Division of Labor Standards Enforcement (DLSE) (2022)

1.

Q.

My employer's vacation plan states that no vacation is earned during the first six months of employment. Is this legal?

A.

Yes. DLSE's enforcement policy does not preclude an employer from providing a specific period of time at the beginning of the employment relationship during which an employee does not earn any vacation benefits. This could apply to a probationary or introductory period, and can even apply to the whole first year of employment.

Such a provision in a vacation plan will only be recognized, however, if it is not a subterfuge (phony reason) and in fact, no vacation is implicitly earned or accrued during that first year or other period. For example, a plan with the following provisions would be an obvious subterfuge and not recognized as valid:

Year 1: No vacation

Year 2: 4 weeks vacation

Year 3: 2 weeks vacation

The four weeks' vacation earned in the second year, when viewed in the context of the two weeks' vacation earned in the third year, makes it clear that two of the four weeks earned in year two are actually vacation earned in year one.

A valid vacation plan could look like the following:

Year 1: No vacation

Year 2: 2 weeks vacation

Year 3: 3 weeks vacation

Years 4 through 10: 4 weeks vacation

In those instances where a "waiting period" (Year 1 in the examples above) is found to be a subterfuge, employees who separate from their employment during the "waiting period" will be entitled to prorated vacation pay at their final rate of pay. On the other hand, where the employer's vacation plan has a valid "waiting period" provision, employees who separate from their employment during that period will be ineligible for any vacation pay.

2.

Q.

How is vacation earned?

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A.

In California, because paid vacation is a form of wages, it is earned as labor is performed. An employer's vacation plan may provide for the earning of vacation benefits on a day-by-day, by the week, by the pay period, or some other period basis. For example, an employer's policy may provide that an employee will earn a proportionate share of his or her annual vacation entitlement for each week of a calendar year in which the employee either works at least one full day or receives at least one full days' pay during such week. Thus, for example, if an employee is entitled to two weeks (10 work days) annual vacation, and works full-time, eight hours per day, 40 hours per week, in the above example for each week the employee works at least one full day, he or she will earn 1.538 hours of paid vacation, calculated as follows:

10 work days entitlement per year x 8 hours/day = 80 hours vacation entitlement per year

80 hours vacation entitlement per year ÷ 52 weeks per year = 1.538 hours of vacation earned per week

In contrast to how vacation pay may be earned, the calculation of vacation pay for terminating employees (a quit, discharge, death, end of contract, etc.) who have earned and accrued and unused vacation on the books at the time of termination must be prorated on a daily basis and must be paid at the final rate of pay in effect as of the date of the separation. For example, an employee who is entitled to three weeks of annual vacation (15 work days entitlement per year x 8 hours/day = 120 hours vacation entitlement per year) who quits on August 7, 2002 (the 219th day of the year) without having taken any vacation in 2002, who has no vacation carry-over from prior years, and whose final rate of pay is $13.00 per hour, would be entitled to $936.00 vacation pay upon separation, calculated as follows:

Pro rata daily basis:

219 days (August 7, 2002, date of quit) ÷ 365 days/year = 60%

60% of 120 hours vacation entitlement = 72 hours vacation earned and accrued through August 7, 2002

Vacation days used in 2002 = 0

Vacation earned but not taken at time of separation = 72 hours

72 hours x $13.00/hour = $936.00 vacation pay due at separation.

3.

Q.

I am a part-time employee, and am excluded from my employer's vacation plan (only full-time employees get vacation). Is this legal?

A.

Yes, it is legal. If an employer's vacation plan/policy excludes certain classes of employees, such as part-time, temporary, casual, probationary, etc., such a provision is valid, and the agreement will govern. To avoid any misunderstandings in this area, the vacation plan/policy should state clearly and specifically which employee classification(s) are excluded.

4.

Q.

My employer's vacation policy provides that if I do not use all of my annual vacation entitlement by the end of the year, that I lose the unused balance. Is this legal?

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A.

No, such a provision is not legal. In California, vacation pay is another form of wages which vests as it is earned (in this context, "vests" means you are invested or endowed with rights in the wages). Accordingly, a policy that provides for the forfeiture of vacation pay that is not used by a specified date ("use it or lose it") is an illegal policy under California law and will not be recognized by the Labor Commissioner.

5.

Q.

My employer's vacation policy provides that once an employee earns 200 hours of vacation, no more vacation may be earned (accrued) until the vacation balance falls below that level. Is this legal?

