"Punching Out--
Even now, firms may be able to schedule workweeks consisting of longer days without overtime pay." by Richard S. Rosenberg

On January 1, 2000, California's law firms became subject to the Eight Hour Day Restoration And Workplace Flexibility Act (AB 60), codified at Labor Code Section 500, et seq. Among other things, AB 60 reinstated the requirement that firms pay overtime premium pay on a daily basis to all non-exempt employees. Labor Code Section 510(a). One of the principle features of AB 60 is the ability to structure so-called "alternative workweek arrangements" which enable the firm to create a schedule of longer work days without paying daily overtime. AB 60 creates three ways to do so. Labor Code Section 510(a)(1)-(3). The new law also nullifies any existing alternative workweek arrangement which was not implemented in conformity with these standards. Labor Code Section 511(f).

Sources of Regulation. The new statute calls for the California Industrial Welfare Commission ("IWC") to issue regulations implementing AB 60 by July 1, 2000. Labor Code Section 517. These regulations have yet to be adopted. However, the IWC has issued Interim Wage Order 2000, which took effect on March 1, 2000. The Interim Wage Order specifically states that it invalidates the existing version of the Wage Order covering law firms (Order 4-98) and reinstates the 1989 version of this Wage Order (except insofar as it is modified by AB 60 and Interim Wage Order 2000). Law firms must post a copy of Interim Wage Order 2000, as well as the IWC's summary of the Order, wherever workplace notices typically are posted. The full text of Interim Wage Order 2000, the IWC's summary and the 1989 Wage Order may be obtained on the IWC website at www.dir.ca.gov/IWC. Until a new Wage Order is implemented, law firms will have to follow AB 60, Interim Wage Order 2000 and the 1989 Wage Order.

The Collectively Bargained Schedule. Some law firms have a union representing the non-exempt staff. AB 60 provides a special exception to the daily overtime rules where the workforce is unionized. Labor Code Section 514. This exception applies where the employees in the bargaining unit earn at least 30% above the prevailing state minimum wage i.e., $7.48 per hour at present, and the union contract provides for some measure for paying an overtime premium on all overtime hours worked. As the minimum wage increases, the minimum rate for this arrangement also will increase. Note that since there is no viable collective bargaining exemption under the federal Fair Labor Standards Act, these firms still must pay overtime on a weekly basis after forty hours of work in the workweek.

The Secret Ballot Election. AB 60 provides for an exception to the daily overtime requirement for non-union employers when an approved "alternative workweek" is duly adopted. Labor Code Section 511. Under Section 511, the proposed "regularly scheduled alternative workweek" may be "a single work schedule that would become the standard schedule" for all of the employees in the work unit, or "a menu of work schedule options, from which each employee in the work unit would be entitled to choose". An approved alternative workweek arrangement must consist of no more than forty regularly scheduled hours in the workweek. Moreover, the regularly schedule cannot consist of more than ten hours in any one day. Labor Code Section 511(a). If the contemplated workweek arrangement exceeds those standards, then the firm must pay the requisite daily overtime.

Under the alternative workweek provisions of the Interim Wage Order, no employer shall be deemed to have violated AB 60's daily overtime provisions by instituting "pursuant to a voluntary written agreement proposed by the employer and ratified in a secret ballot election by at least a two-thirds vote of the affected employees in the work unit before the performance of the work" a regularly schedule alternative work schedule of not more than ten hours per day within a forty hour workweek. Interim Wage Order 2000, Section 3. When factoring in the revived requirements of the 1989 Wage Order, at a minimum, prior to the performance of the work (on the alternative workweek schedule), the firm must:

1. Written Disclosures. Prior to the secret ballot vote, make a disclosure in writing to the affected employees, including the effects of the proposed schedule on the employee's wages hours and benefits; and

2. Employee Meetings. Prior to the vote, the firm must conduct meetings with employees for the specific purpose of discussing the financial effects of any proposed alternative scheduling; and

3. Secret Ballot Election. Conduct a secret ballot election among the affected employees (the schedule(s) must be approved by at least two-thirds of the employees in the affected work group) Labor Code Section 511(a); and

4. Voluntary Written Agreement. Enter into a written agreement voluntarily executed by the firm and at least two-thirds of the employees in the affected work unit specifying the alternative workweek arrangement which has been agreed upon; and

5. Written Notice To The State. Communicate the results of the election (regardless of the outcome) to the California Labor Commissioner's Division of Labor Statistics and Research within thirty days of the election. Labor Code Section 511(e).

