS RELATIN G TO LABOR
CHAPTER V--WAGE AND HOUR
DIVISION, DEPARTMEN T OF LABOR
SUBCHAPTER A--REGULATIONS
PART 541--DEFINING AND DELIMITIN G THE
TERMS "ANY EMPLOYEE EMPLOYED IN A
BONA
FIDE EXECUTIVE , ADMINISTRATIVE , OR
PROFESSIONA L CAPACITY (INCLUDIN G ANY
EMPLOYEE EMPLOYED IN THE CAPACITY OF
ACADEMIC ADMINISTRATIVE PERSO NNEL OR
TEACHE R IN ELEMEN TAR Y OR SECONDARY
SCHOOLS ), OR IN THE CAPACITY OF O UTSIDE
SALESMAN"
SUBPART B--INTERPRETATIONS
EMPLOYE E EMPLOYED IN A BONA FIDE
EXECUTIVE CAPACITY
Current through June 20, 2000; 65 FR 38332
§541.102 Management.
(a) In the usual situation the determination of whether a particular
kind of work is exe
mpt or nonexempt in nature is not difficult. In
the vast majority of cases the bona fide executive employee
performs managerial and supervisory f unctions which are easily
recognized as within the scope of the exemption.
(b) For example, it is generally clear that work such as the
following is ex
empt work when it is performed by an employee
in the management of his department or the supervision of t he
employees under him: Interviewing, selecting, and training of
employees; setting and adjusting their rates of pay and hours of
work; directing their work; maintaining their production or sales
records for use in supervision or control; appraising their
productivity and efficiency for the purpose of recommending
promotions or other changes in their status; handling their
complaints and grievances and disciplining them when
necessary; planning the work; determining the techniques to be
used; apportioning the work among the workers; determining
the type of materials, supplies, machinery or tools to be used or
merchandise to be bought, stocked and sold; controlling the flow
and distribution of materials or merchandise and supplies;
providing for the s
afety of the men and the property.

Current through June 20, 2000; 65 FR 38332
§ 541.103 Primary dut
y.
A determination of whether an employee has management
as his primary duty must be based on all the facts in a
particular case. Th e amount of time spent in the
performance of the managerial duties is a useful guide in
determining whether management is the pr imary duty of an
employee. In the ordinary case it may be taken as a good
rule of thumb that primary duty means the major part, or
over 50 percent, of the employee's time. Thus, an employee
who spends over 50 percent of his time in management
would have management as his primary duty. Time alone,
however, is not the sole test, and in si tuations where the
emplo yee does not spend over 50 percent of his time in
managerial duties, he might neverthel ess have management
as his primary duty if the other pertinent factors support such
importance of the manager ial duties as compared with other
types of duties, the frequency with which the emp loyee
exercises discretionary powers, his relative freedom from
supervision, and the relationship between his salary and the
wages paid other employees for the kind of nonexempt work
performed by the supervisor. For example, in s ome
departments, or subdivisions of an establishme nt, an
employee has broad responsibilities s imilar to those of the
owner or manager of the establishment, but generally spends
more than 50 percent of h is time in production or sales
work. While en gaged in such work he supervises other
employees, directs the work of warehouse and delivery men,
approves advertising, orders merchandise, handles customer
complaints, authorizes payment of bills, or performs other
management duties as the day-to- day operations require. He
will be considered to have management as his primary duty.
In the data processing field an employee who directs the day-
to-day activities of a single group of programmers and wh o
performs the more complex or responsible jobs in
programing will be considered to have management as h is
primary duty.
a conclusion. Some of these pertinent factors are the relative

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 FEDERAL REGULATIONS – 2

Current through June 20, 2000; 65 FR 38332
§ 541.104 Department or subdivision.
(a) In order to qualify under § 541.1, the employee's managerial
duties must be per
formed with respect to the enterprise in which
he is employed or a customarily recognized department or
subdivision thereof. The phrase "a customarily recognized
department or subdivision" is intended to distinguish between a
mere collection of men assigned from time to time to a specific
job or series of jobs and a unit with permanent status and function.
In order properly to classify an individual as an executive he must
be more than merely a supervisor of two or more employees; nor
is it sufficient that he merely participates in the management
of the unit. He must be in charge of and have as his primary duty
the manage ment of a recognized unit which has a continuing
function.
(b) In the vast majority of cases there is no difficulty i n
determining w
hether an individual is in charge of a
customarily recognized department or subdivision of a
department. For example, it is clear that where an enterprise
comprises more than one establishment, the employee in charge
of each establishment may be considered in charge of a
subdivision of the enterprise. Questions arise principally in cases
involving supervisors who work outside the employer's
establishment, move from p lace to place, or have different
subordinates at different times.
(c) In such instances, in determining whether the employee is in
charge of a recog
nized unit with a c ontinuing function, it is the
division's position that the unit supervised need not be physically
within the employer's establishment and may move from place to
place, and that continuity of the same subordinate personnel is not
absolutely essential to the existence of a recognized unit with a
continuing function, although in the ordinary case a fixed location
and continuity of personnel are both helpful in establishing the
existence of such a unit. The following examples will illustrate
these points.
(d) The projects on which an individual i n charge of a
certain type of construc
tion work is employed may occur at
different locations, and he may even hire most of his workforce at
these locations. The mere fact that he moves his location would
not invalidate his exemption if there are other factors which show
that he is actually in charge of a recognized unit with a
continuing func tion in the organization.
(e) Nor will an otherwise exempt employee lose the
exemption merely
because h e draws the men under his
supervision from a pool, if other factors are present which indicate
that he is in charge of a recognized unit with a continuing function.
For instance, if this employee is in charge of the unit which has
the continuing re sponsibility for making all installations for his
employer, or all installations in a particular city or a designated
portion of a city, he would
be in charge of a department or
subdivision despite the fact that he draws his subordinates from a
pool of available men.
(f) It cannot be said, however, that a supervisor drawn from a pool
of supervisors who
supervises employees assigned to him from a
pool and who is assigned a job or series of jobs from day to day
or week to week has the status of an executive. Such an employee
is not in charge of a recognized unit with a continuing function.
<General Materials (GM) - References, Annotations, or
Tables>

Current through June 20, 2000; 65 FR 38332 § 541.105
Two or more other empl
oyees.
(a) An employee will qualify as an "executive" under § 541.1
only if he customari
ly and regularly supervises at least two full-
time employees or the equivalent. For example, if the "executive"
supervises one full-time and two part-time employees of whom
one works morning and one, afternoons; or four part-time
employees, two of whom work mornings and two afternoons, this
requirement would be met.
(b) The employees supervise d must be employed in t he
department which the "ex
ecutive" is managing.
(c) It has been the experience of the divisions that a supervisor of
a few as two employee s usua
lly performs nonexem pt work in
excess of the general 20- percent tolerance provided in § 541.1.
(d) In a large machine shop there may be a machine-shop
supervisor and
two assistant machine-shop supervisors. Assuming
that they meet all the other qualifications § 541.1 and particularly
that they are not working foremen, they should certainly qualify
for the exemption. A small department in a plant or in an office
is usually supervised by one person. Any attempt to classify one
of the other workers in the department as an executive merely by
giving him an honorifi c title such as assistan t supervisor will
almost inevitabl y fail as there will not be sufficient true
supervisory or other managerial work to keep two persons
occupied. On the other hand, it is incorrect to assume that in a
large department, such as a large shoe department in a retail store
which has separate sections for men's, women's, and children's
shoes, for example, the supervision cannot be distributed among
two or three employees, conceivably among more. In such
instances, assuming that the other tests are met, especially the one
concerning the performance of nonex empt work, each such
employee "customarily and regularly directs the work of two or
more other employees therein."

(e) An employee who merely assi sts the manager or buyer of
a part icular dep
artment and supervises two or more
employees only in the actual manager's or buyer's absence,
however, does
not meet this requirement. For example,

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where a single unsegrega ted department, such as a women's
sportswear department or a men's shirt department in a retail
store, is managed by a buyer, with the assistance of one or
more assistant buyers, only one employee, the buyer, can be
considered an executive, even though the assis tant buyers at
time s exercise some managerial and superviso ry
responsibilitie s. A shared responsibility for the supervision
of the same two or more employees in the same department
does not satisfy the requirement that the employee
"customarily and regularly directs the work of two or mor e
employees therein."

Current through June 20, 2000; 65 FR 38332
§ 541.106 Authority to hire or fire.
Section 541.1 requires that an exempt executiv e employee
have the authorit
y to hire or fire other employees or that his
suggestions and recommendations as to hiring or firing and
as to advancement and promotion or any other change of
status of the employees who he s upervises will be given
particular weight. Thus, no employee, whether high or low in
hierarchy of management, can be considered as employed i n
a bona f ide executive capacity unless h e i s directly
concerned either with the hiring or the firing and other
change of status of the employees under his supervision,
whether by d irect action or by recommendation t o those
to who the hiring and f iring functions are delegated.

Current through June 20, 2000; 65 FR 38332 §
541.107 Discretionar y powers.
(a) Section 541.1(d) requires that a n exempt executive
employee customar
ily and regularly exercise discretionary
powers. A person whose work is so completely routinized that
he has no discretion does not qualify for e xemption.
(b) The phrase "customaril y and regularly" signifies a
frequency which must
be greater than occasional but w hich, of
course, may be less than constant. The requirement will be met
by the emplo yee who normally and recurrently is calle d upon
to exercise and doe s ex ercise discretionary power s in the
day-to-day performance of his du ties. T he requirement is not
met b y the occasional exercise of discretionar y powers.
Current through June 20, 2000; 65 FR 38332 §
541.108 Work directly and closely related.
(a) This phras e brings within the category of exempt work not
only the actual manag
ement of the department and the
supervision of th e employees th erein, but also activities
which are closely associated with the p erformance of the duties
involved in such managerial and supervisory functions or
responsibiliti es. Th e supervision of employees and the
management of a department include a great many directly and
closely related ta sks which are dif ferent from the work
performed by subordinates and are commonly performed by
supe rvisors because they are helpful in supervising th e
employees or contribute to the smooth functioning of the
department for whi
ch they are responsible. Frequently such
exempt work is of a kind which in establishments that are
organized differently or which are larger and have greater
specialization of function, may be performed by a nonexempt
employee hired especially f or that purpose. Illustration will
serve to make clear the meaning to be given the phrase "directly
and closely related".
(b) Keeping basic records of worki ng time, for example, is
frequently perf
ormed by a timekeeper employed for that purpose.
In such cases the work is clearly not exempt in nature. In other
establishments which are not large enough to employ a
timekeeper, or in which the timekeeping function has been
decentralized, the supervisor of each department keeps the basic
time records of his own subordinates. In these instances, as
indicated above, the timekeeping is directly related to the function
of m anaging the particular department and supervising its
employees. However, the preparation of a payroll by a supervisor,
even the payroll of the employees under his supervision, cannot
be considered to be exempt work, since the preparation of a
payroll does not aid in the supervision of the employees or the
management of the department. Similarly, the keeping by a
supervisor of production or sales records of his own
subordinates for use in supervision or control would be
exempt work, while the maintenance of production records of
employees not under his direction would not be exempt work.
(c) Another example of work which may be directly and closely
related to the per
formance of management duties is the
distribution of materials or merchandise and supplies.
Maintaining control of the flow of materials or merchandise and
supplies in a department is ordinarily a responsibility of the
managerial employee in charge. In many nonmercantile
establishments the actual distribution of materials is perf ormed
by nonexempt employees under the supervisor's direction. In
other establishments it is not uncommon to leave the actual
distribution of materials and supplies in the hands of the
supervisor. In such cases it is exempt work since it is directly
and closely related to the managerial responsibility of
maintaining the flow of materials. In a large retail establishment,
however, where the replenishing of stocks of merchandise on
the sales floor is customarily assigned to a nonexempt employee,
the performance of such work by the manager or buyer of the
department is nonexempt. The amount of time the manager or
buyer spends in such work must be offset agains t the statutory
tolerance for nonexempt work. The supervision and control of a
flow of merchandise to the sales floor, of course, is directly and
closely related to the managerial responsibi lity of the manager or
buyer.

(d) Setup work is another illustration of work which may be
exempt under cer
tain circumstances if performed by a
supervisor. The nature of setup work differs in various
industries and for different operations. Some setup work is
typically per
formed by the same employees who perform the
"production" work; that is, the employee who operates the

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machine also "sets it up" or adjusts it for the particular job at
hand. Such setup work is part of the production operation and
is not exempt. In other instances the setting up of the work is
a highly skilled operation which the ordinary production
worker or machine tender typically does not perform. In
some plants, particularly large ones, such setup work may be
performed by employees whose duties are not supervisory in
nature. In other plants, however, particularly small plants,
such work is a regular duty of the executive and is directly and
closely related to his responsibility for the work performance
of his subordinates and for the adequacy of the final product.
Under such circumstances it is exempt work. In the data
processing field the work of a supervisor when he performs the
more complex or more responsible work in a program utilizing
several computer programmers or computer operators would
be exempt activity.
(e) Similarly, a supervisor who spot checks and examines the
work of his sub
ordinates to determine whether they are
performing their duties properly, and whether the product is
satisfactory, is performing work which is directly and closely
related to his managerial and supervisory functions.
However, this kind of examining and checking must be
distinguished from the kind which is normally performed by an
"examiner," "checker," or "inspector," and which is really a
production operation rather than a part of the supervisory
function. Likewise, a department manager or buyer in a retail
or service establishment who goes about the sales floor
observing the work of sales personnel under his supervision to
determine the effectiveness of their sales techniques, checking
on the quality of customer service being given, or obse rving
customer preferences and reactions to the lines, styles, types,
colors, and quality of the merchandise offered, is performing
work which is directly and closely related to his managerial
and supervisory functions. His actual participation, except for
supervisory training or demonstration purposes, in such
activities as making sales to customers, replenishing stocks of
merchandise on the sales floor, removing merchandise from
fitting rooms and returning to stock or shelves, however, is
not. The amount of time a manager or buyer spends in the per
formance of such activities must be included in computing the
percentage limitation on nonexempt work.
(f) Watching machines is another duty which may be exempt
when performed by
a supervisor under proper circumstances.
Obviously the mere watching of machines in operation cannot be
considered exempt work where, as in certain industries in which
the machinery is largely automatic, it is an ordinary production
function. Thus, an employee who wat ches machines for the
purpose of seeing that they operate properly or for the purpose of
making repairs or adjustments is performing nonexempt work.
On the other hand, a supervisor who watches the operation of
the machinery in his department in the sense that he "keeps an eye
out for trouble" is performing work which is directly and closely
related to his
managerial responsibilities. Making an occasional
adjustment in the machinery under such circumstances is also
exempt work.
(g) A word of caution is necessary in connection with these
illustrations. T
he recordkeeping, material distributing, setup
work, machine watching and adjusting, and inspecting,
examining, observing and checking referred to in the examples
of exempt work are presumably the kind which are supervisory
and managerial functions rather than merely "production" work.
Frequently it is difficult to distinguish the managerial type from
the type which is a production operation. In deciding such difficult
cases it should be borne in mind that it is one of the objectives of
§ 541.1 to exclude from the definition foremen who hold "dual"
or combination jobs. (See discussion of working foremen in §
541.115.) Thus, if work of this kind takes up a large part of the
employee's time i t would be evidence that management of the
department is not the primary duty of the employee, that such work
is a production operation rather than a function directly and closely
related to the supervisory or managerial duties, and that the
employee is in reality a combination foreman -"setup" man,
foreman-machine adjuster (or mechanic), or foreman -examiner,
floorman-salesperson, etc., rather than a bona fide executive.

Current through June 20, 2000; 65 FR 38332
§541.109 Emergencies.
(a) Under certain occasional emergency conditions, work which
is normally pe
rformed by nonexempt employees and is
nonexempt in nature will be directly and closely related to the
performance of the exempt functions of management and
supervision and will therefore be exempt wor k. In effect, this
means that a bona fide executive who performs work of a
normally nonexempt nature on rare occasions becau se of the
existence of a real emergency will not, because of the
performance of such emergency work, lose the exemption. Bona
fide executives include among their responsibilities the safety of
the employees under their supervision, the preservation and
protection of the merchandise, machinery or other property of the
department or subdivision in their charge from damage due to
unforeseen circumstances, and the prevention of widespread
breakdown in production, sales, or service operations.
Consequently, when conditions beyond control arise which
threaten the safety of the employees, or a cessation of operations,
or serious damage to the employer's property, any manual or other
normally nonexempt work performed in an effort to prevent such
results is considered exempt work and is not included in
computing the percentage limitation on nonexempt work.
(b) The rule in paragraph (a) of t his section is not applicable,
however, to nonex
empt work arising out of occurrences which are
not beyond control or for which the employer can reasonably
provide in the normal course of business.

(c) A few illustrations may be helpful in distinguishing
routine work
performed as a result of real emergencies of the kind
for which no provision can practicably be made by the employer
in advance of their occurrence and routine work which is not in
this category. It is obvious that a mine superintendent who
pitches in after an explosion and digs out the men who are trapped
in the mine is still a bona fide executive during that week. On the

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other hand, the manager of a cleaning establishment who
personally performs the cleaning operations on expensive
garments because he fears damage to the fabrics if he allows his
subordinates to handle them is not performing "emergency" work
of the kind which can be considered exempt. Nor is the manager
of a department in a retail store performing exempt work when
he personally waits on a special or impatient customer
because he fears the loss of the sale or the customer's
goodwill if he allows a salesperson to serve him. The performance
of nonexempt work by executives during inventory -taking,
during other periods of heavy workload, or the handling of rush
orders are the kinds of activities which the percentage tolerances
are intended to cover. For example, pitching in on the
production line in a canning plant during seasonal operations is
not exempt "emergency" work even if the objective is to keep the
food from spoiling. Similarly, pitching in behind the sales counter
in a retail store during special sales or during Christmas or Easter
or other peak sales periods is not "emergency" work, even if
the objective is to improve customer service and the store's sales
record. Maintenance work is not emergency work even if
performed at night or during weekends. Relieving subordinates
during rest or vacation periods cannot be considered in the nature
of "emergency" work since the need for replacements can be
anticipated. Whether replacing the subordinate at the workbench,
or production line, or sales counter during the first day or partial
day of an illness would be considered exempt emergency work
would depend upon the circumstances in the particular case. Such
factors as the size of the establishment and of the executive's
department, the nature of the industry, the consequences that
would flow from the failure to replace the ailing employee
immediately, and the feasibility of filling the employee's place
promptly would all have to be weighed.
(d) All the regular cleaning up around machinery, even when
necessary to prev
ent fire or explosion, is not "emergency" work.
However, the removal by an executive of dirt or obstructions
constituting a hazard to life or property need not be included in
computing the percentage limitation if it is not reasonably
practicable for anyone but the supervisor to perform the work and
it is the kind of "emergency" which has not been recurring. The
occasional performance of repair work in case of a breakdown of
machinery, or the collapse of a display rack, or damage to or
exceptional disarray of merchandise caused by accident or a
customer's carelessness may be considered exempt work if
the breakdown is one which the employer cannot reasonably
anticipate. However, recurring breakdowns or disarrays requiring
frequent attention, such as that of an old belt or machine which
breaks down repeatedly or merchandise displays constantly
requiring re -sorting or straightening, are the kind for which
provision could reasonably be made and repair of which must be
considered as no
nexempt.

Current through June 20, 2000; 65 FR 38332
§ 541.110 Occasional tasks.
(a) In addition to the type of work which by its very nature is
readily identi
fiable as being directly and closely related to the
performance of the supervisory and management duties, there is
another type of work which may be considered directly and
closely related to the performance of these duties. In many
establishments the proper management of a department requires
the performance of a variety of occasional, infrequently recurring
tasks which cannot practicably be performed by the production
workers and are usually performed by the executives. These small
tasks when viewed separately without regard to their relationship
to the executive's overall functions might appear to constitute
nonexempt work. In reality they are the means of properly
carrying out the employee's management functions and
responsibilities in connection with men, materials, and production.
The particular tasks are not specifically assigned to the
"executive" but are performed by him in his discretion.
(b) It might be possible for the executive to take one of his
subordinates awa
y from his usual tasks, instruct and direct him in
the work to be done, and wait for him to finish it. It would
certainly not be practicable, however, to manage a department in
this fashion. With respect to such occasional and relatively
inconsequential tasks, it is the practice in industry generally for
the executive to perform them rather than to delegate them to
other persons. When any one of these tasks is done frequently,
however, it takes on the character of a regular production function
which could be performed by a nonexempt employee and must
be counted as nonexempt work. In determining whether such
work is directly and closely related to the performance of the
management duties, consideration should be given to
whether it is (1) the same as the work performed by any of the
subordinates of the executive; or (2) a specifically as signed
task of the executive employees; or (3) practicably delegable to
nonexempt employees in the establishment; or (4) repetitive and
frequently recurring.
Current through June 20, 2000; 65 FR 38332 § 541.111
Nonexempt work g
enerally.
(a) As indicated in § 541.101 the term "nonexempt work," as
used in this subpa
rt, includes all work other than that described in
§ 541.1 (a) through (d) and the activities directly and closely
related to such work.

(b) Nonexempt work is easily identifiable where, as in the usual
case, it consists of work of the s
ame nature as that performed by
the nonexempt subordinates of the "executive." It is more
difficult to identify in cases where supervisory employees spend
a significant amount of time in activities not performed by any of
their subordinates and not consisting of actual supervision a nd
management. In s
uch case s careful analysis of the employee's
duties with reference to the phrase "directly and closely related
to the performance of the work described in paragraphs (a)
through (d) of t his section" will usuall y be necessar y in

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JUNE, 2002 FEDERAL REGULATIONS – 6

arriving at a determination.
Current through June 20, 2000; 65 FR 38332
§ 541.112 Percen
tage limitations on
nonexempt work.
(a) An employee will not qualify for exemption as an
executive if he devote
s more than 20 percent, or in the case of
an employee of a retail or service establishme nt if he devotes
as much as 40 percent, of his hours worked in the workweek
to nonexempt work. This test is applied on a workweek basis
and the per centage of time spent on nonexempt work is
computed on the time worked by the employee.
(b) (1) The maximum allowance of 20 percent for
nonexempt work applies
unless the establishment by wh ich the
employee is employed qualifies for the higher allowance as a
retail or service establishment within the meaning of the act .
Such an establishment must be a d istinct physical place of
business, open to the general public, which is e ngage d on the
premises in making sales of good s or s ervices to which the
concept of retail selling or se rvicing applies. As defined i n
sectio n 13(a)(2) of the act, such an establishment must make
at least 75 percent of its annual dollar volume of sales of goods
or services from sales that are both not for resale and recogni zed
as retail in the particular industry. Types of establishments
which may me et these tests in clude stores selling consumer
goods to the pub lic; hotels; motels; restaurants; some types
of amusement or recreational establishments (but not those
offering wagering or gambling facilities); hospitals, or
institution s prim arily engaged in the care of the sick, the aged,
the mentally ill, or defective residing on the premises, if open
to the general public; public parking lots and parking garages;
auto repair shops; gasoline service stations (but not truck stops);
funeral homes; cemeteries; etc. Further explanation and
illustrati ons of the establishments included in the term "retail or
service establishment" as used in the act may be found in Part 779
of this chapter.
(2) Public and private eleme ntary and secondary schools and
institutions of higher educat
ion are, as a rule, not retai l or
service establishments, because they are not engaged in sales of
goods or services to which the retail concept applies. Under
section 13(a)(2)(iii) of the act prior to the 1966 amendments, it
was possible for private scho ols for physically or mentally
handicapped or gifted children to qu alify as retail or service
establishments if they met the statutory tests, because the special
types of services provided to their students were c onside red by
Congress to be of a kind that may be recognized as retail. Such
sc hools, unless the nature of their operati ons has changed, may
continue to qualify as retail or se rvice establishments and, if they
do, may utilize t he greater tolerance for nonexempt work
provided for executive and administrativ e employees of retail
or service establishments under section 13(a)(1) of the act.
(3) The legislative history of the act makes it plain that an
establishment e
ngaged in la undering, cleaning, or repairing
clothing or fabrics is not a retail or service establishment. When
the act was amended in 1949, Congress excluded such
establishments from the exemption under s ection 13(a)(2)
because of the lack of a retail concept in the services sold by such
establishments, and provided a separate exe mption for them
which did not depend on status as a retailer. Again in 1966,
when this exemption was repealed, Congress made it plain by
exclusionary language that the exempti on for retail or service
establishments was not to be ap plied to laundries or dry
cleaners.
(c) There a re two special exceptions to the percent age
limitations of paragraph (
a) of this section:
(1) That relating to the e mployee in "sole charge" of an
independent or branch esta
blishment, and
(2) That relating to an employee owning a 20-percent interest
in the enterprise in wh
ich he is employed. These except the
employee only from the percentage limitations on nonexempt
work. They do not e xcept the employee from any of the other
requirements of § 541.1. Th us, while the percentage limitations
on nonexempt work are not applicable, it is clear that an employee
would not qualify for the exemption if he performs so much
nonexempt work that he could no longer meet the requirement of
§ 541.1(a) tha t his primary duty mu st consist of the management
of the enterprise in which he is employed or of a customarily
recognized department or su bdivision thereof.

Current through June 20, 2000; 65 FR 38332
§ 541.113 Sole-charge e xception.
(a) An exception from the percentage limitations on nonexempt
work is provided i
n § 541.1(e) for "an employee who is in sole
char ge of an independent establishment or a physically
separated branch establishment * * * ". Such an employee is
considered to be employed in a bona fide executive capacity
even though he exceeds the applicable percentage limitation on
nonexempt work.
(b) The term "independent establishment" must be given full
several buildings loc
ated on a single or adjoining tracts of
company proper ty does not qualify for the exemption under
this heading. In the case of a branch, there must be a true
and complete physical separation from the main office.

(c)(1) A determination as to the status as "an ind ependent
establishment or
a physically separated branch
establishment" of any part of the business operations on the
premises of a retail or other establishment, however, mus t be
made on the basis of the physical and e conomic facts in the
particular situation. ( See 29 CFR 779.225, 779.305,
779.306.) A leased department cannot be considered to be
a separate establishment where, f or example, it and the
retail store in which it is located operate under a common
trade name and the store may determine, or have the power to
determine, the leased department's space location, the type of
merchandise it will sell its pricing policy, its hours of

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JUNE, 2002 FEDERAL REGULATIONS – 7

operation and some or all of its hiring, firing, and other
personnel policies, and matters such as advertising,
adjus tment, a nd credit operations, insurance and taxes,
are handled on a unified basis by the store.
(2) A leased department may q ualify as a separate
establishm
ent, however, where, among other things, the facts
show that the lessee maintains a separate entrance and
operates under a separate name, with its o wn separate
employees and records, and in other respects conducts his
business independently of the lessor's. In such a case the
leased department would enjoy the same status as a physically
separated branch store.
(d) Since the employee must be i n "sole charge, only one
person in any estab
lishment can qualify as an executive under
this exception, and then only if he is the top person in charge
at that location. (It is possible for other persons in the same
establishment to qualify for exemption as executive
employees, but not under the exception from the nonexempt
work limit ation.) Thus, it would not be applicable to an
employee who is in charge of a branch establishme nt but
whose s uperior ma kes his of fice on t he premises. An
example is a district manager who has overall supervisory
functions in relation to a number of b ranch o ffices, but
makes his office at one of the branches. The branch manager
at the branch where the district manager's office is located is
not in "sole charge" of the establishment and does not come
within the exception. This does not mean that the "sole-
charge" status of an employee will be considered lost because
of an occasional visit to the branch office of the superi or of
the person in charge, or, in the case of an independent
establishment by the visit for a short period on 1 or 2 days a
week of the proprietor or principa l corporate officer of the
establishment. In these situations the sole-char ge status of
the employee in question wil l appear from the facts as to his
functions, particularly in the intervals between visits. If,
during these intervals, the decisions normally made by an
executive in charge of a branch or an independent
establishment are reserved for the superior, the employe e is
not in sole charge. If such decisions are not reser ved for the
superior, the sole -charge status will not be lost merely
because of the superior's visits.
(e) In order to qualify for the exception the employee must
ordinarily
be in charge of all the company activities a t the
location where he is employed. If he is in charge of only a
portion of the company's activities at his location, then he
cannot be said to be in sole charge of an independent
establishment or a physically separated branch
establishment. In excepti onal cases the divisions have found
that an executive employee may be in sole charge of all
activities at a branch office except that one independ ent
function which is not integrated with those managed by the
executive is also performed at the branch. This one function
is not important to the acti vities managed by the executive
and constitutes only an insignificant portion of the
employer's activities at that branch. A typical example of
this type of situation is one in which "desk space" in a
warehouse ot herwise devoted to the storage and shipment of
parts is assigned a salesman who reports to the sales
manager or o ther company official located at the home
office. Normally only one employee (at most two or three,
but in any event an insignifican t n umber when compared
with the total number of persons employed at the branch) is
engaged in the nonintegrated function for which the
executive wh ose sole-charge status is in question is not
responsible. Under such c ircumstanc es the employee does
not lose his "sole-charge" status me rely because of the desk-
space assignment.

Current through June 20, 2000; 65 FR 38332
§ 541.114 Exception for owners of 20-percent interest.
(a) An exception from the percentage limitations on
nonexempt work is
provided in § 541.1(e) for an employee
"who owns at least a 20-percent interest in the enterprise in
which he is employed". This provision recognizes the special
status of a shareholder of an enterprise who is actively
engaged in its management.
(b) The exception is available to an employee owning a bona
fide 20-percent
equity in the enterprise in which he is
employed regardless of whether the business is a corporate or
other type of organization.
Current through June 20, 2000; 65 FR 38332
§ 541.115 Working foremen.
(a) The primary purpose of the exclusionary language
placing a limi
tation on the amount of nonexempt work is to
distinguish between the bona fide executive and the
"working" foreman or "working" supervisor who regularly
performs "production" work or other work which is unrelated
or only remotely related to his supervisory activities.
(The term "working" foreman is used in this subpart in the
sense indi cated in the text and should not be construed to
mean only one who performs work similar to that performed
by his subordinates.)

(b) One type of working foreman or w orkin g supervisor most
commonly found in i
ndustry works alongs ide his subord inates.
Such employees, sometimes k nown as straw bosses, or gang
or group leaders perform the same kind of work as that
performed by their subordinates, and also carry on supervisory
functions. Clearly, the work of the same nature a s that performed
by the employees' subordinates mus t be counted as nonexempt
work and if the amount of such work performed is substantial
the exemption d oes n
ot apply. ("Substantial," as used in this
section, means more than 20 percent. See discussion of the 20-
percen t limitation on nonexempt work in § 541.11 2.) A
foreman in a dress shop, for example, who operates a sewing
machine to produce the product is p erforming clearly
nonexempt work. However, this should not be confused with the
operation of a sewing machine by a foreman to instruct his su

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bordinates in the making of a new product, s uch as a garment,
before it goes into production.
(c) Another type of working foreman or working supervisor who
cannot b e class
ed as a b ona fide executive is one who spends a
substantial amount of time in work which, although not performed
by his own subordinates, consi sts of ordinary production work or
other routine, recurrent, repetitive tasks whic h are a regular part
of his duties. Such an employee is in effect holding a dual job.
He may be, for exampl e, a combination foreman-production
worker, supervisor-clerk, or foreman combined with some other
skill ed or unskilled occupation. His nonsupervis ory duties i n
such instances are unrelated to anything he must do to supervise
the employees unde r him or to manage the department. They
are in many instances mere "fill-in" tasks performed because the
job does not involve sufficient executive duties to occupy
an employee's full time. In o ther instances the nonsupervisory,
nonmanagerial duties may be the principal ones and the
supervi sory or managerial duties are subordinate and are assigned
to the particular employee because it is more convenient to rest
the responsibility for the first line of supervision in the hands of
the person who perform s these othe r duties. Typ ical of
employees in dual jobs which may involve a substantial amount
of nonexempt work are:
(1) Foremen or supervisors who also perform one or more of
the "production"
or "operating" functions, though no other
employee s in the p lant pe rform such work. An example o f
this kind o f employee i s t he foreman in a millinery or
garment plant who is also the cutter, or th e foreman in a garment
factory who operates a multiple-needle machin e not requiring a
full-time operator;
(2) Foremen or supervisor s w ho have as a regular part of thei r
duties the adjustmen
t, repai r, or maintenance of machinery or
equipment. Examples in this category are the fore man-fixer in
the hosiery industry who devotes a considerable amount of time
to making adjustments and repair s to the machines of his
subordinates, or the planer-mill foreman who is also the "machine
man" who repairs the machines and grinds the knives;
(3) Foremen or supervisors who perform clerical work other than
the maintenance of th
e time and production records of their
subordinates; for example, the foreman of the shipping room who
makes out the bills of lading and other shi pping records, the
warehouse foreman who also acts a s inventory clerk , the head
shipper who also has charge of a finished goods stock room,
assisting in p lacing goods on shel ves and keeping perpetual
inventory r ecord s, or the of fice manager, head bookkeeper, or
chief clerk who performs routine bookkeeping. There is no doub t
that the head bookkeeper, for example, who spends a substantia l
amount of his time keeping books of the same general nature
as those kept by the other bookkeepers, even though his
book s are confidential in nature or co ver different transactions
from the books maintained by the under bookkeeper s, is not
primarily an executive employee and should not be so considered.

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Current through June 20, 2000; 65 FR 38332
§ 541.116 Trainees, executive.
The exemption is applicable to an e mployee employed in a bona
fide executive capaci
ty and does not include employees training
to become executives and not actuall y performing the duties of
an executive.

