Artist’s wage lawsuit illustrates risks of getting the exempt classification wrong

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California requires employers to maintain accurate records of non-exempt employees’ work hours. If an employer fails to do so, an employee who establishes he was performing work off-the-clock can use imprecise evidence to show that he is entitled to damages. Hernandez v. Mendoza (1988) 199 Cal.App.3d 721, 727. A Court of Appeal recently reiterated this longstanding case law in overruling a trial court’s decision denying an employee damages.

In Furry v. East Bay Publishing, LLC, an employee who created original artwork, advertising, and event props alleged he was entitled to overtime for hours worked beyond his normal schedule for his former employer. The employee was paid a base salary plus commissions and was treated as non-exempt. The employer did not keep track of his hours, and he was not paid overtime. The employee filed a complaint, alleging he should not have been exempt. He provided estimates for time spent on various projects. Other employees also testified on his behalf as to work he did outside his regular hours. Despite finding that the employer failed to prove exempt status, the trial court concluded the employee was not entitled to any relief for unpaid wages or overtime because his testimony about his unpaid hours was “uncertain.”

The Court of Appeal reversed, finding that the fact that the employee had performed off-the-clock work was not uncertain; it was only the amount of off-the-clock work that was uncertain. The Court found he had met his initial burden and sufficiently estimated the number of hours worked, thus shifting the burden to the employer to dispute the employee’s calculations. The Court also agreed that the commissions the employees received for events could not offset the amount of unpaid overtime he was owed. Rather, the commissions should have been used to calculate his regular rate of pay, and, subsequently, his overtime rate of pay. The Court also found the employee was entitled to damages for the employer’s failure to provide itemized wage statements showing total hours worked, hourly rate, overtime rate, and the amount of overtime worked.

The employee also claimed he was entitled to pay for hours worked during his meal breaks, even though he did not challenge a finding that he was provided an opportunity to take meal breaks but chose to take them at his desk. The Court upheld the trial court’s ruling that the employee failed to show that the employer knew or reasonably should have known that the employee was working through his meal breaks.

Being an employer in California is challenging, particularly where employees are paid (in full or in part) on commission. Employers should be prudent about tracking employee’s hours worked, and they may want to consult with an attorney before drafting commission pay plans.

What’s the Takeaway?

The decision to make an employee exempt creates risks. One of the them is that it usually dictates not tracking hours, which leaves employers at the mercy of employees if they later claim the exempt classification was inappropriate. Employers should consider, in close cases, tracking hours even of exempt employees. They should also consider review of all commission agreements and exempt classification decisions, to avoid unpleasant and expensive surprises.