A.

Yes, such a provision would be acceptable to the Labor Commissioner. Unlike "use it or lose it" policies, a vacation policy that places a "cap" or "ceiling" on vacation pay accruals is permissible. Whereas a "use it or lose it" policy results in a forfeiture of accrued vacation pay, a "cap" simply places a limit on the amount of vacation that can accrue; that is, once a certain level or amount of accrued vacation is earned but not taken, no further vacation or vacation pay accrues until the balance falls below the cap. The time periods involved for taking vacation must, of course, be reasonable. If implementation of a "cap" is a subterfuge to deny employees vacation or vacation benefits, the policy will not be recognized by the Labor Commissioner.

DLSE has repeatedly found 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.

6.

Q.

Can my employer tell me when to take my vacation?

A.

Yes, your employer has the right to manage its vacation pay responsibilities, and one of the ways it can do this is by controlling when vacation can be taken and the amount of vacation that may be taken at any particular time.

7.

Q.

My employer's vacation policy provides that if I don't use all of my vacation by the end of the year, he will pay me for the vacation that I earned and accrued that year, but did not take. Is this legal?

A.

Yes, your employer has the right to manage its vacation pay responsibilities, and one of the ways it can do this is by paying you off each year for vacation that you earned and accrued that year, but did not take.

8.

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Q.

My employer has combined its vacation and sick leave plans into one program that it calls "paid time off" (PTO). Under this program I have a certain number of paid days each year that I can take off from work for any purpose. Does this allow my employer to circumvent the law as it relates to vacations?

A.

No, a "paid time off" (PTO) plan or policy does not allow your employer to circumvent the law with respect to vacations. Where an employer replaces its separate arrangements for vacation and sick leave with a program whereby employees are granted a certain number of "paid days off" each year that can be used for any purpose, including vacation and sick leave, the employees have an absolute right to take these days off. Consequently, again applying the principles of equity and fairness, DLSE takes the position that such a program is subject to the same rules as other vacation policies. Thus, for example, the "paid time off" is earned on a day-by-day basis, vested paid time off days cannot be forfeited, the number of earned and accrued paid time off days can be capped, and if an employee has earned and accrued paid time off days that have not been used at the time the employment relationship ends, the employee must be paid for these days.

9.

Q.

My employer allows its employees to take their vacation before it is actually earned or accrued. Last month I took my three weeks vacation before I had actually earned all of it. I quit my job this month and my employer deducted all of the unearned vacation days that I had taken from my final paycheck. Can he do this?

A.

No, your employer cannot deduct "advanced" vacation (i.e., vacation that is taken before it is earned or accrued) from your final paycheck. Because of work schedules and the wishes of employees, many employers allow employees to take their vacation before it is actually earned. Under California law, vacation benefits are a form of wages, and an employer's practice of allowing employees to take their vacation before it is actually earned or accrued is in effect an advance on wages. Thus, if an employee takes an advance on vacation and then quits or is discharged before all of that advanced vacation is earned or accrued, the effect is that there has been an overpayment of wages which is a debt owed to the employer.

The California courts have noted on a number of occasions that an advance on wages, as with any other debt owed (either to the employer or a third party), is subject to the provisions of the attachment law. However, since wages are exempt from prejudgment attachment, neither the employer nor any third party can recover the debt by way of attachment of the employee's final pay, as to do so would violate the public policy considerations underlying the wage exemption statutes. Thus, in California since the wage garnishment law provides the exclusive judicial procedure by which a judgment creditor can execute against the wages of a judgment debtor, an employer may not resort to self-help to recover debts owed to the employer by an employee from the wages then due to the employee.

10.

Q.

What happens to my earned and accrued but unused vacation if I am discharged or quit my job?

A.

Under California law, unless otherwise stipulated by a collective bargaining agreement, whenever the employment relationship ends, for any reason whatsoever, and the employee has not used all of his or her earned and accrued vacation, the employer must pay the employee at his or her final rate of pay for all of his or her earned and accrued and unused vacation days. Labor Code Section 227.3. Because paid vacation benefits are considered wages, such pay must be included in the employee's final paycheck.

11.

Q.

My employer does not allow employees to carry-over any unused vacation days from year-to-year. When I was discharged last week none of these forfeited vacation days were included in my final paycheck? What can I do?

A.

