Clocking System

California Appellate Court Upholds Employee's Calculation of Unpaid Wages

In a decision submitted for official publication on October 14, 2021, the Court of Appeal of the State of California Second Appellate District Division Four upheld a trial court’s decision to enter judgment in favor of a warehouse employee for wage violations claims filed in a lawsuit against his former employer. The trial court awarded the employee $99,394.16, of which $42,792.00 accounted for unpaid overtime wages. The case, Byron Jerry Morales v Factor Surfaces LLC et. al., reaffirms California Labor Code and principles of employment law when calculating an employee’s regular rate of pay.

Case Background

Byron Jerry Morales was a warehouse employee employed by Factor Surfaces LLC. The company hired Morales in 2016. Morales performed a variety of duties, vital to the financial success of the company. Morales cleaned and sanitized the warehouse; he accepted shipments of supplies and equipment; he facilitated and personally made deliveries and pick-up of workplace materials; and, he engaged in customer service relations.

In 2018, the employment relationship between Morales and Factor soured, when Factor terminated Morales’s employment, after Morales asked to be compensated for unpaid overtime wages.

In 2019, Morales filed a lawsuit against his former employer, alleging that the company retaliated against him; the company violated California law by failing to maintain and provide employee records and wage statements; the company failed to pay overtime wages, along with meal and rest break compensation; and, for wrongful termination.

The Trial

At trial, Factor Surfaces LLC and its agents Gregory and Bianca Factor, both testified that the company was unable to produce as evidence Morales’s employment records and wage statements as required by statute. The employment records and wage statements would have indicated, at minimum, Morales’s regular rate of pay along with the number of days and hours he worked.

However, the company claimed that the records went “missing” after a truck owned by the company was stolen from inside a gated community. Supposedly, Morales’s employment records were inside the truck, and although the stolen truck was later recovered, the records were not. The company also testified that Morales was not paid commissions for sales.

Morales, however, was able to provide evidence at trial of his regular rate of pay and wage history with his former employer. Prior to March 9, 2018, Morales worked a full-time schedule at his former employer: 8:00 a.m. to 6:00 p.m. Monday through Friday and 9:00 a.m. to 5:00 p.m. on Saturdays. After March 9, 2018, Morales stated that he worked two (2) or three (3) Saturdays per month. Morales estimated that prior to March 9, 2018, he earned eighteen (18) hours of overtime per week, and after March 9, 2018, he earned approximately fourteen (14) hours of overtime per week because he was not working every Saturday.

Morales testified and provided evidence in the lawsuit that his regular rate of pay in 2016 was $120.00/per day, and that he received a three percent (3%) commissions on sales, which at the end of 2017, was reduced to one and a half percent (1.5%). Without explanation, the company cut Morales’s commission on sales to zero (0%). Also, at some point during Morales’s term of employment the company increased his weekly wages to $150.00/per day.

The burden is on employers to maintain records of an employee's time worked, duties performed, and wage history.

The Trial Decision

The issues of the trial ultimately boiled down to two questions: (1) which side of the lawsuit, Morales or Factor Surfaces, was more credible or believable based on their testimonies and evidence presented at trial; and (2) whether the trial court should accept Morales’s calculation of his regular rate of pay which included unpaid overtime wages and commission sales?

The trial court’s answer to the first question: Morales. In this case, the employee was found to be more credible than the former employer. Morales established that he performed work for the company that was not properly compensated; and, he provided sufficient evidence to demonstrate the amount and extent of work he performed. The burden then shifted to Factor Surfaces to provide accurate and complete employee records and wage statements as required by California law, and the employer could not. The best defense the company could raise was the documents were stolen. With that, the trial court accepted Morales’s calculation of his regular rate of pay while employed by Factor Surfaces. In result, the company filed an appeal challenging the trial court’s acceptance of the employee’s calculation of regular rate of pay.

The Appeal

The Court of Appeal reminds us that – under California Labor Code Sec. 510(4) – overtime pay means “any work performed by an employee in one workday, and work performed in excess of forty (40) hours in any one work week, must be compensated at no less than one-half time times the employee’s regular rate of pay.” Generally, commission workers receive compensation for their commission sales based on a different formula under California law.

However, in this case, because the employee was found to be more credible than the former employer; and the employer failed to provide any records as evidence, the Court of Appeal agreed that the trial court’s acceptance of Morales’s calculation of his regular rate of pay which included unpaid overtime wages and weekly commission sales was proper.

What does this mean?

What this means for employees is that the Court of Appeal is signaling one way to protect job interests against the unfair labor practices of employers. Employees may be able to do this by keeping copies of their wage statements, records of time worked, and work performance. The Court reiterates “where the employer has failed to keep records required by statute, the consequences for such failure should fall on the employer, not the employee. In such a situation, imprecise evidence by the employee can provide a sufficient basis for damages.”

The Court is saying that, even if the employee is not able to provide precise records, if the employee can at least present credible or believable testimony and records of the employee’s wage history and hours worked, it may be sufficient to shift the burden to the employer to prove otherwise; and, if the employer cannot prove otherwise, then it may lead to recovery of commission sales, unpaid overtime wages, and damages in a lawsuit. $25,000.00 of Morales’s award was for emotional distress damages.

Employees should practice saving and cataloguing their pay stubs or weekly paychecks; track missed meal or rest break periods; track duties performed at work and hours worked; and, track the number of wages earned from commission sales. This information could prove to be vital in a lawsuit for damages.

