©2024 Seyfarth Shaw LLP www.seyfarth.com 2024 Cal-Peculiarities | 241 7.13.2 Special insurance status of expense claims as not “wage and hour” claims Insurance policies for employment practices liability often cover wrongful termination and discrimination claims while excluding coverage for “wage and hour” claims. In 2019 the Court of Appeal held that this policy exclusion should be interpreted narrowly, to apply only to claims involving the duration of work or pay for work. The plaintiffs sued on traditional wage and hour claims and also sued for reimbursement of business-related expenses. The defendant employer tendered its defense on the expense claim to an insurance carrier, which denied coverage. The employer then sued the carrier for breach of contract and declaratory relief. The Court of Appeal ruled against the carrier, reasoning that “wage and hour ... law(s)” are only those laws concerning duration of time worked or remuneration received in exchange for work. The Court of Appeal noted that the reimbursement statutes (Labor Code section 2800 et seq.) do not mention wages or hours and do not appear in the Labor Code sections addressing compensation or working hours. Moreover, expense reimbursement is not pay for labor or services.381 7.14 Payment by Piece-Rate Legislation effective in 2016 dealt a blow to piece-rate employers already reeling from hostile judicial decisions.382 (See § 7.2.2.) This legislation codified the judge-made “pay separately for every hour worked” doctrine as to piece-rate wages, and requires that employers must: Pay piece-rate employees for rest and recovery breaks (and all periods of “other nonproductive time”) separately from, and in addition to, their piece-rate pay. “Other nonproductive time” is defined as “time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis.”383 The law specifies a formula for calculating the required pay rate for rest breaks. Provide piece-rate employees with wage statements that include the pay period, the total hours of compensable rest and recovery breaks, the rate of pay for those breaks, and the gross wages paid for those breaks during the pay period. List, for the pay period, the total hours of other non-productive time, the pay rate for that time, and the gross wages paid, if the employer does not pay a base hourly rate for all hours worked (in addition to piece-rate wages).384 In 2019 the Court of Appeal rejected a constitutional challenge to the piece-rate statute. The plaintiffs were agricultural and construction employers who reasonably relied upon a fair piece-rate compensation system to pay their employees. These employers found the 2016 law so unclear that it was impossible for them to know how to comply and whether to elect to commit to the requirements necessary to claim a complicated affirmative defense available under the statute. Rejecting this claim, the Court of Appeal affirmed a denial of relief, reasoning that the statutory phrase “other nonproductive time” is not unconstitutionally vague.385 DLSE guidance. The DLSE has issued a Fact Sheet and Frequently Asked Questions regarding the piece-rate law. Among the highlights: Employers may not realize they have “piece-rate” employees. The DLSE suggests that the piece-rate law applies to employers that pay employees only partly on a piece-rate basis. For example, an employer may pay piece-rates on certain days of the week and pay hourly wages on other days. The DLSE’s wagerate calculation examples indicate that during a week where an employee performs piece-rate work on some days but not others, the employer must (1) include earnings from days in which no piece-rate work was performed in calculating the average hourly wage for the week, and (2) pay the average hourly wage
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