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You can either file a wage claim with the Division of Labor Standards Enforcement (the Commissioner's Office), or you can file a lawsuit in court against your employer to recover the lost wages. Additionally, if you no longer work for this employer, you can make a claim for the waiting time penalty pursuant to Labor Code Section 203.

12.

Q.

What is the procedure that is followed after I file a wage claim?

A.

After your claim is completed and filed with a local office of the Division of Labor Standards Enforcement (DLSE), it will be assigned to a Deputy Labor Commissioner who will determine, based upon the circumstances of the claim and information presented, how best to proceed. Initial action taken regarding the claim can be referral to a conference or hearing, or dismissal of the claim.

If the decision is to hold a conference, the parties will be notified by mail of the date, time and place of the conference. The purpose of the conference is to determine the validity of the claim, and to see if the claim can be resolved without a hearing. If the claim is not resolved at the conference, the next step usually is to refer the matter to a hearing or dismiss it for lack of evidence.

At the hearing the parties and witnesses testify under oath, and the proceeding is recorded. After the hearing, an Order, Decision, or Award (ODA) of the Labor Commissioner will be served on the parties.

Either party may appeal the ODA to a civil court of competent jurisdiction. The court will set the matter for trial, with each party having the opportunity to present evidence and witnesses. The evidence and testimony presented at the Labor Commissioner's hearing will not be the basis for the court's decision. In the case of an appeal by the employer, DLSE may represent an employee who is financially unable to afford counsel in the court proceeding.

See the Policies and Procedures of Wage Claim Processing pamphlet for more detail on the wage claim procedure.

13.

Q.

What can I do if I prevail at the hearing and the employer doesn't pay or appeal the Order, Decision, or Award?

A.

When the Order, Decision, or Award (ODA) is in the employee's favor and there is no appeal, and the employer does not pay the ODA, the Division of Labor Standards Enforcement (DLSE) will have the court enter the ODA as a judgment against the employer. This judgment has the same force and effect as any other money judgment entered by the court. Consequently, you may either try to collect the judgment yourself or you can assign it to DLSE.

14.

Q.

What can I do if my employer retaliates against me because I informed him that in California vacation is wages and cannot be forfeited?

A.

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If your employer discriminates or retaliates against you in any manner whatsoever, for example, he discharges you because you objected to the fact that your vested vacation was being forfeited and not carried over from year-to-year, or because you file a claim or threaten to file a claim with the Labor Commissioner, you can file a discrimination/retaliation complaint with the Labor Commissioner's Office. In the alternative, you can file a lawsuit in court against your employer.

Summary of Procedures

A summary of procedures used by the Labor Commissioner's Office to investigate complaints under Labor Code section 98.7 is described below.. In most cases, an employee, former employee, or job applicant alleging retaliation under a law within the jurisdiction of the Labor Commissioner must file the complaint with the Labor Commissioner's Office within one year of the adverse action.. Labor Code section 98.7 requires the investigator to interview the worker, the employer, and relevant witnesses, individuals who possess information regarding the alleged violations.. The Labor Commissioner will review the investigative report and send the parties a determination letter; the letter will outline the evidence established during the investigation and report the findings of the investigation.. If the employer fails to comply with the requirements of the determination letter in the time required, an attorney for the Labor Commissioner will file a court action to enforce the determination letter and collect the assessed damages and penalties.. If a timely appeal is filed, then a hearing is held before a hearing officer.. The hearing will be like an informal court case; the hearing officer is like a judge, and the Labor Commissioner will present evidence, such as emails or employment records, and employee testimony to support the citation.. If the Labor Commissioner determines that there is insufficient evidence of retaliation, the Labor Commissioner will dismiss the case and take no further action.. Complaints alleging violation of Labor Code section 6310 or 6311 (related to workplace health and safety) include appeal rights for the worker if the Labor Commissioner dismisses the complaint for insufficient evidence of retaliation.. The worker's right to appeal is required by federal OSHA, and the Labor Commissioner's Office is required to provide the same appeal right for violations of Labor Code section 6310 or 6311 .. In this complaint to OSHA, an individual who is not satisfied with the procedures followed in the Labor Commissioner's investigation may request that federal OSHA review the case file to ensure the case was appropriately investigated.

1.Q.My employer's vacation plan states that no vacation is earned during the first six months of employment. Is this legal?A.Yes. DLSE's enforcement policy does not preclude an employer from providing a specific period of time at the beginning of the employment relationship during which an employee...