Current through June 20, 2000; 65 FR 38332
§ 541.117 Amount of salary required.
(a) Except as otherwise noted in paragraph (b) of this
section, compen
sation on a salary basis at a rate of no less than
$155 per week, exclusive of board, lodging, or other facilities, is
required for exemption as an executive. The $155 a week may
be translated into equivalent amounts for periods longer than 1
week. The requirement will be met if the employee is
compensated biweekly on a salary basis of $310, semimonthly
on a salary basis of $335.84 or monthly on a salary basis of
$671.67. However, the shorte st period of payment which will
meet the requ irement of payment "on a salary basis" is a week.
(b) In Puerto Rico, the Virgin Islands, and American Samoa, the
salary test for exempt
ion as an "executive " is $130 p er week
for other than an employee of the Federal Government.
(c) The payment of the required salary m ust be exclusive of
board, lodging, or othe
r facilities; that is, free and clear. On the
other hand, the regulations in subpart A of this part do not
prohibit the sale of such facilities to executives on a cash basis if
they are negotiated in the same mann er as similar transactions
with other persons.
(d) The validity of including a salary require ment in the
regulations in subpart
A of this part has been sustained in a
number of appel late court decisions. See, for example, Walling
v. Yeakley, 140 F. (2d) 830 (C.A. 10); Helliwell v. Haberman,
140 F. (2d) 833 (C.A. 2); and Walling v. Morris, 155 F. (2d)
832 (C.A. 6) (reversed on a nother point in 332 U.S. 442);
Wirtz v. Mississippi Publishers, 364 F. (2d) 603 (C.A. 5); Craig
v. Far West Engineering Co., 265 F. (2d) 251 (C.A. 9) cert. den.
361 U.S. 816; Hofer v. Federal Cartridge Corp., 71 F. Supp. 243
(D.C. Minn.).
Current through June 20, 2000; 65 FR 38332
§541.118 Salary basis.
(a) An employee will be considered to be paid "on a salary
basis" within the m
eaning of the regulations if under his
employment agreement he regularly receives each pay period
on a weekly, or less frequent basis, a predetermined amount
constituting all or part of his compensation, which amount is
not subject to reduction because of variations in the quality
or quantity of the work performed. Subject to the
exceptions provided below, the employee must receive his
full salary for any week in which he performs any work
without regard to the number of days or hours worked.
This policy is also subject to the general rule that an
employee need not be paid for any workweek in which he
performs no work.
(1) An employee will not be considered to be "on a salary
basis" if deduct
ions from his predetermined compensation
are made for absences occasioned by the employer or by the
operating requirements of the business. Accordingly, if
the employee is
ready, willing, and able to work, deductions
may not be made for time when work is not available.
(2) Deductions may be made, however, when the employee
absents himsel
f from work for a day or more for personal
reasons, other than sickness or accident. Thus, if an
employee is absent for a day or longer to handle personal
affairs, his salaried status will not be affected if deductions
are made from his salary for such absences.
(3) Deductions may also be made for absences of a day or
more occasioned by s
ickness or disability (including
industrial accidents) if the deduction is made in accordance
with a bona fide plan, policy or practice of providing
compensation for loss of salary occasioned by both sickness
and disability. Thus, if the empl oyer's particular plan, policy
or practice provides compensation for such absences,
deductions for absences of a day or longer because of
sickness or disability may be made before an employee
has qualified un der such plan, policy or practice, and after
he has exhausted his leave al lowance thereun der. It is not
required that the employee be paid any portion of his salary
for such days or days for which he receives compensation
for leave under such plan, policy or practice. Similarly, if
the employer operates under a State sickness and disability
insurance law, or a private sickness and disability insurance
plan, deductions may be made for absences of a working
day or longer if benefits are provided in accordance with the
particular law or plan. In the case of an industrial accident,
the "salary basis" requirement will be met if the employee is
compensated for loss of salary in accordance with the
applicable compensation law or the plan adopted by the
employer, provided the employer also has some plan, policy
or practice of providing compensation for sickness and
disability other than that relating to industrial accidents.
(4) Deductions may not be made for absences of an
employee caused b
y jury duty, attendance as a witness, or
temporary military leave. The employer may, however,
offset any amounts received by an employee as jury or
witness fees or military pay for a particular week against
the salary due for that particular week without loss of the
exemption.
(5) Penalties imposed in good faith for infractions of safety
rules of major si
gnificance will not affect the employee's
salaried status. Safety rules of major significance include
only those relating to the prevention of serious danger to the
plant , or other employees, such as rules prohibiting smoking
in explosive plants, oil refineries, and coal mines.
(6) The effect of making a deduction which is not permitted
under these inter
pretations will depend upon the facts in the
particular case. Where deductions are generally made
when there is no work available, it indicates that there
was no intention to pay the employee on a salary basis. In
such a case the exe mption would not be applicable to him
during the entire period when such deductions were being
made. On the other hand, where a deduction not permitted
by these interpretations is inadvertent, or is made for
reasons other tha n lack of work , the exemption will not
be considered to have been lost if the employer

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reimburses the employee for such deductions and promises
to comply in the future.
(b) Minimum guarantee plus extras . It should be noted that
the salary may cons
ist of a predetermined amount
constituting all or par t of the employee's compensation.
In other words, additional compensation besides the salary
is not inconsistent with the salary basis of payment. The
requirement will be met, for example, by a branch manager
who receives a salary of $155 or more a week and in
addition,a commission of 1 percent of the branch sales. The
requirement will also be met by a branch manager who
receives a percentage of the sales or profits of the branch,
if the employment arrangement also includes a guarantee of
at least the minimum weekly salary (or the equivalent for
a monthly or other period) required by the regulations.
Another type of situation in which the requirement will be
met is that of an employee paid on a daily or shift basis, if
the employment arrangement includes a provision that the
employee will receive not less than the amount specified
in the regulations in any week in which the employee
performs any work. Such arrangements are subject to the
exceptions in paragraph (a) of this section. The test of
payment on a salary basis will not be met, however, if the
salary is divided into two parts for the purpose of
circumventing the requirement of payment "on a salary
basis". For example, a salary of $200 in each week in which
any work is performed, and an additional $50 which is made
subject to deductions which, are not permitted under
paragraph (a) of this section
.
(c) Initial and terminal weeks . Failure to pay the full salary
in the initial or t
erminal week of employment is not
considered i nconsistent with the salary basis of payment.
In such weeks the payment of a proportionate part of the
employee's salary for the time actually worked wil l meet
the requirement. However, this should not be construed
to mean tha t an employee is on a salary basis within the
meaning of the regulations if he i s employed occasionally
for a few days and is paid a proportionate part of the weekly
salary when s o employed. Moreover, even payment of the
full weekly salary under such circumstances would not
meet the requirement, since casual or occasional
employment for a few days a t a time is inconsistent w ith
employment on a salary basis within the meaning of the
regulations.

Current through June 20, 2000; 65 FR 38332
§ 541.119 Special proviso for high salaried executives.
(a) Except as otherwise noted in paragraph (b) of this
section, § 541.1 c
ontains an upset or high salary prov iso for
managerial employees who are compensated on a salary basis at
a rate of not less than $250 per week exclusive of board, lodging,
or other facilities. Such a highly paid employee is deemed to
meet all the requirements in paragraphs (a) through (f) of §
541.1 if the employee's primary duty consists of the management
of the enterprise in which employed or of a customarily
recognized department or subdivision thereof and includes the
customary and regular directi on of the work of two or more other
employees therei n. I f an employee qualifies for exemption
under this proviso, it is not necessary to test that employee's
qualifications in detail under paragraphs (a) through (f) of §
541.1 of this Part.
(b) In Puerto Rico, the Virgin Islands, and Ame rican Samoa the
proviso of § 541.1(f)
applies to those managerial employees
(other than employees of the Federal Government) who are paid
on a salary basis at a rate of not less than $200 per week.
(c) Mechanics, carpenters, linotype operators, or craftsmen of
other kinds are not
exempt under the proviso no matter how
highly paid they might be.
CODE OF FEDERAL REGULATIONS
TITLE 29--LABOR
SUBTITL E B --REGULATION S RELATIN G TO
LABOR
CHAPTER
V--WAGE
AND
HOUR
DIVISION,
DEPARTM
ENT OF
LABOR
SUBCHAPTER A--REGULATIONS
PART 541--DE FINING AND DELIMITIN G THE
TERMS "ANY EMPLOYEE EMPLOYED IN A
BONA
FIDE EXECUTIVE , ADMINISTRATIVE , OR
PROFESSIONA L CAPACITY (INCLUDIN G ANY
EMPLOYEE EMPLOYED IN THE CAPACITY OF
ACADEMIC ADMINISTRATIVE PERSO NNEL OR
TEACHE R IN ELEMEN TAR Y OR SECONDARY
SCHOOLS ), OR IN THE CAPACITY OF O UTSIDE
SALESMAN"
SUBPART B--INTERPRETATIONS
EMPLOYE E EMPLOYED IN A BONA FIDE
ADMINISTRATIVE CAPACITY
§ 541.201 Types of administrative employees.
(a) Three types of employees are described in § 541.2(c)
who, if they meet
the other tests in § 541 .2, qualify for
exemption as "administrative" employees.
(1) Executive and administr ative assistants . The first type is
the assistant t
o a proprietor or to an executive or administrative
employee. In modern industrial practice there ha s been a
steady and increasing use of persons who assist an executive
in the performance o f his duties without themselves
having executive authority. Typical ti tles of persons in
this group are executive assistant to the president, confidential
assistant, executive secre tary, assistant to the general
manager, administrative assistant and, in retai l or
service establishments, assistant manager and assistant buyer.
Generally speaking, such assistants are found i n large
establishments where the official assisted has duties of such
scope and which require so muc h attention t hat the work of
personal scrutiny, correspondence, and interviews must be
delegated.
(2) Staff employees .
(i) Employees included in the second alternati ve in the

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definition are those who can be described as staff rather than
line employees, or as functional rather than departme ntal
heads. They include among others employe es who act a s
advisory specialists to the management. Typical examples of
such advisory specialists are tax experts, insurance experts,
sales research experts, wage- rate analysts, i nvestment
consultants , foreign exchange consultants, and statisticians.
(ii) Also i nclud ed are persons who are in charge of a so -
called functi
onal department, which may frequently be a one-
man department. Typical examples of such employees are
credit m anagers, purchasing agents, buyers, safety directors,
personnel directors, and labor relations directors.
(3) Those who perform special assignments.
(i) The third group consists of pers ons who perform special
assignments. Among t
hem are to be found a number of
persons whose work is perform ed away from the employer's
place of business. Typical titles of su ch persons are leas e
buyers, field representatives of utility companies, location
managers of motion picture companies, a nd district gaugers
for oil companies. It should be particularly noted that this is
a field which is rife with h onorif ic titles that do not
adequately portray the nature of the employee's du ties. The
field representative of a utility company, for example, may be
a "glorified service man."
(ii) This classification also includes employees whose special
assignme nts are perf
ormed e ntirely or partly inside their
employer's place of business. Examples are spec ial
organization planners, customers' broke rs in stock exchange
firms, so-called account executives in adverti sing firms and
contact or promotion men of various types.
(b) Job titles insufficient a s yardsticks .
(1) The employees for whom exemption is sought under the
term "administ
rative" have extremely diverse functions and a
wide variety of titles. A title alone is of little or no assistance in
determining the true impor tance of an employ ee to the
employer or his exempt or nonexempt status under the
regulations in subpart A of this part. Titles can b e had
cheaply and are of no determinative valu e. Thus, while there are
supervisors of production control (whose decisions affect the
welfare of large numbers of employees ) who qualify for
exemption u nde r section 13(a)(1), it is not hard to call a rate
setter (whose functions are limited to timing certain operations
and jotting down times on a stand ardized form) a "methods
engineer" or a "production-control supervisor."
(2) Many more examples could be cited to show that titles are
insufficient as y
ardstic ks. As has been in dicated previously,
the exempt or nonexempt status of any particular employee must
be determined on the basis of wh ether his duties ,
responsibili ties, and salary meet all the requirements of the
appropriate section of the regulat ions in subpart A of this part.
(c) Individuals engaged in the overall academic administration
of an elementary o
r seco ndary school system include the
superintendent or other head of the system and those of his
assistants whose duties are pri marily concerne d with
admini stratio n of such m atters as curriculum , qua lity and
methods o f instructing, measuring and testing the learning
potential and achievement of students, establishing and
maintaining academic and grading standards, a nd other aspect s
of the teaching program. In individual schoo l establishments
those engaged in overal l academ ic administration include the
principal and the vi ce principals who are responsible for the
operation of the school. Other employees engaged in academic
administration are such department heads as the heads of the
mathematics department, the English department, the foreign
langu age department, the manual crafts department, and the like.
Institutions of h igher education have simi lar organizational
structure, although in many case s somewhat more complex.

Current through June 20, 2000; 65 FR 38332
§ 541.202 Categories of work.
(a) The work generally performed by employees who perform
administrative t
asks may be clas sified into the following
general categories for pur poses of the definition: (This
classification is without re gard to whether the work i s manual
or nonmanual. The proble m of manual work as it affects the
exemption of administrative employees is discusse d in §
541.203.) (1) The work specificall y described i n paragraphs
(a), (b), and (c) of § 5 41.2; (2) routine work which is directly
and closel y related to the performance of the work w hich is
described in paragr aphs (a), (b), and (c) of § 541.2; and (3)
routine work which is not related or is only remotely related to
the administrative duties. (As used in this subpar t the phrase
"routine work" means work which does not require the exer
cise of discretion an d in dependent judgment . It is not
necessarily restricted to w ork which is repetitive in nature.)
(b) The work in category 1, that which is specifically desc ribe d
in § 541.2 as req
uiring the exercise of discre tion and
independent judgment, is clearly exempt in nature.

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(c) Category 2 consists of work which if separated from the
work in category 1
would appear to be routine, or on a fairly low
level, and which does not itself requi re the exercise of
discretion and independent judgment, but which has a direct and
close relationship to the performance of the more important
duties. The directness and closeness of the relationship may vary
depending up on the nature of the job and the size and
organization of the establishment in which the work i s
performed. This "directly and closely related" work includes
routine wor k which necessar ily a rises out of the administr ative
duties, and the routine work without which the employee's
more important work c annot b e performed properly. It also
includes a vari ety of rou tine tasks which may not be essential
to the pr oper performance of the more important duties but
which are functionally relate d to them directly and closely. In
this latter category are activities which an administrativ e
employee may reasonably be expected to perform in conne ction
with carrying out his administrative functions including duties
which e ither facilitate or arise inc identally from the
performance of such functions and are commonly performed in
connection with them.
(d) These "directly and closely related" duties are
distinguishabl
e from the last group, category 3, those which are
remotely related or completely unrelated to the more important
tasks. The work in this last category is nonexempt and must not
exceed the 20-percent limitation for nonexempt work (up to
40 percent or service establishment) if the exemption is to apply.
(e) Work perform ed by employees in the capacity of "academic
administrative" personnel is a category of administrati ve work
limited to a class of employees engaged i n academic
administration as contrasted with the general usable of
"administrative" in the a ct. The term "academic
administrati ve" denotes administration relating to the academic
operations and functions in a school rather than to administration
along the lines of general business operations. Academi c
administrativ e personne l ar e performing operations
directly in the field of education. Jobs relating to areas outside
the educational fi eld are not within the definition of
academic administration. Examples of jobs i n school systems,
and educational establishments and institutions , which are
outside the term ac ademic adminis tration are jobs relating to
building manageme nt and maintenance, jobs relating to the
health of the students and academic staff such as s ocial
workers, psychologist, lunch room manager, or dietitian.
Employees in such w ork which i s not considered academic
adminis tration may qualify for exemption under other
provisions of § 541.2 or under other sections of the regulations
in subpart A of t his part provided the requirements for such
exemptions are met.
Current through June 20, 2000; 65 FR 38332
§ 541.203 Nonmanual work.
(a) The requirement that the work performed by an exempt
administra
tive employee must be office work or nonmanual work
restricts the exemption to "white-collar" employees who meet
the tests. If the work performed is "offi ce" work it is immaterial
whether it is ma nual or nonmanual in na ture. Thi s is consistent
with the intent to include within the term "administr ative" onl y
employees who are basically w hite-collar employees since the
accepted usage of the term "white-collar" includes all office
workers. Persons empl oyed in the routine operation of office
machines are en
gaged in office work within the meaning of §
541.2 (althoug h they would not qualify as ad ministrativ e
employees since they do not meet the other requirements of §
541.2).
(b) Section 541. 2 does not completely prohibi t the
performance of ma
nual work by an "a dministrative" employee.
The performance by an otherwise exempt administrati ve
employee of some man ual w ork which is directly and closely
related to the work re quiring the exercise of discreti on and
independe nt judgment is not inconsistent with the principle that
the exemption is limited to "white-collar" employees. However,
if the employee performs so much manual work (other than
office work) that he cannot be said to be basically a "white-
collar" employee he does not qualify for exemption as a bona fide
administrative employee, eve n if the manua l work he performs
is directly and closely related to the work requiring the exercise
of discretion and independent judgment. Thus, it is obvious
that employees who spend most of their time in using tools,
instruments, machinery, or other equipment, or in performing
repetitive operations with their hands, no matter how much
skill is required, w ould not be bona fide administrative
employees withi n the meanin g of § 541.2. An office employee,
on the other hand, is a "white-collar" worker, and would not
lose the exemption on the grounds that he is not p rimarily
engaged in "nonmanual" wo rk, although he would lose th e
exemption if he failed to meet any of the other requirements.

Current through June 20, 2000; 65 FR 38332
§ 541.205 Directly related to management policies or
general business operati ons.
(a) The ph rase "directly related to management policies or
general busine
ss operations of his employer or his employer's
customers" describes those types of activities relating to th e
administrati ve operations of a business as distinguished from
"production" or, in a retail or service establishment, "s ales"
work. In addition to describing the types of activities , th e
phrase limits the exemption to persons who perform work of
substantial importance to the management or operation of the
business of his employer or his employer's customers.
(b) The administrative operations of the business include the
work performed by so-ca
lled white-collar employees engaged in
"servicing" a business as, for, example, advising the
management, planning, negotiating, representing the company,
purchasing, promoting sales, and busines s research and control.
An employee performing suc h work is engaged i n activities
relating to the a dministrative operations of the business
notwithstanding that he is employed as an administrati ve
assistant to an executive in the producti on department of the
business.
(c) As used to describe work of substantial importance to the
management
or operation of the business, the phrase "directl y
related to ma nagement policies or general business operations"
is not limited to persons who participate in the formulation of
management policies or in the ope ration of the business as a
whole. Employees wh ose work is "directly related" to
management policies or to general business operations include
those work affects policy or whose responsibility it is to execute
or carry it out. The phrase also includes a wide variety of persons
who either carr y out major assignments in conducting the
operations of the busines s, or whose work affects business

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operations to a substantial degree, even though their assignments
are tasks related to the operation of a particular segment of the
business.
(1) It is not possible to lay down specific rules that will indicate
the p recise point at which wor
k becomes of substantial
importance to the management or operation of a business . It
should be clear that the cashier of a bank perform s work at a
responsible level and may therefore be said to be performing
work directly rel ated to management policies or general
business operations. On the other hand, the bank telle r does
not. Likewise it is cl ear that bookkeepers , secretaries,
and clerks of various kinds hold the run-of-the-mine positions in
any ordinary business and a re no t performing work directly
related to management policies or general business operations.
On the other hand, a ta x consultant employed either by an
individual company or by a firm of consultants i s ordi narily
doing work of substantial importance to the management or
operation of a business.
(2) An employee performing routine clerical duties obviously
is not performing
work o f substantial importance t o the
management or o peration of the business even though he may
exercise some measu re of discretion and judgment as to the
manner in which he performs his cler ical tasks. A messenger
boy who is entrusted with carrying la rge sums of money or
securities cannot be said to be doing work of importance to the
busines s even though serious consequence s may flow from his
neglect. An employee operating very expensive equipment
may cause se rious loss to his employer b y the improper
performance of his duties. An i nspector, such as, for example,
an inspector for a n insurance company, may cause los s to his
employer by the failu re to perform his job properly. But such
employ ees, obviously, are not performing work of such
substantial importance to the management or operation of the
business that it can be said to be "directly related to management
policies or genera l business operations" as that phrase is used in
§ 541.2.
(3) Some firm s employ p er sons whom they describe as
"statisticians." If all such a person does, in effect, is to tabulate
data, he is clearly not exempt. However , if such an employee
makes analyses of data and draws conclusions which are
important to the determination of, or which, in fact, determine
financial, merchandising, or other po licy, clearl y he is doing
work dir ectly related to management policies or general
business oper ations. Similarly, a personnel employee may
be a clerk at a hiring window of a plant, or he may be a man
who determines or effects personnel policies affecting all
the worke rs in the establishment. In the latter case, he is
clear ly doing work directly related to ma nagement policies or
general business operations . These example s illustr ate the two
extremes. In each case, between these extreme types there are
many employ ees whose work may be of substantial importance
to the management or operation of the business, depending
upon the particular facts.
(4) Another example of an employee whose work may be
important to the
welfare of the business is a buyer of a particular
article or equipme nt in an industrial plant or personne l
commonly c alled assistant buyers in retail or servic e
establishments. Where such work is of substantial importance
to the management or operation of the business, eve n though it
may be limited to purchasing for a particular department of the
business, it is directly related to management policies or general
business operatio
ns.
(5) The test of "directly related to management policies or
general bu
siness operations" is also met by many persons
employed as advisory specialists and consultants of various
kinds, credit managers, safety directors, claim agents and
adjusters, wage-rate analysts, tax experts, account executives of
advertising agencies, customers' brokers in stock exchange
firms, promotion men, and many others.
(6) It should be noted in t his connection that an employer's
volume of ac
tivities may make it necessary to employ a number
of employees in some of these cat egories. Th e fact that there
are a number of other employees of the same employer carrying
out assignments of the same relat ive importance or performing
identical work does not affect the determination of whether they
meet this t est so long as the wor k of each such employee is of
substantial importance to th e manag ement or operation of t he
business.
(7) In the data processing field some firms employ persons
described a
s systems analysts and compute r programmers. If
such employees are concerned with the planning, scheduling,
and coordination of activities which are required to develop
systems for processing data to obtai n solutions to co mplex
business, scientific, or engineering problems of his employer or
his employer's customers, he is clearly doing work directly
related to manag ement policie s or genera l business
operations.
(d) Under § 541.2 the "management policies or general
business operations
" may be those of the employer or the
employer's customers. For example, many bona fide
administrati ve employees perform important functions as
advisers and consultants but are employ ed b y a concern
engaged in furnishing such services for a fee. Typical instances
are tax experts, labor relations consultants, financial consultants,
syste ms analysts, or resident buyers. Such employees, if they
meet the other requirement s of § 541.2, qualify for exemption
regardless of whether the management policies or general
business operations to which their work is directly related are
those of their employer's clients or customers or those of their
employer.

Current through June 20, 2000; 65 FR 38332
§ 541.206 Primary duty.
(a) The de finition of "administrati ve" exempts only
employees who
are primarily engaged in the responsible
work which is characteristic of empl oyment in a bona f ide
administrati ve capacity. Thus, the employee must have as his
primary duty office or non manual work directly related to
management policies or general b usiness operations of his
employer or his employer's cus tomers, o r, in the case of
"academic administrative personnel," the employee m ust
have as his primary duty work that is directly related to
academic administration or general academic oper ations of
the school in whose operations he is employed.
(b) In determining w hether an employee's exempt work
meets the "prim
ary duty" requirement, the principles explained
in § 541.103 in t he discussion of "primary duty" under the
definition of "executive" are applicable.

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 FEDERAL REGULATIONS – 14

Current through June 20, 2000; 65 FR 38332
§ 541.207 Discretion and independen t judgment.
(a) In general, the exercise of discre tion and independent
judgment involv
es the comparison and the evaluation of possible
courses of conduct and acting or maki ng a decision after the
various possibilities have been considered . The term as used
in the regulations in Subpart A of this part, m ore over ,
implies that the person has the authority or power to make
an independent choice, free from immediate direction or
supervision and with respe ct to matters of significance .
(Without actually attempting to define the term, the court s h ave
given it this meaning in applying it in particular cases. See, for
example, Walling v. Sterli ng Ice Co., 69 F. Supp. 655, reversed
on other grounds, 165 F. (2d) 265 (CCA 10). See also Connell
v. Delaware Aircraft Industries, 55 Atl. (2d) 637.)
(b) The term must be applied in the light of all the facts involved
in the particular
employment situation in which the question
arises. It has been most frequently misunderstood and
misapplied by employers and employees in cases involving the
following: (1) Confusion between the exercise of discretion and
indepe ndent judgment, and the use of skill i n applying
techniques, procedures, o r specific standards; and (2)
misapplication of the term to employees making decisions
relating to matters of little consequence.
(c) Distinguished from skills and procedures:
(1) Perhaps the most frequent cause of misapplication of the
term " discreti
on and independent judgment" is the failure to
distinguish it from the use of skill in va rious respects. An
employee who mer ely applies his knowledge in foll owing
prescribed procedures or determ ining which procedure to
follow, or who determines whether specifie d standards are met
or whethe r an object falls into one or another of a number of
definite grades, clas ses, or other categories, with or without the
use of testing or measur ing devices, is not exercising
discretion and independent judgment within the meaning of §
541.2. This is true even if there i s some leeway in reaching a
conclusion, as when an accep table standard include s a range or
a tolerance above or below a specific standard.
(2) A typical example of the application of skills and
procedures is ordinary i
nspection work of various kinds.
Inspectors normally perform specialized work along
standardized lines involving well -established techniques and
procedures which may h ave been cataloged and described in
manuals or other sources. Such inspectors rely on techniques
and skills acquired by special training or experience. They
may have some leeway in the performance of their work but only
within closely prescribed limits. Employees of this type may
make recommendations on the basis of the information they
develop in the course of their inspections (as for example, to
accept or reject an insurance risk or a product manufactured to
specifications ), but these recommendations are based on the
development of the facts as to whether there is conformity wi
th t he prescribed standards . In such cases a decision to depart
from the prescribed standards or the p ermitted tolerance is
typically made by the inspector's superior. The inspector i s
engaged in exercising skill rather than discretion and indepe
ndent judgment within the meaning of the regulations in Subpart
A of this part. (3) A related g roup of employees usually cal led
examiners or graders perform similar work involving the
comparis on of products w ith established standards which are
frequently catalog ed. Often , after continued reference to the
written standards , or through experience, the employee acquires
sufficient knowledge so that reference to written standards is
unnecessary. The substitution of the employee's memory for the
manual of st andards does not convert the character of the work
performed to work requiring the exercise o f discretion and
independent judgment as req uired by the reg ulatio ns in
subpart A of this part. The mere fact that the employee uses his
knowledge and experience does not change his decision, i.e.,
that the product does or does not conform with the established
standard, into a real decision in a significant matter.
(4) For exa mple, certain "graders" of lumber turn over ea ch
"stick" to see
both sides, after w hich a crayon mark is made to
indicate the grade. Thes e lumber gr ades are well establishe d
and the employee's familiarity with them ste ms from his
experience and training. Skill rather than discreti on and
independent judgment is exer cised in grading the lumber .
This does not n ecessarily mean, however, that all employee s
who grade lumber or other c ommodities are not exercising
discretion and independent judgment. Grading of commoditie s
for which there are no recognized or established standards
may require the exer cise of discretion and independent
judgment as contemplated by the regulations i n Subpart A of
this part. In addition, in those situations in which an oth erwise
exempt buyer does grading, the grading even th ough routine
work, may be considered exempt if it is directly and clos ely
related to the exempt buying.
(5) Another type of situation where skill in the application of
techniques and pr
ocedures i s sometimes c onfused with
discretion and independent judgment is the "scr eening" of
applicants by a pe rsonne l clerk. Typically such an employee
will interview applicants and obtain from them data regarding
their qualification s and fitness for employment. These data
may be entered on a form specially prepared for the purpose. The
"screening" operation consists of rejecting all applicants who do
not meet standards for the particular job or for employment by
the company. The standards are usually set by the employee's
superior or other company officials, and the decision to h ire
from the group of applicants who do meet the standards is
similarly made by other company officials . It seems clear that
such a personnel clerk does not exercise discretion and
independent judgment as required by the regulations in Subpart
A of this part. On the other hand an exempt personnel manager
will often perform similar functions; that is, he will interview
applicants to obtain the necessar y data and eliminate applicants
who are not qualified. The personne l manager will then hire one
of the qualified applicants. Thus, when the interviewing and
screening are performe d by the p ersonnel manager who does
the hiring they constitute exempt w ork, even though routine,
because thi s work is directly and closel y related to the
employee's exemp t functions.
(6) Similarly, co mparison sh opping performed b y an
employee of a
retail store who merely reports to the buyer his
findings as to the prices at which a competitor's store is offering
merchandise of the same or comparable quality does not involve
the exercise of discretion and judgment a s required in the
regulations. Discretion and judgment are exercised , however,
by the buyer who evaluates the assistants' reports and on the basis
of their findings direct s that certain items be re-priced. Whe n
performed by the buyer who actually makes the decisions

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 FEDERAL REGULATIONS – 15

which affect the buying or pricing policies of the department
he ma nages, the comparison shopping, although in itself a
comparatively routine operation, is directly and closely related
to his managerial responsibility.
(7) In the data processing field a systems analyst is exerci sing
discretion and independe
nt judgment when he develops methods
to process, for example, accounting, inventory, sales, and
other business information by using electronic computers. He
also exercises d iscretion and in dependent judgment when he
determines the exact nature of the data processing problem, and
structures the pr oblem in a l ogical manner so that a system to
solve the problem and obtain the desired results can be
developed. Whether a co mputer programme r is exercising
discretion and independent judgment depends o n the fact s in
each particular case. Every proble m process ed in a co mputer
first must be ca refully analyzed so that exact and logical steps
for its solution can be worked out. When this preliminary work
is done by a computer programmer he is exercising discretion
and independent judgment. A computer programmer would also
be using discretion and indepe ndent judgment when he
determines exactly what information must be used to prepare the
necessary documents and by as certainin g the exact f orm in
which the in formation is to be p resented. Examples of work
not requiring the level of discretion and judgment
contemplated by the regulations are highly technical and
mechanical operations such as the preparation of a flow chart or
diagram showing the order in which the computer must
perform each operation, the preparation of instructi ons to the
console operator who runs the computer or the actu al running
of the computer by the programmer, and th e debugging o f a
program. It is clear that the duties of data processing employees
such as tape librarians, keypunch operators , computer
operators, junior programme rs and programmer trainees are
so closely supervi sed as to preclude the use of the required
discretion and independent judgment.
(d) Decisions in significant matters.
(1) The second type of situation in which some diffic ulty
with this phrase ha
s been experienced relates to the level or
importance of the matters with respec t to which the
employee may make decision s. In one sense almost every
employee is required to use some discretion and independent
judgment. Thus, it is frequently left to a truck driver to
decide which route to follow in going from one place to another;
the shipping clerk is normally permitted to decide the method of
packing and the mode of shipment of small order s; and t he
bookkeeper may usually decide whether he will post first to
one ledger rather than an other. Yet it i s obvious that these
decisions do not consti tute the exercise of discretion and
independent judgment of the level contempla ted by the
regulations in Subpart A of this part. The divisions have
consistently taken the posi tion that decisions of this nature
concerning relativ ely unimportant matters are not those
intended by the re gulatio ns in Subpart A of this part, but that
the discretion and independent judgment exercised must be rea l
and substantial, that is, they must be exercised with respect to
matters of consequence. Thi s interpretati on has also b een
followed by courts in decisions in volving the application of the
regulations in this part, to particular cases.
(2) It is not possible to state a general rule which will distinguish
in each of the many thousands of possi
ble factual situations
between the making of real decisions i n significant matters and
the making of c
hoices involving m atters of little or no
consequence. It should be clear , however, that the term
"discretion and independent judgme nt," within the meaning
of the regulations in Subpart A of this part, does not apply to the
kinds of decisions normally made by clerical and similar types
of employees. The term does apply to the kinds of decisions
normally made by persons who formulate or participate in the
formu lation of p olicy within their spheres of responsibility or
who exercise authority within a wide range to commit their
employer in subs tantial respects financially or otherwise. The
regulations in Subpart A of this part , however, do not require
the e xercise of discreti on an d independent judgment at so high
a level. The r egulations in Subpart A of this part also
contemplate the kind of discretion and independent judgment
exercised by an administrative assistant to an executive, who
without specific instru ctions or prescribed procedures, arranges
interviews and meetings, and ha ndle s callers and meetings
himself where the executive's personal attention is not required.
It incl udes the kind of discretion and independent judgment
exercised by a customer's man in a brokerage hous e in deciding
what recommendations to make to a customer for the purchase
of securi ties. It may include the kind of discre tion an d
judgment exercised by buyers, certain wholesale salesmen,
representatives , a nd other contact persons who are given
reasonable latitude in carrying on negotiation on behalf of
their employers.
(e) Final decisions not
necessary.
(1) The
term "discretion and independent judgment" as used in
the regulation
s in Subpart A of this part does not necessarily
imply that the decisions made by the employee must h ave a
finality that goes with unlimited au thority and a complete
absence of review. The decisions made as a resu lt of the
exercise of discret ion and independent judgment may consist of
recommendations for action rather than the actual taking of
action. The fact that an employee's decision may be subject to
review and that upon occasion the decisions are revised or
reversed after review does not mean that the employee is not
exercising discr etion and independent judgment within the
meaning of the regulations in Subpart A of this part. For
example, the assistant to the president of a large corporatio n may
regularly reply to correspondence addressed to the president.
Typically, such an assistant will submit the m ore important
replies to the presi dent for review before they are sent out.
Upon occasion, after review, the president may alter or disc ard
the prepared reply and direct that another be sent instead. This
action by the president would not, however, destroy the exempt
character of the assistant's function, and does not mean that he
does not exercise discretion and independent judgment in
answering correspondence and in deciding which replies may be
sent out without review by the president.
(2) The policies formulated by the credit manager of a large
corporation may be
subject to review by higher company officials
who may approve or disapprove these policies. The management
consultant who has made a study of the operations of a business
and who has drawn a proposed change in organization, may
have the plan reviewed or revised by his superiors before it is
submitted to the client. The purchasing agent may be requi red to
consult with top management officials before making a purchase

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 FEDERAL REGULATIONS – 16

commitment for raw materials in excess of the contemplated plant
needs for a stated period, say 6 months. These employees exercise
discretion and independent judgment within the meaning of the
regulations despite the fact that the i r decisions or
recommendations are reviewed at a higher level.
(f) Distinguished from loss through neglect: A distinction must
also be made betw
een the exercise of discretion and independent
judgment with respect to matters of consequence and the cases
where serious consequences may result from the negligence of an
employee, the failure to follow instruction or procedures, the
improper application of skills, or the choice of the wrong
techniques. The operator of a very intricate piece o f
machinery, for example, may cause a complete stoppage of
production or a breakdown of his very expensive machine merely
by pressing the wrong button. A bank teller who is engaged in
receipt and disbursement of money at a teller's window and in
related routine bookkeeping duties may, b y crediting the
wrong account with a deposit, cause his employer to suffer a
large financial loss. An inspector charged with responsibility for
loading oil onto a ship may, by not applying correct techniques
fail to notice the presence of fo reign ingredients in the tank
with resulting contaminat ion of t he cargo and serious loss to
his employer. In these cases, the work of the employee does
not require the exercise of discre tion and independent
judgment within the meaning of the regulations in Subpart A of
this part.
(g) Customarily and regularly: The work o f a n e xempt
administra
tive employee must requi re the exercise of
discretion and independent judgment customarily and regularl y.
The phrase "customarily and regularly" signifies a frequency
which m ust be greater than occasional but which, of course,
may be less than constant. The requirement will be met by the
employee who n ormal ly and recurrently is calle d upon t o
exercise an d does exercise disc retion and independent
judgment in the day-to-day performance of his duties . The
requirement i s not met by the occasional exercis e of
discretion and independent judgment.

