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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.


Know The Law

Know the Law. Know your Rights.

Under California labor law, overtime wages must be paid when an eligible employee works overtime. Make sure your rights are protected when you work overtime. Here are some FAQs about overtime wages:

When am I entitled to overtime wages?

According to California labor law, a work day consists of eight hours of labor, and a workweek consists of no more than 40 hours a week. Any additional hours beyond eight hours per day or 40 hours per week are considered “overtime” and employees are entitled to overtime wages. Under the law, overtime wage must be at least one and one-half times the regular rate of pay. Moreover, any employee who works more than 12 hours in one day shall be entitled to overtime pay of no less than two times the regular rate of pay. There are additional overtime requirements for employees who work more than eight hours on their seventh consecutive workday,

Not every employee is entitled to overtime pay however. There are some narrow exemptions based on salary and job description, and in cases where a flexible work schedule is agreed upon. Also, some hours such as travel time, is not considered part of the workday.

How is overtime pay calculated?

Overtime pay is based on the employee’s regular hourly rate of pay. If the employee earns a salary, then the hourly rate is calculated by dividing the annual salary by 52 weeks, and the weekly pay is further divided by 40 hours. If an employee receives different rates of pay, then overtime is calculated by a weighted average of the rate.

What happens if I don’t get overtime pay?

An employer who fails to pay the lawful overtime wage to an eligible employee has broken the law. In that case, an employee has the right to sue under California law. According to California labor code section 1194, the employee may be able to recover the unpaid balance plus interest, as well as attorney’s fees and costs.

California labor law also requires overtime pay to be included in the next schedule paycheck. This is required by law regardless of any administrative delays such as having a supervisor approve the overtime.

Can I decline overtime pay?

Under California labor law, an employee cannot decline overtime pay if they are eligible. In other words, an employee cannot tell an employer that they will work overtime at the regular hourly rate. The reason for this is because California labor laws are designed to protect employees and are among the most strict and specific in the country. Allowing employees to waive their state rights to overtime pay is not good public policy and may be harmful to employees overall.

Also, employees cannot hide the fact that they are starting “overtime” hours from employers. This means that an employee cannot prevent employers from knowing they are about to accrue overtime hours, and therefore allow the employer the opportunity to prevent the employee from working overtime hours.

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 overtime wages 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 such as not receiving overtime pay in California, you may have certain employee rights under state and federal law and may be entitled to unpaid wages, interest, attorneys’ fees and costs, and/or be entitled to compensation as a part of the class action lawsuit. Please contact us to speak with one of our experienced lawyers for a free consultation.


Know The Law

Know the Law. Know your Rights.

Most people eagerly await payday in order to pay rent and bills on time, or maybe to splurge a little. Getting a late paycheck, regardless of the reason, is not only frustrating, but it could be against the law. Under California labor laws, employers must pay you on time, or they are violating your rights and breaking the law.

In general, employees must be paid by a certain date depending on whether paychecks are issued every two weeks (bi-weekly) or twice a month (bi-monthly). There are some narrow exceptions that apply to certain types of employees, such as salaried monthly executives, but the vast majority of employees are protected under California Labor Code section 204(a).

California Labor Code § 204(a) (in relevant part)

Labor performed between the 1st and 15th days, inclusive, of any calendar month shall be paid for between the 16th and the 26th day of the month during which the labor was performed, and labor performed between the 16th and the last day, inclusive, of any calendar month, shall be paid for between the 1st and 10th day of the following month.

For example, if an employee is paid twice a month, the pay period is often divided into the 1st through 15 days of the month; and the 16th through the last day of the month. Under California law, employers must issue paychecks no later than the 26th of the month for the first pay period, and the 10th of the following month for the second pay period.

For employees that are paid every two weeks, or weekly, the law requires employers issue checks within seven calendar days after each pay period. Failure to issue timely paychecks could subject employers to significant penalties.  

Also, according to California Labor Code section 204(b)(1), Employees have a right to be paid for overtime by the next regular paycheck. That means if you accrue overtime during a particular pay period, those extra wages must be included in the next paycheck. Again, if your employer fails to pay you overtime wage on time, your rights have been violated and you should seek legal advice.

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 failure to receive paychecks on time 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 such as not receiving paychecks on times in California, you may have certain employee rights under state and federal law and may be entitled to unpaid wages, interest, attorneys’ fees and costs, and/or be entitled to compensation as a part of the class action lawsuit. Please contact us to speak with one of our experienced lawyers for a free consultation.