(Video) How To File a Wage Claim With Labor Commissioner in California (DLSE). (Video) What to Expect During a DLSE Claim and Conference or Hearing | Struthers Legal. My employer's vacation policy provides that once an employee earns 200 hours of vacation, no more vacation may be earned (accrued) until the vacation balance falls below that level.. DLSE has repeatedly found 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.. Can my employer tell me when to take my vacation?. My employer's vacation policy provides that if I don't use all of my vacation by the end of the year, he will pay me for the vacation that I earned and accrued that year, but did not take.. Under California law, vacation benefits are a form of wages, and an employer's practice of allowing employees to take their vacation before it is actually earned or accrued is in effect an advance on wages.. Under California law, unless otherwise stipulated by a collective bargaining agreement, whenever the employment relationship ends, for any reason whatsoever, and the employee has not used all of his or her earned and accrued vacation, the employer must pay the employee at his or her final rate of pay for all of his or her earned and accrued and unused vacation days.. (Video) Fighting Wage Theft, Recovering Unpaid Wages

L'Chaim House, Inc. v. Divison of Labor Standards Enforcement, California Court of Appeals 2019

L’Chaim claimed that under Industrial Welfare Commission (IWC) Wage Order 5, it may require its employees to work “on-duty” meal periods that, unlike periods when employees are “relieved of all duty,” do not need to be at least 30 minutes long (Cal.. The court of appeal affirmed, holding that L’Chaim must provide meal periods of at least 30 minutes, regardless of whether they are on-duty or off-duty, under Wage Order No.. Although L’Chaim was authorized to provide on-duty, as opposed to off-duty, meal periods to its employees, those meal periods still had to be at least 30 minutes long.. On appeal, L’Chaim claims that under the applicable Industrial Welfare Commission (IWC) wage order, it may require its employees to work “on-duty” meal periods that, unlike periods when employees are “relieved of all duty,” do not need to be at least 30 minutes long.. In 1999, the Legislature regulated meal periods for the first time by passing section 512, which “made meal periods a statutory as well as a wage order obligation.” (Brinker, supra, 53 Cal.4th at pp.. Under the statute, “[a]n employer shall 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.” (§ 512, subd.. As noted above, subdivision 11(A) states that “[u]nless 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.” L’Chaim interprets this language to “contemplate[] instances where an employee’s meal period may be less than 30 minutes,” in which case subdivision 11(A) “does not extend the meal period until a full 2 Effective January 1, 2019, the word “shall” was substituted for “may” (Stats.. Thus, we cannot agree with L’Chaim that the trial court’s determination that its employees are entitled to an on-duty meal period of at least 30 minutes equates to an “imputation of a 30-minute uninterrupted meal period into an ‘on-duty’ meal period.” The court’s order says no such thing.. The Palacio employer required its employees to work on-duty meal periods under subdivision 11(E) and to sign agreements waiving their right to off-duty meal periods.. . . meal periods .. 1 (See Gerard, supra, 6 Cal.5th at p. 446 [“Labor Code generally provides that employees who work more than five hours must be provided with a 30-minute meal period”].). But this says next to nothing about the nature of a lawful “on-duty” meal period under any exception to the general rule and, particularly, the 24 hour residential care facility exception.. By definition, an employee who “may be [lawfully] required to work on-duty meal periods” (Wage Order No.. This exception can apply, for example, as discussed above, where “the residential care employees [sic] eats with residents during the residents’ meals and the employer provides the same meal at no charge to the employee.” (Wage Order No.

California Wage/Hour Update (No. 3, July 2009) Most employers doing business in California are familiar with wage claims brought by current or former employees before the Division of Labor Standards…

Effective July 1, 2004, the California Legislature de-funded the IWC, but their wage orders generally still have the force of law.. DLSE Hearing and Dispute Resolution Procedures The DLSE adjudicates wage claims in hearings conducted by hearing officers or deputy Labor Commissioners and may be called upon to decide the issue of jurisdiction itself.. (The DLSE's exercise of jurisdiction, if disputed, may be challenged by a separate court action).. The DLSE also investigates discrimination and public works complaints and enforces Labor Code statutes and IWC wage orders.. If the DLSE decides to accept the matter and conduct an administrative hearing, commonly known as a "Berman hearing," the hearing generally is held within 90 days.. The decision of the trial court is subject to a conventional appeal to an appropriate appellate court.. The Labor Commissioner's Opinions And Internal Guidelines The Labor Commissioner and DLSE staff issue "opinion letters" that purport to create a cohesive policy to guide employers and hearing officers in the adjudication of wage claims.. These opinions and internal guidelines do not have the force of law, but may provide valuable insight regarding how the DLSE will rule on issues of law.