Current through June 20, 2000; 65 FR 38332
§ 541.208 Directly and closely related.
(a) As indicated in § 541.202, w ork whic h is directly and
closely related to the per
formance of the work described in §
541.2 is considered exempt work. Some illustrations may be
helpfu l in clarifying the differences between such work and
work which is un related or only remotely related t o the work
described in § 541.2.
(b)(1) For purposes of illustration, the case of a high-salaried
management consulta
nt ab out whose exempt status as an
administrati ve employee there is no doubt will be assumed.
The particular employee is employed by a firm of consultants
and performs work in which he customarily and regularly
exercises discretion and independent judgment. The work
consists primarily of analyzing, and recommending changes in,
the business operations of his employer's client. This work
falls in the category of exempt work described in § 541.2.
(2) In the course of performing that work, the consultant makes
extensive note
s recording the flow of work and materials through
the office and plant of the client. Standing alone or separated
from the primary duty such notemaking would be routine in
nature. However, this is work without which the more important
work cannot be per
formed properly. It is "directly and closely
related" to the administrative work and is therefore exempt work.
Upon his return to the office of his employer the consultant
personally types his report and draws, first in rough and then i n
final form, a proposed table of organization to be submitted with
it. Although all this work may not be essential to the performance
of his more important work, it is all directly and closely related
to that work and should be considered exempt. While it is
possibl e to assign the typing and final drafting to nonexempt
employees and in fact it is frequently the practice to do so, it is
not requi red as a condition of exemption that it be so delegated.
(3) Finally, if because this particul ar employee has a special skill
in such work, he a
lso drafts tables or organization proposed
by other consultants, he would then be performing routine work
wholly unrelated, or a t best only remotely related, to his more
important work. Under such conditions, the drafting is
nonexempt.
(c) Another illustration is the credit manager who makes and
administers the cred
it policy of his employer. Establishing credit
limits for customers and au thorizing the shipment of orders on
credit, including the decisions to exceed or otherwise vary
these limits in the case of particular customers, would be
exempt work of the kind specifically described in § 541.2. Work
which is directly and closely related to these exempt duties may
include such activities as checking the status of accounts to
determine whether the credi t limit would be exceeded by the
shipment of a new order, removing credit reports from the files
for analysis and writing letters giving credit data and experience
to other employers or credit agencies. On the other hand, any
general office or bookkeeping work is nonexempt work. For
instance, posting to the accounts receivable ledger would be only
remotely related to his administrative work and must be
considered nonexempt.
(d) One phase of the work of an administrative assistant to a bona
fide executive or ad
ministrative employee provides anothe r
illustration. The work of determining whether to answe r
correspondence personally, call it to his superior's attention, or
route it to someone else for reply requires the exercis e of
discretion and independent judgment and is exempt work of the
kind described in § 541.2. Opening the mail for the purpose of
reading it to make the decisions indicated will be directly and
closely related to the administrativ e work described. However,
merely opening mail and placing it unread before his superior or
some other person would be related only remotely, if at all, to any
work requiring the exercise of discretion and independent
judgment.
(e) The following additional examples may also be of value in
applying these pri
nciples. A traffic manager is employed t o
handle the company's transportation problems. The ex empt
work performed by such an employee would include planning the
most economical and quickest routes for shipping merchandise
to and from the plant, contracting for common -carrier and other
transportation facilities, negotiating with carriers for adjustments
for damages to merchandise in transit and making the necessary
rearrangements resulting from delays, damages, or irregularitie s
in transit. This employee may also spend part of his time taking
city orders (for local deliveries) over the telephone. The order-
taking is a routine function not directly and closely related to the
exempt work and must be considered nonexempt.

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 FEDERAL REGULATIONS – 17

(f) An office manager who does not supervise two or more
employees woul
d not meet the requirements for exemption as an
executive employee but may possibly qualify for exemption as an
administrative employee. Such an employee may perform
administrative duties, such as the executiv e of the employer's
credit policy, the management of the company's traffic,
purchasing, and other responsible office work requiring the
customary and regular exercise of discretion and judgment,
which are clearly exempt. On the other hand, this office manager
may perform all the bookkeeping, prepare the confidential or
regular payrolls, and send out monthly statements of account.
These latter activities are not directly and closely related to the
exempt functions and are not exempt.
Current through June 20, 2000; 65 FR 38332
§ 541.209 Percentage l
imitations on nonexempt work.
(a) Under § 541.2(d), an empl oyee will not qualify for
exemption as a
n administrative employee if he devotes more
than 20 percent, or, in the case of an e mployee of a retail or
service establishment if he devotes as much as 40 percent, of his
hours worked in the workweek to nonexempt work; that is, to
activities which are not directly and closely related to the
performance of the work described in § 541 .2 (a) through (c).
(b) This test is applied on a workweek basis and the percentage
of time spent on n onexe
mpt w ork is computed on the time
worked by the employee.
(c) The tolerance for nonexempt w ork allows the
performanc
e of nonexempt manual or nonmanual wo rk within
the percentages allowed for all types of nonexempt work.
(d) Refer to § 541.112(b) for the de finition of a retail or
service establis
hment as this term is used in paragraph (a) of
this section.

Current through June 20, 2000; 65 FR 38332
§ 541.210 Trainees, administrative.
The exemptio n is applicable to an employee employed in a bona
fide administra tive capaci
ty and does not include employees
training for employment i n an administrative capacity who are
not actuall y performing the duties of an administrati ve
employee.

Current through June 20, 2000; 65 FR 38332
§ 541.211 Amount of salary or fees required.
(a) Except as otherwise noted in paragraphs (b) and (c) of this
section, compensa
tion on a salary or fee basis at a rate of not less
than $155 a week, exclusive of b oard, lodging or other
facilities, is required for exemption a s an administrative
employee. The requirement wi ll be met if the employee is
compensated biweekly on a salary basis of $310, semimonthly on
a salary basis of $335.84, o r monthly on a salary basis of
$671.67.
(b) In Puerto Rico, the Virgin Islands, and American Samoa,
the salary test for exe
mption as an administrative employee is
$125 per week for other than an employee of the Federal
Government.
(c) In the case of academic administrative pers onnel, the
compe nsation re quir
ement for exemption as an administrative
employee may be met either by the payme nt described in
paragraph (a) or (b) of this section, whichever is applicable, or
alternatively by compensation on a s alary basis in an amount
which is at least equal to the entrance salary for teachers in the
school system, or education al e stablishment or institution by
which the employee is employed.
(d) The payment of the required salar y must be exclusive of
board, lodging, or othe
r facilities; that is, free and clear. On the
other hand, the regulations in Subpart A of this part do not
prohibit the sale of such facilities to administrative employees
on a cash basis if they are negotiated in the same manner as
similar transactions with other persons.

Current through Jun e 20, 2000; 65 FR 38332
§ 541.212 Salary basis.
The explanation of the salary basis of payment made i n §
541.118 in connect
ion with the definition of "executive" i s
also applicable in the definition of "administ rative".
Current through Jun e 20, 2000; 65 FR 38332
§ 541.213 Fee bas
is.
The requirements for exemption as an administrative
employee ma
y be met by an employee who is c ompensated
on a fee basis as well as by one who is paid on a salary basis.
For a discussion of payment of a fee basis, see § 541.313.

Current through June 20, 2000; 65 FR 38332
§ 541.214 Special provi so for high salaried administrat ive
employees.
(a) Except as otherwise n oted in paragraph (b) of this
section, § 541.2 co
ntains a special proviso incl uding within
the definition of "administrative" an employee who is
compensated on a salary or fee basis at a rate of not less than
$250 per week exclusive of board, lodging, or other facilities,
and whose primary duty consists of either the performance of
office or nonmanual work directly related to management
policies or general business operations of the employer or the
employer's customers, or the performance of functions in the
administrat ion of a school system, or educational establishment
or institution, or of a department or subdivision thereof, in
work directly related to the academic instruction or training
carried on therei n, where the performance of such primary
duty inclu des work requir ing the exercise of discretion and
independent judgment. Such a highly paid employee having
such work as his or her primary duty is deemed to meet all the
requi rements in § 541.2 (a) throug h (e). If an employee
qualifies for exemption under this proviso, it is not necessary to
test the employee's qualifications in detail under § 541.2 (a)
through (e).
(b) In Puerto Rico, the Virgin Islands, and American Samoa,
the proviso of § 541.2
(e) applies to those administrative
employees other than an employee of the Federal Government
w ho are compensated on a salary or fee basis or not less than $200
per week.

Current through June 20, 2000; 65 FR 38332
§ 541.215 Elementary or secondary schools and other educational
establishments and institutions.
To be considered for exemption as employed in the capacity of
academic adminis
trative personnel, the employment must be in
connection with the operation of an elementary or secondary

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 FEDERAL REGULATIONS – 18

school system, an institution of higher education, or other
educational establishment or institution. Sections 3(v) and 3(w)
of the act define elementary and secondary schools as those day
or residential schools which provide elementary or secondary
education, as determined under State law. Under the laws of
most States, such education includes the curriculums in grades
1 through 12; under many it includes also the introductory
programs in kindergarten. Such education in some States may
include also nursery school programs in elementary education and
junior college curric ulums in secondary education. Education
above the secondary school level is in any event included in the
programs of institutions of higher education. Special schools for
mentally or physically handicapped or gifted children are
included among the educational establishments in which teachers
and academic administrative personnel may qualify for the
administrative exemption, regardless of any classification of such
schools as elementary, secondary, or higher. Also, for purposes
of the exemption, no distinction is drawn betwe en public or
private schools. Accordingly, the classification for other
purposes of the school system, or educational establishment or
institution, is ordinarily not a matter requiring consideration in
a determination of whether the exemption applies. If the work is
that of a teacher or academic personnel as defined in the
regulations, in such an educational system, establishment, or
institution, and if the other requirement of the regulations, are
met, the level of instruction involved and the status of the school
as public or private or operated for profit or not for profit will not
alter the availability of the exemption.

Current through June 20, 2000; 65 FR 38332
CODE OF FEDERAL REGULATIONS
TITLE 29--LABOR
SUBTITL E B --REGULATION S RELATIN G TO
LABOR
CHAPTER V--WAGE AND HOUR DIVISION,
DEPARTMENT OF LABOR
SUBCHAPTER A--REGULATIONS
PART 541--DEFINING AND DELIMITIN G THE
TERMS "ANY EMPLOYEE EMPLOYED IN A
BONA
FIDE EXECUTIVE , ADMINISTRATIVE , OR
PROFESSIONA L CAPACITY (INCLUDIN G ANY
EMPLOYEE EMPLOYED IN THE CAPACITY OF
ACADEMIC ADMINISTRATIVE PERSO NNEL OR
TEACHE R IN ELEMEN TAR Y OR SECONDARY
SCHOOLS ), OR IN THE CAPACITY OF O UTSIDE
SALESMAN"
SUBPART B --INTERPRETATIONS EMPLOYEE
EMPLOYED IN A BONA FIDE
PROFESSIONAL CAPACITY
§ 541.300 General.
The term "professional" is not restricted to the traditional
professions of law, medicine, and theology. It includes those
professions which have a recognized status and which are
based on the acquirement of professional knowledge through
prolonged study. It also includes the artistic professions, such
as acting or music. Since the test of the bona fide
professional capacity of such employment is differe nt in
character from the test for persons in the learned
professions, an alternative test for such employees is contained
in the regulations, in addition to the requirements common to
both groups.

Current through June 20, 2000; 65 FR 38332
§ 541.301 Learned professions.
(a) The "learned" professions are describ e d in § 541.3(a)(1) as
those requiring knowl
e dge of an a dvance d type in a field of
science or learning customarily acquired by a prolonged
course of specialized intellect ual instruction and study as
distinguished from a general academic educati on and from an
apprentices hip and from training in the performance of routine
mental, manual, or physical processes.
(b) The first element in the requireme nt is that the
knowledge be o
f an advanced type. Thus, generally speaking, it
must be knowl edge which cannot be attained at the high school
level.
(c) Second, it must be knowledge in a field of sc ience or
learning. This serv
es to distingu ish the professions from the
mechanical arts where in some instances the knowledge is of a
fairly advance d type, but not in a field of science or
learning.
(d) The requisite knowledge, in the third place, must be
customarily
acquired by a prolonged course of sp ecialized
intellectual instruction and study. Here it should be noted that
the word "customarily" has been used to meet a specific problem
occurring in many industries. As is well known, even in the
classical profession of law, there are still a few practitioner s
who have gained their knowledge b y ho me study and
experience. Characteristically, the members of the profe ssion
are graduates of law schools, but some few of their fellow
professionals whose status is equal to theirs, whose attainments
are the same, and whose word is the same did not enjoy that
opportunity. Such persons are not barred from the exemption.
The word "customarily" implies that in the vast majority of cases
the specific academic training is a prerequisite for entrance into
the profession. It makes the exemption available to th e
occasional lawyer who has not gone to law school, or the
occasional chemist wh o is not the possessor o f a degree in
chemistry, etc., but i t does not include the members of such
quasi-professions as jo urnalism i n which the b ulk of the
employees have acquired their ski ll by experience rather than
by any formal specialized training. It should be noted also that
many employees in these quasi-professions may qualify for
exemption under other sections of the regulations in Subpart A
of this part or under the alt ernative paragraph of the
"professional" definition applicable to the artistic fields.
(e)(1) Generally speaking the professions which meet the
requirement for a
prolonged course of specialized intellec tual
instruction and study include law, medicine, nursing, accounting,
actuarial computation, engineering, a rchitecture, teaching,
various types of physical, chemical, and biol ogical sciences,
including pharmacy and registered or certified medical
technology and so forth. The typical symbol of the professional
training and the best prim a facie evidence of its possession is,
of co urse, the appropriate academic degree, and in these
prof essions an advanced academic degree is a standard (if not

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 FEDERAL REGULATIONS – 19

universal) prereq uisite. In the case of registered (or certified)
medical technologist s, successful completion of 3 academic
years of preprofessional s tudy in an accredited college or
university plus a four th year of professional course work in
a school of medical technology approved b y the Council of
Medical E ducation of the American Medical Association w ill
be recognized as a prolonged course of s pecialized intellectu al
instruction and study. Registered nurses have traditionally been
recognized as professional employees by the Division in its
enforcement of the act. Although, in some cases, the cours e of
study has become shortened (but more concentrated), nurses who
are registered by the appropriate State examining board will
contin ue to be recognized as having met the requirement of §
541.3(a)(1) of the regulations.
(2) The areas in which professional exemptions may be
available are exp
anding. As knowledge is developed,
academic training is broadened, degrees are offered in new and
diverse fields, spe cialtie s are created and the true
specialist, so trained, who is g iven new and greater
responsibilities, comes closer to meeting the tests. However,
just as an excellent legal stenographer is not a lawyer, these
technical specialists must be more th an highly skilled
technicians. Many employees in industry rise to executive or
administrati ve positions by their natural ability and good
commonsense, combined with long experience with a
company, without the aid of a college education or degree in any
area. A college educati on would perhaps give an executive
or administrator a more cultured and polished approach but
the necessary know-how for doing the executive job would
depend upon the person's own inhere nt talent. The professional
person, on the other hand, attains his status after a prolonged
course of specialized intellectu al instruction and study.
(f) Many accountants are exempt as professional employees
(regardles
s of whether they are employed by public
accounting firms or by other types of enterprises). (S ome
accountants may qualify for exemption as bona f ide
administrati ve employees.) However, exemption of
accountants, as in the case of other occupational groups (see
§ 541.308), must be deter mined on the basis of the individual
employe e's duties and th e other cri teria in the r egulations . It
has been the Divisions' experience th at certified public
accountants who meet the salary re qui rement of the
regulations will, except i n unusual cases, meet the
requirements of the professional ex emption since they meet
the tests contained in § 541.3. Similarly, accountants who are
not certified public acc ountants may also be exempt as
professional employees if they actually perform work which
requires the consistent exercise of discretion and judgment
and otherwise meet the tests prescribed in the definition of
"professio nal" employee. Accounting cler ks, junior
accountants, and other a ccountants, on the ot her hand,
normally perform a great deal of r outine work which is not
an essential part of and necessarily incident to any
professional work which they may do. Where these facts are
found such accountants are not ex empt. The title "Junior
Accountant," however, is not determinative of failure to
qualify for exemption any more than the title "Senior
Accountant" would necessarily imply that t he employee
is exempt.
(g)(1) A requisite for exemption a s a teacher is the condition that
the employee is "employed and engaged" in this activity as a
teacher in the school system, or educational establishment or
institution by which he is employed.
(2) "Employed and engaged as a teache r" denotes
employment and engag
ement in the named specific occupational
category as a requisite for exemption. Teaching consists of the
activities of teaching, tutoring, instructing, lecturing, and the like
in the activity of imparting knowledge. Teaching personnel may
include the following (altho ugh not necessarily limited to):
Regular academic teachers' teachers of kindergarten or nursery
school pupil s or of gifted or handicapped children; teachers
of skilled and semiskilled trade s and occupations; teachers
engaged in automobile driving instruction; aircraft flight
instructors; ho me economics teachers; a nd vocal or
instrumental music instructors. Those faculty members who are
engaged as teachers but also spend a considerable amount of
their time in extracurricul ar activities such as coachi ng athletic
teams or acting as moderators or advisers in such areas as
drama, forensics, or journalism are engaged in teaching. Such
activities are a recognized part of the school 's responsibility in
contributi ng to the educational development of the student.
(3) Within the p ublic schools of all the States, certificates,
whether c onditi
onal o r unconditional, have become a
uniform requirement for employment as a teacher at the
elementary and secondary levels. The possessi on of an
elementary or secondary teacher's certificate provide a uniform
means of identifying the individuals contemplated as being
within the scope of the exemption provided by the statutor y
language and d efine d in § 541.3(a)( 3) with respect to all
teachers employed in public schools and those private schools
who possess State certificates. However, the private schools of
all the States are not uniform in requiring a certificate for
employment as an elementary or secondary school teacher and
teacher's certificates are not generally necessary for
employment as a teacher in institutions of higher education
or o ther educational establishments which rely on other
qualification standards. Therefore, a teacher who is not
certified but is engage d in teaching in such a school may be
considered for exemption provided t hat su ch teacher is
employed as a teacher by the employing school or school system
and satisfies the other requirements of § 541.3.
(4) Whether certification is conditional or unconditional will not
affect the determina
tion as to employment within the scope of the
exemption contemplated by this section. There is no standard
terminology within the States referring to th e different kinds of
certificates. The mean ings of such labels as permanent ,
standard, p rovisional, temporary, emergency, profession al,
highest standard, limited, and unlimited vary widely . For the
purpose of this section , the terminology affixed by the particular
State in designatin g the certificates does not affect the
determination of the exempt status of the individual.

Current through June 20, 2000; 65 FR 38332
§ 541.302 Artistic professions.
(a) The requirements concerning the character of the artistic type
of profession
al work are contained in § 541.3(a)(2). Work of
this type 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

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 FEDERAL REGULATIONS – 20

invention, imaginat ion, or talent of the employee.
(b) The work must be "in a recognized field of artistic
endeavor." This include
s such fie lds as music, writing, the
theater, and the plastic a nd graphic arts.
(c)(1) The work must be original and creative in character, as
opposed to work
which can be produced by a person endowed
with general manual or intellectual ability and training. In the field
of music there should be little difficulty in ascertaining the
application of the requ irement. Musicians, composers,
conductors, soloists, all are engaged in orig inal and creative work
within the sense of this definition. In the plastic and graphic
arts the requirement is, generally speaking, met by painters
who at most are given the subject matter of their painting. It is
similarly met by cartoonists who are merely told the title or
underly ing concept of a cartoon and then must rely on their own
creative powers to express the concept. It would not normally be
met by a person who is employed as a copyist, or as an "animator"
of motion-picture cartoons, or as a retoucher of photographs since
it is not believed that such work is properly described as creative
in character.
(2) In the field of writing the distinction is perhaps more
difficult t o draw.
Obviously the requ irement is met by
essayists or novelists or scenario writers who choose their own
subjects and hand in a finished piece of work to their employers
(the majority of such persons are, of course, not employees but
self-employed). The requirement would also be met, generally
speaking, by persons h olding the mo re responsibl e writing
positions in advertising agencies.
(d) Another requirement is that the employee be engaged in
work "the result o f wh
ich dep ends primarily on the
invention, imagination, or talent of the employee." This
requirement is easily met by a person employed as an actor, or
a singer, or a violinist, or a short-story writer. In the case o f
newspaper employees the distinction here is similar to the
distinction observed above in connection with the requirement
that the work be "origina l and creative in character." Obviously
the majority of reporters do work which depends primarily on
intelligence, diligence, and accuracy . It is the minority whose
work depends primarily on "invention, imaging, or talent." On
the other hand, this requirement will normally be met by actors,
musicians, painters , and other artists.
(e)(1) The determination of the exempt or nonexempt status of
radio and telev
ision announcer s as professional employees has
been relatively difficult because of the merging of the artistic
aspects of t he job with t he commercial . There is considerable
variation in the type of work performed by various announcers,
ranging from predominantly routine to predominantl y exempt
work. The wide variation in earnings as between individual
announcers, from the highly paid "name " announcer on a
national network who is greatly in demand by sponsors to the
staff announcer paid a comparativel y small salary in a small
station, indicates not only great differences in personality, voice
and manner, but also in some inherent special ability or talent
which, while extremel y difficult to define, is nevertheles s real.
(2) The duties which many announcers are called upon to
perform include: Fun
ctioning as a master of ceremonies; playing
dramatic, comedy, or straight parts in a program; interviewing;
conducting farm, fashion, and home economics programs;
covering public events, such as sports programs , in which the
announcer may be require d to ad lib and describe current
changing events
; and acting as narrator and commentator. Such
work is generally exempt. Work suc h as giving stat ion
identification and time signals, announcing the names of
programs, and similar routine work is nonexempt work. In the
field of radio entertainment as in other fields of artistic endeavor,
the status of a n employee as a bona fide professional under §
541.3 is in large part dependent upon whether his duties are
original and creative in character, and whethe r they require
invention, imagination or talent. The determination of whether
a particular announce r is exempt as a professional employee
must be base d upon his individual duties and the amount of
exempt and nonexempt wor k performed, as wel l as h is
compensation.
(f) The field of journalism also employs many exempt as well
as many none
xempt employees under the same or similar job
titles. Newspaper writers and reporters are the principal
categories of employment in which this is found.
(1) Newspaper writers, with possible rare exceptions in certain
highly tech
nical fields, do not meet the requirements of §
541.3(a)(1) for exemption as professional employees of the
"learned" type. Exemption for newspaper writers as
professional employees is normally avail able only under the
provisions for professio nal employees of the "artistic" type.
Newspaper writing of the exempt type must, therefore, be
"predominantly original and creative in character." Only
writing which is analytical, interpretative or highly
individualize d is considered to be cre ative in nature. (The
writing of fiction to the extent that it may be found on a
newspaper would also be considered as exempt work.)
Newspaper writers commonly performing w ork which is
original an d creativ e within th e meaning of § 541 .3 are
editorial wri ters, columnists, critics, and "top-flight" writers o f
analytical and interpretative articles.
(2) The reporting of news, the rewriting of stories received from
various sourc
es, or the routine editorial work of a newspape r is
not predominantly origina l and creative in character within the
meaning of § 541.3 and must be considered as nonexempt work.
Thus, a reporter or news write r ordinarily collects facts about
news events by investigati on, interview, or personal observation
and writes storie s reporting these events for publication, or
submits the facts to a rewrite ma n or other editorial employees
for story preparation. Such work is nonexempt work. The leg
man, the reporter covering a police beat, the reporte r sent out
under specific instructions to cover a murder, fire, accident, ship
arrival, convention, sport event, etc., are normally performing
duties which are not professional in nature within the meaning of
the act and § 541.3.
(3) Incidental interviewing or investigation, w hen it is
performed as
an essential p art of and is necessarily incident to
an employee's professional work, h oweve r, need not be counted
as n onexempt work. Thus, i f a dramatic critic interviews an
actor and writes a story around the int erview, the work of
interviewing him and writing the story would not be considered
as nonexempt work. However, a dramatic critic who is
assigned to co ver a routine new s event such as a fire or a
convention w ould be doing nonexempt work since covering the
fire or the convention would not be necessary an d incident to
his work as a dramatic critic.
Current through June 20, 2000; 65 FR 38332

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 FEDERAL REGULATIONS – 21

§ 541.303 Computer Related Occupations Under Public Law
101-583.
(a) Pu rsuant to Public Law 101-583, enacted November 15,
1990, § 541.3(a)(4)
provides that co mputer systems a nalysts,
computer programmers, software engineers, or other similarly
skilled workers in the computer software field are eligible for
exemption as professiona ls under section 13(a)(1) of the Act.
Employees who qu alify for th is exemption are highly-skilled
in computer systems analysis, programming, or related work in
software functions. Employees who perform these types of work
have varied job titles . Included among the more common job
titles are computer programmer, systems analyst, co mputer
systems a nalyst, co mputer programmer analyst, ap plications
programmer, applications systems analyst, applications systems
analyst/programm er, software engineer, software specialist,
systems engineer, and systems specialist. These job titles are
illustrative only and the list is not intended to be all-inclusiv e.
Further, because of the wide variety of job ti tles applied to
computer systems analysis and programming wo rk, job titles
alone are not determinative of the applicabilit y of this exemption.
(b) To be considered for exemption unde r § 541.3(a)(4), an
employee's p
rimary duty must cons ist of one or more of the
following:
(1) The application of systems analysis techni ques and
procedures
, including consulting with users, to determine
hardware, software, or system functional specifications;
(2) The design, development, documentation, analysis,
creation, testing, or
modification of computer systems or
programs, including prototypes, based on and related to user or
system design specificatio ns;
(3) The design, documentation, testing, creation or modification
of computer pr
ograms related to machine operating systems; or
(4) a combination of the aforementioned duties, the
performance of
which requires the same level of skills.
(c) The exemp tion provided by § 541.3(a)(4) applies only to
highly-skilled em
ployees who have achieved a level of
proficiency in the theoretical and practical application of a body
of highly-specialized knowl edge in computer systems analysis,
programming, and software engineering, and does not include
trainees or employees in entry level positions learning to become
proficient in such areas or to employees in these computer-related
occu pations who have not attained a level of skill and expertise
which allows them to work independently and generally without
close su pervision. The level of expertis e and skill required to
qualify for thi s exemption is generally attained through
combinations of education and experience in the fie ld. While
such employees commonly have a bachelor's or higher degre e,
no particular academic degree is required for this exemption, nor
are there any requirements for licensure or certification, as is
required for the exemption for the learned professions.
(d) The exemption does not include employees engaged in the
operation of comput
ers or in the manufacture, repair, or
maintenance of computer hardware and related equipment.
Employees whose work is highly dependent upon, or facilitated
by, the use of computers and computer software programs, e.g.,
engineers, drafters, and others skilled in computer -aided design
software like CAD/ CAM, but who are not in computer systems
analysis and programming occupa tions, are also excluded from
this exemption.
(e) Employees in computer software occupations within the
scope of this exe
mption, as well as those employees not within
its scope, may also have managerial and administrative duties
which may qualify the employees for exemption under
§ 541.1 or § 541.2 (see §§ 541.205(c)(7) and 541.2 07(c)(7) of
this subpart).
Current through June 20, 2000; 65 FR 38332
§ 541.304 Primary duty.
(a) For a general explanation of the term "primary duty" see the
discussion of th
is term under "executive" in § 541.103. See also
the discussion under "administrative" in § 541.206.
(b) The "primary duty" of an employee as a teacher must be that
of act ivity in the fie
ld of teaching. Mer e certification by the
State, or employment in a school will not suffice to qualify
an individual for exemption within the sc ope of §
541.3(a)(3) if the individual is not in fact both employ ed and
engaged as a teache
r (see § 541.302(g)(2)). The words "primary
duty" have the effect of placing major emphasis on the character
of the employee's job as a whole. Therefore, employment and
engagement in the activity of imparting knowledge as a primary
duty shall be determinative with respect to employment within the
meaning of the exemption as "teacher" in conjunction with the
other requirements of § 541.3.
Current through June 20, 2000; 65 FR 38332
§ 541.305 Discretion and judgment.
(a) Under § 541.3 a professiona l employee must perform work
which requires
the consistent exercise of dis cretion and judgment
in its performance.
(b) A prime characteristic of professional work is the fact that
the employee do
es apply his special knowledge or talents with
discretion and judgment. Purely mechanical or r outi ne work is
not professional.

