Wage Theft Conviction of Business Owner

The Superior Court of California, County of San Diego, convicted the owner of a Thai restaurant to two years in jail (among other penalties) for forcing employees to work through breaks and meal periods.

The Court found the defendant guilty of felony grand theft of labor for failing to pay workers as promised, and felony grand theft of tips. The business owner was also found guilty for refusing to pay wages when she had the ability to do so and for failing to provide itemized wage statements.

This appears to be the first time a prosecutor in California pursues criminal charges for wage theft. Hopefully, it won’t be the last.

Suspension of Salaried Employee Without Pay

 The Fair Labor Standards Act allows employers to suspend an exempt employee without pay as long as the employer has a written policy applicable to all employees.  An exempt employee may be subject to a good faith unpaid suspension for infraction of workplace conduct rules.  The disciplinary deduction may only be made in full day increments.  See:  USDoL.


Does my employer have to reimburse me for auto mileage?

Yes. Labor Code § 2802(a) requires an employer to pay business related expenses their employees incur in performing their duties, such as driving for the benefit of the employer.

How can my employer pay me for my mileage? The California Supreme Court has recognized that your employer can reimburse you in at least these three ways;

First, by the IRS standard mileage rate. The Department of Labor Standards Enforcement (DLSE) recognizes that the mileage reimbursement used by the IRS is reasonable. If the employee believes they are entitled to more than the IRS mileage reimbursement, they are permitted to challenge the amount to prove their actual costs are more. If the employer want to pay less than the IRS rate, the employer has the burden of proving that the employees cost for operating a vehicle for work is actually less.

Second, by the actual expense method. The actual cost of mileage is calculated by adding the cost of fuel, depreciation, insurance, maintenance and all other operating costs. If the employer believes the actual cost is less that the IRS standard mileage rate, they can pay less if they can prove that.

Third, with a lump sum, such as a car allowance. This sum must provide full reimbursement for the actual costs incurred. The lump sum amount is subject to challenge by the employee. The employee can do so by comparing the lump sum to the actual expense method or the mileage reimbursement method. If the lump sum is not enough, the employer must make up the difference.

An employer can compensate their employee for their mileage expense with increased wages or commissions as long as they can prove, with an itemization, that the compensation is sufficient to cover the actual cost. If commission compensation, which tends to be variable, falls to a level where the actual driving expenses are not covered, the employer must make up the difference.

Unlicensed Junior Accountant May Be Exempt from Overtime

The Ninth Circuit Court of Appeals has ruled that an “unlicensed junior accountant” may not be exempt from wage and hour law under the professional or administrative exemptions. The Court also ruled, in revoking the trial court’s summary judgment for the accountant, that the Defendant in this case had enough evidence for a jury to decide if the accountant was an exempt employee. Campbell v. PricewaterhouseCoopers LLP (2011) 642 F.3d 820.

Fixed Salary May Serve To Compensate Overtime Hours

On February 7, 2011, a Court of Appeals in Los Angeles ruled that the “explicit mutual wage agreement” doctrine is available in California wage & hour cases notwithstanding the significant changes made by the Legislature to the Labor Code more than ten years ago. (Arechiga v. Dolores Press, Inc., Court of Appeals, Second Appellate District, Division Eight, Case No. BC380124) Under an “explicit mutual wage agreement,” an employer can avoid the payment of the overtime hours worked by a non-exempt employee if the fixed salary pays the employee at least 1 1/2 the employee’s basic hourly rate for all overtime hours.

To prove the existence of an explicit fixed wage agreement, the employee must have been told: 1) The days he or she would work; 2) The number of hours he or she would work; 3) that he or she would be paid a guaranteed salary of a specific amount; 4) The basic hourly salary rate upon which his or her salary is based; 5) That the salary will cover both his or her regular and overtime hours; and 6) The agreement must be reached before the work was performed by the employee.

This decision will most likely be appealed before the California Supreme Court. Until such time as the Supreme Courts defines the availability of the explicit mutual wage agreement doctrine, employers should exercise caution and continue to pay overtime based on the effective rate of the employee. In the case of non-exempt salaried employees, the Labor Code states that the “regular hourly rate shall be 1/40th of the employees’ weekly salary.”

Out-of-State employees entitled to California overtime for work done in California

On June 30, 2011, the California Supreme Court ruled as follows: “The California Labor Code does apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case, such that overtime pay is required for work in excess of eight hours per day or in excess of forty hours per week. (See Sullivan III, supra, 557 F.3d 979, 983.)” The Court also ruled that employees are not entitled to a California cause of action for unfair competition for the employer’s alleged violation of federal wage and hour law for work done out of California. See: Sullivan v. Oracle Corporation