Keyes Motors, Inc. v. Division of Labor Standards Enforcement (1987), California Court of Appeals

3d 560] were not "commission" employees and ordered Keyes to pay those mechanics $6,000 in overtime wages pursuant to IWC Order 7-80.. Keyes instituted proceedings against DLSE seeking a judicial declaration that the mechanics' "flat rate" method of compensation, based on a percentage of the hourly rate charged the customer, constituted commission wages, thereby exempting Keyes's mechanics from overtime.. Defining commission as "a percentage of the money received in [the] transaction" [citation omitted], the trial court found Keyes's mechanics earn commission, as does a car wash employee who receives 50 cents per car or a 9 percent commission on each sale.. It found Keyes's mechanics engaged "in the sale of goods and services through the services [sic] managers and services [sic] writers," satisfying the Labor Code's definition of commission, because the mechanics' recommendations "causes [sic] the customer to authorize further sales.". Hours and Days of Work [¶](A) No employee eighteen (18) years of age or over nor any minor permitted to work as an adult ... shall be employed more than eight (8) hours in any workday or more than forty (40) hours in any workweek unless the employee receives one and one-half (1 1/2) times such employee's regular rate of pay for all hours worked over forty (40) hours in the workweek.. Under the order, employees earn time and one-half for each hour worked in excess of eight hours per day, with one exception: pursuant to subdivision (C), the overtime provisions do not apply when more than one half the employee's compensation represents commissions.. DLSE cites Labor Code section 204.1 defining commission in support of its position: "... 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.". [2c] Accordingly, DLSE's interpretation which would entitle dealers' mechanics to overtime wages appears more compatible with the intent of IWC Order 7-80 and the legislative intent behind California's wage and hour laws.. 9-80, regulating wages, hours and working conditions in the transportation industry, which applies to mechanics working in auto repair shops not connected to auto dealerships does not contain an overtime exemption for employees earning commission.. 29 Code of Federal Regulations section 779.414 reads: "Section 7(i) [exempting commission employees from overtime compensation under the FLSA] was enacted to relieve an employer from the obligation of paying overtime compensation to certain employees of a retail or service establishment paid wholly or in greater part on the basis of commissions.

Wang v. Division of Labor Standards Enforcement (1990), California Court of Appeals

This sanction was assessed under Labor Code section 1021.5, which penalizes a licensed general contractor who willingly and knowingly enters into a contract with a subcontractor who does not hold a valid state contractor's license.fn.. Upon calling the Contractors' State License Board and [219 Cal.. DLSE's inspector had issued the citation after contacting the Contractors' State License Board and determining that the license number on the subcontract belonged to another company and that Plastering Subcontractor did not hold a valid license.. 3d 1157] with whom he/she contracts is required to be licensed and whether the subcontractor is or is not licensed."fn.. The court further held that, since the hearing officer did not find respondent knew Plastering Subcontractor was unlicensed, the penalty must be set aside.. Labor Code Section 1021.5. [1] DLSE contended, and the hearing officer found, that violation of Labor Code section 1021.5 was shown by the mere fact that respondent failed to call the Contractors' State License Board to verify the license number Plastering Subcontractor gave to respondent.. Labor Code section 1021.5 provides in pertinent part, "Any person who holds a valid state contractor's license ..., and who willingly and knowingly enters into a contract with any person to perform services for which [219 Cal.. 3d 1158] such a license is required as an independent contractor, and that person does not meet the burden of proof of independent contractor status pursuant to Section 2750.5 or hold a valid state contractor's license, shall be subject to a civil penalty ...." (Italics added.). Where Code of Civil Procedure section 1028.5 applies, Government Code section 800 does [219 Cal.. DLSE contends that in assessing a civil penalty under Labor Code section 1021.5, DLSE acts as an "enforcement" agency, a function DLSE claims is not "regulatory.". We find to the contrary that in assessing the civil penalties authorized by Labor Code section 1021.5, DLSE exercised a regulatory function within the meaning of Code of Civil Procedure section 1028.5.. Labor Code section 1021.5 provides: "Any person who holds a valid state contractor's license issued pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code, and who willingly and knowingly enters into a contract with any person to perform services for which such a license is required as an independent contractor, and that person does not meet the burden of proof of independent contractor status pursuant to Section 2750.5 or hold a valid state contractor's license, shall be subject to a civil penalty in the amount of one hundred dollars ($100) per person so contracted with for each day of the contract.. The bulletin states, "It is the Labor Commissioner's interpretation of the meaning of that statute that 'willingly and knowingly,' as used in the statute, means that the contractor has, of his/her own volition, entered into a contract with a subcontractor to do work or perform services for which a state contractor's license is required, and that, at the time the contract was entered into, the contractor knew or should have known that the subcontractor was unlicensed.