Current through June 20, 2000; 65 FR 38332
§ 541.306 Predominantly intellectual and varied.
(a) Section 541.3 requires that the employee be engaged in work
predominantly in
tellectual and varied in character as opposed to
routine mental, manual, mechanical, or physical work. This test
applies to the type of thinking which must be performed by the
employee in question. While a doctor may make 20 physical
examinations in th e morning and perform in the course of his
examination s essentially similar tests. It requires not only
judgment and discretion on his part but a continual variety of
interpretation of the tests to perform satisfactory work. Likewise,
although a professional chemist may make a series of similar tests,
the problems presented will vary as will the deductions to be made
therefrom. The work of the true professional is inherently
varied even though similar outward actions may be performed.
(b) Another example of this is the professional med ical
technologist
who performs complicated chemical, microscopic,
and bacteriological tests and procedures. In a large medical
laboratory or clinic, the technologist usually specializes in making
several kinds of re lated tests in areas such as microbiology ,
parasitology, bio chemistry, hematology, histology, cytology,
and nuclear medical technology . The t echnologist also does

DIVISION OF LABOR STANDARDS ENFORCEMENT
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JUNE, 2002 FEDERAL REGULATIONS – 22

the blood b anking. He will also conduct tests related to the
examination and treatment of patients, or do research on new
drugs, or on the improvement of laboratory techniques, or teach
and perform administrativ e duties. The simple, routine, and
preliminary tests are generally performed by laboratory assistants
or technicians. However, technologists who work in small
laboratories may perform tasks that are performed by nonexempt
employees in larger establishments. This type of activity will not
necessarily be considered nonexempt (see § 541.307).
(c) On the ot her hand, X-ray technician s have only limited
opportunity for the ex erci
se of independent discre tion and
judgment, usually performing thei r duties under the
supervision of a more highly qualified empl oyee. The more
complex duties of interpretation and jud gment in this f ield are
performed by obviously exempt professional employees.
Current through June 20, 2000; 65 FR 38332
§ 541.307 Essential part of and necessarily incident to.
(a) Section 541.3(d) , i t will be noted, has the effect of
including withi
n the ex empt work activities which are an
essential part of and necessarily incident to the professional
work described in § 541.3 (a) through (c). This provision
recognizes th e fact that there are professional employees whose
work necessaril y involves som e of the actual routin e physical
tasks also performed by obviously nonexempt employees.
For example, a chemist performing important and original
experiments frequently finds it necessary to perform himself
some of the most menial tasks in connection with the operation
of his experiments, even t hough at times these menial tasks can
be conveniently or prop erly assigned to laboratory assistants.
See also the exam ple of incidental interviewing or investigation
in § 541.303(a)(3).
(b) It should be noted that the test of whethe r routine work is
exempt work is differ
ent in the definition of "professional" from
that in the definition of "executive" and "administrative." Thus,
while routine work will be exempt if it is "directly and closely
related" to the performance of executive or administrative
duties, work which is directly and closel y related to the
performance of the professional duties will not be exempt unless
it is a lso "an essential part of and necessaril y incident to " the
professional work.
(c) Section 541.3(d) takes int o consideration the fact that ther e
are teachin g e
mployees whose wor k necessarily involve s
some of the actua l routine d uties and physical tasks a lso
performed by nonexempt employees. For example, a teache r
may conduct his pupils on a field trip rel ated to the classroom
work of his pupils and in connection with the field trip engage
in activi ties such as driving a school bus and monitoring th e
behavior of his pupils in public restaurants. These duties are an
essential part of and necessarily incident to his job as teacher.
However, driv ing a scho ol bus each day at the beginning and
end of the schools day to pick up an d deliver pupils would not
be exempt type work.
Current through Jun e 20, 2000; 65 FR 38332
§ 541.308 Nonexem
pt work generally.
(a) It has been the Divisions' experience that some employer s
erroneousl y bel
ieve that anyone employed in the field of
accountancy, engineering, or other professional fields, will
qualify for exem ption as a p rofessional employee by virtue of
such employment. While there are many exempt employee s in
these field
s, the exempti on of individual depends upon hi s
duties and other qualificatio ns.
(b) It is necessary to emphasize the fact that section 13(a)(1)
exempts "any e
mployee employed in a bona fide * * *
professional capacity." I t does not exempt all employees of
professional employers, or a ll employees in industries hav ing
large numbers of professional members, or all employees in any
particular occupation. Nor does it exempt, as such those
learning a profession.
Moreover, it does not exempt persons with professional training,
who are working in professional fields, but performing
subprofessional or routine work. For example, in the f ield of
library science there are large numbers of employees who
are trained librarians but who, nevertheless , do not perform
professional work or receive salarie s commensurate w ith
recognized professional status. The field of "engineering" has
many persons with "engineer" titles , who are not professional
engineers, as well as many who are trained in the engineering
profession, bu t are actually working as trainees , junior
engineers, or draftsmen.
Current through Jun e 20, 2000; 65 FR 38332
§ 541.309 20-perc
ent nonexempt work limitation.
Time spent in nonexempt work, that is, work which is not an
essential p
art of and necessarily incident to the exempt work, is
limited to 20 percent of the time worked by the employee in the
workweek.
Current through Jun e 20, 2000; 65 FR 38332
§ 541.310 Trai
nees, professional.
The exemption applies to an employee employed in a bona fide
professional ca
pacity and does not include trainees who are not
actually performing the duties of a professional employee.
Current through June 20, 2000; 65 FR 38332
§ 541.311 Amount of
salary or fees required.
(a) Except as otherwise noted in paragraphs (b) and (c) of this
section, co
mpensation on a salary or fee basis at a rate of not
less than $170 per week, exclu sive of board, lodging or other
facilities, is required for exemption a s a "professional
employee." An employee will meet this requirement if paid a
biweekly salary of $340, a semi monthly salary of $368.33 or a
monthly salary of $736.67.
(b) In Puerto Rico, the Virgin Islands, and Ame rican Samoa
the salary t
est for exempt ion as a "profession al" for other than
employees of the Federal Government is $150 per week.
(c) The payment of the compensation specified in paragraph (a)
or (b) of this section is n
ot a re quisite for exemption in the case
of employees exempted from this require ment by the proviso
to § 541.3(e), as explained in § 541.314.
(d) The payment of the required sal ary must be exclusive of
board, lodging, or oth
er facilities; that is, free and clear. On the
other han d, the re gulations in Subpart A of this pa rt do not
prohibit the sale of such facilities to professi onal employees
on a cash basis if they are n egotiated in the same manner as
similar transactions with other persons.

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Current through June 20, 2000; 65 FR 38332
§ 541.312 Salary basis.
The sa lary ba sis of payment is explained in § 541.118 in
connection with the definition of "executive." Pursuant to Public
Law 101-583, enacted Novembe r 15, 1990, p ayment "on a
salary basis" is not a requirement for exemption in the case of
those employees in computer-related oc cupations, as defined in
§ 541.3(a)(4) and § 541.303, who otherwise meet the
requirements of § 541 .3 and who are paid on an hourly basis if
their hourly rate of pay exceeds 6 1/2 times the minimum wage
provided by section 6 of the Act.
[57 FR 46745, Oct. 9, 1992]

Current through June 20, 2000; 65 FR 38332
§ 541.313 Fee basis.
(a) The requirements for exemption as a professional (or
administra
tive) employee may be met by an employee who is
compensated on a fee basis as well as by one who is paid on a
salary basis.
(b) Little or no difficulty arises in determ ining whether a
part icular employ
ment arrangement involves payment on a fee
basis. Such arrangements are characteri zed by the payment of
an agreed sum for a single job regardless of the time required for
its completion. These payments in a sense resemble piecework
payments with the important distinction that generally speaking a
fee payment is made for the kind of job which is unique rather
than for a series of jobs which are repeated a n indefinite
number o f tim es and for wh ich payment on an ident ical
basis is made over and over again. Payments based on the
number of hours or days worked and not on the accomplishment
of a given single task are not considered payments on a fee basis.
The type of payment contemplated in the regulations in Subpart
A of this part is thus readily recognized.
(c) The adequacy of a fee payment. Whether it am ounts of
payment at a ra
te of not less than $170 per week to a professio nal
employee or at a rate of n ot less than $155 per week to an
administrative employee can ordinarily be determined only after
the time wo rked on the job has been determined. In
determining whether pa yment is at the rate specified in the
regulatio ns in Subpart A of this part the amount paid to the
employee will be tested by reference to a standard workweek of
40 hours. Thus compli ance will be tested in each case of a fee
payment by determining whether the payment is at a rate which
would amount to a t least $170 per week to a professional empl
oyee or at a rate of not less than $1 55 p er week to an
administrative employee if 40 hours were worked.
(d) The following examples will illu strate the principle stated
above:
(1) A si
nger receives $5 0 for a song on a 15-minute program
(no rehearsal time is invo
lved ). Obviously the requ irement will
be met since the employee would earn $170 at this rate of pay in
far less than 40 hours.
(2) An artist is paid $100 for a picture. Upon completion of the
assignment, it is
determined that the artist worked 20 hours. Since
earnings at this rate would yield the artist $200 if 40 hours were
worked, the requirement is met.
(3) An illustrator is assigned the illus tration of a pamphlet at a
fee of $150. When the job is completed, it is determined that the
employe e worked 60 hours. If the employee worked 40 hours at
this rate, the employee would have earned only $100. The fee
payment of $150 for work which required 60 hours to complete
therefore does not meet the requ irement of payment at a rate of
$170 pe r week and the employee must be considered nonexempt.
It follows that if in the performance of this assignment the
illustrator worked in excess of 40 hours in any week, overtime
rates must be paid. Whether or not the employee worked in excess
of 40 hours in any week, records for such an employee would
have to be kept in accordance with the regulations covering
records for nonexempt employees (Part 516 of this chapter).

Current through June 20, 2000; 65 FR 38332
§ 541.314 Exception for physicians, lawyers, and
teachers.
(a) A holder of a valid license or certifi cate permitting the
practice of l
aw or medicine or any of their branches, who is
actually engaged in practicing the professi on, or a holder of the
requisite academic degree for the general practice of medicine
who is en gaged in an internship or resident program
pursuant to the practice of his professi on, or an employee
employed and engaged as a teacher in the activity of imparting
knowledge, is excepted from the salary or fee requirement.
This exception applies only to the traditional professions of law,
medicine, and teaching a nd not to e mployees in related
professions which merely serve these professions.
(b) In the case of medicine:
(1) The exception applie s to physician s and other
practitioners l
icensed and practicing in the fie ld of medical
science and healing or any of the medical specialties practiced by
physicians or practitioners. The term physicians means medical
doctors including gener al practitioners and specialists,
and osteopathic physicians (doctors of osteopathy). Other
practitioners in the fie ld of medical science and healing may
include podiatrists (sometimes called chiropodists), dentists
(doctors of dental medicine), optometrists (doctors of optometry
or bachelors of science in optometry).
(2) Physician s and other pract itioners included in paragraph
(b)(1) of this s
ection, whether or not licensed to practice prior to
commencement of an i nternship or resident program, are
excepted from the salary or fee r equirement during t heir
internship or resident program, wher e such a training program is
entered upon after the earning of the appropriate degree required
for the general practice of their profession.
(c) In the case of m edical occupations, the exception from the
salary or fee requ
ir ement does not apply to pharmacists, nurses,
therapists, technologists, sanitarians, dietitians, soci al workers,
psychologists, psychometrists, or other professions which service
the medi cal profession.
Current through June 20, 2000; 65 FR 38332
§ 541.315 Special proviso for high salaried
professional employees.
(a) Except as otherwise noted in paragraph (b) of this
section, the def
inition of "professional" contains a special proviso
for employees who are compensated on a salary or fee basis at a
rate of at least $250 per week exclusive of board, lodging, or other
facilities. Under this pr oviso, the requirements for exemption

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in § 541.3 (a) through (e) will be deemed to be met by an
employee who receives the higher salary or fees and whose
primary duty consists of the performance of work requiring
know ledge of an a dvanced type in a field of science or learning ,
or work as a t eacher in the activity of imparting knowledge,
which includes work requiring the consistent exercise of
discretion and judgment, or consists of the performance of work
requiring i nvention, imagination, or talent in a recognized field
of artistic endeavor . Thus, the exemption will apply to highly
paid employees employed either in on e of the "learned"
professions or in an "artistic" profession and do ing primarily
profess ional work. If an employee qualifies for exempti on
under this proviso, it is not necessary to test the employee's
qualifications in detail under § 541.3 (a) through (e).
(b) In Puerto Rico, the Virgin Islands, and Ame rican Samoa the
second proviso of
§ 541.3(e) applies to those "professional"
employees (other than employees of the Federal government)
who are compensated on a salary or fee basis of not less than $200
per week. Current through June 20, 2000; 65 FR 38332
§ 541.500 Definition of "outside salesman."
Section 541.5 defines the term "outside salesman" as follows:
The term "employee employed * * * in the capacity of outside
salesman" in section 13(a)(1) of the act shall mean any employee:
(a) Who is employed for the purpose of and who is customarily
and regularly en
gaged away from his employer's place or places
of business in:
(1) Making sales within the meaning of section 3(k) of
the act; or
(2) Obt
aining orders or contracts for services o r for the
use of facilities fo
r which a consideration will be paid by
the client or customer; and
(b) Whose hours of work of a nature other than that described in
paragraph (a)(1) o
r (2) of this section do not exceed 20 percent
of the hours worked in the workweek by nonexempt employees
of the employ ers: Provided, That work performed incidental
to and in conjunction with the employee's own outside sales or
solicitations, including incidental deliveries and collections, shall
not be regarded as nonexempt work.

Current through June 20, 2000; 65 FR 38332
§ 541.501 Making sales or obtaining orders.
(a) Section 541.5 requi res that the employee be engaged in: (1)
Making sales within th
e meaning of secti on 3(k) of the act, or
(2) o btaining orders or contracts for ser vices or for the use of
facilities.
(b) Generally speaking, the divisions have interpreted
section 3(k) of
the act to include the transfer of title to tangible
property, and in certain cases, of tangibl e an d valuable
evidences of intangible prop erty. Thus sales of automobiles,
coffee, shoes, cigars, stocks, bonds, and insurance are
construed as sales within the meaning of section 3(k). (Sec.
3(k) of the act states that "sale" or "sell" includes any sale,
exchange, contract to sell, consignment for sale, shipment for
sale, or other dispositi on.)
(c) It will be noted that the exempt work includes not only the
sales of commoditi
es, but also "obtaining orders or contracts for
services or for the use of facilities for which a consideration will
be paid by the client or cus tomer." "Obtaining orders or *
* * for the use of facilities" includes the selling of time on the
radio, the solicitation of advertising for newspapers and other
periodical s and the solicitation of freight for railroads and other
transportation agencies.
(d) The word "services" extends the e xemption as outside
sales men to employ
ees who sell or take orders for a service,
which is performed for the customer by someone other than the
person taking the order. F or example, it includes the salesman
of a typewriter repair service who does not h imself do the
repairing. It also includes otherwise exempt outside salesmen
who obtain orders for the launderi ng of the customer's own
linens as well as those who obtain orders for the rental of the
laundry's linens.
(e) The inclusion of the word "services" is not intended to
exempt persons who, in a
very loose sense, a re sometimes
described as selling "service s". For example, it does not
include persons such as servicemen even though they may sell
the service which they themselves pe rform. Selling the service
in such cases would be incidental to the servici ng rather than
the reverse. Nor does it include outside buyers, who in a very
loose sense are sometimes desc ribed as selling their employer's
"service" to the person from whom they obtain their goods. It is
obvious that the relationship here is the reverse of th at of
salesman-customer.
Current through June 20, 2000; 65 FR 38332
§ 541.502 Away from his employer's place of business.
(a) Section 541.5 requ ires that an outside salesman be
customaril
y and regularly engaged "away from his employer's
place or places of business". This requ irement is based on the
obvious connotation of the word "outside" in the term "outside
salesman". It would ob viously lie beyond the scope of the
Administrator's autho rity that "outside salesman" should be
construed to include inside salesmen. Inside sales and other
inside wor k (except such a s i s directly in conjunction
with and incidental to outside sales and solicitation s, as
explained in paragraph (b) of this section) is nonexempt.
(b) Characteristically the outside salesman is one who makes
his sales at his cu
stomer's place of business. This is the reverse
of sales made by mail or telephone (except where the telephone
is used merely as an adjunct to personal calls). Thus any fixed
site, whether home or office, used by a salesman as a headquarters
or for telephonic s olicitation of sales must be construed as one of
his employer's places of business, even though the employer is
not in any formal sense the owner or tenant of the property. It
should not be inferred from the fo regoing that an outside
salesman loses his exemptio n by displaying his samples in
hotel sample rooms as he travels f rom city to city; these
sample rooms should not be considered as his employer 's
places of business.

Current through June 20, 2000; 65 FR 38332
§ 541.503 Incidental to and in conjunction with sales work.
Work performed " incidental to and in conjunction with the
employee's own outside sales or sol icitation" includes not only
incidental de liveries and collections which a re specifically
mentioned in § 541.5(b), but also any other work performed by
the employee in furthering his own sales efforts. Work

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performed incidental to and in conjunction with the employee's
own outside sales or solicit ations
would include, among other things, the writing of his sales
reports, the revision of his own catalog, the planning of his
itiniery and attendance at sales conferences.

Current through June 20, 2000; 65 FR 38332
§ 541.504 Promotion work.
(a) Promotion work is one type of activity often p erformed by
persons who make s
ales, which may or may not be exempt
work, depending upon the circumstances under which it is
performed. Prom ot ion men are not exempt as "outside
salesmen." (This discussion relates solely to the exemption
under § 541.5, dealing with out side salesmen. Promotion men
who receive the required salar y and otherwise qualify may
be exempt a s administrative employees.) However, any
promotiona l work which is actually performed incidental to and
in c onjunction with an employee's own outside sa les or
solicitations is clearly exempt work. On the other h and,
promotional work which is incidental to sales made, or to be
made, by someone else cannot be considered as exempt work.
Man y persons are engaged in certain combinations of sales and
promotional work or in certain types of promotional work having
some of the characteris tics of sales work while lacki ng others.
The types of work involved include activitie s in borderline areas
in which it is difficult to determine whether the work is sales or
promotional. Where the work is p romoti onal in n ature it is
sometimes difficult to determine whether it is incidental to the
employee's own sales work.
(b)(1) Typically, the problems presented involve distribution
through jobbers
(who employ their o wn salesmen) or
through central w arehouses of chainstore organizations or
cooperat ive retail buying a ssociations. A manufacturer's
representative in such cases visits the r etailer, either alone or
accompanied by the jobber' s salesman. In some instances the
manufacturer's repre sentative may sell directly to the retailer; in
others, he may urge the retailer to buy from the jobber.
(2) This manufacturer's representative may p erform va rious
types of promotion
al activities such as putting up displays and
posters, removing damaged or spoiled stock from the merchant's
shelves or rearranging the merchandise. Such persons can be
considered salesmen only if they are actually employed for the
purpose of and are engaged in making sales or contracts. To the
extent that they a re engaged in promotional activities designed
to stimulate sales which will be made by someone else the work
must be considered nonexempt. With such variations in the
methods of s elling and promoting s ales each case must be
decided upon its facts. In borderline cases the test is whether
the person is actually en gaged in activities direc ted
toward the consummation of his own sales, at least to the extent
of obtaining a commitment to buy from the person to whom he is
selling. If his efforts are directed towar d stimulating the sales
of his company generally rather than the consummation of his
own specific sales his activities are not exem pt. Incidental
promotional activities m ay be tested by whether they are
"performed incidental to and in conjunction with the employee's
own outside sa les or solicitations" or wh ether they are
incidental to sales which will be made by someone else.
(c)(1) A few illustratio ns of typical situations will be of
assistance in determining whethe r a particular type of work is
exempt or nonexempt under § 541.5. One situation involves a
manufacturer's repre sentative who visits the retailer for the
purpose of obtaining o rders for h is employer's product, but
transmits any orders h e obtains to the local jobber to be
filled. In such a cas e the employee is performing sales work
regardless of the fact th at the order is filled by the jo bber
rather than direct ly by his own e mployer. The sale in this
instance has been "consummated" in the sense that the
salesman has obtained a commitment from the customer.
(2) Another t ypical situation involves facts similar to those
described in the p
receding illustration with the difference that
the jobber's salesman accompanies the representative of the
company whose product is being sold. The order in this instance
is ta ken by the jobber's salesman after the manufacturer's
representative has done the preliminary work which may include
arranging the stock , putting up a display or poster, and talking
to the retailer for the purpose of getting him to place the order
for the product with the jobber's salesman. In this instance the
sale is consummated by the jobber's salesman. The work
performed by the manufacturer's representative is not incidental
to sales made by himself and is not exempt work. Moreover,
even if in a particular instance the sale is consummated by the
manufac turer's representative it is nec essary to examine the
nature of the work performed by the repr esent ative to
determine whether his promotional activities are directed toward
paving the way for his own present and future sales, or whether
they are intended to stimulate the present and future sales of the
jobber's salesman. If his work is related to his own sales it would
be consider ed exempt work, while if it is directed toward
stimulating sa les by the jobber's representative it must be
considered nonexempt work.
(3) Another type of situation involves representatives
employed by utility com
pa nies engaged in furnishing gas or
electricity to consumers . In a sense these representatives are
employed for the purpose of "selling" the consumer an increased
volume of the product of the utility. This "selling" is
accomplished indirectly by persuad ing the consumer to
purchase appliances which will result in a greater use of gas or
electrici ty. Different methods are used by various companies.
In some instances the utility representa tive after persuading the
consumer to install a particular appliance may actually take the
order for the appliance which is deliv ered from stock by his
employer, or he may forward the order to an appliance dealer
who t hen delivers it. In such case s the sales activity would be
exempt, since it is directed at the consummation of a specific sale
by the utility representative, the employer actually making the
delivery in the one case, while in the other the sale is
consummated in the sense that the representati ve obtains an order
or commitment from the customer. In another type of situation
the utility representative persuades the co nsumer to buy the
appliance and he may even accompany the consumer to an
appliance store where the retailer shows the appliance and
takes the order. In such instances the utility representative is
not an outside salesman since he does not consummate the sal e
or direct his efforts t oward making the sale himself. Similarly,
the utility represe ntative is not exempt as an outside salesman if
he merely persuades the consumer to p urcha se an appliance
and the consumer then goes to an appliance dealer and places his
order.
(4) Still anoth er type of situation involves the company

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representative who visits chainstores, arranges the merchandise
on shelves, replenishes stoc k by replacing old with new
merchandise, consults with the manager as to the requirements
of the store, fills out a requisi tion for the quantity wanted
and leaves it with the store manager to be transmitted to the
central warehouse of the chainstore company which later
ships the quantity requested . The arrangement of
merchandise on the shelves or the replenishing of st ock is
not exempt work unless it is incidental to and in conjunction
with the employee's own outside sales. Since the manufacturer's
representati ve in this instance does not consummate the sale nor
direct his efforts toward the consu mmation of a sale (the store
manager often has no authority to buy) this work must be counted
as nonexempt.

Current through June 20, 2000; 65 FR 38332
§ 541.505 Driver salesmen.
(a) Where drivers who deliver to an employer's customers the
products distri
buted by the employer also perform fu nctions
concerned with the selling of su ch products, and questions arise
as to whether such an employee is employed in the capacity of
outside salesman, all the facts bearing on the content of the
job as a whole must be scrutinized to determine whether such
an employee is really emplo yed for the purpose of making sales
rather than for the ser vice and delivery duties which he
performs and, if so, whether he is customarily and regularly
engaged in making sales and his performance of nonexempt
work is sufficie ntly limited to come within the tolerance
permitted by § 54 1.5. The employee m ay qualify as an
employee employe d in the capacity of outside salesman if,
and only if, the facts clearly indicate that he is employed for
the purpose of making sales and that he is customarily and
regularly engaged in such activity within the meaning of the act
and this part. As in the case of outside sales men whose jobs do
not involve delivery of products to customers, the empl oyee's
chi ef duty or primary function must be the making of sales or
the taking of orders if he is to qualif y under the definition in §
541.5. He must be a salesman by occupation. If he is, all work
that he performs which is actually inciden tal to and in
conjunction with his own sales effort is exempt work. All ot her
work of such an employee is nonexempt work. A
determination of an employee's chief duty or primary function
must be made in terms of the basic character of the job as a
whole. All of the duties performed by an employee must be
consi dered. The time devoted to the va rious duties is an
importa nt, but not necessarily controlling, element.
(b) Employees who may perform a combination of selling or
sales promotion
activities with product deliveries are employed
in a number of industries. Dis tributors of carbonated
beverages, beer, bottled water, food and dairy products of various
kinds, cigars and other nonfood products commonly utilize such
employees, variously known as routemen, route drivers, route
salesmen, dealer salesmen, distributor salesmen, or driver
salesmen. Some such employees deliver at retail to customers'
homes; others deliver on wholesale routes to such customers
as retail stores, restaurants, hospitals, hotels, taverns, and other
business establishments. Whether such an employee
qualifies a s an outside salesman under the r egulations
depends, as stated in paragraph (a) of this section, on the content
of the job as a whole and not on its title or designation or
the kind of business in whi ch the employer is engaged. Hearings
in 1964 concerning the application of § 541.5 to such employees
demonstrated that there is gre at variation in the nature and extent
of sales activity and its significance as an element of the job, as
among drivers whose duties are performed with respect t o
different products or different industries and also among drivers
engaged in the same industry in deliver ing products to different
types of customers. In some cases the facts ma y make it plain
that such an employee is employed for the pu rpose of making
sales; in other cases the fact s are equally clear that he is
employed for another purpose. Thus, there is li ttle question that
a routeman who provides the only sales contact between the
employer and the customers, who calls on customers and takes
orders for products which he delivers from stock in his vehicle or
procures and delivers to the customer on a later trip, and who
receives compensation commensurate with the volume of
products sold, is employed f or the purpose of making sales. It is
equally clear, on the other hand, that a routeman whose chief duty
is to transport products sold by the employer through vending
machines and to keep such machines stocked, in good oper ating
condition, and in good locations, is not selling his employer's
product or employed for the purpose of making sales but is
employed for purposes which, although important to the
promotion of sales to customers using the machines, plainly
cannot characterize the employee as a salesman by occupation.
In other cases there may be more difficulty in determining
whether the employee is employed for the purpose of making
sales within the meaning of this part. The facts in such cases
must be weighed in the light of the principles stated in paragr aph
(a) of this section, giving due consideration to the factors
discussed in su bsequent paragraphs of this section.
(c) One source of difficu lty in determining the extent to which
a route driv
er may actually be engaged in making sales arises
from the fact that such a driver often calls on established
customers day after day or week after week, delivering a quantity
of his empl oyer's products at each call. Plainly, such a driver is
not making sales when he delivers orders to customers to whom
he did not make the initial sale in amounts which are exactly or
approximately prearranged by customer or contractual
arrangement or in amounts specified by the customer and not
significantly affected by solicitations of the customer by the
delivering driver. Making such deliverie s, as well as recurring
deliveries the amounts of which are determined by the volume of
sal es by the customer since the previous delivery rather than by
any sales effort of the driver, do not qualify the dr iver as an
outside salesman nor are such deliveries and the work incident
thereto directly to the making or soliciting of sales by the driver
so as to be considere d exempt work. On the other hand, route
drivers are making sales when they actually obtain or solicit, at
the stops on their routes, orders for their employer's products from
persons who have authority to commit the customer for
purchases. A d river who calls on new prospects for customers
along his route and attempts to convince them of the desirability
of accepting regul ar delivery of goods is likewise engaged in
sales activity and is making sales to those from whom he obtains
a commitment. Als o, a driver salesman calling on established
customers o n his route, carrying an assortment of the arti cles
which his employer sells, may be making sales by persuading
regular customers to accept delivery of increased amounts of
goods or of new products, even though the initial sale or
agreement for delivery of the employer’s products may have been
made by someone else. Work which is performed incidental to

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and in conjunction with such sales activities w ill also be
considered exempt work, provided such soli citation of the
customer is frequent and regular. Incidental activities
include loading the truck with the good s to be sold by the
driver salesman, driving the truck, delivering the products sold,
removing empty containers f or return to the em ployer, and
collecting payment for the goods delivered.
(d) Neither deliver y of goods sold by others nor s ales
promotion work as such co ns
titutes making sales within the
meaning of § 541.5; delivery men and promotion men are not
employed in the capacity of outside salesmen for purposes
of section 13(a)(1) of the act although both delivery work and
promotion work are exempt salesman as an incident to his
own sales or efforts to sell. T he distinction between the making
of sales and the promotion of sales is explained in more detail
in t he discussion and illu strations contained in § 541.504.
Under the principles th ere stated a route driver, ju st as any
other employee, must ha ve as his c hief d uty and primary
function the making of sales in the sense of obtaining and
soliciting commitments to buy from the persons upon whom he
calls if he is to qualify under the regulations as an employee
employed in t he capacity of outside salesman. For this
reason, a route driver primarily engaged in making deliveries to
his em ployer's customers and performing activities intended to
promote sales by customers, including placing point-of-
sale and ot her advertising materials, price stamping commoditi
es, arranging merchandise on shelves or in coolers or cabinets,
rotating stock according to date, and cleaning and otherwise servi
cing display cases, is not employed in the capacity of an outside
salesman by reason of such work. Such work is n onexempt
work for purposes of this part un less it is performed as an
incident to or in conjunction with sales actu ally made by the
driver to s uch customers. If the driver who performs such
functions ac tually takes orders or obtains commitments from
such customers for the products which he delivers, and the
performance of the promotion work is in furtherance of his own
sales efforts, his activities for that purpose in the customer's
establishment would be exempt work.
(e) As indicated in paragrap h (a) of this section, whether a
route driver can qualify as an outsi
de salesman depends on the
facts which establish t he content of his job as a whole.
Accordingly, in borderline cases a determination of whether the
driver is actually employed for the purpose of, is customarily
and regularly eng aged in, and has as his chief duty and
primary func tion the making of sales, may involve consideration
of such factors as a comparison of his duties with those of other
employees en gaged as (1) truckd rive rs and (2) salesmen;
possession of a salesman's or solicitor's license when such
license is required by law or ordinances; presence o r absence
of customary or contractu al prearrangements concerning
amounts of pr oducts to be delivered; description of the
employee's occupation in union contracts; the employer's
specifications as to qualifications for hiring; sales training;
attendance at sales conferences; method of payment;
proportion of earnings directly attributable to sales effort; and
other factors that may have a bearing on the relationship to sales
of the e mployee's work. However, where it is clear that an
emplo yee performs nonexempt w ork in excess of the amount
permitted by § 541.5, he would be nonexempt in any event
and consideration of such factors as the foregoing would not be
pertinent.
(f) The following examples will further i llustrate the factual
situations in whic
h, under the principles discussed previously in
this section, routemen engaged i n recurrent deliv eries of goods
may qualify or may fail to qual ify for e xemption as outside
salesmen.
(1) A retail routeman who regularly call s on established retail
customers to delive
r goods of generally prearranged amounts and
kinds may also exert considerable effort not only to keep such
customers satisfied to continue their orders for such goods but
also to make such customers aware of other products which he
would like to sell to them and to offer to take orders for such
product s or for increased amou nts of the products which he is
already delivering to the customer. In addition, he may call at
prospective retail customers' homes for the purpose of
persuading such persons to order the goods which he sells. A
routeman who cu stomarily and regularly calls on customers for
these purposes and takes orders from them for products which
he delivers to them, in addition to those products for which
delive ry has been prearranged, who is in practical effect
his employer's exclusive sales contact with such customers, and
whose earnings are in large part directly attributable to sales made
to such customers, will be consid ered to be employed in the
capacity of outside salesman and within the exemption provided
by section 13(a)(1) of the A ct if he does not perform
nonexempt work i n excess of the tolerance permitted by
§ 541.5.
(2) A routeman who calls on retail stores which are among his
employer's establ
ished customers may also qualif y for
exemption as an outside salesman notwithstanding the goods he
delivers to them are of kinds and in amounts w hich are
generally prearranged. Other facts may show that mak ing
sales is his chief duty a nd primary function and t hat he is
customarily and regularly engaged in per forming this
function. Thus, such a routeman whose regul ar calls on
established customers involve not only delivery of prearranged
items but also a ctive efforts to persuade such customers to
continue or increase their orders for such goods and to solicit
their orders for other kinds of products which he offers for sale,
who also calls on retail stores which are prospective customers,
talks to persons who a re authorized to order goods for suc h
stores, and solicits orders from them for the goods which he
sells, and whose compensation is based primarily on the volum e
of sales attributable to his efforts, wi ll be considered exempt as
an outside salesman if he does not perform none xempt work in
excess of the tolerance permitted by § 541.5.
(3) If a ro uteman delivers go ods to branch business
establishments whos
e personnel have no a uthority to p lace
orders or make commitments with respect to the k inds and
amounts of such goods, and if the kinds and amounts of goods
delivered are not dete rmined pursuan t t o orders placed by
the authorized personnel of the customer's enterprise as a
result of sales solicitation by the routeman, it is clear that the
routeman's calls on such branch establishments are not a part of
the making of sales by him or incidental t o sales made by him.
If such work is his chief duty or primary function or i f he spends
a greater proportion of the workweek in such work than is allowed
for nonexempt work under § 541.5, such a rou teman cannot
qualify for exemption as an "outside salesman".
(4) A routeman who d eliv ers to supermarkets after the
enterprise has be
en persuaded, by a salesman of the routeman's

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 FEDERAL REGULATIONS – 28

employer, to accept de livery of goods, and whose fu nctions
other than such deliverie s are primarily to arrang e merchandise,
rotate stocks, place po int-of-sale a nd other advertising
materials, and engage in other activities which are intended to
promote sales by the supermarkets of the goods he has delivered,
is not employed primarily for the purpose of selling and is not
customarily a nd regularly engaged in making sales. Rather,
he is employed prim arily to deliver goods and to perform
activities in the supermarkets of a nature usually performed by
store employees not employed as salesmen. Such a routeman
is not employ ed i n the capacity of outside salesman within
the exemption provided by section 13(a)(1).
(5) Some employees are engaged in a combination of
activities i
nvolving delivery, the selling of services, and the
performance of the services. For example, some drivers call on
customers for the purpose of s elling p esticides and, if a sa le
is consummated, applying the pestici des on the custo mer's
property. Such employees, like those referred to in § 541.501(e),
are not e xempt as outside sa lesmen. They are primarily
engaged in deli very or service fu ncti ons, not in outside selling.

Current through June 20, 2000; 65 FR 38332
§ 541.506 Nonexempt work generally
Nonexempt work is that work which is not sales work and is not
performed incidental to and in conj unction with the outside
sales activities of the employee. It includes outside activities
like meter-reading, which are not part of t he sales process.
Inside sales and all work incidental thereto are also nonexempt
work. So is clerical warehouse work which is not related to the
employee's own sale s. Similarly, the training of other salesmen
is not exempt as outside sales work, with one exception. In
some concerns it is the custom for the salesman to be
accompanied by the trainee while actually making sales. Under
such cir cumstances it appears that normally the trainer-
salesman and the traine e m ake the various sales jointly , and
both normally receive a commis sion thereon. In such instances,
since both are engaged in making sales, th e work of both
is considered exempt work. However, the work of a helper
who merely assists the salesman i n transporting goods or
samples and who is not directly concerned with effectuating the
sale is nonexempt work.

Current through June 20, 2000; 65 FR 38332
§ 541.507 20-percent limitation on nonexempt work.
Nonexempt work in the definition of " outside salesman" is
limited to "20 percent of the hours worked in the workweek by
nonexe mpt employees of the employer." The 20 perc ent is
computed on the basis of the hours worked by nonexempt
employees of the employer who perform the kind of nonexempt
work perform ed by the outs ide salesm an. If there are no
employees of the employer performing such nonexempt work,
the b ase to be ta ken is 40 hours a we ek, and the amount of
nonexempt work allowed will be 8 hours a week.

