• New Year Brings New and Daunting Wage Order For On-Site Construction Employees
  • August 26, 2003
  • Law Firm: Atkinson, Andelson, Loya, Ruud & Romo, A Professional Corporation - Cerritos Office
  • On October 16, 2000, the Industrial Welfare Commission ("IWC") of the State of California adopted Wage Order 16, which became effective January 1, 2001. Wage Order 16 is a new, comprehensive wage order for employees working in on-site occupations in construction, drilling, mining and logging. Prior to January 1, 2000, these occupations were not included in any wage order and were considered exempt from the wage orders and California's overtime requirements. The fact that employees working in these industries were exempt from California's overtime requirements prior to January 1, 2000, was confirmed in a recent decision by the Court of Appeals in Hestand v. Saunders 2000 D.A.R. 13085.

    With the passage of the Eight-Hour-Day Restoration and Workplace Flexibility Act, also known as AB 60, in 1999, California's overtime pay requirements were made applicable to all employees, including on-site construction industry employees, beginning January 1, 2000. On January 28, 2000, the IWC adopted Interim Wage Order -2000 which became effective March 1, 2000. The Interim Wage Order expressly stated that any industry or occupation not previously covered by, and all employees not specifically exempted in, the IWC's Wage Orders in effect in 1997 were covered by this Interim Wage Order. The Interim Wage Order was limited, however, to the requirements of AB 60 and did not include many of the regulations generally found in the IWC's other Wage Orders. Accordingly, in order to make such regulations applicable to the construction industry, the IWC adopted Wage Order 16, which expressly covers on-site occupations such as construction.

    Applicability of Wage Order 16 to Construction Industry

    Wage Order 16 applies to all workers performing on-site construction work, including, but not limited to, work involving alteration, demolition, building, excavating, renovation, remodeling, maintenance, improvement, and repair work, and work for which a contractor's license is required by the California Business and Professions Code §§7025 et seq. Wage Order 16 does provide that employees in administrative, executive, and professional capacities are exempt from the overtime requirements if they meet several criteria. It should be noted that Wage Order 16 applies only to an employer's on-site construction employees. Other employees, such as clerical workers, are likely covered under other existing wage orders.

    Hours and Days of Work

    Wage Order 16 sets forth the daily overtime requirements as mandated in AB 60. Employees covered by the Wage Order must receive overtime for all hours worked over eight (8) in one day or more than forty (40) in one workweek, and on the seventh consecutive day of work in a workweek, as follows:

    1. One and on-half (1 ½) times the employee's regular rate of pay for all hours worked in excess of eight (8) hours up to and including twelve (12) hours in any workday (or all hours over forty (40) in one workweek), and for the first eight (8) hours worked on the seventh (7th) consecutive day of work in a workweek; and

    2. Double the employee's regular rate of pay for all hours worked in excess of twelve (12) hours in any workday, and for all hours worked in excess of eight (8) hours on the seventh (7th) consecutive day of work in any workweek.

    The overtime rate of compensation to be paid to a nonexempt full-time salaried employee shall be computed by using one-fortieth (1/40) of the employee's weekly salary as the employee's regular hourly rate of pay.

    Wage Order 16 provides that alternative workweek schedules ("AWS") can be adopted pursuant to a number of conditions that must be met, including an election by employees. An alternative workweek schedule cannot require employees to work more than ten (10) hours per day within a 40-hour workweek without the payment of overtime. Under such a schedule, overtime of one and one-half times the employee's regular rate must be paid for the first two hours in excess of 10 hours in one day, or over 40 in one workweek, and double time must be paid for any work in excess of twelve 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. The AWS requirements for construction in the wage order are dramatically different than the other wage orders. Careful consideration must be given before implementing an AWS.

    Travel Time and Reporting Time Pay

    Wage Order 16 defines "Hours Worked" as "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." Section 5 of Wage Order 16 addresses travel time and reporting time. Section 5(a) states, "All employer-mandated travel that occurs after the first location where the employee's presence is required by the employer shall be compensated as the employee's regular rate of pay, or if applicable, the premium rate that may be required" by the overtime laws.

    Under this section, it is clear that if an employee is required by the employer to come to the yard to be transported to the jobsite, then the employee must be paid from the time he arrives at the yard and for the time he spends traveling back to the yard after leaving the jobsite. However, if an employee chooses for his own convenience to voluntarily come to the yard to be transported on company vehicles to the jobsite, and is not required or does not on his own provide any labor, such as loading vehicles, or gathering tools, etc., then the employee does not have to be compensated for time spent traveling to and from the jobsite. It is important to point out that if the employee is permitted to do any work at the yard, even if that work is not requested or required by the employer, then the employee must be compensated from that time forward.