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The hearing officer found: “[Taylor] did not have workers' compensation insurance for the period of February 27, 2012 through January 29, 2015 and had 11 employees during that time period.” The hearing officer concluded Taylor's constitutional arguments provided no basis for defense in an administrative hearing and also determined the term calendar year, as used in section 3722(b), means “one year back from the date that the director determines an employer has been uninsured on the date the citation is issued.” (Italics omitted.). Section 3722 provides, in relevant part: “(a) At the time the stop order is issued and served pursuant to Section 3710.1, the director[ 5 ] shall also issue and serve a penalty assessment order requiring the uninsured employer to pay to the director, for deposit in the State Treasury to the credit of the Uninsured Employers Fund, the sum of one thousand five hundred dollars ($1,500) per employee employed at the time the order is issued and served, as an additional penalty for being uninsured at that time or issue and serve a penalty assessment order pursuant to subdivision (b).. “(b) At any time that the director determines that an employer has been uninsured for a period in excess of one week during the calendar year preceding the determination, the director shall issue and serve a penalty assessment order requiring the uninsured employer to pay to the director, for deposit in the State Treasury to the credit of the Uninsured Employers Fund, the greater of (1) twice the amount the employer would have paid in workers' compensation premiums during the period the employer was uninsured, determined according to subdivision (c), or (2) the sum of one thousand five hundred dollars ($1,500) per employee employed during the period the employer was uninsured.. If the employer is uninsured at the time the penalty under subdivision (b) is being determined, the amount an employer would have paid in workers' compensation premiums shall be the product of the employer's payroll for all periods of time the employer was uninsured within the three-year period immediately prior to the date the penalty assessment is issued multiplied by a rate determined in accordance with regulations that may be adopted by the director or, if none has been adopted, the manual rate or rates of the State Compensation Insurance Fund for the employer's governing classification pursuant to the standard classification system approved by the Insurance Commissioner.” (Italics added.). Section 3722(b) provides, in relevant part: “At any time that the director determines that an employer has been uninsured for a period in excess of one week during the calendar year preceding the determination, the director shall issue and serve a penalty assessment order requiring the uninsured employer to pay to the director, for deposit in the State Treasury to the credit of the Uninsured Employers Fund, the greater of (1) twice the amount the employer would have paid in workers' compensation premiums during the period the employer was uninsured, determined according to subdivision (c), or (2) the sum of one thousand five hundred dollars ($1,500) per employee employed during the period the employer was uninsured.” (Italics added.)

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DLSE contended, and the hearing officer found, that violation of Labor Code section 1021.5 was shown by the mere fact that respondent failed to call the Contractors' State License Board to verify the license number Plastering Subcontractor gave to respondent.. Labor Code section 1021.5 provides in pertinent part, “Any person who holds a valid state contractor's license ․, and who willingly and knowingly enters into a contract with any person to perform services for which such a license is required as an independent contractor, and that person does not meet the burden of proof of independent contractor status pursuant to Section 2750.5 or hold a valid state contractor's license, shall be subject to a civil penalty․” (Emph.. DLSE contends that in assessing a civil penalty under Labor Code section 1021.5, DLSE acts as an “enforcement” agency, a function DLSE claims is not “regulatory.” DLSE contends that because the DLSE does not, in the words of its brief, “promulgate ․ rules or regulations regulating the business activities” of licensed contractors, DLSE does not exercise a regulatory function as to respondent.. Labor Code section 1021.5 provides: “Any person who holds a valid state contractor's license issued pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code, and who willingly and knowingly enters into a contract with any person to perform services for which such a license is required as an independent contractor, and that person does not meet the burden of proof of independent contractor status pursuant to Section 2750.5 or hold a valid state contractor's license, shall be subject to a civil penalty in the amount of one hundred dollars ($100) per person so contracted with for each day of the contract.. The bulletin states, “It is the Labor Commissioner's interpretation of the meaning of that statute that ‘willingly and knowingly,’ as used in the statute, means that the contractor has, of his/her own volition, entered into a contract with a subcontractor to do work or perform services for which a state contractor's license is required, and that, at the time the contract was entered into, the contractor knew or should have known that the subcontractor was unlicensed.“Under the section, the contractor is required to know or should be held to the duty to make a reasonable effort to ascertain whether any subcontractor with whom he/she contracts is required to be licensed and whether the subcontractor is or is not licensed.“In those cases where the contractor has taken reasonable steps to ascertain the licensure status of the subcontractor and has been either misled or furnished incorrect information, there may be a basis for modification of the penalty assessment, but only after hearing and by appropriate findings, in accordance with previous directives.”. Labor Code section 98.9 provides, “Upon a finding by the Labor Commissioner that a willful or deliberate violation of any of the provisions of the Labor Code, within the jurisdiction of the Labor Commissioner, has been committed by a person licensed as a contractor pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code, in the course of such licensed activity, the Labor Commissioner shall immediately, upon expiration of the period for review specified in Section 98.2, or other applicable section, deliver a certified copy of the finding of the violation to the registrar of the Contractors' State License Board.”

