Employer Fraud Claim Survives Against Employee Claiming Waiting-Time Penalties

Employers often face claims by employees alleging they were not paid all wages due at the end of employment. This can be significant in California, where failure to pay any part of an employee's wages at termination can result in a "waiting-time" penalty equal to 30 times an average day's wages under Labor Code section 203. Unpaid wages could include hourly pay, overtime premiums, or even unused vacation. Section 203 can be viewed here.

Section 203 appears in most California wage suits on top of the basic pay claims. The California Supreme Court is also considering whether unpaid meal and rest-period premiums count as "wages" and support waiting-time penalties as well. (The case, Naranjo v. Spectrum Security Services, has not yet been argued but can be followed here.)

One particularly difficult situation involves models, actors, and similar individuals who perform short-term work such as photo shoots. A model obtained for one day, for example, may argue that failure to pay the same day as the work creates immediate liability for penalties (as the work is completed that day).

This has become a repeat issue in the industry, where some models have been fully paid via their agency or another party but, because they were not paid on the day they worked, nonetheless file a claim for nothing but waiting-time penalties. The entity retaining the talent and any related providers (such as photographers, makeup artists, etc.) can be shocked by such claims, especially where their agreement expressly provides that the talent's agency be paid directly. Such claims are common even in small counties; multiple claims have been filed on behalf of the same individual, for example, in one small North Bay county. See, e.g., here and here.

This is exactly what happened in Brighton Collectibles, LLC v. Natalie Hockey. According to the appellate opinion, Ms. Hockey was a model who negotiated a one-day, $3000 shoot through an agency, LA Models, Inc. The retaining business sent payment to the agency after receiving an invoice it sent weeks later. Ms. Hockey did not claim that she had not been paid, instead filing suit solely for $90,000 in waiting-time penalties (30 x $3000) because she had not been paid the day of the shoot.

The business counter-sued for fraud, alleging that Ms. Hockey intentionally misrepresented how she preferred to be paid by inducing the business to send payment to her agency rather than paying her immediately. Ms. Hockey filed an "Anti-SLAPP" motion alleging that the countersuit was improper, which was granted by the court but overturned by the appellate panel. The higher court appears to have a dim view of Ms. Hockey's strategy, holding that "such deceit, if proven at trial, does not entitle her to a [$90,000] bonus."

The case is both a cautionary tale and a bright spot for employers, who should remain vigilant in ensuring final pay is made promptly. Brighton Collectibles, LLC v. Natalie Hockey can be viewed here.

Employers May Not 'Round' Meal Periods

Employers and payroll services often 'round' time entries, calculating total time worked to the nearest tenth or quarter of an hour. Federal law expressly permits this, for example allowing time to be rounded down from one to seven minutes (8:01 is counted as 8:00) so long as time is rounded up from eight to fourteen minutes (8:14 is counted as 8:15). State law generally follows this rule so long as the process does not ultimately favor the employer.

Unfortunately, despite many employers' reliance on the doctrine, the same rule now does not apply to meal-period tracking. In Donohue v. AMN Services, LLC, the California Supreme Court held that the rounding rule cannot be used to record employee breaks because meal periods are designed to provide an absolute minimum time off for employees. According to the court, systems that apply rounding to meal periods do not guarantee that employees actually received a full 30-minute meal time, as an employer's system might show a half-hour break when the employee was gone for less than thirty minutes.

This decision, like so many recent appellate cases, applies retroactively and thus guarantees a host of Donohue-based individual and class-action claims. While payroll companies are sure to change their practices quickly, employers should monitor their providers and their own practices to eliminate rounding when tracking meal periods.

The Donohue case can be viewed here.

Ensure IIPP is Available to Employees

California's law requiring employers to maintain a written Injury and Illness Prevention Plan ("IIPP") was adopted over thirty years ago. Under this requirement, employers must proactively identify and develop plans to mitigate workplace dangers, regularly updating the IIPP if conditions change.

Cal-OSHA makes this process easy for most employers, providing model forms and guidance on its website such as the non-high-hazard example here and a full guide to developing IIPP materials here.

Effective January 1, 2021, employers must now make their IIPP available to employees or their labor representatives (i.e., union) within five days of a request. This must be satisfied by providing a written copy unless the requestor agrees to accept an electronic version. Initial copies must be free. Alternatively, the program can be maintained on an employer's electronic resources so long as employees regularly use the system to communicate with management. Employees must be advised of their right and the procedure to request review of IIPP materials (which is best distributed in the employee handbook).

The chief benefit of this change is to remind employers that IIPPs are not "set and forget" programs. Management should review and revise their programs regularly and keep copies readily available for employee (and Cal-OSHA) review.