    This interpretation of the law is supported by the recent decision of the California Supreme Court in Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575. In Morillion, the employer required its field employees to meet for work each day at specified parking lots. The employer then transported the employees, in buses that the employer provided and paid for, to the fields where the employees actually worked. At the end of the day, the employer transported the employees back to the departure points. Significantly, the employer's work rules prohibited the employees from using their own transportation to get to and from the fields. The employees were not paid for the time they spent assembling at the departure points, riding the bus to the fields, waiting for the bus at the end of the day, and riding the bus back to the departure points. The employees sued, seeking pay for all of this time. The California Supreme Court ruled that the time the employees were required to spend traveling on the employer's buses was compensable under the relevant IWC Wage Order because the employees were "subject to the control of an employer." The fact that the employees were not "suffered or permitted to work" during this travel period did not change the determination that the time was "hours worked." Thus, the court concluded that the compulsory travel time was compensable as "hours worked."

    The California Supreme Court's decision in Morillion differs from previous interpretations of federal law. The Federal Labor Standards Act ("FLSA") and federal cases interpreting the FLSA are considered favorable for employers because they apply only the more flexible "permitted or suffered to work" standard. In Morillion, the California Supreme Court clarified that California imposes an additional standard, the "subject to the control of the employer" standard. Under California law, it is only necessary that the worker be subject to the "control of the employer" in order to be entitled to compensation.

    According to California law, in order to avoid having to pay employees who meet at the yard to be transported to the jobsite for that travel time, two requirements must be met. First, the employer cannot require the employees to meet at the yard to be transported to the jobsite. Otherwise, it may likely be construed that the employees are "subject to the control of the employer" and must be compensated for that time. Second, the employee must not be permitted to engage in any work while at the yard. It is important that if a company offers to transport employees from the yard to the jobsite for the employees' own convenience, the company must ensure that the employees do not engage in any work while at the yard, either while waiting to be transported to the jobsite or after they return from the jobsite.

    Recordkeeping Requirements

    Construction industry employers must now keep detailed and accurate time records for each and every employee. Wage Order 16 requires every employer who has control over wages, hours, or working conditions to keep accurate information with respect to each employee, including all of the following:

    1. The employee's full name, home address, occupation, and social security number. The employee's date of birth, if under 18 years of age, and designation as a minor. Time records showing when the employee begins and ends each work period. Meal periods, split shift intervals, and total daily hours worked shall also be recorded.

    2. Total wages paid each payroll period, including value of board, lodging, or other compensation actually furnished to the employee.

    3. Total hours worked during the payroll period and applicable rates of pay. This information shall be made readily available to the employee upon reasonable request. When a piece rate or incentive plan is in operation, piece rates, or an explanation of the incentive plan formula, shall be provided to employees. An accurate production record shall be maintained by the employer.

    If an employee is paid on a piece-rate basis, Labor Code §226 has been amended and now requires that employers provide employees, at the time payment is made, either as a detachable part of the payroll check or separately if wages are paid by personal check or cash, an itemized statement with the above information as well as the number of piece-rate units earned and any applicable piece rate.

    Wage Order 16 also requires employers to keep these records for at least three years and make them available for inspection by the employee upon reasonable request.

    This firm has developed time cards which may assist employers in meeting these new recordkeeping requirements.

    Meal and Rest Periods

    A. Meal Periods

    Wage Order 16 requires all employers to provide a meal period of at least thirty (30) minutes for each employee who works more than five (5) hours, unless the employee works no more than six (6) hours in which case the meal period can be waived by mutual consent of the employer and employee. As long as the employee is relieved of all duty during the thirty (30) minutes, the meal period does not have to be counted as time worked. However, if the employee is not relieved of all duties during the thirty (30) minutes, then the meal period must be considered an "on duty" meal period and counted as time worked. An "on duty" meal period is only permitted when the nature of the work prevents the employee from being relieved of all duty and when, by written agreement of the parties, an on-the-job paid meal period is agreed to and complies with Labor Code section 512. Wage Order 16 also requires employers to provide an adequate supply of potable water, soap, or other suitable cleansing agent and single use towels for hand washing.

