Minimum Wage Update!
California’s Legislature is considering AB10 this session, which would increase California’s minimum wage from the current $8 per hour to $8.25 per hour next year, to $8.75 per hour in 2015, and to $9.25 per hour in 2016. Beginning in 2017 and thereafter, the minimum wage would be automatically adjusted upward based on the state’s inflation rate. Recent legislative efforts to increase California’s minimum wage rate have failed and it is not clear whether this bill will fare differently. However, the bill did recently pass the Assembly Labor and Employment Committee. California’s minimum wage is already one of the highest in the country. Only a handful of states have minimum wage rates higher than California’s.
On the federal level, legislation has also been introduced to raise the federal minimum wage from the current $7.25 per hour to $8.20 per hour three months after the legislation is passed, to $9.15 per hour one year after the legislation is passed, and to $10.10 per hour two years after the legislation is passed. Starting the third year after the legislation is passed, the federal minimum wage would be automatically adjusted upward based on the Consumer Price Index. The federal legislation, known as the Fair Minimum Wage Act of 2013, would also increase the minimum wage for tipped employees over the next three years from $2.13 per hour to 70% of the minimum wage.
We will post developments on this and other employment-related legislation here.
Employer Hit With Unpaid Vacation Wages Even Though Union Agreed Vacation Was Properly Paid Under CBA
California employers should all be aware that California law requires employers to pay out all accrued, but unused, vacation pay immediately upon termination of employment. In other words, use it or lose it policies and/or policies that provide for forfeiture of vacation on termination of employment are illegal in California. Employers who fail to timely pay vacation wages on termination of employment are liable not only for the actual amount of unpaid vacation wages, but also for “waiting time penalties” of a full day’s regular wages for each day the payment is late, up to 30 days. There is, however, an exception to the rule prohibiting a forfeiture of vacation wages for unionized employees if the collective bargaining agreement “otherwise provides” (meaning it provides for something other than full payment of all vested vacation upon termination of employment). Recently, a California court interpreted this exception narrowly to hold that a collective bargaining agreement (“CBA”) must “clearly and unmistakably” specify that vested vacation does not need to be paid in order for a waiver to be found. In other words, an implied waiver or a waiver inferred from the totality of the circumstances (such as the past mutual practice of the union and the employer) is not good enough. The case is Choate v. Celite Corp..
In the Choate case, the employer granted its employees between one and five weeks of vacation annually. At the beginning of each year, the employer calculated the yearly vacation allotment based on an employee’s length of service and the number of hours the employee worked the year before. Under the CBA, employees terminated from employment were entitled to “receive whatever vacation allotment is due them upon separation.” Both the union and the employer understood this provision to mean that employees were entitled to be paid for the vacation time already allotted to them for the year of their termination, but not for any vacation time they had accrued toward the next year’s allotment by virtue of having performed a certain number of hours of work. The employer paid out vacation in accordance with this understanding. Notwithstanding the apparent agreement of the union and the employer as to the interpretation of the CBA’s vacation provision, a group of terminated employees sued for unpaid vacation wages and waiting time penalties.
The court held that the employer owed the pro rata vacation wages earned during the termination year because the CBA did not “clearly and unmistakably” waive employees’ right to receive those vacation wages. The court held that it was not sufficient that the union had for years agreed with the employer’s interpretation of the vacation provision. Although the court held that the vacation wages were owed, the court held that the employer did not owe waiting time penalties because the employer’s failure to pay was not “willful.” The court held that the employer reasonably believed that the wages were not owed based not only on the union’s agreement but also on conflicting case law, some of which suggested that an implied waiver standard was proper.
Employers with unionized employees who do not pay out all accrued, unused vacation on termination of employment should ensure that the applicable CBA clearly and unmistakably waives this entitlement.