In regard to the first two requirements, each employee eligible to vote in an election must be informed, prior to the election, of the precise work schedule - that is, the precise work days and work hours - that he or she will be assigned to work (or in the case of an election to establish a "menu of work schedule options", allowed to choose from). Labor Code Section 511(a). The Wage Order states that the term "affected employees" includes all employees in a readily identified work unit, such as a division, a department, a job classification, a shift, a separate physical location, or a recognized subdivision of any such work unit. A work unit may consist of an individual employee as long as the criteria for an identifiable work unit in this subsection are met (Section 3(B)(4) of Wage Order 4 - 89).

If an alternative workweek(s) is approved, the firm may require all employees to work the alternative workweek, but must make reasonable efforts to accommodate any employee eligible to vote in the election who is unable to work the alternative workweek schedule. Labor Code Section 511(d). Neither the Labor Code nor Interim Wage Order 2000 states the extent to which the firm must actually accommodate such employees. The firm is permitted, but not required, to provide a work schedule not to exceed eight hours in a work day to accommodate any employee who is hired after the election and who is unable to work the alternative workweek. Labor Code Section 511(d). Also, the firm must "explore any available reasonable alternative means of accommodating the religious belief or observance of an affected employee which conflicts with an adopted alternative workweek schedule". Labor Code Section 511(d).

Several payment issues must be observed as well. In the event an employee is required on occasion to work extra hours beyond those regularly scheduled under the approved alternative workweek schedule, the employee must be paid overtime for the extra work at the rate of no less than one and one-half times the employee's regular rate of pay for any work in excess of the regularly scheduled hours (up to twelve and on any extra day) established by the alternative workweek arrangement. The requisite overtime is double the employee's regular rate of pay for all hours worked in excess of twelve hours in an work day or after eight hours of work on day(s) worked other than on those which are regularly scheduled. Firms may not reduce an employee's regular rate of hourly pay as a result of the adoption, repeal or nullification of an alternative workweek schedule. Labor Code Section 511(e).

Interim Wage Order 2000 is silent regarding how to terminate an alternative workweek schedule, once adopted. The 1989 Wage Order permits employees subject to an alternative workweek schedule to terminate the alternative workweek schedule after one year, upon a petition of one-third of the affected employees, and followed by a new secret ballot vote. An approval by two-thirds of the affected employees will be required to actually reverse the agreement. If the agreement is revoked, the employer must comply within sixty days. The Division of Labor Standards Enforcement may grant an extension of time for compliance upon a proper showing by the employer of undue hardship.

The Individual Alternative Workweek. The third way to establish a viable AB 60 compliant alternative workweek is codified at Labor Code Section 511(h). Labor Code Section 511(h) allows for a so-called "non-collectively bargained, non-secret ballot approved, individual alternative schedule" for certain individuals. Under Labor Code Section 511(h), individual employees working an alternative schedule as of January 1, 2000 could continue to do so without an election provided all of the following conditions exist: (1) The employee was employed on July 1, 1999; and (2) The employee was then voluntarily working an alternative workweek schedule; and (3) This schedule did not provide for work in excess of ten hours of work in any work day; and (4) This employee makes a written request to the employer after January 1, 2000 to continue working this schedule; and (5) The firm approves the written request.

Employees hired after July 1, 1999 are not eligible for an individual alternative workweek schedule. Further, if the employee was working a regular schedule consisting of more than ten hours per day, this option is unavailable, even if the employee and the firm are now willing to limit the workday to ten hours. Further, according to the Labor Commissioner, a written request to continue working the individual alternative workweek (without payment of daily overtime) will be effective only as to work performed after the date of the request. Since the basis of this exception is the voluntary agreement of the affected employee, DLSE takes the enforcement position that an employee can revoke the written request at any time, in which case the firm must begin paying daily overtime in accordance with AB 60.

Summary. AB 60 provides law firms with the opportunity to establish compliant alternative workweek arrangements. If these requirements can be met, the firm need not pay daily overtime to the affected individuals. As firms contemplate whether an alternative workweek arrangement makes sense, it is worthwhile to keep in mind that AB 60 does not prohibit regularly scheduled longer work days, provided the applicable overtime premium is paid. Thus, it may be more operationally convenient to pay daily overtime and retain work hours flexibility. Also, keep in mind that since AB 60 eliminated overtime exemptions for any hourly paid employees, all hourly paid employees must be paid overtime. This includes hourly paid professional staff. The legal community is awaiting official word from the Labor Commissioner regarding how AB 60 impacts the traditional summer clerk program. However, since the duties of typical summer clerks do not readily fit into any recognized exemption, it is risky to assume that salaried summer clerks are not entitled to state mandated overtime pay.