For the past several years, the California Division of Labor Standards Enforcement (DLSE) has taken the position that employers may not deduct partial-day absences from exempt employees' accrued vacation leave banks. Recently, however, the First District Court of Appeal ruled in Conley v. Pacific Gas & Electric Co. that such deductions are lawful in certain circumstances.

Under the federal Fair Labor Standards Act, while employers may not make deductions from an exempt employee’s wages resulting from the employee’s partial-day absence for personal reasons, employers may deduct time for such absences from the employee’s accrued but unused vacation.. By contrast, in California, the DLSE historically has ruled that because accrued vacation time is a form of vested wages under the California Supreme Court’s decision in Suastez v. Plastic Dress-Up Co., employers cannot make any deductions to exempt employees’ accrued vacation time for partial-day absences.. The employees in Conley attempted to extend the Suastez decision by arguing that if PG&E could not make deductions to exempt employees’ pay for partial-day absences, the organization could not make deductions to exempt employees’ accrued vacation balances either, since accrued vacation is a form of vested wages (i.e., pay.). The court held that because PG&E’s policy only required deductions to be made from exempt employees’ accrued vacation balances if the employees missed at least four hours of work in the workday, the policy did not prevent vacation pay from vesting as it is earned and was consistent with federal law.. In its advice letter, the DLSE concluded that “state law does not permit the deduction of accrued vacation or PTO when the employer already has an independent obligation to pay the exempt employee’s salary.” This reasoning constituted the foundation for the DLSE’s finding that, in contrast to federal law, exempt employees in California could not be allowed or required to use accrued vacation in partial-day increments.

The Governor’s budget proposes $11 million in special funds and 82.5 positions, phased in over three years, for the Division of Labor Standards Enforcement to pursue additional investigations of labor standards violations. In this analysis, we provide our assessment of the Governor’s proposal and raise several concerns that we believe should be addressed before any funding and staffing are approved.

State law places responsibility for enforcing labor standards on DLSE within the Department of Industrial Relations (DIR).. This unit provides an administrative process for individual workers to pursue unpaid wages and other damages from an employer who has violated wage and hour requirements.. First, a worker submits a wage claim to WCA that alleges that wage and hour requirements were not followed and the worker is due unpaid wages.. The RCI unit investigates complaints from workers who allege that they faced unlawful retaliation—such as dismissal—because they engaged in certain protected activities, such as reporting a labor standards violation to DLSE or threatening to report a violation.. Following an investigation, the RCI unit issues a determination that may include requiring the employer to take actions to address the retaliation, such as reinstating the worker.. The new funding and positions requested in the Governor’s proposal are intended to allow DLSE to increase the number of investigations conducted under the strategic enforcement approach.. The Governor’s proposal identifies several industries as priorities for additional investigations.. However, citations for wage and hour requirements, such as the minimum wage, increased as a percentage of total citations over this period, consistent with the Labor Commissioner’s priority of focusing on wage and hour violations.. Finally, and perhaps most importantly, the average amount of unpaid wages found due per filled staff position in BOFE also increased significantly over the same period, suggesting that resources dedicated to investigations of wage and hour violations became increasingly effective.. Prior to CalAtlas, information about complaints and investigations was not tracked consistently across field offices, limiting DLSE’s ability to assess trends in complaints and analyze the effectiveness of past investigations and use this analysis to refine investigation targeting.. The 20 percent vacancy rate in 2015‑16 represents an improvement over prior years, but we remain concerned that a significant portion of the positions requested in the Governor’s proposal might not be filled on a timely basis if they are approved.. In light of these concerns, we withhold our recommendation at this time on whether the Legislature should approve the requested multiyear funding and positions increase and suggest that DLSE provide additional information at budget hearings on the following issues relative to the proposal:. We suggest that the Legislature wait to approve any additional funding or staffing for labor standards enforcement until DLSE has provided additional information that addresses the above questions and concerns.