Current through June 20, 2000; 65 FR 38332
§ 541.508 Trainees, outsi de salesmen.
The exemption is applicable to an employee employed in the
capacity of outside salesman and does not include employees
training to become outside salesmen who are not act ually
performing the duties of an outside salesman (see also §
541.506).

Current through June 20, 2000; 65 FR 38332
§ 541.600 Combination exemptions
(a) The divisions' position under the regulations in Subpart A
of this pa rt permit
s the " tacking" of exempt work un der one
section of the regulations in Subpart A to exempt work under
another section of those regulations, so that a person who, for
example, performs a combination of executive and professional
work may qualify for exemption. In combination exemptions,
however, the em ployee must meet the stricter of the
requirements on salary and nonexe mpt work. For instance, if the
employee performs a combination of an executive's and an outside
salesman's function (regardless of which occupies most of his
time) he must meet the salary requirement for executives. Also,
the total hours of nonexempt work under the definition of
"exe cutive" together with the hours of work which would not be
exempt if he were clearly an outside sales man, must not exceed
either 20 percent of his own time or 20 percent of the hours
worked in the workweek by the nonexempt employees of the
employer, whichever is the smaller amount.
(b) Under the principles in paragraph (a) of this secti on
combinations of exem
ptions under the ot her se ctions of the
regulations in Subpart A of th is part are als o permissi ble. In
short, under the regulations in Su bpart A, work which is
"exempt" under one section of the regulations in Subpart A will
not defeat the exemption under any other s ection.

Current through June 20, 2000; 65 FR 38332
§ 541.601 Special p rovi sion for motion picture producing
industry.
Under § 541.5a, t he requirement that the employee be paid "on
a salary ba sis" does not apply to an employee in the motion
picture producing industry who is compensated at a base rate of
at least $250 a week (exclusive of board, lodging, or other
facilities). Thus, an employee in this industry who is otherwise
exempt under §§ 541.1, 541.2, or 541.3 and who is employed at
a base rate of at least $250 a week is exempt if he is paid at least
prorata (based on a week of not more than 6 days) for any week
when he does not w ork a full workweek for any reason.
Moreover, an otherwise exempt employee in this industry qualifi
es for exemption if he is employed at a daily rate under the
following circ umstances: (a) The employee is in a job
category for whi ch a weekly base rate is not provided and his
daily base rate would yield at least $250 if 6 days were worked;
or ( b) the employee is in a job category having a weekly base
rate of at least $2 50 and his daily base rate is at least one-sixth
of such weekly base rate. The hig her minimum salary tests will
be effective on April 1, 1975.
[40 FR 7094, Feb. 19, 1975]
Current through June 20, 2000; 65 FR 38332
§ 541.602 Specia
l p roviso concerning executive and
administrati ve employees in multi-store retailing operations.
(a) The tolerance of up to 40 percent of the employee's time
which is allowed for nonex
empt work performed by an

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 FEDERAL REGULATIONS – 29

executive or administrative employee of a retail or service
establishment does not ap ply to employees of a multiunit
retailing operation, such as a chainstore s ystem or a retail
establishment having one or more branch stores, who perform
central functions for the organization in physically separated
establishments such as warehous es, central of fice buildings or
other central service units or by trav eling from store to store.
Nor does this special tol erance apply to employees wh o
perform central office, warehousi ng, or service functions in
a multi-unit retaili ng operation by reason of the fact th at the
space provided for such work is located in a portion or portions
of the building in which the main retail or service
establishment or an other retail outlet of the organization is also
situated. Such e mployees are subject to the 20-percent
limitation on nonexempt work.
(b) With respect to executive or a dministrative em ployees
stationed in the main stor
e of a multistore retailing oper ation who
engage in activities (other than central office functions) which
relate to the operations of the main store, and also to t he
operations of one or more physically se parated units, such as
branch stores, of the same retailing operation, the Divisions will,
as an enforcement policy, assert no disqualification of such an
employee for the se ction 13(a 1) exemption by reason of
nonexempt activities if the employee devotes less than 40
percent of his t ime to s uch nonexempt activities. This
enforcement policy would apply, for example, in the case of a
buyer who works in the main store of a multistore retailing
operation and who not only manages the millinery department
in the main store, but is also responsible for buying some
or all of the merchandise sold in the millinery departments of the
branch stores.
Current through June 20, 2000; 65 FR 38332
Appendix to Part 541--Occupational Index
[NOTE BY DLSE: The following list is placed here for the
sole purpose of illustrating the possibl e differences between
Californi a and federal law. The list is not to be relied upon
in any way, but may be used to find terms. (DLSE training
guide)]
Note: This index lists, for ease of refere nce, the sections of this
part which refer to job titles . The user
should note, however,
that where job titles do appear in the illustratio ns in the tex t,
they should not be construed to mean that employees
holding such titles are either exempt or nonexempt or that they
meet any one of the specific requirements for e xemption.
Accountant, 541.302
Account executive, 541.201, 541.205
Actor, 541.303
Adjuster, 541.205
Advisory specialist, 541.205
Analyst, wage rate, 541.201, 541.205
Animator, 541.303
Announcer, radio, 541.303
Announcer, television, 541.303
Artist, 541.303, 541.313
Assistant, administrative , 541.201, 541.205, 541.207, 541.208
Assistant buyer, 541.105, 541.201, 541.205
Assistant, confidential, 541.201
Assistant, executive, 541.201
Assistant department head, 541.105
Assistant to general manager, 541.201
Assistant to president, 541.201, 541.207
Auditor, traveling, 541.201
Bookkeeper, 541.205, 541.207
Bookkeeper, head, 541.115
Broker, customers', 541.201, 541.205, 541.207
Buyer, 541.108, 541.201, 541.205, 541.207, 541.501, 541.602
Buyer, assistant, 541.105, 541.201, 541.205
Buyer, lease, 541.201
Buyer, outside, 541.501
Buyer, resident, 541.205
Carpenter, 541.119
Cartoonist , 541.303
Cashier, bank, 541.205
Checker, 541.108
Chemist, 541.302, 541.306, 541.307
Claim agent, 541.205
Clerk, 541.205
Clerk, accounting, 541.302
Clerk, chief, 541.115
Clerk, counter, 541.109
Clerk, shipping, 541.207
Columnist, 541.303
Company representative, 541.504
Comparison shopper, 541.207, 541.504
Composer, 541.303
Computer operator, 541.108, 541.207
Computer programmer, 541.108, 541.205, 541.207, 541.302
Conductor, 541.303
Consultant, 541.205, 541.207, 541.208
Contact man, 541.201, 541.207
Copyist (motion picture), 541.303
Craftsman, 541.119
Credit manager, 541.201, 541.205, 541.207, 541.208
Delivery man, 541.505
Dentist, 541.314
Department head, assistant, 541.105
Dietitian, 541.202, 541.314
Doctor, 541.306, 541.314
Draftsman, 541.308
Dramatic critic, 541.303

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 FEDERAL REGULATIONS – 30

Driver salesman, 541.505
Engineer, 541.302, 541.308
Engineer, junior, 541.308
Essayist, 541.303
Examiner, 541.108, 541.207
Executive secretary, 541.201
Financial consultant, 541.205
Foreign exchange consultant, 541.201
Foreman-cutter, 541.115
Foreman-examiner, 541.108
Foreman-fix er (hosiery), 541.115
Foreman-machine adjuster, 541.108
Foreman-"setup" man, 541.108
Foreman, construction, 541.104
Foreman, garment shop, 541.115
Foreman, installation, 541.104
Foreman, planer-mill, 541.115
Foreman, shipping room, 541.115
Foreman, warehouse, 541.115
Foreman, working, 541.115
Gang leader, 541.115
Gauger (oil company), 541.201
Group leader, 541.115
Grader, 541.207
Head bookkeeper, 541.115
Head shipper, 541.115
Illustrator , 541.313
Inside salesman, 541.502
Inspector, 541.108, 541.207
Inspector, insurance, 541.205
Insurance expert, 541.201
Interns, 541.314
Inventory man, traveling, 541.201
Investment consultant, 541.201
Jobber's representative, 541.504
Jobber's salesman, 541.504
Journalist, 541.303
Key punch operator, 541.207
Junior programmer, 541.207
Labor relations consultant, 541.205
Labor relations director, 541.201
Lawyer, 541.302, 541.314
Legal stenographer, 541.302
Librarian, 541.308
Linotype operator, 541.119
Location manager, motion picture, 541.201
Lumber grader, 541.207
Machine shop supervisor, 541.105
Manager, branch, 541.113, 541.118
Manager, credit, 541.201, 541.205, 541.207, 541.208
Manager, cleaning establishment, 541.109
Manager, of fice, 541.115, 541.208
Manager, traffic, 541.208
Management consultant, 541.207, 541.208
Manufacturer' s representative, 541.504
Mechanic, 541.119
Medical technologist, 541.203, 541.306

Methods engineer, 541.201
Mine superintende nt, 541.109
Motion picture producing industry, employees in, 541.601
Musician, 541.303Newspape r writer, 541.303
Novelist, 541.303
Nurse, 541.314
Office manager, 541.115, 541.208
Optometrist , 541.314
Organizatio n planner, 541.201
Painter, 541.303
Personnel clerk, 541.205, 541.207
Personnel director, 541.201
Personnel manager, 541.205, 541.207
Pharmacist, 541.314
Physician, 541.306, 541.314
Physician, general practitioner, 541.314
Physician, intern, 541.314
Physician, osteopathic, 541.314
Physician, resident, 541.314
Planer-mill foreman, 541.115
Podiatrist , 541.314
Production control supervisor, 541.201
Programmer trainee, 541.207
Promotion man, 541.201, 541.205, 541.504, 541.505
Psychologist , 541.202, 541.314
Psychometrist , 541.314
Purchasing agent, 541.201, 541.207
Radio announcer, 541.303
Ratesetter, 541.201
Registered nurse, 541.302
Reporter, 541.303
Representative, company, 541.504
Representative, jobber's, 541.504
Representative, manufacturer's , 541.504
Representative, utility, 541.504
Resident buyer, 541.205
Retail routeman, 541.505
Retoucher, photographic, 541.303
Route driver, 541.505
Routeman, 541.505
Routeman, retail, 541.505
Safety director, 541.201, 541.205
Salesman, dealer, 541.505
Salesman, distributor , 541.505
Salesman, driver, 541.505
Salesman, inside, 541.502
Salesman, jobber's, 541.504
Salesman, laundry, 541.501
Salesman, mail, 541.502
Salesman, route, 541.505
Salesman, telephone, 541.502
Salesman, typewriter repair, 541.501
Salesman, wholesale, 541.207
Salesman's helper, 541.506
Sales research expert, 541.201
Sanitarian, 541.314
School building manager, 541.202
School department head, 541.201
School lunch room manager, 541.202
School maintenance man, 541.202
School principal, 541.201

DIVISION OF LABOR STANDARDS ENFORCEMENT
POLICIES AND INTERPRETATIONS MANUAL
JUNE, 2002 FEDERAL REGULATIONS – 31

School superintendent, 541.201
School vice principal, 541.201
Secretary, 541.205
Secretary, executive, 541.201
Serviceman, 541.501
Shipper, head, 541.115
Shipping clerk, 541.207
Shipping room foreman, 541.115
Singer, 541.303, 541.313
Social worker, 541.202, 541.314
Statisticia n, 541.201, 541.205
Strawboss, 541.115
Supervisor, production control, 541.201
Tape libraria n, 541.207
Tax consultant, 541.205
Tax expert, 541.201, 541.205
Teacher, 541.215, 541.300, 541.302, 541.304, 541.307,
541.315
Technologis t,
541.314

Television announcer, 541.303
Teller, bank, 541.205, 541.207
Therapist, 541.314
Timekeeper, 541.108
Traffic manager, 541.208
Trainee, 541.116, 541.210, 541.308, 541.310, 541.506,
541.508
Trainer-sa
lesma n, 541.506
Truck driver, 541.207, 541.505
Utility representative, 541.201, 541.504
Violinist, 541.303
Working foreman, 541.115
Working supervisor, 541.115
Writer, advertising, 541.303
Writer, fiction, 541.303
Writer, newspaper, 541.303
Writer, scenario, 541.303
Writer, short story, 541.303
X-ray technician, 541.306

https://www.dir.ca.gov/dlse/29CFR-WOs1-13and15.pdf

https://www.dir.ca.gov/dlse/29CFR-WO16.pdf

Retrieval chunks

#1

The 2002 Update Of The DLSE Enforcement Policies and Interpretations Manual (Revised) The Division of Labor Standards Enforcement (DLSE) Enforcement Policies and Interpretations Manual summarizes the policies and interpretations which DLSE has followed and continues to follow in discharging its duty to administ…
#2

3. WAGES PAYABLE ON TERMINATION 3-1 ................................................................. Labor Code § 201 – Discharge 3-1 Layoff, When Discharge 3-1 Sale Of Business Constitutes Discharge 3-1 Motion Picture Workers’ Exception 3-2 Print Shoot Employees Exception 3-2 Oil Well Drilling Workers’ …
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During Course Of Employment 8-1 9. METHOD OF PAYMENT OF WAGES 9-1 Wages Must Be Paid In Cash Or Negotiable Instrument Payable In Cash 9-1 Requirements Regarding Negotiable Instruments 9-1 Payment By Scrip Specifically Prohibited 9-2 Payment To ERISA Trust Not Subject To Penalty 9-2 Limited Exceptions To …
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Disclosure Of Information To Government Authorities or Employer 17-15 Filing Safety Complaint Or Refusal To Work In Unsafe Conditions 17-16 18. ASSIGNMENT OF WAGES 18-1 19. GRATUITIES – TIPS 19-1 Tip Pooling Limited 19-2 Service Charge May Be a Gratuity 19-3 No Cost May Be Imposed For Recovery For Tips Left …
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................................................................................................................ ............................................................................................................. ......................................... ......................................... ........…
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gation To Indemnify Employee For Expenses Or Losses 29-1 Labor Code § 2810.5 Written Notice to Employees Upon Hire and for Changes 29-4 30. HEALT HY WORKPLACES, HEALTHY FAMILIES ACT OF 2014 30-1 31. CONTRACTS – GENERALLY 31-1 32. CONTRACT INTERPRETATION - GENERALLY 32-1 33. CONTRACTS, IMPLIED-IN-LAW (QUASI-CO…
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................................................................................................ ................................................................................................ DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL DECEMBER, 2019 vii TABLE OF CONTEN TS (C…
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Employer May Not Intimidate Or Coerce Employees Regarding Elections 56-8 Existing Alternative Workweek Arrangements Adopted Pri or To 1998 56-9 Special Rules Regarding Orders 4 And 5 56-9 Employee Petition To Repeal Alternative Workweek Arrangement 56-10 Two-Thirds Majority Required to Repeal 56-10 Twelve-Mo…
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interpretation and that these interpretations should be uniform and available to the public, the Legislature empowered the DLSE to promulgate necessary “regulations and rules of practice and procedure.” (Labor Code § 98.8.) The Labor Code does not, however, include special rulemaking procedures for the DLSE simila…
#19

expressions short of formal, quasi -legislative regulations. (See, e.g., DeYoung, supra, 147 Cal.App.3d 11, 19- 21, 194 Cal.Rptr. 722 [long -standing interpretation of city charter provision embodied in city attorney's opinions]...” The Supreme Court gave two reasons why such administrative letters should be ent…
#20

supra, 19 Cal.4t h at p. 14, 78 Cal.Rptr.2d 1, 960 P.2d 1031.) Thus, in Morillion v. Royal Packing Co., supra, 22 Cal.4th a t page 584, 94 Cal.Rptr.2d 3, 995 P.2d 139, the court reviewed two DLSE advice letters and found support in the fact that the DLSE interpretation was consistent with its independent analysis. …
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1.1.6.2 Certain opinion letters cited in this manu al refer to “Interpretive Bulletins” that were previously issued by DLSE. However, the California Supreme Court, in Tidewater, held that the Division’s use of interpretive bulletins violates the provisions of the Administrative Procedures Act to the extent that suc…
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(b) “Labor” includes labor, work , or service wheth er rendered or performed under c ontract, subcontract, partnership, station plan, or other arrangement if the labor to b e paid for is performed personally by the person demanding payment. 2.4 Definition Of Wage . A wage is defined as money or other value which i…
#23

yearly “salary”). 2.4.4 A wage is also defined as a specified sum or amount which is paid to an employee in exchange for a given time of service to an employer, or a fixed sum which is paid for a specified piece of work (e.g., “piecework”). 2.4.5 In the final analysis, wages are considered to be compensation paid…
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2.5.4.1 Again, as with a piece rate plan, a commission plan may include a group of employees who share in the commissions earned. (See detailed discussion of commissions at Section 34 of this Manual) 2.5.5 Bonus Defined. A bonus is money promised to an employee in addition to the monthly salary, hourly wage, commi…
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2.6.1 Both California and federal law prohibit imprisonment for debt (unlawful and violative o f individual rights). It should be noted, however, that the courts have upheld criminal cases which involved imprisonment for failure to pay wages when there is the ability to pay. Cases define the analytical framework a…
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2.7.1 Note. Labor Code § 220(b) still exempts counties, incorporated cities, towns or other municipal corporations from the provisions of Labor Code §§ 200-211 and 215-219. 2.7.1.1 Other municipal corporations would include such entities as hospital districts, (See DLSE v. El Camino Hospital District (1970) 8 Cal.…
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“seasonal employment in the curing, canning, or drying of any variety of perishable fruit, fish or vegetables” so long as wages of such employees are paid within 72 hours. 3.2.1 Employees in the curing, canning or drying occupations may be paid by mail if the employee so requests and designates a mailing address. …
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anytime employment terminates. Now, an employee engaged in the production or broadcasting of motion pictures, must be paid by the next regular pay day, anytime the employee is discharged, laid off, resigns, completes employment for a specified term, or otherwise. See subsection (d). DIVISION OF LABOR STANDARDS E…
#29

hosts live theatrical o r concert events who are dispatched through a hiring hall or other system of regular short-term employement pursuant to a bona fide collective bargaining agreement may establish by express terms in the collective bargaining agreement the time limits for payment of wages to an employee who …
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entitled to receive waiting time penalties if they are not paid in a timely manner. 3.9 Extension Of Coverage Of Wage Statutes To Some Public Employees. Effective January 1, 2001, Labor Code § 220 has b een amended to extend the coverage of Labor Code §§ 201, 202, 203, 204.2, 206, 207, 208 and 209 to employees o…
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type of work, the working conditions, and the quality and price of the services. (B) Determines assignments or reassignments of workers, even if workers retain the right to refuse specific assignm ents. (C) Retains the authority to assign or reassign a worker to another client or customer when the worker is deter…
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If the assignment is for over 90 consecutive calendar days, unless the employee is paid weekly the requirements do not apply. Upon discharge or quit, the requirements of Labor Code §§ 201 and 202 apply and a violation is subject to waiting time penalties under Labor Code § 203. DIVISION OF LABOR STANDARDS ENFORCE…
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Data Services, Inc. v. Jackson (1984) 153 Cal.App.3d Supp. 1, 11.)” 4.1.1.1 The above language reflects the strong view California courts take regarding imposition of the penalty wage provided in Labor Code § 203. 4.2 Willfully. The statute provides the penalty if the employer “willfully” fails to pay the wages due…
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4.2.2.1 The civil penalty assessed under Labor Code § 203 does not require that the employer intended the action; merely that the action occurred and it was within the employer’s control. ( Davis v. Morris (1940) 37 Cal.App.2d 269; 99 P.2d 345) 4.2.3 Termination of Employment. Employment may be terminated by any…
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employer must not only prove that the letter was mailed to the correct address but, since the employee did not assent to receipt by this method, it must prove that the check was received by the employee. See Villafuerte v. Inter-Con Security Systems, Inc. (2002) 96 Cal.App.4th, Supp. 45. 4.3.4 Any Wages. “Any wage…
#36

issions) are not calculable until after termination and, thus, are not due until that time. The employer has an obligation to pay those wages as soon as the amount is ascertainable and failure to pay those wages at that time will result in imposition of waiting time penalties. (See discussion at O.L. 1999.01.09). …
#37

in the California cou rts and the issue of the pre-emptive effect of ERISA may play a role in the final analysis of any case brought under this section. 4.7.4 The penalty provided in Section 203.1 is not applicable if the employee recovers the servic e charge authorize d by Section 1719 of the Civil Code. DIVISI…
#38

(c) However, when employees are covered by a collective bargaining agreement that provides different pay arrangements, those arrangements shall apply to the covered employees. (d) The requirements of this section shall be deemed satisfied by the payment of wages for weekly, biweekl y, or semimonthly payroll if …
#39

5.2.3 Section 204 also provides exceptions which allow the payment of salary, for those employees who are exempt under the Fair Labor Standards Act, once a month. 5.2.4 Base salary must be paid pursuant to the provisions of Labor Code § 204; how ever, certain exceptions are provided in the statute for specified e…
#40

5.3.1 The central place is required to maintain the time records, pay each worker for his or her total time worked in each pay period , and deduct and report taxes. 5.3.2 Both discharged and quitting employees must be paid at the central place. Employers intending to start a central pay plan must provide DLSE wit…
#41

5.4.1 The Legislature enacted Section 204.1 to permit the monthly payment of commission wages by employees employed by employers licensed as vehicle dealers. Mechanics and other employees performing repair or related services are not “commissioned” employees. ( See Keyes Motors v. DLSE (1987) 197 Cal.App.3d 557; 2…
#42

lodged by the employer , the wages due an y employee remaining in such employment shall become due and payable once in each calendar month on a day designated in advance by the employer as the regular payday. No two successive paydays shall be more than 31 days apart, and the payment shall include all wages up to …
#43

s been adopted by the Legislature providing its view of the use of “compensating time off.” The adoption of that language has precluded the Division from promulgating or enforcing any other “compensatory time” provisions. Thus, the Division policy concerning compensatory time which had been in effect for many yea…
#44

6.4 See Section 48.2 of this Manual for further guidance regarding “Makeup Work Time.” *Pursuant to AB 1066 (2016), as stated in Labor Code § 8 61, all overtime provisions in Labor Code Division 2, Part 2, Chapter 1 (co mm encing with section 500) not subject to the overtime phase- in began to apply to agricultura…
#45

7.2 § 206.5 – Release Of Claim Of Wages Illegal Unless Wages Previously Paid: No employer shall require the execution of any release of any claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of such wages has been made. Any release required or exe…
#46

7.3 § 207 – Required Notices Of Paydays And Place Of Payment: Every employer shall keep posted conspicuously at the place of work, if practicable, or otherwise wh ere it can be seen as employees come or go to their places of work, or at the office or nearest agency for payment kept by the employer, a notice speci…
#47

circumstances – to give all of the workers an opportunity to be paid. 7.5.2 Payment of Wages Due Earned In Collective Bargaining Situation. The Supreme Court decision in Liv adas v. Bradshaw 512 U.S. 107, 114 S.Ct. 2068 (1994) makes it clear that under certain circumstances wages owed under the terms of a collect…
#48

7.6.1 The following days have been designated as holidays by Government Code: January 1, the third Monday in Janua ry, February 12, the third Monday in February, March 31, the last Monday in May, July 4, the first Monday in Septe mber, the se cond Monday in October, November 11, Thanksgiving, the day after Thank…
#49

enforcing judgments for citations issued by the Labor Commissioner under this section shall be the same as those set forth in subdiviisions (b) through (k), inclusive, of Section 1197.1. (c) An employee is only entitled to either recover the statutory penalty provided for in this section or t o enforce a civil p…
#50

violation of Section 212, 216, 221, 222, or 223 shall be subject to a civil penalty as follows: (a) For any initial violation, one hundred dollars ($100) for each failure to pay each employee. (b) Fo r each subsequent violation, or any willful or intentional violation, two hundred dollars ($200) for each f ailu…
#51

ble and payable in cash, on demand, without discount, at some established place of business in the state, the name and address of which must appear on the instrument, and at the time of its issuance and for a reasonable time thereafter, which must be at least 30 days, the maker or drawer has sufficient funds in, or…
#52

in this State. DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JUNE, 2002 9 - 2 9.1.2.1 Payment By Scrip Prohibited. The DLSE has, on a number of occasions, addressed the issue of payment “in cash” or in an “instrument negotiable in cash”. In one such situation, for instance, a “…
#53

reason of insufficien t funds and that there was no credit arrangement with the depositing bank. The defendant must make some showing that the non- negotiable instrument resulted from circumstances “neither foreseeable nor preventable by reasonably prudent investigation or action .” 9.1.7 Prosecutions under Sectio…
#54

universities, and other nonprofit educational institutions. 9.1.9.3 An employer may deposit wages due or to become due or an advance on wages to be earned in an account in any bank, savings and loan association or credit union of the employee’s choice which is located in the State of California if the employee has…
#55

9.1.11.2 Note: Deputies unfamiliar with the Probate forms should contact their assigned attorne y through their Sen ior Deputy. 9.1.12 Escheat To State. In addition, California Code of Civil Procedure also provides that an y unclaimed personal property (which would include wages) escheats to the State. Unclaime…
#56

It shall be unlawful for any employer to collect or receive from an employee any part of wages theretofore paid by said employer to said employee. 10.5 Section 221 is “declarative of a strong public policy against fraud and deceit in the employment relatio nship. Even where fraud is not involved, however, the Leg…
#57

withhold or divert any portion of an employee’s wages when the employer is required or empowered so to do by state or federal law or when a deduction is expressly authorized in writing by the employee to cover insurance premiums, hospital or medical dues, or other deductions not amounting to a rebate or deduction f…
#58

arrangement (29 U.S.C. §1144(e)(1)) Howeve r, as indicated in Section 11.1.1.1 above, Labor Code §224 authorizes diversion of a portion of wages when performed pursuant to federal law, and the state standard is thus not preempted. Additionally, the pree mption provision further defines what constitutes an “autom a…
#59

er from recovering wages paid. This provision prohibits an employer from receiving from an employee any wage paid by the employer to the employee either by deduction or recovery after payment of the wage: “It shall be unlawful for any employer to collect or receive from an employee any part of wages theretofore p…
#60

that a discharge which is a resul t of a complaint made by an employe e about an illegal deduction constitutes a violation of public policy giving rise to a cause of action for wrongful discharge. (Phillips v. Gemini Moving Specailists (1998) 63 Cal.App.4th 563) 11.2.4 Loss Suffered As A Result Of The Dishonest Or…
#61

18 of this Manual). It should be noted that the Barnhill decision does not address Labor Code § 300. DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JANUARY, 2009 11 - 5 11.3 Any Deduction Must Be For Direct Benefit Of Employee. Deductions are only permitted for items which are f …
#62

221 in any event. Thus, such a pra ctice is illegal in any industry or occupation; not just in the occupations covered by Order 16. 11.3.3 Allowable Deductions. Note that section 224 also allows deductions when authorized by the employee in writing but that a uthorization is lim ited to (1) in surance premiums, …
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12.1.2 Attorney’s Fees May Be Recovered in Private Action . Labor Code § 218.5 provides for recovery of attorney’s fees to the prevailing party in the event of an action to recover wages brought by a private party if any party to the action requests attorney’s fees and costs upon the initiation of the action. Ho…
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v. El Camino H ospital District (1970) 8 Cal.App.3d, Supp. 30); community college districts, ( See Kistler v. Redwoords Community College Dist. (1993) 15 Cal. App.4th 1326), and a water storage district ( See Johnson v. Arvin -Edison Water Storage Dist . (2009) 174 Cal.App.4th 729). But s ee, Gateway Community C…
#65

13.1.2 Current Employee May Not Be Charged Where Requirement Is Imposed by Law. The second half of the statute, cited directly above, prohibits an employer from requiring any employee to pay the costs of any medical or physical examination required by law. However, medical or physical examinations required b y law …
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number or an employee identification number other than a social security number, (8) the name and address of the legal entity that is the employer and, if the employer is a farm labor contractor, as defined in subdivision (b) of Section 1682, the name and address of the legal entity that secured the services of the…
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(d) This section does not apply to any employer of any person employed by the owner or occupa nt of a residential dwelling whose duties are incidental to the ownership, maintenance, or use of the dwelling, including the care and supervision of children, or whose duties are personal and not in the course of the tra…
#68

reference to other documents or information. (3) For purposes of this subdivision, a “knowing and intentional failure” does not include an isol ated and unintentional payroll error due to a clerical or inadvertent mistake. In reviewing for compliance with this section, the factfinder may consider as a relevant fa…
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(A) The exem ption for persons employed in an executive, administrative, or professional c apacity provided in any applicable order of the Industrial Welfare Commission. (B) The exemption for outside salespersons provided in any applicable order of the Industrial Wel fare Commission. (C) The overtime exemption …
#70

2. IW C Order exemption for outside salespersons; 3. Exempt as a computer professional and paid on a salary basis as provided in Section 515.5; 4. A parent, spouse, child or legally adopted child of the employer; 5. A participant, director, or staff member of a live -in alternative to incarceration re habi…
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periods during the pay period must appear on the itemized statement. Labor Code § 226.2(a)(2). In addition, unless employees paid on a piece -rate basis are separately compensated at an hourly rate of at least the applicable minimum wage for all hours worked, the total hours of other nonproductive time, the rate …
#72

residence if the duties of the employee are incidental to the ownership, maintenance or use of the dwelling including the care and supervision of children, or whose duties are personal and not in the course of the trade, business, profession or occupation of the owner or occupant. 226(d). 14.1.6 Damages may be r…
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provided for in this section are in addition to any other penalty provided by law. In enforcing this section, the Labor Commissioner shall take into consideration whether the violation was inadvertent, and in his or her discretion, may decide not to penalize an employer for a first violation when that violation wa…
#74

14.4 Garment Manufacturing Record Requirements. Garment manufacturers are required by Labor Code § 2673 to keep the following records for three years: (a) The names and addresses of all garment workers directly employed by such person. (b) The hours worked daily by employees, including the times the employees …
#75

clear that Section 227.3 requires that, upon termination, an employee must be paid for the pro rata share of his or her vacation which has accrued through the termination date. 15.1.2 Statute Does Not Require That Employer Provide Vacation. Neither the statute nor the case law requires t hat any employer provide …
#76

apply where the opt -out is met and DLSE would not have jurisdiction to determine whether vacation pay is due. In Choate v. Celite Corporation (2013) 215 Cal.App.4 th 1460, the court held the union collective bargaining agreement must contain a provision explicitly waiving the anti-forfeiture protections set forth…
#77

15.1.7.1 In evaluating the method of funding for a purported ERISA plan a thorough review of the following d ocuments is necessary: 1. all Annual Reports (Form 5500’s, including all schedules and attachments therefo; 2. Summary Annual Reports, inclufing all schedules and attachments thereto; 3. all plan docume…
#78

where the employee shows that he/she is in the class of persons for whose benefit the obligation is made. A written vacation policy or other similar written documentation which constitutes a unilateral or bilateral agreement by an employer to provide paid vacation to an employee is subject to the four year limitati…
#79

express written consent of the obligee (the employee). 15.1.12 Confusion Of Vacation Pay With Other Leave Benefits. DLSE has been asked on numerous occasions to give an opinion regarding the difference between vacation wages and other leave benefits. The DLSE has always opined that leave time which is provided …
#80

1. Leave that is granted infrequently tends to support t he assertion that the leave is intended to retain experienced employees. Every seven years is the traditional frequency. Greater or less frequency could be appropriate depending upon the industry or particular company involved. 2. The length of the leave …
#81

administrative, discretionary analysis to make the program in this case a ‘plan’.” 16.4 On the other hand, in a more recent case, that same Ninth Circuit held in the case of Delaye v. Agripac, Inc. ( 1994, 9th Cir.), that a lower court erred in holding that an employer ha d violated ERISA by not paying employee se…
#82

benefits Wages o nly Wages plus several other benefits such as medical and out-placement services Trigger ing event one, such as plant closure Empl oyee s beco me eligibl e at di fferen t *Most importan t factor DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL DECEMBER, 2020 1…
#83

differ from that of wage and hour violations claims. Retaliation matters processed pursuant to Labor Code 98.7 typically do not involve a hearing. Although the Labor Commissioner’s Office may hold hearings in retaliation matters (for example, claims pursuant to Health and Safety Code section 1596.881), the overwh…
#84

finding reasonable cause, petition the superior court for appropriate temporary or preliminary injunctive relief. 17.1.4 Enforcement Jurisdiction Of The DLSE. The DLSE has jurisdiction over all cases of retaliation or discrimination invo lving any of the following statutes. There is no exhaustion requirement. Th…
#85

Protects an em ployee who is a victim of a crime, who take s time off to appear in court to comply with a subpoena or other court order as a witness to a judicial proceeding. DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL DECEMBER, 2020 17 - 3 Labor Code section 230(c) Prohibits a…
#86

and a threat of physical injury. AB 2992 also expands the types of certification that can be provided to include documentation that reasonably verifies that the crime or abuse occurred, including but not limited to, a written statement signed by the employee, or an individual acting on the employee ’s behalf, certi…
#87

or that caused mental injury and a threat of physical injury, and a person whose immediate family member is deceased as a direct result of a crime. (The complaint must be filed within one year from the date of occurrence of the violation.) Labor Code section 230.1 Protects an employee who is a victim of domestic v…
#88

Labor Code section 230.5 Protects an employee who is a victim of an offense listed under Labor Code section 230.5 for taking time off from work, to appear in court to be heard at any proceeding, including any delinquency proceeding, involving a postarrest release decision, plea, senten cing, postconviction releas…
#89

