USA – CALIFORNIA Law and Practice Contributed by: William C. Martucci, Laura M. Booth, Ashley N. Harrison and Carrie A. McAtee, Shook, Hardy & Bacon LLP
1. Employment Terms 1.1 Employee Status
limited by an employment contract. Employment con - tracts can be express or implied in fact. For example, under certain circumstances, employee handbooks can qualify as employment contracts. (See Foley v Interactive Data Corp., 47 Cal. 3d 654, 677 (1988) .) However, the court will consider any disclaimer lan - guage in the handbook in considering whether a valid contract was formed. (See Guz v Bechtel Nat’l Inc., 24 Cal. 4th 317, 339-40 (2000) .) In addition, employ - ment contracts can be oral. (Foley, 47 Cal. 3d at 677.) There are no set terms that are required in employ - ment contracts. 1.3 Working Hours For non-exempt employees, California employers must satisfy the federal or state law overtime com - pensation requirements (whichever is more protec - tive to employees). California is more protective to employees with regard to work hours and overtime. Under California law, employers must pay one and a half times an employee’s “regular rate” if the employee works more than 40 hours in a single workweek or more than eight hours in a single workday or the first eight hours worked on the seventh consecutive day of work in a workweek; and double the “regular rate” for work in excess of 12 hours in a single day or more than eight hours on the seventh consecutive day of a workweek. (California Labor Code, Section 510.) However, employers may adopt alternative workweek schedules (AWS) that depart from the standard eight- hour workday, under certain conditions. California Labor Code, Section 511 allows AWS arrangements only if approved by at least two-thirds of affected employees in a secret ballot election. Further, such arrangement must be fully disclosed to affected employees. Under a duly-adopted alternative work - week schedule, the employer must pay overtime at one and a half times the regular rate after ten hours per day in a 40-hour workweek, and at double the regular rate after 12 hours per day and for any work more than eight hours on those days worked beyond the regularly scheduled workdays established by the alternative workweek agreement. 1.4 Compensation For non-exempt employees, employers must com - ply with both federal and California law regarding
Under federal and California law, all employees are either “exempt” or “non-exempt” from minimum wage and overtime requirements. “Exempt” employees (which include many white-collar professions) must meet the requirements of a qualified “exemption”. Such exemptions include employees serving in exec - utive, administrative, professional, computer soft - ware, outside sales, and commissioned (inside) sales roles, as defined under the California Labor Code and Industrial Welfare Commission (IWC) Orders. There are other, less common exemptions available for cer - tain industries or types of employees. To be consid - ered “exempt”, an employee must spend over 50% of their time performing exempt tasks. In contrast, “non-exempt” employees (generally blue-collar work - ers) and all other employees who do not fall within a qualified exemption, are entitled to minimum wage and overtime requirements. Generally, California wage and hour laws are more stringent than the federal overtime rules under the FLSA. California courts interpret the exceptions nar - rowly, and employers bear the burden of establishing that an exemption applies. ( Ramirez v Yosemite Water Co., Inc., 20 Cal. 4th 785, 794-95 (1999) .) Failure to correctly categorise an employee risks exposure to litigation under the California Private Attorney Gener - als Act (PAGA). While “independent contractors” are not “employees” covered by wage and hour law protections, employ - ers must be careful not to misclassify individuals, as California mandates a very onerous test to show an individual is an independent contractor. (See Dynamex Operations West, Inc. v Superior Court, 4 Cal. 5th 903 (2018) .) California courts also presume that an employer–employee relationship exists when an indi - vidual provides services for an employer. ( Ruiz v Affini - ty Logistics Corp., 667 F.3d 1318, 1323 (9th Cir. 2012 ).) 1.2 Employment Contracts In California, the presumption is that an employee is employed “at will”, and any agreement for “permanent employment” will be construed as “at will” employ - ment. However, such “at will” employment can be
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