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On March 25, 1992, DLSE filed suit against Fidelity to recover unpaid wages and penalties under the state's prevailing wage law.. Here, the parties agree the project was accepted as complete by AUSD on December 10, 1991, that no notice of completion was ever recorded, 8 and that DLSE's complaint was filed on March 25, 1992.. The 90-day period for DLSE to act begins to run upon the completion of the public work unless a notice of completion is recorded within the next 10 days.. As noted above, the recording of a notice of completion invokes a shorter statute of limitations for the recording of mechanics' liens, service of stop notices, or filing of claims against the payment bond surety.. DLSE suggests Fidelity could have recorded a notice of completion itself thereby limiting the time during which DLSE could file a claim.. Finally, DLSE relies upon legislative history to support its position that the 90-day statute of limitations requires both acceptance and the recording of a notice of completion.. The surety claimed that the state was barred by a statute of limitations providing: “ ‘Suit against the surety or sureties on the contractor's bond may be brought by any claimant, or his assign, at any time after the claimant has ceased to perform labor or furnish material, or both, and until the expiration of six months after the period in which verified claims may be filed․’ ” (Id.. When proceeding under section 1775 to recover unpaid prevailing wages and penalties, DLSE must act within 90 days of the acceptance of the public work or the recording of a valid notice of completion, whichever occurs last.. Lumbermens contends that affording DLSE the right to proceed against the surety obviates the 90-day statute of limitations for DLSE to recover unpaid prevailing wages and penalties under section 1775, because the limitations period for claims against the surety is at least seven months.. At the time of the amendment, Code of Civil Procedure former section 1193.1 required a notice of completion to be recorded within 10 days after completion.

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Fidelity appealed from the judgment, alleging that DLSE's complaint was barred by the statute of limitations, that the trial court erred in assessing unpaid wages against Fidelity, and that any recovery in favor of DLSE should be further reduced by those wages attributable to employees enrolled in an apprenticeship program because ERISA preempts application of the prevailing wage law to such programs.. A stop notice for public work may be served by a claimant other than an original contractor but must be served no more than 30 days after a notice of completion is recorded or 90 days after completion if no notice is recorded.. Civil Code section 3248, subdivision (c) provides that the payment bond shall “[b]y its terms inure to the benefit of any of the persons named in Section 3181 so as to give a right of action to such persons or their assigns in any suit brought upon the bond.” In turn, Civil Code section 3181 describes those parties entitled to serve a stop notice in a public works context: “Except for an original contractor, any person mentioned in Section 3110, 3111, or 3112, or in Section 4107.7 of the Public Contract Code, or furnishing provisions, provender, or other supplies, may serve a stop notice upon the public entity responsible for the public work in accordance with this chapter.” DLSE is not included in any of the code sections enumerated in Civil Code section 3181, nor is it otherwise described there.. Furthermore, Civil Code section 3248, subdivision (b) requires the payment bond must “[p]rovide that if the original contractor or a subcontractor fails to pay any of the persons named in Section 3181, or amounts due under the Unemployment Insurance Code with respect to work or labor performed under the contract, or for any amounts required to be deducted, withheld, and paid over to the Employment Development Department from the wages of employees of the contractor and subcontractors pursuant to Section 13020 of the Unemployment Insurance Code, with respect to such work and labor that the sureties will pay for the same․” The Legislature included certain unemployment insurance contributions within the payment bond's coverage.. DLSE contends the Krueger court meant that DLSE is not a proper claimant under the Civil Code stop-notice provisions to the extent DLSE seeks penalties and not unpaid wages because penalties, unlike unpaid wages, inure to the benefit of the state not the workers.

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