Prohibits retaliation for using or attempting to use sick leave that accrued during six months for a reason allowe d under section 246.5. Section 234 provides that an employer’s “absence control” policies that punish sick leave taken pursuant to section 233 are a violation of section 233. Applies to plans that hav…
#90

(a) A person shall not, as a condition of employment, continued employment, or the receipt of any employment-rel ated benefit, require any applicant for employment or any employee to waive any right, forum, or procedure for a violation of any provision of California Fair Employment and Housing Act… or this code, i…
#91

specific employment situations. In addition, regarding asking an applicant or seeking information about criminal convictions, now only particular convictions, (including eradicated, expunged, dismissed, or sealed convictions) which are relevant to the position being applied for may be inquired into and only under …
#92

threatening to contact immigration authorities. Labor Code section 1019 creates a private right of action in court for victims of unfair immigration-related practices that are retaliatory. The Labor Commissioner will process such complaints under Labor Code section 98.6, which prohibits retaliation for engaging in…
#93

work area, shielded from view, and free from intrusion while the employee is expressing milk in private. The room or location may include the place where the employee normally works if it otherwise meets the requirements of this section. The lactation room or location must be safe, clean, and free from hazardous ma…
#94

resources, nature, or structure of the employer’s business. If an employer with less than 50 employees can demonstrate that providing the use of a room or other location, other than a bathroom would impose an undue hardship when considered in relation to size, nature, or structure of the employee’s business, the em…
#95

employees who engage or participate in politics or who become candidates for public office. An employer may not make, adopt, or enforce any rule, regulation or policy that forbids, controls, directs or tends to direct the political activities or affiliations of employees. Labor Code section 1102 Prohibits an empl…
#96

on a bona fide factor other than sex, race, or ethnicity, to file a claim for unequal pay with the Labor Commissioner ’s office. A civil action to recover wages under section 1197.5(a) may be commenced no later than two years after the cause of action occurs, except that a civil action arising out of a willful v i…
#97

Prohibits retaliation against an employee who exercises the right to take a paid leave of absence for the purpose of donating his or her organ or bone marrow to another person DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL DECEMBER, 2020 17 - 12 Labor Code section 2814 Makes it unl…
#98

occupational health and safety committee established pursuant to Labor Code section 6401.7. Protects an employee who is a family member of a person who has or is perceived to have engaged in any protected conduct. Effective January 1, 2021, Labor Code section 6310 explicitly includes protections for “domestic work…
#99

violation. A claim by the employee alleging the violation by the employer of section 1596.881 shall be presented to the employer within 45 days after the action as to which complaint is made, and presented to DLSE not later than 90 days after the action as to which complaint is made. Unemployment Insurance Code se…
#100

faith and a reasonable person in the circumstances would consider the complaint to be valid and enforceable. 17.4.2 Note that the first two protected activities involve a filing or threat to file or engaging in a proceeding within the jurisdiction of the Labor Commissioner; but activity numbered 6 is not so limited…
#101

statutory protections also apply to an employee who is pre -emptively fired because the employer fears the employee may file a complaint. Lujan v. Minagar (2005) 124 Cal.app.4 th 1040. 17.4.6 Penalty assessed against employer. Effective January 1, 2014, section 98.6(b)(3) provides for a civil penalty of up to $…
#102

Commissioner’s Office within one year of the retaliatory act. Investigations of complaints filed under this statute are handled pursuant to the procedures set forth in Labor Code section 98.7. 17.5.4 Remedies for violation of this statute include unpaid wages, interest, and liquidated damages in the amount of the…
#103

tivity is also protected from retaliation pursuant to section 1102.5(h). The inclusion of this language in 2015 is consistent with the DLSE’s broad interpretation of anti- retaliation laws to prohibit retaliation against employees who are family members. 17.6.4 Penalty assessed against employer. Section 1102.5(f)…
#104

extent that the remaining portion of the wages would severely impair the wage earner’s economic well being. These restrictions protect the employee by prohibiting the employer from paying out to “assignees” more of the employee’s wages than is permitted by law. 18.1.1 Note : The employe r may also be an assigne e …
#105

7. The wages of an employee who is paid at a central location as set out at Labor Code Section 204 a may not be assigned. (See Section 5.3 o f this Manual) 18.3. 1 Note that these provisions do not apply in assignments for spousal or child support. (See § 300(a)) 18.3. 2 Does Not Apply To Certain Deductions. Sect…
#106

and whether such service is rendered on a commission, concessionaire, or other basis. (c) "Employing" includes hiring, or in any way contracting for the services of an employee. (d) "Agent" means every person other than the employer having the authority to hire or discharge any employee or sup ervise, direct, or c…
#107

to the patron. 19.2.1.1 Note that the amendment to Labor Code § 350 effective January 1, 2001, adds specific language regarding dancers. Also, as explain ed below, section 351 now prohibits, among other things, the practice of recovering credit card charges incurred by an employer when a tip is left on a credit ca…
#108

2) No employer or agent with the authority to hire or discharge any employee or supervise, direct, or control the acts of employees may collect, take or receive any part of the gratuities intended for the employee(s) as his or her own. (also see Definitions for “Employer” and “Agent” , Cal Labor Code section 350).…
#109

claims process or through the Bureau of Field Enforcement. In O’Grady v. Merchant Exchange Productions, Inc. (2019) 41 Cal.App.5th 771, the court held mandatory service charges added to food and beverages could constitute a gratuity. An opinion letter dated November 2, 2000, makes reference to a particular set of…
#110

POLICIES AND INTERPRETATIONS MANUAL JUNE, 2002 19 - 4 recoverable under Business and Professions Code § 17200 as an unfair business practice. (Application Group, I nc. v. Hunter Group, Inc. (1998) 61 Cal.App.4th 881, 907-908; Hudgins v. Neiman Marcus (1995) 34 Cal.App.4th 1109, 1126-1127) 19.6 Credit Card Cha…
#111

The account must be set up in such a way that the amount deposited can only be withdrawn by the joint signatures of both the employer and the employee (or applicant), the sum may not be co-mingled with other money of the employer, and the agreement concerning the bond must be in writing. The money in such an accou…
#112

requirin g such a purchas e as a conditio n of e mployment . The DLSE take s the positio n tha t any purchas e of stock or interes t in a busines s as a condit ion of continued employment is likewis e prohibi ted. 21.2 Labo r Cod e § 432 provide s tha t eithe r an employe e or an app licant has the right to obt…
#113

(a) No employer, or agent or officer thereof, or other person, may compel or coerce any employee, or appli cant for employment, to patronize his or her employer, or any other person, in the purchase of any thing of value. (b) For purposes of this section, to compel or coerce the purchase of any thing of value in…
#114

1993.02.22-3 ), pay for uniforms required by the employer, purchase a truck to be used by the employee in the business (O.L. 1997.01.02), or pay for a bank account as a condition of receiving incurred expens es by direct deposit (O.L. 1997.03.2 1-2). The employee must show that there is a cost in…
#115

individual unorganized worker is helpless to exercise actual liberty of contract and to protect his freedom of labor, and thereby to obtain acceptable terms and conditions of employment. Therefore it is necessary that the individual workman have full freedom of association, self-organization, and designati…
#116

hange employment by false representations concerning the nature or duration of employment. The statutory scheme is particularly addressed to preventing employers from inducing potential employees to move to a new locale based on misrepresentations of the nature of the employment. ( Tyco Industries, Inc. v. Sup…
#117

AUGUST, 2019 25 - 1 25 CONSTR UCTIO N INDUSTR Y CONTRAC TORS’ REQUI REME NTS. 25.1 Labor Code § 1021. Any person who does not hold a valid state contractor's license issued pursuant to Chapter 9 (commencing with S ection 7000) of Division 3 of the Business and Professions Code, and who employs any worker to per…
#118

sometimes refered to as a “prime contractor.” A “subco ntractor” is defined as a contractor that does not have a direct contractual relationship with an owner and includes a contractor that has a contractual relationship with a direct contractor or with another subcontractor. See Civil Code § 8046. 25.3.1 On o…
#119

employee may discuss or disclose, may not waive or infringe on these statutory protections. Brown v. TGS management Co., LLC (2020) 57 Cal.App.5 th 303, *8. 26.2 Labor Code section 1024.5 prohibits use of a consumer credit report for employment purposes unless the position of the person for whom the report is sou…
#120

education program, provided that this reasonable accommodation does not impose an undue hardship on the employer.” DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL AUGUST, 2017 26 - 2 26.4.1 The employer must make reasonable efforts to safeguard the privacy of the em ployee as t…
#121

is further prohibited from coercing or influencing or attempting to coerce or influence employees through or by means of threat of discharge or loss of employment to adopt or follow or refrain from adopting or following any particular course or line of political action or political activity. 26.6.1 By inference (Se…
#122

all individuals regardless of immigration status who have applied for employment, or who are or who have been employed, in this state.” DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL DECEMBER, 2017 27 - 1 27 PROHIBITED OR LICENSED OCCUPATIONS , SUCCESSORSHIP, CAL -WARN ACT 27.1 In…
#123

person similarly engaged who has not registered with the commissioner or does not have a valid bond on file with the commissioner, as required by Section 2675, shall be deemed an employer, and shall be jointly liable with such other person for any violation of Section 2675 and the sections enumerated in that sectio…
#124

subcontracts, to notify a contractor that the service contract has been terminated or will be terminated. The terminated contractor shall, within three working days after receiving notification, provide to the successor contractor, or awarding authority (if identity of successor unknown) the name, date of hire, and…
#125

27.2.6 Public Transit and Collection and Transportation of Solid Waste. Labor Code §§ 1070 et seq. require any bidder for a public transit or collection and transportation of solid waste contract to declare as 27 - 2 DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL DECEMBER 20…
#126

ineligible to bid or be awarded a contract for not less than one year nor more than three years. For solid waste contracts, su ccessors are required to retain only employees who would have been terminated due to the award to the successor and of those employees an exception applies to employees not meeting any stan…
#127

operations in a covered establishment. Unlike a mass layoff, which requires a layoff of 50 or more employees at a covered establishment, once it is determined that the employer 27 - 3 DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL DECEMBER, 2020 27 - 4 op erates a covered establis…
#128

the relocation or termination; and ( c) The employer must have reasonably and in good faith believed that giving a 60 day notice would have precluded the employer from obtaining the needed capital or business. In addition, the employer must supply an affidavit, containing a declaration signe d under penalty of perj…
#129

that the employer is unregistered, not to exceed ten thousand dollars ($10,000). Any person or entity that contracts with an employer who lacks a current and valid registration, as displayed on the online registration database at the time the contract is executed, extended, renewed, or modified, under this part on…
#130

washing and polishing on an intermittent basis to raise funds for charitable, education, or religious purposes, any licensed vehicle dealer or car rental agency that conducts car washing and polishing a ncillary to its primary business of se lling, leasing o r servici ng vehi cles, a new motor vehicle dealer, as de…
#131

that more than six years have ela psed since the most recent grocery establishment was located in the area designated as a food desert and that the grocery establishment stocks and sells fresh fruits and vegetables in amounts, and of a quality, that is comparable to what the establishment sells in its three geograp…
#132

pter. Talent agencies may, in addition, counsel or direct artists in the development of their professional careers. (Labor Code § 1700 .4(a)) 27.4.2 Artists means actors and actresses rendering services on the legitimate stage and in the production of motion pictures, radio artists, musical artists, musical organiz…
#133

of foreign labor contractors who have been denied renewal or registration. Foreign labor contractors must post a surety bond. A private cause of actio n for any aggrieved person, as well as allowing the Labor Commissi oner to bring suit for vio lations, is also part of the law. DIVISION OF LABOR STANDARDS ENFORCE…
#134

state, depriving workers of critical labor law protections, depriving the state of tax revenue, and depriving law-abiding businesses from a level playing field on which to compete. One of the specific intents o f AB 5 is to “ensure workers who are currently exploited by being misclassified as independent contracto…
#135

fn. 24 citing Robinson v. George (1940) 16 Cal.2d 238, 242; Linton v. DeSoto Cab Co., Inc. (2017) 15 Cal.App.5 th 1208, 1220-1221; Labor Code §§ 27 75 (b)(1), 3357; S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations (1989) 48 Cal.3d 341 at pp. 349, 354.) 28.3 The ABC Test New Labor Code section 2775 p…
#136

 A worker who is subject, either as a matter of contractual right or in actual practice, to the type and degree of control a business typically exercises over employees would be considered an employee. (Dynamex, 4 Cal.5th at 963.)  As discussed in Borello, depending on the nature of the work and overall arrangem…
#137

because he wanted control over his own activities. (Great N. Constr., Inc. v. Dept. of Labor (Vt. 2016) 161 A.3d 1207, 1215.) Part A “control” can be analyzed just as “necessary” control is analyzed under Borello In discussing Part A of the ABC test, the Supreme Court specifically referred to Borello to explain th…
#138

sold them to the buyer, maintained documentation on workers’ proceeds from the sale, and handed out the workers’ checks (issued directly by the buyer at the grower’s request). It was the simplicity of the harvesting work which made detailed supervision unnecessary. Thus, grower retained all necessary control over …
#139

the courier service, JKH retained all necessary control over the operation as a whole, even in the absence of JKH’s control over the details of the work, and even though JKH was more concerned with the results of the work rather than the means of its accomplishment. 28.3.2 Part B – Does the Worker Perform Work tha…
#140

 The cutting and harvesting of timber by an individual worker was work performed in the usual course of business of a timber management company whose business involved contracting for the purchase and harvesting of trees and the sale and delivery of the cut timber to customers. Rejecting the company’s contention …
#141

of business.” The Restatement includes “whether or not the work is a part of the regular business of the principal,” Labor Code section 2750.5 includes “performing work that is not ordinarily in the course of the principal’s work,” and the “economic realities” test includes “whether the service rendered is an inte…
#142

action of a hiring entity, there is a substantial risk of misclassification. (Id.)  The fact that a company has not prohibited or prevented a worker from engaging in an independent business is not sufficient to establish that the worker has independently made the decision to go into business for themselves. (Id.…
#143

 The hiring entity, a same-day pickup and delivery service, failed to establish that a bicycle courier was engaged in an independently established business where the entity did not present evidence that the courier “held himself out as an independent businessman performing courier services for any community of pot…
#144

IWC wage orders. The bill references subdivision 2(E) of Wage Order No. 2, which establishes that individuals in the personal service industry, such as barbers and hairstylists, are considered to be employees under certain conditions. If the wage order definition of employee is not met then the statute, which has…
#145

isions in the Labor Code that expressly extend obligations to government entities as employers, such as Labor Code section 1182.12. There are also provisions of the Labor Code such as sections 201, 202, 245.5, and 246 that expressly apply to the state as an employer, as well as section 203 which has been interpret…
#146

Borello to apply. Further, for certain occupations, a Business & Professions Code standard will apply. Threshold statutory requirements must be met for many occupations and contracting relationships in order for the hiring entity to use the Borello standard instead of ABC. The threshold requirements are very sim…
#147

administration; travel agents; graphic design; grant writers; fine artists; enrolled agents licensed to practice before the IRS; payment processing agents; still photographers / photojournalists; videographers; photo editors to a digital content aggregator; freelance writers, translators, editors, copy editors, il…
#148

 Certain individuals performing services pursuant to a third party’s contract with a motor club to provide motor club services. Borello applies to determine whether the individual is an employee of the motor club if initial requirements are met. DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS…
#149

Dynamex applies retroactively — that is, to all cases not yet final as of the date our decision in Dynamex became final — we rely primarily on the fact that Dynamex addressed an issue of first impression. It did not change a settled rule on which the parties below had relied. No decision of this court prior to Dy…
#150

reimbursement for cash shortages, breakage, or loss of equipment, as well as for required uniforms, tools, and equipment. The letter also notes that, because an employee who brings a waiting time penalty claim under Labor Code section 203 for failure to timely pay minimum or overtime wages after termination is see…
#151

JANUARY 2022 28 - 13 ABC Test Applies for Work Performed Before January 1, 2020 Borello Applies for Work Performed Before January 1, 2020 All wage order obligations Labor Code claims not listed in the first column4 Minimum wage Overtime Meal and rest periods Recordkeeping Itemized pay stub Reporting time …
#152

Under the multifactor approach adopted by the California Supreme Court in Borello – applied specifically to wage and hour claims in Linton v. DeSoto Cab Co., Inc. (2017) 15 Cal.App.5th 1208 – whether the person who receives the services (the potential employer) has the right to control the work is one factor that s…
#153

28.5.1 Control As A Factor. Borello brought about a sharp departure from control over work details. The growers who were found to be employers by the Borello court did not have the contractual authority to exercise supervision over work details, yet the court ruled that they retained “all necessary control” ov…
#154

whenever they wanted. The court, while noting the absence of control over work details, reasoned that “to the extent [a driver’s] freedom might appear to exceed that of a typical employee, it was largely illusory. If he wanted to earn a livelihood, he had to work productively and that meant carrying paying passen…
#155

this arrangement, the court observed that their seasonal positions are “permanently integrated into the [grower’s] business.” 28.5.9 Effect of Tax Status. The fact that a person who provides services is paid as an independent contractor, that is, without payroll deductions and with income reported by an IRS form 1…
#156

exception to the term “independent contractor” – such express provisions remain in effect pursuant to Labor Code section 2775. The worker must be performing work under a subcontract with a contractor in the construction industry. The term “construction industry” is not defined in the statute. However, Wage Order …
#157

services as evidenced by insurance, legally authorized indemnity obligations, performance bonds, or warranties relating to the labor or services being provided, and, DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JANUARY 2022 28 - 18 (7) The subcontractor is customarily engaged in an…
#158

presence of cumulative factors such as substantial investment other than personal services in the business, holding out to be in business for oneself, bargaining for a contract to complete a specific project for compensation by project rather than by time, control over the time and place the work is performed, supp…
#159

(1) The person receives wages as their sole compensation - “wages,” as defined by Labor Code section 200, includes “all amounts for labor performed by employees of every descriptio n, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation.”…
#160

7031, which prohibits an unlicensed contractor from recovering payment fo r services. Under section 7031, for example, [the unlicensed subcontractor] was properly denied his DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JANUARY 2022 28 - 20 wage claim. But [the general contractor] a…
#161

Fillmore v. Irvine (1983) 146 Cal.App.3d 649, 656-57. Workers’ Compensation does not apply Business and Professions Code sections 7031 and 7053 because the workers are not seeking compensation. DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JULY, 2017 29 - 1 29 OBLIGATIONS OF EMP…
#162

liable for risks broadly incidental to the enterprise undertaken by the employer --that is, for an employee’s conduct that, in the context of the employer's enterprise, is “not so unusual or startling that it would seem unfair to include the loss resulting from it among other costs of th e employer’s business.” Rod…
#163

Unified School Dist., supra, 123 Cal.App.3d 133, 140-142, 176 Cal.Rptr. 287 [school district not liable for rape of student by janitor].) In line with that authority, the California Supreme Court has held that an employer has no obligation to indemnify a sexual harasser, even though the acts occurred during work h…
#164

1994.08.14) 29.2.3.2 It should be noted that the IWC Orders allow an employer to require that employees furnish “hand tools and equipment” if the hand tools and equipment are “customarily required by the trade or craft”. The DLSE has concluded that in the phrase “hand tools and equipment”, the word “hand” is an …
#165

29.2.7 Applicants for employment, and employees are now protected by new Labor Code section 2802, effective January 1, 2 021, from incurring any expense or cost of any “ employer-provided or employer-required educational program or training” for an employee providing direct patient care or for an applicant for di…
#166

section 2802.1 also prohibits retaliation against employees who refuse to enter into a contract or agreement that is in violation of AB 2588. A prevailing plaintiff is entitled to injunctive relief and attorney fees and costs. 29.3 Labor Code §2810.5 Requires Employers to P rovide Written Notice to Emplo yees Upo…
#167

Employers are required to notify employees in writing of any changes to the above information within s even calendar days after the time of the changes unless all the changes are reflected on a timely wage statement furnished in accordance with Section 226 or notice of all changes is provided in another writing re…
#168

payment for sick leave taken no later than the payday for the next regular payroll period after the sick leave was taken. An employer may calculate the payment to non-exempt employees in one of two alternative manners: 1) The regular rate of pay for the workweek in which the paid sick leave was taken or 2) All n…
#169

calendar year of employment. Paid sick days shall be carried over t o the following year of employment but employers may through a policy limit an employee’s total accrual of paid sick leave to 48 hours or 6 days provided an employee’s rights to accrue and use paid sick leave is not otherwise limited. Employers ar…
#170

employment. Any modification to the accrual method (other than increasing the accrual amount or rate) for this type of grandfathered sick leave or paid timeoff poli cy will modify its qualification as a granfathered policy and the employer will b e required to comply with the accrual requirements under the new law…
#171

compensated time off equal to or exceeding one hour per every 30 hours worked, beginning at the commencement of employment or the operative date of this article, whichever is later. Retired annuitents working for public agencies, as specified. 30.6 Anti-Retaliation Provisions: Prohibits an employer from denying an …
#172

by clear and convincing evidence. Section 226 allows for the storing of records electronically, DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL DECEMBER, 2017 30 - 4 including these records . Liquidated damages provided for shall not be assessed due to an isolated and unintentional…
#173

31.1 Deputies are often called upon to interpret the provisions of employment contracts to determine the rights and liabilities of the parties. As will be evident, there are many provisions of general contract law which are not applicable to employment contracts because of statutory protections of employees in gen…
#174

docks to unload the ship “Gallant.” None of the first ten workers ever expressly agree to the wage but their reporti ng to the docks under those circumstances creates an implied in -fact contract whereby they are entitled to recover $15 for every hour they work. 31.2.3.2 Note: A contract may also be “implied in -l…
#175

is voidable, but may be ratified by a subsequent valid consent. (Civil Code § 1588) 31.2.6 “Objective Theory” Determines Mutual Assent: Whether there exists expressed mutual assent is tested under an “objective theory.” The reasonable meaning of the words and acts of the parties (as a reasonable person in the posit…
#176

31.2.7.2 Incapacity, e.g., by death, insanity, of the offeror (Civil Code § 1587(4)) terminates or revokes the offer even if the offeree has no knowledge of it. Fritz v. Thompson (1954) 125 Cal.App.2d 858, 863, 271 P.2d 205, 209). Also, the destruction of the thing essential to performance prior to an acceptance, t…
#177

acceptance after that time is merely a counteroffer. If no time limit is stated in the offer, the lapse of a reasonable time without acceptance will revoke or terminate the offer. (Civil Code § 1587) Generally, offers are revocable at the will of the offeror prior to the time of acceptance. (Civil Code § 1586). Lim…
#178

revocation of the offer by the offeror. Under this doctrine, commencement of performance constitutes acceptance of the offer and the offeree is bound to complete performance. (Restatement 2d, Contracts, § 63) 31.2.12.2 Offers made non-revocable by statute, e.g., “firm offers” by merchants to sell goods. (Commercia…
#179

31.2.16 Object Of Contract May Not Be In Conflict With Statute Or Public Policy. The object of the contract must not be in conflict with express statutes, public policy or express statutes though not expressly prohibited, or otherwise contrary to good morals. (Civil Code § 1667) (See also, Section 23 of this …
#180

Code § 1050 provides a criminal penalty for anyone who “by any misrepresentation prevents or attempts to prevent” a former employee from obtaining employment. Any provision which would waive that provision would be void as against public policy. More important, a statement to the effect that an individual would h…
#181

standard conditions fixed by the Industrial Welfare Commission shall be the maximum hours and standard conditions of labor for employees. Employment of any employee for longer hours than those fixed by the IWC order or under conditions of labor prohibited by the order is unlawful. (Labor Code § 1198) 31.4.4 Timel…
#182

employer and employee). 31.5.1.5 Example: Where the employer pays and the employee accepts a fixed salary, the normal implication is that all services are compensated for thereby; but where the parties agree that an additional amount shall be paid, such agreement, if supported by consideration consisting of either …
#183

binding if injustice can be avoided only by enforcement of the promise. (Restatement 2d, Contracts, § 90(1)). 31.6.1.1 Promissory estoppel is inapplicable if there were neither a clear promise nor any reliance and substantial detriment o n the part of the promisee. ( Southern California Acoustics Co. v. Holder (19…
#184

the lower rate would be unenforceable. Also, since B already performed prior to the subsequent offer, his performance constituted “past consideration” which is also insufficient consideration . 31.6.1.6 Although there is no consideration for the compromise of a wholly invalid claim, consideration may be sufficien…
#185

employee all remedies he might otherwise be entitled to as to any balance claimed.” (Labor Code § 206(a )) DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JUNE, 2002 31 - 11 31.7.2 Labor Code § 206.5 , however, prohibits an employer from requiring execution of a release of any cl…
#186

to them by usage. (Civil Code § 1644) Technical words are to be interpreted as usually understood by persons in the profession or business to which they relate, unless clearly used in a different sense. (Civil Code § 1645) 32.1.2 All applicable laws in existence when the agreement is made become a part of the contr…
#187

32.2.1 In Graham v. Scissor -Tail, Inc. (1981) 28 Cal.3d 807, 820, 171 Cal.Rptr.604, 612, the Supreme Court stated that there were two judicially imposed limitations on the enforcement of adhesion contracts or provisions therein. DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JUNE…
#188

an adhesion contract which adversely affects, impedes, or contravenes the prompt payment of wages would be suspect. (See also, Labor Code § 219 which provides that the provisions of § 200 et seq. cannot, in any way, be contravened or set aside by private agreement whether written, oral, or implied) 32.2.4 Legisl…
#189

to contract damages is unconscionable within meaning of Civil Code § 1670.5. Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 60 Cal.Rptr.2d 138. 32.2.5.2 An arbitration clause in consumer loan contracts made in California which requires that participatory hearings to resolve disputes be held in Minnesota, …
#190

33.1.1 Under a special equity doctrine, the law implies a promise to pay for benefits or services rendered even though no such promise was ever made or intended. McCall v. Superior Court (1934) 1 Cal.2d 527, 531, 36 P.2d 642; Kossian v. American Nat. Ins. Co. (1967) 254 Cal.App.2d 647, 651, 62 Cal.Rptr. 255. The…
#191

commissions arise from the sale of a product, not the making of a product or the rendering of a service. The court further held that in order to be a commission, the compensation must be a percentage of the price of the product or service which is sold. (See also, O.L. 1983.11.25; see also Section 2.5.4 of this Man…
#192

qualify as a “commission”, the scheme must meet the requirements of a “commission wage” as set out in the Keyes Motors case. Bonuses are not predicated upon the price of a particular product or service, but are usually based on reaching a minimum amount of sales or making a minimum number of pieces, and can be dist…
#193

to be construed according to the contract of employment but must be completed within a reasonable time depending upon the transactions involved. 34.3 Computation Of Commissions. Commission computation is based upon the contract between the employer and the employee. The commission may be based on either gross sale…
#194

store where the salesperson cannot be identified, and returns on defective merchandise, customer abuse, etc. The court held such a commission program was illegal in California, citing Kerr's Catering v. DIR (1962) 57 Cal.2d 319; 19 Cal.Rptr. 492 and Quillian v. Lion Oil (1979) 96 Cal.App.3d 156; 157 Cal.Rptr. 740.…
#195

provision. The McKinnon court also found substantive unconscionability on the basis that the amount of earnings forfeited by Ellis under the provision indicated it to be commercially unreasonable. By contrast, in American Software Inc. v. Ali (1996) 46 Cal.App.4th 1386, no procedural unconscionability was found w…
#196

terminated employee on a “sale” transaction that is not an instantaneous event (as in the context of retail sales) but, rather, is “completed” over a relatively long period of time during which the sales agent may be required to perform additional services for the customer. ( Hudgins v. Neiman Marcus Group, Inc., s…
#197

975. This has been the rule ever since Peterson v. California Shipbuil ding Corp. (1947) 80 Cal.App.2d 827, 831, 183 P.2d 56. The California rule is in accord with the prevailing view that where a definite bonus or profit-sharing plan has been established and forms part of the employment contract, the employee is …
#198

voluntarily terminated his employment and went to work for a competitor forfeited his rights to benefits under the plan. The court held that the forfeiture clause was invalid as it was contrary to the strong public policy against contracts by which anyone is restrained from engaging in a lawful profession, trade …
#199

36.1 California Law. Section 229 of the Labor Code addresses the effect of arbitration agreements on the right of individuals to invoke state law remedies to collect unpaid wages due under state law. Section 229 provides: Actions to enforce the provisions of this article for the collection of due and unpaid wages …
#200

(1) Initially, applying federal precedents, the Labor Commissioner must inquire whether the claim has its sou rce in state law independent of the collective -bargaining agreement (Hawaiian Airlines, Inc. v. Norris (1994) 512 U.S. 24 ; Lingle v. Norge Division of Magic Chef, Inc. (1988) 486 U.S. 399), or whether…
#201

36.3 Federal Arbitration Act Restrictions. The first sentence of Labor Code § 229 provides that an agreement to a rbitrate statutory wage claims will not deprive an employee of the right to resort to the Labor Commissioner or the courts to enforce a claim for unpaid wages. If, however, such an agreement is…
#202

Court’s decision in Armendariz v. Foundation Health Psyhcare Services, Inc. (2000) 24 Cal.4th 83, 89. 36.3.2.2 Current Law Regarding Arbitration Clauses. Unless the arbitration agreement is found to be both procedurally an d substantively unconscionable and, thus, unenforceable under California law, the fede…
#203

37.1 In order for an action to be prosecuted, there must be some entity aimed at by the processes of the law, and against whom the court’s judgment is sought. Tanner v. Estate of Best (1940) 40 Cal.App.2d 442, 445. Administrative “actions” or “proceedings” are not self -executing and require ultimate judicial act…
#204

multiple entities contr ol different aspects of the employment relationship, as when one entity, which hires and pays workers, places them with other entities that supervise the work.” Martinez v. Coombs (2010) 49 Cal.4th 35, 59. In Guerrero v. Superior Court (2013) 213 Cal.App.4th 912, 945-47, the court quoted…
#205

are joint and severally liable for any unpaid wages, including interest. Property servi ces is defined as janitorial, security guard, v alet parking, landscaping and g ardening services. Long- term care means the operation of a skilled nursing facility, intermediate care facility, congregate living health facilit…
#206

But not, JOHN SMITH, individually and dba JOHN’S BAR-B- Q (This is not correct because a “dba” is not a separate l egal entity such that John Smith can be sued as a “dba”) 37.2.3 General Partnerships. A general partnership is an association of two or more persons (or other business entities) to carry on as co…
#207

Transport, a general partnership dba B&C Trucking; John Smith, an individual and general partner of B&C Transport, a general partnership Note: If only the partnership is named, the personal assets of the individual partners may not be able to be reached in the enforcement of the judgment. Cavaet: The California pr…
#208

37.3.2 Formalities: A limited partnership exists upon the filing of a certificate of limited partnership with the Secretary of State. Corp. Code § 15621. The certificate must contain the names and addresses of the general partners but the names of the limited partners and amounts of their investments need not be…
#209

officer, agent, or employee of another person, who pays or causes to be paid to any employee a wage less than the minimum fixed by an applicable state or local law, or by an order of the Commission”. Labor Code § 558.1 provides liability for “any employer or other person acting on behalf of an employer, who holds …
#210

37.4.3 Foreign corporations: A foreign corporation has the same capacity to be sued as a domestic corporation. The main issue for non -registered foreign corporations is whether it has subjected itself to the jurisdiction of the state. Conducting significant or regular business in the state will suffice. …
#211

exceed the total amount of assets of the dissolved corporation distributed to the shareholder upon dissolution of the corporation. Corp. Code § 2011(a)(1 ). 37.4.6 Formalities: A corporation must comply with the state’s corporation law which requires filing of articles of incorporation containing certain essential…
#212

LLC in dealings with third persons and can bind the LLC in the same way as a general partner can bind a partnership. Corp. Code § 17157. 37.5.2.2 Where articles provide for centralized management, the LLC may allow its business and affairs to be managed by or under the authority of one or more designated managers,…
#213

not filed with the county clerk a certificate of fictitious business name lack the capacity to sue on transactions entered into under the fictitious name. B&P § 17918. 37.6.2 Designation: - ABC Association, an unincorporated association - ABC Association, an unincorporated association; Jim Smith, an individua…
#214

professional corporation. (e.g., clerical staff, etc .) Corp. Code § 13405. The articles of incorporation must specifically state that the corporation is a professional corporation and no professional corporation can render professional services without a currently effective certificate of registration issued by th…
#215

Witkin & Moore, L.L.P., a limited liability partnership, or Money Manager Accountants, RLLP, a registered limited liability partnership 37.10 Business Trusts. A rare business entity, a business trust is formed pursuant to a trust document naming trustee(s), beneficiaries, and trust property. The trustee h…
#216

beneficiaries. Witkin, Summary of Calif. Law, Vol. 11, Trusts, §265-266. 37.11 For purposes under the Labor Code, a “business trust” is a person (Labor Code 18), and an employer may be a “person” (IWC Orders, §2, Definitions). Accordingly, an action may appropriately be designated against both the business trust a…
#217

creditors from even asking the debtor to pay voluntarily or even the sending of a demand letter. This does not necessarily mean the creditor will be forever barred from enforcing the judgment. The automatic stay usually only applies while a bankruptcy case is pending. Moreover, the automatic stay does not apply to…
#218

priority position of their assignors.” A different rule would deprive individual employees of the full value of their claim by impairing its transferability. 38.2 What Pre -Petition Wages Are Eligible. Bankruptcy courts generally follow th e rule that the employee earns wages within the meaning of the priority at t…
#219

