In a case of first impression, the California Court of Appeal has ruled that even though federal law permits an employer to use the "averaging" method to determine if an employer has met its minimum wage obligations, California wage and hour law does not permit such "averaging."
In a case of first impression, the California Court of Appeal has ruled that even though federal law permits an employer to use the "averaging" method to determine if an employer has met its minimum wage obligations, California wage and hour law does not permit such "averaging." Armenta v. Osmose, Inc. (Dec. 29, 2005.)
Here, plaintiffs were union members subject to a collective bargaining agreement that provided for employees to be paid hourly wages ranging between $9.08 to $20.00 per hour. The employer's (Osmose, Inc.) business relates to maintenance of utility poles. The plaintiffs' work time was classified as either "productive" or "nonproductive." "Productive" time was time directly related to maintaining utility poles in the field. "Nonproductive" time was all other time including, but not limited to, time maintaining and cleaning the trucks used during "productive" time, repairing tools, driving to and from job sites, preparing paperwork, and the like.
The plaintiffs claimed that, while they were paid for their "productive" time at their regular hourly rate of pay, they were not paid at all for their "nonproductive" time. Osmose claimed that when the number of hours the employees worked per week was divided into their wages for that time period, it "averaged" out to more than the minimum wage.
The trial court found that Osmose violated California's minimum wage laws by using the "averaging" method of determining minimum wage compliance. The Court of Appeal affirmed the trial court's decision. In so holding, the court explained that, while the "averaging" method is acceptable under the federal Fair Labor Standards Act (FLSA), it is not acceptable under California wage and hour law. The FLSA requires payment of the minimum wage to employees who "in any work week" are engaged in commerce. By contrast, California law requires employers to pay employees wages not less than the minimum wage "for all hours worked" in the payroll period. The court explained that this language requires employees to be paid for each hour worked.
Bottom Line for Employers:
This is yet another circumstance in which California wage and hour law differs significantly from the federal law, and the laws of most other states. This is why it is imperative that all employers with employees in California have their pay practices evaluated by counsel well-versed in the differences between the wage and hour laws of California and those under the FLSA and other states.
If you have any questions regarding this decision or any other labor or employment related issue, please contact the Ford & Harrison attorney with whom you usually work or the author of this Alert, Helene Wasserman, 213-237-2403.