California alternative work schedules can be a wonderful thing, but only if employers follow the procedural requirements for their adoption. Otherwise, they are a trap, especially for out-of-state employers with California operations who may not be as intimately familiar with California wage and hour laws, including the requirement of daily overtime.
One California employer recently discovered the importance of following the special AWS procedural rules during a wage-hour class action.
Alternative Work Schedules
What’s an alternative work schedule in California? An alternative work schedule, or “AWS,” refers to a compressed or flexible work schedule. Two common AWSs are the so-called “4/10” or “9/80” schedules. Under a 4/10 schedule, employees work 10 hours a day for four days and receive no daily overtime, but receive an additional day off. A 9/80 schedule compresses 80 hours of work into nine work days instead of the usual 10 under a regular bi-weekly schedule. Employees do not receive overtime pay based on the extra eight hours, but they receive an extra day off every two weeks.
California Labor Code Section 510(a)(1) provides that “any work in excess of 8 hours in one day shall be compensated at the overtime rate of time and a half. This does not apply, however, to an employee working pursuant to a properly adopted AWS.” (Emphasis added.)
Alternative work schedules are popular with employees, who like the flexibility and the extra full days off, and with employers, who have increased flexibility without overtime liability.
The Catch
Because alternative work schedules require employees to waive their right to receive overtime, employers may not impose them unilaterally. An employer may adopt an AWS providing for no more than 10 hours of straight time in one day without the payment of overtime, only if it receives approval in a secret ballot election by at least two-thirds of the affected employees. (Labor Code § 511) Industrial Welfare Commission wage orders provide further requirements applicable to specific industries, including the following:
- The proposal must be in the form of a written agreement from the employer.
- The employer must disclose, in writing, to affected employees, the effects of the proposed arrangement on the employees’ wages, hours, and benefits (if 5 percent or more of the affected employees speak a language other than English, the disclosure must also be provided in that language).
- A duly noticed meeting must be held at least 14 days prior to the secret ballot vote.
- Notice of election results must be provided to the California Division of Labor Statistics and Research.
- There must be a 30-day waiting period between the election and implementation.
In addition, employers are prohibited from intimidating employees, or forcing them to vote for or against a proposed AWS.
Maldonado v. Epsilon Plastics, Inc.
Epsilon employees had a relatively ordinary 48/32-hour work schedule. In other words, they worked 12 hours a day, alternating between four-day workweeks and three-day workweeks. They received their regular rates of pay for 10 hours of each day, and overtime for the remaining two hours. The plaintiffs brought a class action under California wage and hour law for unpaid overtime. Although the trial court found that the Epsilon arrangement would have been a permissible AWS, it nonetheless ruled that Epsilon was liable for unpaid overtime, interest, waiting time penalties, inaccurate wage statement penalties, and attorneys’ fees because it failed to establish that it had complied with California’s procedural requirements for adopting an AWS. On appeal, Epsilon argued that a predecessor entity had properly adopted the AWS, and that the evidence did not support the trial court’s ruling.
The Court of Appeal affirmed, holding that “[t]he assertion of an exemption from the overtime laws is considered to be an affirmative defense, and therefore the employer bears the burden of proving the employee’s exemption.” Thus, Epsilon had the burden of proving that the AWS was properly adopted, even if the adoption was made by a predecessor entity. Epsilon’s evidence was limited to some documentary evidence that the AWS was adopted in 1993 and confirmed by votes in 1999; however, there was no evidence of a pre-adoption election and vote as required by law.
Implications for Employers
Conventional HR wisdom is that employers should encourage better work-life balance through flexible scheduling, occasional longer days in exchange for predictable days off, or early departure (like summer hours). However, when it comes to non-exempt employees in California, such benefits are more easily touted than accomplished.
Both California-based employers and out-of-state employers with employees in California should carefully consider the disclosure, secret ballot election, and opt-out provisions of the applicable AWS rules before moving forward with alternative schedules. Failure to do so may result in years of back overtime liability, and additional penalties and expenses, in the event of a legal challenge.
It is never too early to review AWS policies and procedures in California!