38.2.3 Severance Pay falls into one of two categories: 1) severance pay agreements that provide for severance pay solely as a substitute for notice. The courts agree that a claim for this type of severance pay is entitled to first priority treatment if the employee is terminated post -petition, on the ground that …
#220

38.3.1 The necessity of affording first priority for post -petition wage claims is apparent: After the bankruptcy petition is filed, the trustee or debtor in possession may require the services of regular or new employees for either continued operation of the business or for winding up the estate. Those needed emp…
#221

after the bankruptcy estate has been created. The automatic stay, however, will preclude collection of the judgment until it is lifted i.e. after the close of the bankruptcy. 38.4.1 Referral to Legal Section. There are times when a referral to legal may be appropriate to protect legitimate state interest…
#222

Liens. Liens often survive bankruptcy even when the underlying debt is discharged. Thus, Labor Code section 98.2 certificates of lien, recorded in the appropriate counties, will survive bankruptcy (absent a bankruptcy court order removing them or stripping them). These liens, as long as they are recorded prior to t…
#223

38.7.8 Exempt Property - That property generally described by California Civil Procedure §§ 690 to 690.25, and Code of Civil Procedure §§ 704.10 to 704.995, homesteads belonging to the debtor or bankrupt. 38.7.9 General Claim - A claim with neither an order of priority nor a lien securing it. 38.7.10 Involuntar…
#224

classified in this priority. However, wages earned post-petition are also entitled to a priority. DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JUNE, 2002 38 - 6 38.7.15 Pre-Petition Wage Claim - A priority claim which arises for services rendered before the bankruptcy petition …
#225

Procedure 493.010, et seq. The procedure involves a conveyance by a debtor (usually a business entity) of substantially all property to a party (usually a credit management company or an attorney) in trust to collect all amounts owing to the debtor, to sell and convey the property transferred, distribute the proce…
#226

expenses. Divi sion of Labor Law Enforcement v. Stanley Restaurant, Inc. (9th Cir. 1955) 228 F.2d 420. DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JUNE, 2002 39 - 2 3. Preferred wage claims are paramount to most state tax claims. (See Cal. Rev. & Taxation Code §§ 2191.5, 6756,…
#227

The truste e must withhol d sufficient mone y to cover the dispute d balance unti l the claiman t h as had a reason abl e opportunity to establ ish the val idit y of his claim by cour t action. In the even t tha t the Deputy has establishe d that the balance of the claim is valid and enforceable, the c…
#228

that the Deputy consul t with the assigned Legal Sectio n attorne y rega rding what actio n to take. DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JUNE, 2002 40 - 1 40 BULK SALE TRANSFERS, LIQUOR LICENSE TRANSFERS, ETC. 40.1 A priority wage lien is provided for at Code of Civil P…
#229

40.1.1.7 Escrow: A deposit with a third person to be delivered on performance of a condition, and, on delivery by the thir d-party depository, the title passes. The sale or transfer may be through an escrow or by auction. The purpose of bulk sale laws such as Code of Civil Procedure Section 1205 are to protect t…
#230

aware of sales of such properties the assets of which could be utilized to pay the wages of the workers. 40.2.4.1 Shifting Of Assets From One Firm To Another To Avoid Payment. Deputies should be aware of this practice and, if found after investigation, bring the facts to the attention of the Legal Section. 40.3 …
#231

fer appl ication. 40.3.2 Discretio n. Ther e are occasion s whe n the li cen se is onl y for beer and wine and t he licens e is not worth transferri n g becaus e a new licens e is relativ ely inexpensi ve and easy to procure . However , when the sale cover s a locatio n wher e a licens e to dispens e hard liquor …
#232

the referral. The Deputy is to call the assigned Attorney (if the assigned Attorney cannot be reached within t wo days, the Senior Deputy should contact the Chief Counsel or Assistant Chief Counsel) and inform the Attorney of the fact that the referral is on the w ay or has been sent. The referral should be mark…
#233

(c) Keep a record showing the names and addr esses of all employees employed and the ages of all minors. (d) Keep, at a central location in the state or at the plants or establishments at which employees are employed, payroll records showing the hours worked daily by and the wages paid to, and the number of piece-…
#234

wages earned, (6) the inclusive dates of the period for which the employee is paid, (7) the name of the employee and only the last four digits of his or her social security number or an employee identification number other than a social security number, (8) the name and address of the legal entity that is the emplo…
#235

(6) When a piece rate or incenti ve plan i s in operati on, piece rates or an expla nation of the incentive plan formula shall be provided to employees. An accurate production record shall be maintained by the employer. (B) Every employer shall semi-monthly or at the time of each payment of wages furnish each emp…
#236

(O.L. 1994.02.03-1 and 1995.07.20 ) DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JULY, 2017 42 - 1 42 RIGHT TO INSPECT PERSONNEL FILE. 42.1 An employee’s right to inspect the personnel records that an employer maintains may be found in Labor Code § 1198.5. Section 1198.5 was am…
#237

employee was terminated for a violation of law, or an employment-related policy, involving harassement or workplace violence, the employer may comply with the request by making the records available at a location other than the workplace that is within a reasonable driving distance of the former employee’s residen…
#238

industry, trade, and occupation” as specified in Labor Code sections 1171 through 1205. 43.3 Overtime Requirements Of IWC Orders Do Not Apply To Some E mployees. The IWC’s orders apply t o employees in private industry, including those of non- profit organizations. Public employees are expressly excluded from mos…
#239

for working people. (1999, ch. 134) DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JULY, 2017 43 - 2 43.4.1 Any Exception From The 8-Hour Norm Must Be Clearly Provided. Adoption of this language ev idences the Legislature’s intent that the 8-hour day is to be con…
#240

located at 100 Howe Avenue, Ste. 100, Sacramento 95825 (telephone: 916-574-1900). DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL NOVEMBER, 2005 43 - 3 43.6.2.1 Definition Of Federal Enclave. The first question that must be asked is whether the military ins tallation is a “federal …
#241

43.6.3 Workers Employed by Indian Tribes or Businesses Owned by Tribes. Indian tribes, and businesses owned by tribes, enjoy sovereign immunity which deprives DLSE and non- tribal courts of jurisdiction to enforce or adjud icate claimed violations of wage and hour laws, including claims for unpaid wages, against I…
#242

reated as the tribe for immunity purposes. This immunity extends to individual tribal officials and agents acting in their representative capacity and within the scope of their authority. Trudgeon v. Fantasy Springs Casino (1999) 71 Cal.App.4th, 84 Cal.Rptr.2d 65; Redding Rancheria v. Superior Court (2001) 88…
#243

between the tribe and the state. The Indian Gaming Compact adopted by California, under which Indian casino gambling is now regulated, is completely silent as to wage and hour issues. The Compact expressly allows tribes to maintain their own workers’ compensation insurance systems, while requiring independent con…
#244

43.6.4.1 Public Employees Are Now Covered By State Minimum Wage Requirements. With the enactment of MW-2001, on January 1, 2001, public employees (“employees directly employed by the State or any political subdivision thereof, including any city, county, or special district”) are now expressly covered by minimum wa…
#245

43.6.9 Members of Religious Orders. In the past, DLSE has followed the rule that members of religious orders and clergy in general are not employees unless they work in DECEMBER 2022 43 - 6 DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL MARCH, 2006 43 - 7 43.6.10 Applicants for R…
#246

include Orders 1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 12, and 13 as well as wage orders (i.e., MW-01) which provide only for the minimum wage requirement. commercial establishments which serve the general public. (For purposes of this proviso, DLSE followed the conclusions reached by the U.S. Supreme Court regarding enfor…
#247

e orders covering their operations and their employees are treated *The quoted language was deleted with the 2001 Wage Order. However, DLSE will continue to read into the Applicability section of Order 4 the language “unless such occupation is performed in an industry covered by an industry order...” To do oth…
#248

“Household Occupations” means all services related to the care of persons or maintenance of a private household or its premises by an employee of a private householder. Said occupations shall include, but not be limited to, the following: butlers, chauffeurs, companions, cooks, day workers, gardeners, graduate nurs…
#249

January 1, 2020 $13.00 per hour $12.00 per hour January 1, 2021 $14.00 per hour $13.00 per hour January 1, 2022 $15.00 per hour $14.00 per hour January 1, 2023 $15.50 per hour2 $15.50 per hour 44.1.2 44.1.3 Labor Code Section 1182.12 provided for an increase in the mini mum wage beginning July 1, 2014 to $9.00…
#250

F.2d 167, 171; Hershey v. MacMillan Bloedel Containers (8th Cir. 1986) 786 F.2d 353, 357. 44.2 In California, Employer With Obligation To Pay Contract Wage Amount Cannot Offset That Contract Amount Wit h The Minimum Wage Obligation. California law differs dramatically from the FLSA in a crucial way -- the FLSA d…
#251

amount equal or greater than the minimum wage pursuant to the provisions of the contract must be compensated precisely in accordance with the provisions of the contract; and all other hours (or parts of hours) which the contract explicitly states will be paid at less than the minimum wage, but which constitute “hou…
#252

her than the employee’s scheduled reporting time. 45.1.1 Reporting time pay constitutes wages. (Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal. 4th 1094). Thus, failure to pay all reporting ti me pay due at the time of employm ent termination may be the basis for waiting time penalties pursuant to Labor C…
#253

again, say, two hours later. The language of the r egulation clearly requires that the applicable premium be paid if, at the first reporting of the day, the employee is not put to work or is provided less than one -half the scheduled or usual num ber of hours; this would be the r esult des pite the f act that th…
#254

employer. This would not be true in connection with regularly contracted relief for part- time work...Should a woman be employed regularly to work a lunch hour to relieve the full-time clerk and reports to work expecting and knowing that she is to receive but one hour’s employment per day and this is the regular par…
#255

employee must be paid, pursuant to Section 5(B) (see above) at least two hours for reporting a second time in one day. b. If the meeting is scheduled to immediately follow the scheduled shift, there is no requirement for the pa yment of reporting time no matter how long the meeting continues. 45.1.5 Interrupti…
#256

n some limited freedom to leave the employer’s premises or worksite while “waiting out” a delay caused by rain or inclement weather, there will still be an obligation to pay the employee for such time if the employee is so restricted geographically and/or temporally that the worker is deprived of effective use of h…
#257

ovisions of this order, the employer shall pay the employee one (1) hour of pay at the employee’s regular rate of compensation for each workday that the meal period is not provided. DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL NOVEMBER, 2013 45 - 6 (C) In all places of employmen…
#258

employer has the obligation to accurately record all hours worked, including those worked during a meal period, and must properly report all such time on wage statements, as required by Labor Code section 226(a). 45.2.1.2 Where an employee – although relieved of al l duties – is not free to leave the work place du…
#259

d. In Ehret v. Winco Foods, LLC . (2018) 26 Cal.App.5th 1, the w aiver in the CBA was upheld as a matter of state law when working more than five hours but not more than six hours. Labor Code § 512 does not prohibit an agreement that waives the meal peri od on shifts of more than five hours but not more than si…
#260

Motion Picture and Broadcasting Industries. The meal period provisions of Section 512(a), Section 226.7, a nd IWC Wage Orders 11 and 12 do not apply to employees in the motion picture industry and the broadcasting industry that are covered by a valid collective bargaining agreement that: (i) provides for meal per…
#261

provided, a CBA opt-out for meal period requirements. Presently, the only CBA opt-outs are those contained in Section 512 (1)(c-g). [Historical note: In 2006 the Court of Appeal declared the Order 16 opt -out provision to be unenforceable due to its having been adopted in violation of the express provisions of Labo…
#262

ee must be provided with the opportunity to eat his or her meal while performing the duties required and any on-duty meal period must, like any off-duty meal period, be at least 30 minutes long. L’Chaim House, Inc. v. DLSE (2019) 38 Cal.App.5th 141. 45.2.6 Meal Time Training Or Client Meetings. If an employee is…
#263

Proposition enacts new Labor Code sections 880 -890 and applies to all actions pending on or commenced after October 25, 2017. This new chapter applies to privately employed emergency medical technicians, dispatchers, paramedics or other licensed or certified ambulance transport personnel who contribute to the deli…
#264

shall be no deduction from wages. (A) If an employer fails to provide an employee a rest period in accordance with the applicable provisions of this order, the employer shall pay the employee one (1) hour of pay at the employee’s regular rate of compensation for each workday that the rest period is not provided. …
#265

The regulation requires that the rest period time shall be counted as hours worked for which there shall be no deduction from wages. In Augustus v. ABM Security Services, Inc., (2016) 5 Cal.5 th 257, 269, the Califonia Supreme Court held that the rest period requirement “obligates employers to permit—and authorize…
#266

DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL DECEMBER, 2018 45 - 13 period cannot be rescheduled, the employer must pay the employee one hour of pay at his or her regular rat e for the missed rest period. In such a situation the pay stub must separately include the total hours …
#267

to “stagger” the rest periods to avoid an interruption in the flow of work and maintain continuous operations. The DLSE has opined that an employer subject to Order 16 still may not schedule a rest period at the very beginning or very end of the w orkday. The very idea of a “rest period” is to provide the worker wi…
#268

$734.21 /month $677.75 /month $790.67 /month $734.21 /month $847.12 /month $790.67 /month $875.33 /month Where a couple are both employed by the employer, two thirds (2/3) of the ordinary rental value, and in no event more than: $1086.07 /month $1002.56 /month $1169.59 /month $1086.07 /month $…
#269

requirement. It had been the established practice in the restaurant industry up until 1976 to credit the minimum wage obligation if meals were “furnished or reasonably made available” to the employee. The Whitlow court noted that “In light of the prohibition against compelled purchases in section 450, the implied p…
#270

nurses can wear their white uniforms wherever they work, and the employer, conseq uently, need not pay for them . Other workers in occupations for which the particular white uniform is generally useable would fall into the same category. (See, generally, O.L. 1994.02.16-1 ) 45.5.3 If, instead of being professional…
#271

45.5.7 Tools. When tools or equipment are required by the employer or are necessary to the performance of a job, suc h tools and equipment shall be provided and maintained by the *This language appeared in the Statement As to The Basis for the 1980 and subsequent Orders and inasmuch as no substantive changes were …
#272

specifically prohibit deductions for normal wear and tear. 45.5.11 Even if there is a deduction made, the deduction may only represent the reasonable cost of the equipment or tool provided by the employer and not returned. The burden is on the employer to establish the reasonable cost. ∗ The exception for appren…
#273

ork site, all of the time from the moment of reporting until the employee is released to proceed directly to his or her home is time subject to the control of the employer, and constitutes hours worked. (O.L. 1994.02.16; Morillion v. Royal Packing Co., supra.) Extended Trav el Time. The California rule requires…
#274

hours spent between the time he arrives at the airport and the time he arrives at his hotel. No further “travel” hours are incurred after the employee reaches his hotel and is then free to choose the place where he will go. (O.L. 2002.02.21). Different Pay Rate for Travel Time Permissible. The employer may estab…
#275

security guard employees in that case were subject to the control of the employer. The Court found that guards that were required to reside in a trailer provided by CPS, and required to remain within certain geographical boundaries, were entitled to compensation for on-call time. The Supreme Court in Mendiola consi…
#276

concluded that the “guards’ on-call hours represent hours worked for purposes of Wage Order No. 4.” The guards here were required to “reside” in their trailers as a condition of employment and spend on-call hours in their trailers or elsewhere at the worksite. They were obliged 3 Gomez also identified the partie…
#277

of its service agreement had a guard or reliever not been at the worksite during all contracted for hours.4 Mendiola, supra at p. 841. 46.2 The DLSE Interpretation of the Basic Definition of Hours Worked The DLSE enforcement policy has consi stently held that hours for which an employee has been hired to do nothi…
#278

definition is applied to employees, not employers. Consequently, it is the position of the DLSE that the IWC, in adopting this exemption to the narrow California definition of “hours worked”, only intended that the broader definition contained in the federal law was to apply to those who are defined at subsection 2…
#279

tasks.” Mendiola noted that the language in Wage Order No. 5 is akin to the language in 29 C.F.R. sec. 785.23, which only requires compensation when the employee is actually carrying out assigned duties and is an on -call employee who is required to reside on the premises. This specific rule concerning hours worked…
#280

ndants who work 24-hour shifts. These employees may agree in writing to exclude three one-hour meal periods and one eight -hour uninterrupted sleep period from their hours worked. Oral agreements by such employees to exclude sleep time may only be valid if excluded from compensable hours worked, not overtime hours …
#281

exercising some limited control over his employee at all times. For instance, by statute the employee must give preference to the business of his employer if it is similar to the personal business he transacts. (Labor Code § 2863 ). However, immediate control by the employer which is for the direct benefit of the e…
#282

(b) Interruptions of sleep. If the sleeping period is interrupted by a call to duty, the interruption must be counted as hours worked. If the period is interrupted to such an extent that the employee cannot get a reasonable night’s sleep, the entire period must be counted. For enforcement purposes, the Divisions h…
#283

worksites under the employer’s control are compensable under California law. Under state law, provisions in the federal Department of Labor Regulations relating to sleep time only a pply to certain employees in the health care industry working under Wage Order Nos. 4 and 5 and certain ambulance drivers and attenda…
#284

all the following criteria are met: 1. Attendance is outside regular working hours; 2. Attendance is voluntary: attendance is not voluntary if the employee is led to believe that present working conditions or the continuation of employment would be adversely affected by nonattendance; 3. The course, lecture, or m…
#285

performed administrative and clerical work in addition to their x -ray training, received little or no supervision, displace regular workers, and functioned as an integral part of the operation of the hospital. Thus, the students work went beyond a mere training experience DIVISION OF LABOR STANDARDS ENFORCEMENT …
#286

occupation can usually be used as a guide to determine the amount of time necessary for a “try out”. 46.8.2 Reporting Time Pay. The IWC Orders provide that if an employee is required to report for work and does report, but i s not put to work or is furnished less than half the employee’s usual or scheduled day’s …
#287

federal de minimis doctrine, does some version of the doctrine nonetheless apply to wage and hour claims as a matter of state law? We hold that the relevant wage order and statutes do not permit application of the de minimis rule on the facts given to us by the Ninth Circuit, where the employer required the employe…
#288

hour for purposes of calculating the number of hours worked pursuant to certain restrictions. (29 CFR § 785.48(b)). The federal regulations allow rounding of hours to five m inute segments. R ecording the employees’ starting time and stopping time to the nearest 5 minutes, or to the nearest one -tenth or quarter …
#289

as to the accuracy of the records of the hours actually worked . 47.5 Special IWC Provision For Hours Worked – Recess Periods: A special provision i n Orders 3, 8, and 13 allows employe rs to exclude from “hours worked” recess periods occurring during the workday, provided the following conditions are met: 1. th…
#290

Example: Employee is paid $15.00 per hour for all hours worked and is also paid a stipend of $20.00 per day for remaining available to return to work after hours. The employee works five days of eight hours each and is entitled to $600.00 plus $100.00 stipend for the uncontrolled standby. In the event the employee…
#291

employer’s realistic expectations, whether there was any concrete expression of employer displeasure ove r an employee’s...performance , and whether these expression s were themselves realistic given the actual overall requirements of the job.” I n other words, an employer may not choose to ignore the fact t…
#292

consecutive 24-hour period beginning at the same time each calendar day, but it may begin at any time of day. The beginning of an employee’s workday need not coincide with the beginning of that employee’s shift, and an employer may establish different workdays for different shifts. However, once a workd…
#293

POLICIES AND INTERPRETATIONS MANUAL JUNE, 2002 48 - 2 calculation on the work week basis is the work period of 14 consecutive days available to employers engaged in the operation of licensed acute care or extended care facilities covered by Order 5. Note, however, that in the case of an employer using the 14-…
#294

48.1.5.1 Fluctuating Workweek Compensation Arrangement Defined. Under this method, an employee is compensated by a fixed weekly salary which by agreement between the employer and employee is designed to provide basic non-overtime compensation for all hours worked. The employee’s regular rate of pay, for purp…
#295

50 hours minus 40 hours = 10 overtime hours 10 hours times $18.75 (1½ of regular rate of pay) = $187.50 $187.50 - Overtime Compensation +500.00 - Fixed weekly salary $687.50 - Total compensation 48.1.5.4 Salary. In California, in a situation where a non- exempt employee is paid a salary, the regular hourly…
#296

system encourages the employer to so employ the worker because the overtime has, according to the plan, already been paid for. 48.1.9 Overtime Compensation Is Not Due for Negligible Work : In Lindow vs. United States (9th Cir. 1984) 738 F.2d 1057, the Court held that under the “de minimis rule,” employers are n…
#297

DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL AUGUST, 2019 48 - 5 48.1.9.1 In the Lindow case, although the employer did not require its employees to report to work early, employees sometimes came to work before their shift to read the log book and exchange information. The appell…
#298

2. Makeup hours worked in one day may not exceed eleven (11) nor, of course, may the number of makeup hour s worked in one workweek exceed forty (40). 3. Request may be made for ma keup time for a recurring personal obligation which is “fixed in time over a succession of weeks” provided a written request is made…
#299

and 15) meeting the hours criteria could be employed for seven days in a week if they were paid the applicable premium pay including for all of their hours worked on the seventh consecutive day of the workweek pursuant to Section 510(a). Pursuant to AB 1066 (2016), as stated in Labor Code § 861, all overtime provi…
#300

time Computation. Following the long-established enforcement policy of the DLSE (which clos ely tracks the federal regulations in this regard) housing benefits, meals, etc., are added to the cash wage paid for purposes of determining the “regular rate” of pay. The federal courts have addressed this issue and the…
#301

(1) Sums paid as gifts; payments in the nature of gifts made at Christmas time or on other special occasions, as a reward for service, the amounts of which are not measured by or dependent on hours worked, production, or efficiency; (Discussed in 29 CFR § 778.212). (2) Payments made for occasional periods when no…
#302

subsection (a) of this section or in excess of the em ployee's normal working hours or regular working hours, as the case may be; (Discussed in 29 CFR §§ 778.201 and 778.202). (6) Extra compensation provided by a premium rate paid for work by the employee on Saturdays, Sundays, holidays, or regular days of rest, …
#303

provided grants or rights that are based on performance are— (i) made based upon m eeting previously established perfor mance criteria (which may include hours of work, efficiency, or productivity) of any business unit consisting of at least 10 e mployees or of a facility, except that, any determinations may be b…
#304

employer to pay a salary to a non-exempt employee that provided compensation for hours in excess of 40 in a workweek. (See, Ghory v. Al-Lahham (1989) 209 Cal.App.3d 1487, 257 Cal.Rptr. 924). Such an agreement (backing in the regular rate) is no longer allowed as a result of the specific language adopted by the Leg…
#305

or production during overtime hours. This method is rarely used. 49.2.1.3 It is recognized that the method outlined in alternative 1, above, resembles the computation used in the illegal f luctuating workweek plans. However, there is a distinct difference: Under that federal method the salaried employee is not g…
#306

regular base hourly rate of at lest two times the state minimum wage for all hours worked in addition to commissions paid. In addition, employees must be compensated for other non-productive time separate from any piece-rate compensation at an hourly rate that is no less than the applicable minimum wage. This m…
#307

Again, of course, the regular rate cannot be less than the minimum wage and rest and recovery periods must be separately compensated and included in the regular rate computation. 49.2.3 Note: If notice is given to all workers before the performance of the work, the ratio among the various workers may d iffer (i.…
#308

Bonus attr ibutabl e to the workwee k $138.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regula r bonus rate = $138.0 0 ÷ 52 = $2 .653 8 ÷ 2 = $1.3 3 x 12 Overtim e H our s $ 15.92 . . . . . . . . . . . . . . . Tota l earn ings due for the workweek: Str…
#309

divided by 640 $ 0.469 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1½ x regular bonus rate = 1½ x $0.469 $ 0.703 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Double regular bonus rate = 2 x $0.469 …
#310

wei ghted averag e or the prevailin g w age rate in effect at the time that the w ork is performe d. (It would be very unusal for the weighted average to be higher than the prevailing wage rate, but it is possible.) 49.2.6.1 Example: If an employee is employed in a workweek for some hours on a private construction …
#311

monthly minimum wage contained in Labor Code section 2695.2(a) and Wage Order 14. Effective September 27, 2022, goat herders became subject to the same provisions as sheepherders by passage of AB 156. 3. Outside salespersons (IWC Orders, Section 1(C)). 4. Effective January 1, 2001, any individual participating in…
#312

8. Generally, employees covered by a valid CBA that expressly provides for the wages, hours of work, and working conditions of the employees, and if the agreement provides premium wage rates for all overtime hours worked and a regular hourly rate of pay for those employees of not less than 30 percent more than the …
#313

e. Personal attendants (See definition at IWC Order 5-2001, Section 2(N) which includes babys itters for purposes of that Order) who are employed by a non-profit organization* covere d by Wage Order 5-2001. But see special overtime rules for personal attend ants who are employed in private homes who meet the …
#314

hospital or an establishment which is an institution primarily engaged in the care of the sick, the aged, or the mentally ill or defective who reside on the premises, the employer and employee may enter into an agreement or understanding , before the performance of the work, which provides a work period of fourteen…
#315

iod off. However, the IWC provided further that “time spent sleeping shall not be included as hours worked. 50.6 Commissioned Salespeople. Certain commissioned salespersons covered either by Order 4- 2001 or 7- 2001 are exem pted from overtime requirements by Subsection 3(D) of those Orders (O.L. 1994.02.0 7): …
#316

and policies, Cal ifornia in applying the provisions of Subsection 3(D) of Order 4- 2001 and 7-2001, has adhered to the federal government’s interpretation of the provisions of 29 U.S.C. § 207( i) (See also, Hermann v. Suwanee Swifty Stores, Inc. 19 F.Supp.2d 1365 (N.D. Ga.1998) However, the definition of commissi…
#317

that exceeds 1.5 times the minimum wage and that can be recovered only from commissions earned in that workweek and not from commissions earned i n futur e workweeks. This is so because every workweek must stand alone for purposes of minimum wage and overtime computation. 50.6.4.2 The stipulated sum may not be co…
#318

loyee receives earnings for each period (not exceeding a weekly period) of more than one and one-half times the applicable minimum wage. These earnings would include a guaranteed draw against commissions earned during the weekly period so long as that guaranteed draw was part of a bona fide commission plan. 50.7 E…
#319

Commission’s long-standing practice of waiting until the parties enter into a new agreement and then applying Wage Order 11-80’s provisions to the interim period only if the overtime provisions of the successor contract are not made retroactive to the date of the old contract's expiration. The letter stated in rele…
#320

POLICIES AND INTERPRETATIONS MANUAL JUNE, 2002 50 - 9 50.8.1 Overtime Exemption Under Section 3 Of The IWC Orders For Two-Axle Trucks Of 26,000 lbs. Or Less Whi ch Are Regulated By The CHP, The PUC, Or The DOT. Most of the Industrial Welfare Commission Orders provide that the overtime provisions: ..…
#321

POLICIES AND INTERPRETATIONS MANUAL JUNE, 2002 50 - 10 50.8.3 The U.S. Dep artmen t of Transportatio n defines interstate commerc e as “[T]rade, traffi c or transpo rtat ion in the Unite d State s whic h is betwee n a plac e in a Stat e and a place outsid e of s uch S tat e (inc luding a plac e outside of the U…
#322

to regulation by st ate authorities in any event. *It is important to note that the term “interstate commerce” is given different interpretations depending on the context within which the term is used. For instance, for purposes of the Fair Labor Standards Act, the term interstate commerce is measured very broadly…
#323

40 feet in length; (g) two-axle trucks transporting any hazardous material or towing a trailer transporting hazardous material; (j) two axle trucks regulated by the PUC, and (k) two-axle trucks with a gross vehicle weight of 26,001 or more pounds, and any two-axle truck towing any regulated trailer/semitrailer w…
#324

order for those employees employed in occupations covered by the Order (See Order 16, Section 1(F)), this can have a far reaching effect. 50.9.6 Logging Truck Drivers . Despite the provisions of Order 16 which are designed to seemingly cove r any employee engaged in logging, truck drivers hauling logs who are em…
#325

50.9.8.1 DLS E has histo ricall y enforce d the exemp tion provis ion coverin g ambulanc e drivers and attendants as requi ring, as the provision in the IWC Orders has always sp ecifically stated , a writte n agreement befor e the e xemptio n from the overtim e requir e ments is effective. The Seco nd Distric t Co…
#326

population of not more than 25,000 according to the most recent U.S. census. (Order 1 1- 2001, § 3(K )) DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL AUGUST, 2019 50 - 14 50.12 Irrigators In The Agricultural Occupations ar e subject to the same overtime phase- in that applies to …
#327

51.2 Primarily Engaged In. Each of the exemptions – administrative, executive or professional – require that the employee be “primarily engaged in” the duties which meet the test for the exemption. The term “Primarily Engaged In” m eans that more than one-half (½) of the employee’s work time must be spent en…
#328

exemption. Specific examples for each of the exemptions are set out at 29 CFR § 541.108 (Managerial), § 541.208 (Administrative), and § 541.308 (Professional). 51.4.2 In assessing the duties of a putatively-exempt employee, it should be borne in mind that it is not the intent of the de finitional language of “di…
#329

initial draft of the IWC O rders was produced, the California Legislature amended Labor Code § 515(a) to require, unlike the federal regulations, that in order to meet the criteria for exempt status, the employe e “customaril y and regularl y exercises discret ion and independent judgment in performing ” th…
#330

designed to be production duties and may, also, have some limited managerial duties as well. The production duties which the straw boss is assigned would not be counted toward the “directly and closely related” work because they are designed to fulfill the production aspect of the worker’s assigned duties. The fac…
#331

valid exemption. A trial court, in determining whether the employee is an outside salesperson, must steer clear of these two pitfalls by inquiring into the realistic requirements of the job. In so doing, the court should consider, first and foremost, how the employee actually spends his or her time. But the trial c…
#332

interpretations of the word “salary” for purposes of the IWC Orders. The fact that the Legislature provided that the monthly salary was to be “no less than” two times the state minimum wage indicates that they intended that the salary (as it is with the federal rule) was not to be subject to deduction unless the e…
#333

without regard to the number of days or hours worked , subject also to the general rule that an employee need not be paid the contract salary for any workweek in whic h no work is performed. 51.6.3.2 The federal courts have Discussed the requirements of the “salary” requirements under the Fair Labor Standar ds A…
#334

guidelines so far as possible; but that certain of the federal guidelines may not be utilized in California because they conflict with California statutory law, case law, or public policy. DIVISION OF LABORSTANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL DECEMBER 2022 51 -7 51.6.4.1 The important …
#335

salary from the monthly salary where the employee performed no work that week. In contrast, the employer may not prorate the monthly salary for part-time employees. It must also be noted that deductions for vacation are treated differently under state and federal law. (O.L. 2002.03.01) DIVISION OF LABOR STANDARDS…
#336

workweek the pro rata salary reduction may be one -fifth of the employee’s salary. If the regular workweek is six days, each day of absence would equate to one-sixth of the weekly salary. In no event, however, may any one day of absence reduce the salary by more than one-fifth. (O .L. 2002.05.0 1) DIVISION OF LAB…
#337

exem pt employ e e’s salar y is not subje ct to the dedu ctio n if the emplo yee did not have a reasonabl e expectatio n that he was free o f all duties . However , the employe e may not unilaterall y absen t himse lf and simpl y announc e that he will be availa b le. There m ust be some indicat ion by the emplo y…
#338

day absence.” (See discussion at Section 51.6.8 of this Manual; also see O.L. 2002.04.08). However, on June 21, 2005 the First District Court of Appeal, Division 2, decided Conley v. PG&E . One of the issues decided was whether an employer can deduct for partial day absences of four hours or more from an employee’s…
#339

salary obligation for “partial day” absences for illness and injury; however, the federal interpretation does not allow a deduction from the salary for such partial day absences in the event the employee’s eligibility for the leave has not yet vested or the employee has exhausted his or her leave. 51.6.15.4 DLSE E…
#340

Novato, 17 F.3d 1256, 1261-62 (9th Cir. 1993). The Ninth Circuit did not directly address the question of what would be the result if what they referred to as a “benefit” was actually vested and could be drawn on as cash. The only logical legal conclusion would be that such vested “wages” which the employer was ob…
#341

Department of Labor’s interpretation of the Code of Federal Regulations at 29 CFR § 541.118(a) was correct. That Court held: “additional compensation besides the required minimum weekly salary guarantee may be paid to exempt employees for hours beyond their standard workweek without affecting the salary basis of…
#342

“overtime” pay will be paid. If the employer can show that the industry practice is to work a lesser number of hours, DLSE will accept the payment to an otherwise exempt employee of an hourly rate in excess of that number of hours which is found to be the industry standard regarding number of hours in a workday or …
#343

s that there was no intention to pay the employee on a salary basis. In that case, the exemption would not be applicable to such employee and the overtime requirements of the Orders would apply. DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JUNE, 2002 52 – 14 51.6.22.2 On the o…
#344

that the worker is to be on the job site or performing any certain number of days or hours per week. DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JUNE, 2002 52 – 1 52 ADMINISTRATIVE EXEMPTION. 52.1 Administrative Employee mean s any employee whose duties and responsibilities inv…
#345