    In addition, an employer may not employ an employee for more than ten (10) hours per day without providing a second meal period of not less than thirty (30) minutes, unless the total hours worked are less than twelve (12) hours in which case 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. We suggest that any waiver of the second meal period by mutual consent of the employer and employee be put in writing.

    With respect to employees with collective bargaining agreements, it should be noted that the overtime requirements of Wage Order 16 do 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 thirty (30) percent more than the state minimum wage ($6.25 as of Jan. 1, 2001).

    Wage Order 16 provides significant penalties for failure to provide a meal period. If an employer fails to provide an employee with the appropriate meal period, the employer must pay the employee one (1) hour of pay at the employee's regular rate of compensation for each work day that the meal period was not provided. For this reason, it is imperative that employers have a record that meal periods have been taken.

    One question which has arisen is whether the employer must provide the meal period within the first five hours of the employee's shift or whether the employer can schedule the meal period after the fifth hour, since some employees prefer to take a meal period towards the end of their shift. The DLSE has taken the position that the Wage Order requires that the meal period must be provided no later than the end of the 5th hour of the shift, and cannot be taken later even with the mutual consent of the employer and employee.

    B. Rest Periods

    Wage Order 16 requires employers to permit all employees to take rest periods, "which insofar as practicable, should be in the middle of each work period." The Wage Order does not prevent an employer from staggering rest periods to avoid interruption in the flow of work and to maintain continuous operations, or from scheduling rest periods to coincide with breaks in the flow of work that occur in the course of the workday. The rest period time is based on the total hours worked in a day at the rate ten (10) minutes net rest time for every four (4) hours worked, or major fraction thereof. Rest periods are to take place at employer designated areas, which may include or be limited to the employees immediate work area. Rest periods must be counted as hours worked and cannot be deducted from wages.

    Wage Order 16 does contain a limited exception to this requirement. An employer does not have to authorize rest periods in those limited circumstances when the disruption of continuous operations would jeopardize the product or process of work. However, the employer must make up the missed rest period within the same work day or compensate the employee for the missed ten (10) minutes of rest time at his or her regular rate of pay within the same pay period. It is anticipated that the DLSE will closely scrutinize the use of this exception by employers. Accordingly, employers should document the circumstances anytime this exception applies. Employees who work less than three and one-half (3 ½) hours do not have to be given a rest period.

    Again, Wage Order 16 delineates penalties for failing to provide rest periods. If the employer fails to provide required rest periods, then the employer must pay the employee one (1) hour of pay at the employee's regular rate of pay for each work day that the rest period was not provided. For this reason, although rest periods do not have to be recorded, employers are wise to record the fact that rest periods have been provided. These rest period provisions do not apply to any employee covered by a valid collective bargaining agreement if it provides equivalent protection.

    Further Penalties

    In addition to the penalties discussed above, Wage Order 16 provides for additional penalties for violating the Order. Violation of any provision of Wage Order 16 can subject the employer to the following civil penalties:

    (1) Initial Violation- $50.00 for each underpaid employee for each pay period during which the employee was underpaid in addition to an amount which is sufficient to recover underpaid wages.

    (2) Subsequent Violations- $100.00 for each underpaid employee for each pay period during which the employee was underpaid in addition to an amount which is sufficient to recover underpaid wages.

    (3) The affected employee shall receive payment of all wages recovered. The Labor Commissioner may also issue citations pursuant to Cal. Lab. Code §1197.1 for non-payment of wages for overtime work in violation of the order.

    These penalties can be substantial, and are designed to encourage employers to comply with the Wage Order.

    What It All Means

    Wage Order 16 extends for the first time to the construction industry the overtime laws and other wage and hour regulations that other industries have worked under for years. The DLSE will undoubtedly take an aggressive position in enforcing this new Wage Order to foster widespread compliance. For this reason, employers must take steps now to be in compliance with the law. Proper implementation of the Wage Order's provisions require all persons in a supervisory position to be familiar with the new law and understand the importance of complying with its requirements. Accurate and adequate recordkeeping is key. Employers do not want to learn the hard way in March 2001, or later, that an employee has kept track of all of his or her employer's violations since January 1, 2001.

    Construction employers would be wise to hold a meeting with their supervisors and employees to inform them of the new law so that everyone understands the need to comply with these requirements. Finally, implementing the use of newly developed time cards (such as those our office provides) may be a good way to encourage employees and supervisors to follow Wage Order 16.