Each case will depend on the specific facts, so it is important to consult with an experienced labor law attorney to assess the specifics of your case to determine if you are owed additional compensation and unpaid overtime wages from your employer.

Free Consultation

Srourian Law Firm, with locations in Los Angeles, Westwood, Woodland Hills, and Orange County is experienced in all aspects of employment law including wage, labor, meal and rest break violations in the workplace, and have aggressively represented employees in Los Angeles, Hollywood, Santa Monica, Orange, Irvine, Anaheim, Santa Ana, Newport Beach, Costa Mesa, Fullerton, Tustin, Mission Viejo, San Clemente, Garden Grove, Laguna Niguel, Brea, Fountain Valley, Aliso Viejo, Yorba Linda, Westminster, Laguna Hills, Cypress, and La Habra.

If you or someone you know suffered employment violations, you may have certain employee rights under state and federal law, and may be entitled to compensation as a part of a class action lawsuit. Please contact us to speak with one of our lawyers for a free consultation.


Dismissal Contract

FAQs on Severance Agreements: Should I sign it?

Severance agreements are legally binding contracts. Consult an attorney to protect your rights.

Learning that you are being laid off or fired from your job is stressful, to say the least. In many cases, your employer will offer you a severance package and ask you to sign a severance agreement. Before you sign any severance agreement, you should know your rights and protect yourself financially and professionally. You should also consult an attorney to ensure your severance agreement is accurate and fair.

Here are some FAQs about severance:

Q: What is a severance package?

A: A severance package refers to a payment or other benefits an employer offers an employee upon termination of employment. Generally, an employer is not required by law to offer a severance package to every employee unless there was a previous agreement included in the terms of employment. Nevertheless, many employers voluntarily offer a severance package in order to limit liability and as a way of assisting employees. Employees who are terminated for poor performance or terminated for cause are generally not entitled to severance.

Q: What is a severance agreement?

A: First and foremost, a severance agreement is a legally binding contract between you and your employer that indicates you have agreed to accept a severance package as a result of the termination of your employment. You should realize that you are agreeing to the terms of the agreement, and the agreement will be enforceable. Signing a severance agreement will usually mean that the employee agrees to give up (or waive) certain rights in exchange for the payment specified in the agreement. The most important right that an employee waives by signing a severance agreement is the right to sue the employer for any reason, such as harassment, discrimination, retaliation, wrongful termination, or violations of the California Labor Code. In other words, your employer is offering to give you a payment in exchange for a promise that you will not sue them for terminating your employment. Also, depending on the severance agreement, you may be giving up other rights as well such as a confidentiality clause that prohibits you from speaking about the termination. Because you are waiving important rights, you should always consult with an attorney before signing a severance agreement.

Q: Are severance agreements enforceable?

A: Yes. Since the severance agreement is a contract, it is legally binding and courts will generally enforce the terms of the contract. That means, for the most part, you are bound by the terms of the severance agreement. Of course, there are some employment rights that are not waiveable under a severance agreement, and even if they are included will not be enforceable. These include rights that are strictly protected under California and/or federal law such as a dispute over unpaid wages or overtime pay you may be entitled to. However, for the most part, a severance agreement is enforceable absent certain theories of contract law such as duress, fraud or unconscionability.

Q: Do I have to sign a severance agreement to receive a severance package?

A: Yes. By design, you will not receive your severance package unless you sign a severance agreement. That’s why it is important to consult an attorney so you fully understand the terms of the agreement. But before you sign a severance agreement, you are free to negotiate the terms of the severance package. Remember, a severance package is merely an offer that you are free to accept, reject or negotiate. Of course, if you do not agree to a severance package, you will not receive any severance payment or benefits.

Once you are told that your employment is being terminated, you should consult the employee handbook to see what rights and benefits you have as an employee as well as any pre-employment terms and agreements to ensure the severance package fairly reflects any prior agreements. Also, there are also certain benefits that are protected by law that you are entitled to after termination such as COBRA for health care, and ERISA for retirement benefits.

Q: Do I need an attorney?

A: Yes. In all legal matters, it is best to consult with an attorney, particularly in a stressful situation like losing your job. Even if you are caught off guard, don’t rush to accept a severance package or sign a severance agreement. You have certain rights as an employee that are protected by law, and you need an experienced labor attorney to ensure your rights are protected.

Labor law is quite complicated, and losing your job is stressful. You should consider consulting an attorney to advise you about relevant local, state and federal labor laws that are enacted to protect employees. Also, an attorney should review the severance agreement to ensure the terms are accurate and lawful. More importantly, an attorney can advocate for you during this difficult situation.

FREE CONSULTATION

Srourian Law Firm, with locations in Los Angeles, Westwood, Woodland Hills, and Orange County is experienced in all aspects of employment law including severance agreements and have aggressively represented employees in Los Angeles, Hollywood, Santa Monica, Orange, Irvine, Anaheim, Santa Ana, Newport Beach, Costa Mesa, Fullerton, Tustin, Mission Viejo, San Clemente, Garden Grove, Laguna Niguel, Brea, Fountain Valley, Aliso Viejo, Yorba Linda, Westminster, Laguna Hills, Cypress, and La Habra.

If you or someone you know suffered employment violations as an employee or need advice regarding a severance agreement, you should be aware of the employee rights and protections under state and federal law to ensure the severance package is fair and accurate. Please contact us to speak with one of our lawyers for a free consultation.