A recent decision from the California Court of Appeal, Maldonado v. Epsilon Plastics , tells the story of Epsilon Plastics, Inc. (“Epsilon”), an employer that learned the hard way about the perils a California employer may face when it tries to “go it alone” in implementing and maintaining an Alternative Workweek Schedule (“AWS”). The California Industrial Welfare Commission (“IWC”) wage orders allow an employer to implement an AWS for hourly employees whereby employees may work regular shifts of over eight hours (in the case of manufacturers like Epsilon, up to 10 hours) at their regular payrate before becoming eligible for overtime hours. However, an AWS can only be implemented with the express consent of at least two-thirds of the affected employees , as determined by a secret-ballot election or via union negotiations (for unionized employees) if certain financial benchmarks are met (Labor Code Section 514). Strict rules and timetables for announcing, holding and reporting the results of the election must be followed.
Failure to adhere to any of these rules may result in a determination — often years later — that the Alternate Work Week Schedule is invalid. For Epsilon, which had inherited an already-existing AWS from a predecessor and then re-implemented it on a number of occasions (guided solely by what its HR administrator could glean from the Internet), the result was a judgment against the company for almost one million dollars, to compensate employees not only for years of unpaid overtime premiums, but also imposing “waiting time penalties” (of up to 30-days’ pay) for employees terminated while the AWS was in place, as well as interest on the unpaid wages, and an award of almost $900,000 in attorneys’ fees.
The fateful mistakes by Epsilon included:
Failing to investigate, when it bought the plant (and continued to employ the former employees) from its predecessor, Apple Plastics, whether Apple had properly implemented the AWS;
Failing to hold a meeting with affected employees, providing them with a written proposal for the Alternate Work Week Schedule, at least 14 days before the vote. (Managers did not meet with employees until the day of the vote);
- Failing to expressly explain to employee that if the AWS was not adopted they would earn overtime premiums after eight hours of work;
- Presenting the AWS to affected employees as a foregone conclusion. (“…[O]ur plant will be moving from an (8) hour shift to a (12) twelve hour shift. …”)
- Telling an employee (via the plant manager) that if he did not agree with the AWS, he could leave;
Telling an employee (via a supervisor) that it does not matter how he votes because the plant is going to implement the AWS regardless of how he votes;
Failing to report the results of the election to the Division of Labor Statistics and Research within 30 days after the vote;
- Requiring employees to begin working under the AWS less than 30 days after the vote; and
Allowing a salaried supervisor to participate in the vote.