(See O .L. 1998.10.05 ): 1. Employees who regularly and directly assist a proprietor or exempt executive or administrator. They inc lude those executive assistants and administrative assistants to whom executives or high level administrators have delegated part o f their discretionary powers. Generally, such ass…
#346

determination of exempt or non-exempt status must be based on the nature of the actual work performed by the individual employee. (29 CFR Section 541.2 01(b)) 52.3.2 Trainees. The administrative exemption does not include employees training for employment in an administrative capacity who are not actually perform…
#347

planning, negotiating, representing the company, purchasing, promoting sales, and business research and control. An employee performing such work is engaged in activities relating to the administ rative operations of the business notwithstanding that he is emp loyed as an administrative assistant to an executive in…
#348

employ e es] carr y out [the employer’s ] day-to-day operations...or whethe r they administe r the busines s affai rs ... [of the company ].” Bell v. Farmers Insurance Exchange (2001) 87 Cal.App.4t h 805. On the facts presented in Bell, the cour t found the insura n ce adjus tors non -exem pt. 52…
#349

to persons who perfo rm work of substant ial importanc e to the managemen t or operatio n of the busines s of the employer o r the employer's customers . Such wo rk is not limited, however , to participa tion in the formulatio n of managemen t policies regardin g the operatio n o f the busines s as a whole . E mpl…
#350

serious consequences for the employer would not, based solely on these facts, be an exempt employee. Some examples of situations which distinguish serious loss through neglect by an employee from exercise of decisions of significant matters are Discussed at 29 C FR § 54 1.207 (f). 52.3.8.4 Customarily And Regular…
#351

there is conformity with the prescribed standards. In such cases a decision to depart from the prescribed standards or the permitted tolerance is typically made by the employee’s superior. The employee is engaged in exercising skill rather than discretion and independent judgment. For a further discussion of this …
#352

Standards are usually set by the employee’s superior or other company officials, and the decision to hire from the group of applicants who do meet the standards is similarly made by other company officials. Such a personnel clerk does not exercise discretion and independent judgment as required by the Orders. 52.…
#353

substantial respects financially or otherwise. For a discussion of the meaning given the term see 29 C FR § 5 41.20 7(d). 52.3.13 Review Of Decisions. The term “discretion and independent judgment” does not necessarily imply that the deci sions made by the employee must have a finality that goes with unlimited…
#354

work, together with the employer's realistic expectations and the realistic requirements of the job, shall be considered in determining whether the employee satisfies this requirement. 53.3 Management Duties Must Be Exercised Over The Entire Enterprise Or A Customarily Recognized Department Or Subdivision Thereof…
#355

the employees which the putative exempt employee supervises, the more it is likely that the “manager” is actually a working foreman or straw boss performing non-exempt work more than 50% of the time. 53.5 The Manager Must Have The Authority To Hire Or Fire or that his or her suggestions and recommendations as…
#356

he term discretion and independent judgment has been most frequently misunderstood and misapplied by employers and employees in cases involving the following: 1. Confusion between the exercise of discretion and independent judgment, and the use of skill in appl ying techniques, procedures, or specific stand…
#357

al duties would include use of a computer to type a memo to a subordinate; hands-on training of subordinates; record-keeping dealing with subordinate’s activities, or other functions which directly aid in the supervision of subordinates or DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS …
#358

therefore be exempt work. 53.6.6.1 In effect, this means that a bona fide executive who performs work of a normally nonexempt nature on rare o ccasions because of the existence of a real emergency will not , because of the performance of such emergency work, lose the exemption. 53.6.6.1.1 Such activities as the s…
#359

exempt activities more than 50% of the time is exempt. 53.6.8 Trainees. Th e managerial exemption is not applicable to employees training to becom e executives (or any other exempt category) if they are not actually performing the duties required to meet the test or do not otherwise meet the criteria. DIVISION OF…
#360

54.2 Pharmacists And Most Nurses Are Not Exempt. Pharmacists employed to engage in the practice of ph armacy, and registered nurses employed to engage in the practice of nursing , are not considered exempt professional employees, and are not to be considered exempt unless they individually meet the criteria estab…
#361

2. The e mployee is highly skilled and is prof icient in the the oretical and prac tical application of hig hly specialized infor mation to com puter syste ms analysis, programming, and software engineering. A job title shall not be determinative of the applicability of this exemption. 3. The employee is cu…
#362

the World Wide Web or CD-ROMs. (6) The employee is en gaged in creating imagery for effects used in the m otion picture, televi sion, or theatrical industry. 54.6 Physicians. As with computer specialists, phys icians earning at l east $84.79 per hour are exempt. (L abor Code § 515.6(a)). T his figure, too, i…
#363

exemption is the same language as that contained in many of the IWC Orders first promulgated in 1989 under IWC Orders 1, 4, 5, 9, and 10, which include the “learned and artistic” exemption. The IWC provided in its “Statement As To The Basis” for Order 16 that the Commission “chose to adopt regulations that substan…
#364

one must “customarily and regularly exercise discretion and independent judgment,” that requirement must be read into the Order. 54.8.5 “Learned Professions ” are those requiring knowledge of an advanced type [which cannot be attain ed at the high school level] in a field of science or learning, customar…
#365

54.10.4 Discretion And Independent Judgment. Unlike the federal regulations which require that a learned or artistic professional “must perform work which requires the consistent exercise of discretion and judgment in its performance,” 29 CFR § 541.305(a), California law dictated use of the criteria found at § 54…
#366

or other professional fields, will qualify for exemption as a professional employee by virtue of such employment. While there are many exempt employees in these fields, the exemption of individual depends upon his or her duties and the other listed criteria. 54.10.6.3 The professional exemption does not extend to…
#367

requirement, instead tying the requirement to the compensation of public school teachers, statewide and locally. Effective January, 2018, 515.8 provides the s alary requirement may be prorated for part time teachers. For example, if the minimum s alary threshold in a particular private school has been determined…
#368

under the professiona l exemption under Labor Code section 515.7 mirror those of IWC Wage Orders 4 and 5. Specifically, section 1(A)(3)(b) of both wage orders: • The employee is primarily engaged in an occupation commonly recognized as a learned or artistic profes sion; and • The employee customarily and regular…
#369

ective bargaining agreement, so long as the employee is expressly and unambiguously classified as a professional in the collective bargaining agreement. Labor Code § 515.7(a)(2)(C). When the employee is not paid a salary but rather, per course or laboratory, the rate of pay per “classroom” hour spent is specified…
#370

54.10.8 Registered Nurses And Pharmacists . The special treatment for registered nurses an d pharmacists is man dated by the express language of the IWC Orders which provides: “...pharmacists employed to engage in the practice of pharmacy, and registered nurses employed to engage in the practice of nursing, shall …
#371

Commission : To employ under the IWC definitions has three alternative definitions. “It means (a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common-law employment relationship.” Martinez v Combs (2010) 49 Cal.4th 35 55.…
#372

POLICIES AND INTERPRETATIONS MANUAL JANUARY, 2014 55 – 2 a. Any person who performs services through the IHSS program; b. Any person who is the parent, grandparent, spouse, sibling, child or legally adopted child of the dom estic work employer; c. Any person under 18 years of age employed to care for a minor c…
#373

similar entity, employs or exercises control over the wages, hours or working condition of a domestic work employee.” (Labor Code sec. 1451(c)(1).) EXCLUSIONS: Domestic work employer does not include any of the following: a. Any person or entity that employs or exercises control over the wages, hours, or working…
#374

(J) “Personal attendant” includes babysitters and means any person employed by a private househ older or by any third party employer recognized in the health care industry to work in a private household, to supervise, feed, or dress a child or person who by reason of advanced age, physical disability, or mental de…
#375

apply, the clinic would be considered part of the “Health Care industry”. 55.5.1.1 Under the recently adopted definition of “Health Care Industry” the term “clinic” does not apply to a physician’ s office unless that office meets the requirements of a “clinic” under either of the definitions listed. 55.6 “Employe…
#376

55.10 The IWC noted in its Statement As To The Basis of Order 16, that it intended that this DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JUNE, 2002 55 – 5 exception is to be construed narrowly, as a determination that an employee is an outside salesperson depri ves that emplo…
#377

1066 (2016) removed the previous provision in Labor Code § 544 which provided that none of the provisions of the Chapter, except Labor Code § 558, applied to agricultural employees. As stated in Labor Code § 861, all overtime provisions in Labor Code Division 2, Part 2, Chapter 1 (commencing with section 500) no…
#378

um number of hours) must provide at least four hours of work in any scheduled work day in the alternative workweek. 56.4 Requirement That Alternative Workweek Schedule Provide For Two Consecutive Days Off Retained In Most Orders . The IWC retained the requirement contained in pre vious Orders that alternative w…
#379

the shifts which will be available during the alternative workweek. Two examples of acceptable regularly scheduled alternative workweeks: a) a 3/12 and 1/4 workweek; b) a 4/10 wor kweek. 56.7.2.1 Choice From Menu Of Options. The IWC recognized that employers with a large number of employe es and multiple shif…
#380

56.7.2.5 Example Of A Proposed Alternative Workweek Without Menu Options: An employer employ ing workers seven days a week, may, for instance, propose a number of 10- hour, four-day work schedules by dividing the employees into separate work units. “This method would inform each employee of exactly which schedule…
#381

d not present a problem since, as discussed below, each of the Orders except 16-2001 require a four-hour minimum be scheduled for any day within an alternative workweek. DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JANUARY, 2007 56 – 5 56.7.4 Overview Of Alternative Workweek Req…
#382

that the number of v otes in favor of adoption must be two-thirds of the affected workers. Thus, it is not two-thirds of the affected workers who voted that will determine the result. A worker not voting in effect votes no. DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JUNE, 2002 …
#383

Wage Board which negotiated the language in Order 16 was concerned that employers might “man-up” or “ man-down” (i.e., hire more help or lay off help) in order to affect an election for an alternative workweek. (Transcript o f Wage Board meeting of August 17, 2000, pages 7-17) Significant fluctuations in the number…
#384

The IWC Orders provide that “[t]he election shall be held during regular working hours at the employees’ work site.” Recognizing that some employees of a single employer in the on- site occupations covered by Order 16 may be eligible to vote on one particular job site while currently assigned to another job site, …
#385

16-2001, Section 3(B)(1)(d)) (O.L. 2002.01.21 and 2002.05.22) 56.11.1 Unilaterally Imposed Alternative Workweek Schedules . DLSE has been asked to respond to a num ber of questions regarding the validity of plans unilaterally instituted by employers which require employees to work regular schedules of more than ei…
#386

also, Section 56.22 of this Manual). 56.13.2 Note : The employer is not prohibited from exercising his or her free speech in connection with the alternative wo rkweek election. So long as the employer does not engage in coercion or intimidation, he/she is not prohibited from expressing an opinion on the alterna…
#387

56.15 Special Rules Covering Alternative Workweek Arrangements Under Orders 4 - and 5-2001. Labor Code § 511(g) allowed 12- hour alternative workweeks in the Health Care Industry whic h had been adopted pursuant to Orders 4 and 5 prior to 1998 or under the rules contained in Orders 4 and 5 effective prior to …
#388

in most of the old Orders (IWC Orders 2, 3, 6, 7, 8, 11, 12 and 13 first promulgated in 1980 required a two-thirds (b) majority) The one-third requirement is now applicable to all Orders. 56.17.2 New Secret Ballot Election Upon The Question Of Repeal. In the event that the requisite one-third (a) of the affe …
#389

be held to de termine whether, in fact, a hardshi p exists which would warrant such a n extension. 56.17.7 Alternative Workweek Schedules Repealed Under Order 16 -2001. Order 16-2001 does not contain the lan guage allowing an employer sixty days to comply with the repeal of the alternative workweek schedule. Ho…
#390

o Work The Alternative Workweek Schedule For Any Reason . If an employee who was elig ible to vote in the election which resulted in the adoption of the Alternative Workweek schedule finds that he or she is unable to work that schedule, the employer must make a reasonable effort to accommodate that emplo yee. (IW…
#391

procedure surrounding the conduct of the election did not meet the requirements of the law, the DLSE will notify the employer and the employee s of its findings, void the previous election, and require, in the event a new electio n is proposed by the employer that such election be conducted by a neutral third party…
#392

Care Industry) must provide that all work in excess of the schedule established by the agreement and up to twelve (12) hours a day or beyond forth (40) hours per week shall be paid at one and one- half (1 ½) times the employee’s regular rate of pay. All work performed in excess of twelve (12) hours per day and any…
#393

an sixteen (16) hours in a 24- hour period unless by voluntary mutual agreement of the employee and the employer. (IWC Orders 4-2001 and 5-2001, Section 3(B)(11)). DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JANUARY, 2007 56 – 15 56.23.7 24-Hour Overtime Shift. Notwithstandin…
#394

specific language of the Orders provide a premium of double time after eight hours on those days. 56.23.9 Substitution of One Shift For Another At Request Of Employee. Section 3(B)(1) of the Orders allows a n employer, at the request of the employee subject to an alternative workweek schedule, to substitute one d…
#395

56.26 Adoption Of Alternative Workweek Schedules As Subterfuge To Escape Eight-Hour Day Limitations. The Legislature repeats in its “Legislative Finding”, following each section of the “Eight-Hour -Day Restoration and Workplace Flexibility Act of 1999”, that it considers the 8- hour day to be the norm in Californ…
#396

1987.09.08 43.6.11 Vacation: Federal Service Contract Act (See also O.L. 1987.06.13) DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL MARCH, 2011 OPINION LETTERS INDEX – ii Letter No. Manual Section Description 1987.10.06 15.1.14 Vacation: Sabbatical leave (See also O.L. 1987.07…
#397

Deductions: Section 9, IWC Orders 1993.02.22-3 29.2.3.1; 22.3 Deductions: LC § 2802: costs of insurance required by employer are recoverable 1993.03.08 34.3.1; 34.8 Commissions: Effect of termination 1993.03.31 46.1.1; 47.4.2; 47.5.6.1 Hours worked: On-call Time- Beepers Compensation: “Control of the empl…
#398

1996.05.30 3.2.2 Discharge: Layoff (contractual recall rights) 1996.07.10 50.8.1.1 Overtime: Provisions of WO for two-axle trucks not regulated by DOT 1996.11.12 9.1.9 Pay Day Obligations: Direct deposit 1996.11.20 4.6.2 Waiting Time: “Willfulness” (Inability to pay) 1996.12.30 46.6.6 Exempt trainee intern progra…
#399

2002.03.12 51.6.7 Exempt Employee: Reduction of salary in conjunction with reduction of hours in workday or days in workweek 2002.04.08 51.6.12; 51.6.15 Exempt Employee: No reduction in salary for day absent if there is a reasonable expectation that employee is to perform some duty 2002.05.01 51.6.10 Exempt E…
#400

empt work when it is performed by an employee in the management of his department or the supervision of t he employees under him: Interviewing, selecting, and training of employees; setting and adjusting their rates of pay and hours of work; directing their work; maintaining their production or sales records f…
#401

work. While en gaged in such work he supervises other employees, directs the work of warehouse and delivery men, approves advertising, orders merchandise, handles customer complaints, authorizes payment of bills, or performs other management duties as the day-to- day operations require. He will be considered to…
#402

within the employer's establishment and may move from place to place, and that continuity of the same subordinate personnel is not absolutely essential to the existence of a recognized unit with a continuing function, although in the ordinary case a fixed location and continuity of personnel are both helpful in es…
#403

(c) It has been the experience of the divisions that a supervisor of a few as two employee s usua lly performs nonexem pt work in excess of the general 20- percent tolerance provided in § 541.1. (d) In a large machine shop there may be a machine-shop supervisor and two assistant machine-shop supervisors. Assumi…
#404

Section 541.1 requires that an exempt executiv e employee have the authorit y to hire or fire other employees or that his suggestions and recommendations as to hiring or firing and as to advancement and promotion or any other change of status of the employees who he s upervises will be given particular weight. T…
#405

employee hired especially f or that purpose. Illustration will serve to make clear the meaning to be given the phrase "directly and closely related". (b) Keeping basic records of worki ng time, for example, is frequently perf ormed by a timekeeper employed for that purpose. In such cases the work is clearly not …
#406

flow of merchandise to the sales floor, of course, is directly and closely related to the managerial responsibi lity of the manager or buyer. (d) Setup work is another illustration of work which may be exempt under cer tain circumstances if performed by a supervisor. The nature of setup work differs in variou…
#407

customer preferences and reactions to the lines, styles, types, colors, and quality of the merchandise offered, is performing work which is directly and closely related to his managerial and supervisory functions. His actual participation, except for supervisory training or demonstration purposes, in such activ…
#408

is a production operation rather than a function directly and closely related to the supervisory or managerial duties, and that the employee is in reality a combination foreman -"setup" man, foreman-machine adjuster (or mechanic), or foreman -examiner, floorman-salesperson, etc., rather than a bona fide executive.…
#409

other hand, the manager of a cleaning establishment who personally performs the cleaning operations on expensive garments because he fears damage to the fabrics if he allows his subordinates to handle them is not performing "emergency" work of the kind which can be considered exempt. Nor is the manager of …
#410

it is the kind of "emergency" which has not been recurring. The occasional performance of repair work in case of a breakdown of machinery, or the collapse of a display rack, or damage to or exceptional disarray of merchandise caused by accident or a customer's carelessness may be considered e…
#411

be counted as nonexempt work. In determining whether such work is directly and closely related to the performance of the management duties, consideration should be given to whether it is (1) the same as the work performed by any of the subordinates of the executive; or (2) a specifically…
#412

premises in making sales of good s or s ervices to which the concept of retail selling or se rvicing applies. As defined i n sectio n 13(a)(2) of the act, such an establishment must make at least 75 percent of its annual dollar volume of sales of goods or services from sales that are both not for resale and reco…
#413

because of the lack of a retail concept in the services sold by such establishments, and provided a separate exe mption for them which did not depend on status as a retailer. Again in 1966, when this exemption was repealed, Congress made it plain by exclusionary language that the exempti on for retail or service…
#414

a separate establishment where, f or example, it and the retail store in which it is located operate under a common trade name and the store may determine, or have the power to determine, the leased department's space location, the type of merchandise it will sell its pricing policy, its hours of DIVISION OF LA…
#415

functions, particularly in the intervals between visits. If, during these intervals, the decisions normally made by an executive in charge of a branch or an independent establishment are reserved for the superior, the employe e is not in sole charge. If such decisions are not reser ved for the superior…
#416

employed regardless of whether the business is a corporate or other type of organization. Current through June 20, 2000; 65 FR 38332 § 541.115 Working foremen. (a) The primary purpose of the exclusionary language placing a limi tation on the amount of nonexempt work is to distinguish between the bona fi…
#417

such instances are unrelated to anything he must do to supervise the employees unde r him or to manage the department. They are in many instances mere "fill-in" tasks performed because the job does not involve sufficient executive duties to occupy an employee's full time. In o ther instances the nons…
#418

from the books maintained by the under bookkeeper s, is not primarily an executive employee and should not be so considered. DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JUNE, 2002 FEDERAL REGULATIONS – 9 Current through June 20, 2000; 65 FR 38332 § 541.116 Trainees, exe…
#419

(a) An employee will be considered to be paid "on a salary basis" within the m eaning of the regulations if under his employment agreement he regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of his compensation, which amount is not su…
#420

plan, deductions may be made for absences of a working day or longer if benefits are provided in accordance with the particular law or plan. In the case of an industrial accident, the "salary basis" requirement will be met if the employee is compensated for loss of salary in accordance with the applicable…
#421

requirement will be met, for example, by a branch manager who receives a salary of $155 or more a week and in addition,a commission of 1 percent of the branch sales. The requirement will also be met by a branch manager who receives a percentage of the sales or profits of the branch, if the employment …
#422

a rate of not less than $250 per week exclusive of board, lodging, or other facilities. Such a highly paid employee is deemed to meet all the requirements in paragraphs (a) through (f) of § 541.1 if the employee's primary duty consists of the management of the enterprise in which employed or of a cus…
#423

service establishments, assistant manager and assistant buyer. Generally speaking, such assistants are found i n large establishments where the official assisted has duties of such scope and which require so muc h attention t hat the work of personal scrutiny, correspondence, and interviews must be delegated. (2…
#424

rative" have extremely diverse functions and a wide variety of titles. A title alone is of little or no assistance in determining the true impor tance of an employ ee to the employer or his exempt or nonexempt status under the regulations in subpart A of this part. Titles can b e had cheaply and are of no d…
#425

classification is without re gard to whether the work i s manual or nonmanual. The proble m of manual work as it affects the exemption of administrative employees is discusse d in § 541.203.) (1) The work specificall y described i n paragraphs (a), (b), and (c) of § 5 41.2; (2) routine work which is directly …
#426

remotely related or completely unrelated to the more important tasks. The work in this last category is nonexempt and must not exceed the 20-percent limitation for nonexempt work (up to 40 percent or service establishment) if the exemption is to apply. (e) Work perform ed by employees in the capacity of "a…
#427

performance of ma nual work by an "a dministrative" employee. The performance by an otherwise exempt administrati ve employee of some man ual w ork which is directly and closely related to the work re quiring the exercise of discreti on and independe nt judgment is not inconsistent with the principle that the ex…
#428

notwithstanding that he is employed as an administrati ve assistant to an executive in the producti on department of the business. (c) As used to describe work of substantial importance to the management or operation of the business, the phrase "directl y related to ma nagement policies or general business ope…
#429

busines s even though serious consequence s may flow from his neglect. An employee operating very expensive equipment may cause se rious loss to his employer b y the improper performance of his duties. An i nspector, such as, for example, an inspector for a n insurance company, may cause los s to his employer by…
#430

adjusters, wage-rate analysts, tax experts, account executives of advertising agencies, customers' brokers in stock exchange firms, promotion men, and many others. (6) It should be noted in t his connection that an employer's volume of ac tivities may make it necessary to employ a number of employees in some of …
#431

"academic administrative personnel," the employee m ust have as his primary duty work that is directly related to academic administration or general academic oper ations of the school in whose operations he is employed. (b) In determining w hether an employee's exempt work meets the "prim ary duty" …
#432

or whethe r an object falls into one or another of a number of definite grades, clas ses, or other categories, with or without the use of testing or measur ing devices, is not exercising discretion and independent judgment within the meaning of § 541.2. This is true even if there i s some leeway in reaching a c…
#433

standard, into a real decision in a significant matter. (4) For exa mple, certain "graders" of lumber turn over ea ch "stick" to see both sides, after w hich a crayon mark is made to indicate the grade. Thes e lumber gr ades are well establishe d and the employee's familiarity with them ste ms from his experie…
#434

employee's exemp t functions. (6) Similarly, co mparison sh opping performed b y an employee of a retail store who merely reports to the buyer his findings as to the prices at which a competitor's store is offering merchandise of the same or comparable quality does not involve the exercise of discretion and judg…
#435

console operator who runs the computer or the actu al running of the computer by the programmer, and th e debugging o f a program. It is clear that the duties of data processing employees such as tape librarians, keypunch operators , computer operators, junior programme rs and programmer trainees are so clo…
#436

formu lation of p olicy within their spheres of responsibility or who exercise authority within a wide range to commit their employer in subs tantial respects financially or otherwise. The regulations in Subpart A of this part , however, do not require the e xercise of discreti on an d independent judgment…
#437

does not exercise discretion and independent judgment in answering correspondence and in deciding which replies may be sent out without review by the president. (2) The policies formulated by the credit manager of a large corporation may be subject to review by higher company officials who may approve or disapp…
#438

tive employee must requi re the exercise of discretion and independent judgment customarily and regularl y. The phrase "customarily and regularly" signifies a frequency which m ust be greater than occasional but which, of course, may be less than constant. The requirement will be met by the employee …
#439

employees and in fact it is frequently the practice to do so, it is not requi red as a condition of exemption that it be so delegated. (3) Finally, if because this particul ar employee has a special skill in such work, he a lso drafts tables or organization proposed by other consultants, he would then be …
#440

work performed by such an employee would include planning the most economical and quickest routes for shipping merchandise to and from the plant, contracting for common -carrier and other transportation facilities, negotiating with carriers for adjustments for damages to merchandise in transit and making the…
#441

(d) Refer to § 541.112(b) for the de finition of a retail or service establis hment as this term is used in paragraph (a) of this section. Current through June 20, 2000; 65 FR 38332 § 541.210 Trainees, administrative. The exemptio n is applicable to an employee employed in a bona fide administra tive capaci ty…
#442

y be met by an employee who is c ompensated on a fee basis as well as by one who is paid on a salary basis. For a discussion of payment of a fee basis, see § 541.313. Current through June 20, 2000; 65 FR 38332 § 541.214 Special provi so for high salaried administrat ive employees. (a) Except as otherwise …
#443

education, as determined under State law. Under the laws of most States, such education includes the curriculums in grades 1 through 12; under many it includes also the introductory programs in kindergarten. Such education in some States may include also nursery school programs in elementary education …
#444

prolonged study. It also includes the artistic professions, such as acting or music. Since the test of the bona fide professional capacity of such employment is differe nt in character from the test for persons in the learned professions, an alternative test for such employees is contained i…
#445

chemistry, etc., but i t does not include the members of such quasi-professions as jo urnalism i n which the b ulk of the employees have acquired their ski ll by experience rather than by any formal specialized training. It should be noted also that many employees in these quasi-professions may qualify for ex…
#446

just as an excellent legal stenographer is not a lawyer, these technical specialists must be more th an highly skilled technicians. Many employees in industry rise to executive or administrati ve positions by their natural ability and good commonsense, combined with long experience with a company, without the a…
#447

teacher in the school system, or educational establishment or institution by which he is employed. (2) "Employed and engaged as a teache r" denotes employment and engag ement in the named specific occupational category as a requisite for exemption. Teaching consists of the activities of teachi…
#448

and satisfies the other requirements of § 541.3. (4) Whether certification is conditional or unconditional will not affect the determina tion as to employment within the scope of the exemption contemplated by this section. There is no standard terminology within the States referring to th e different kinds of c…
#449

it is not believed that such work is properly described as creative in character. (2) In the field of writing the distinction is perhaps more difficult t o draw. Obviously the requ irement is met by essayists or novelists or scenario writers who choose their own subjects and hand in a finished piece of wor…
#450

covering public events, such as sports programs , in which the announcer may be require d to ad lib and describe current changing events ; and acting as narrator and commentator. Such work is generally exempt. Work suc h as giving stat ion identification and time signals, announcing the names of programs, an…
#451

and writes storie s reporting these events for publication, or submits the facts to a rewrite ma n or other editorial employees for story preparation. Such work is nonexempt work. The leg man, the reporter covering a police beat, the reporte r sent out under specific instructions to cover a murder, fire, acci…
#452

alone are not determinative of the applicabilit y of this exemption. (b) To be considered for exemption unde r § 541.3(a)(4), an employee's p rimary duty must cons ist of one or more of the following: (1) The application of systems analysis techni ques and procedures , including consulting with users, to determ…
#453

mption, as well as those employees not within its scope, may also have managerial and administrative duties which may qualify the employees for exemption under § 541.1 or § 541.2 (see §§ 541.205(c)(7) and 541.2 07(c)(7) of this subpart). Current through June 20, 2000; 65 FR 38332 § 541.304 Primary duty. (a) F…
#454

the problems presented will vary as will the deductions to be made therefrom. The work of the true professional is inherently varied even though similar outward actions may be performed. (b) Another example of this is the professional med ical technologist who performs complicated chemical, mic…
#455

of his experiments, even t hough at times these menial tasks can be conveniently or prop erly assigned to laboratory assistants. See also the exam ple of incidental interviewing or investigation in § 541.303(a)(3). (b) It should be noted that the test of whethe r routine work is exempt work is differ ent in the …
#456

who are working in professional fields, but performing subprofessional or routine work. For example, in the f ield of library science there are large numbers of employees who are trained librarians but who, nevertheless , do not perform professional work or receive salarie s commensurate w ith recognized…
#457

DIVISION OF LABOR STANDARDS ENFORCEMENT POLICIES AND INTERPRETATIONS MANUAL JUNE, 2002 FEDERAL REGULATIONS – 23 Current through June 20, 2000; 65 FR 38332 § 541.312 Salary basis. The sa lary ba sis of payment is explained in § 541.118 in connection with the definition of "executive." Pursuant to Public Law …
#458

payment by determining whether the payment is at a rate which would amount to a t least $170 per week to a professional empl oyee or at a rate of not less than $1 55 p er week to an administrative employee if 40 hours were worked. (d) The following examples will illu strate the principle stated above: …
#459

(1) The exception applie s to physician s and other practitioners l icensed and practicing in the fie ld of medical science and healing or any of the medical specialties practiced by physicians or practitioners. The term physicians means medical doctors including gener al practitioners …
#460

of artistic endeavor . Thus, the exemption will apply to highly paid employees employed either in on e of the "learned" professions or in an "artistic" profession and do ing primarily profess ional work. If an employee qualifies for exempti on under this proviso, it is not necessary to test the em…
#461

3(k) of the act states that "sale" or "sell" includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other dispositi on.) (c) It will be noted that the exempt work includes not only the sales of commoditi es, but also "obtaining orders or contracts for services or for the use…
#462

with and incidental to outside sales and solicitation s, as explained in paragraph (b) of this section) is nonexempt. (b) Characteristically the outside salesman is one who makes his sales at his cu stomer's place of business. This is the reverse of sales made by mail or telephone (except where the telephone i…
#463

solicitations is clearly exempt work. On the other h and, promotional work which is incidental to sales made, or to be made, by someone else cannot be considered as exempt work. Man y persons are engaged in certain combinations of sales and promotional work or in certain types of promotional work having some of…
#464

incidental to sales which will be made by someone else. (c)(1) A few illustratio ns of typical situations will be of assistance in determining whethe r a particular type of work is exempt or nonexempt under § 541.5. One situation involves a manufacturer's repre sentative who visits the retailer for the purpose o…
#465

accomplished indirectly by persuad ing the consumer to purchase appliances which will result in a greater use of gas or electrici ty. Different methods are used by various companies. In some instances the utility representa tive after persuading the consumer to install a particular appliance may actually take…
#466

Current through June 20, 2000; 65 FR 38332 § 541.505 Driver salesmen. (a) Where drivers who deliver to an employer's customers the products distri buted by the employer also perform fu nctions concerned with the selling of su ch products, and questions arise as to whether such an employee is employed in the cap…
#467

as retail stores, restaurants, hospitals, hotels, taverns, and other business establishments. Whether such an employee qualifies a s an outside salesman under the r egulations depends, as stated in paragraph (a) of this section, on the content of the job as a whole and not on its t…
#468

from the fact that such a driver often calls on established customers day after day or week after week, delivering a quantity of his empl oyer's products at each call. Plainly, such a driver is not making sales when he delivers orders to customers to whom he did not make the initial sale in amounts which are exac…
#469

promotion work as such co ns titutes making sales within the meaning of § 541.5; delivery men and promotion men are not employed in the capacity of outside salesmen for purposes of section 13(a)(1) of the act although both delivery work and promotion work are exempt salesman as an incident to his…
#470

possession of a salesman's or solicitor's license when such license is required by law or ordinances; presence o r absence of customary or contractu al prearrangements concerning amounts of pr oducts to be delivered; description of the employee's occupation in union contracts; the employer's spec…
#471

employer's establ ished customers may also qualif y for exemption as an outside salesman notwithstanding the goods he delivers to them are of kinds and in amounts w hich are generally prearranged. Other facts may show that mak ing sales is his chief duty a nd primary function and t hat he is customarily and …
#472

promote sales by the supermarkets of the goods he has delivered, is not employed primarily for the purpose of selling and is not customarily a nd regularly engaged in making sales. Rather, he is employed prim arily to deliver goods and to perform activities in the supermarkets of a nature usually performed by st…
#473

nonexe mpt employees of the employer." The 20 perc ent is computed on the basis of the hours worked by nonexempt employees of the employer who perform the kind of nonexempt work perform ed by the outs ide salesm an. If there are no employees of the employer performing such nonexempt work, the b ase to be…
#474

a salary ba sis" does not apply to an employee in the motion picture producing industry who is compensated at a base rate of at least $250 a week (exclusive of board, lodging, or other facilities). Thus, an employee in this industry who is otherwise exempt under §§ 541.1, 541.2, or 541.3 and who is employed at a …
#475

e of a multistore retailing oper ation who engage in activities (other than central office functions) which relate to the operations of the main store, and also to t he operations of one or more physically se parated units, such as branch stores, of the same retailing operation, the Divisions will, as an enforcem…
#476

Buyer, resident, 541.205 Carpenter, 541.119 Cartoonist , 541.303 Cashier, bank, 541.205 Checker, 541.108 Chemist, 541.302, 541.306, 541.307 Claim agent, 541.205 Clerk, 541.205 Clerk, accounting, 541.302 Clerk, chief, 541.115 Clerk, counter, 541.109 Clerk, shipping, 541.207 Columnist, 541.303 Company repre…
#477

Manager, of fice, 541.115, 541.208 Manager, traffic, 541.208 Management consultant, 541.207, 541.208 Manufacturer' s representative, 541.504 Mechanic, 541.119 Medical technologist, 541.203, 541.306 Methods engineer, 541.201 Mine superintende nt, 541.109 Motion picture producing industry, employees in, 541.601 …
#478

Supervisor, production control, 541.201 Tape libraria n, 541.207 Tax consultant, 541.205 Tax expert, 541.201, 541.205 Teacher, 541.215, 541.300, 541.302, 541.304, 541.307, 541.315 Technologis t, 541.314 Television announcer, 541.303 Teller, bank, 541.205, 541.207 Therapist, 541.314 Timekeeper, 541.108 Traf…

DLSE Enforcement Policies and Interpretations Manual

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