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Wage and Hour Compliance: The World of Wage Orders

March 02, 2017 Matthew Schechter

Wage orders are an oft forgotten feature of the employment law landscape, but one which may trip up employers.  Employers should take steps to understand what wage order applies to their business, and make sure they are in compliance with the requirements of the applicable order.

California’s wage orders are rules created by the Industrial Welfare Commission (“IWC”) governing employees’ wages, hours and working conditions.  While the IWC no longer operates, the wage orders are still enforced by the Labor Commissioner.

There are 17 wage orders: 12 of them cover specific industries (“industrial orders”)  such as manufacturing, professional, clerical, amusement and recreation, and transportation, while the other 5 cover certain occupations (“occupational orders”) such as construction or mining and agriculture.  Most jobs will be covered by one of the industrial orders.  If you are not covered by an industry order, an occupational order will apply.  There are also occasional situations where both an industrial and an occupational order will appear to apply.  In such cases, the industrial order takes precedence.  Whichever order applies, though, it needs to be posted in an area frequented by employees, where it may be easily read during the workday.

Unfortunately, deciding which wage order applies is not as simple as it seems.  It is not uncommon for the same job to fall under completely different wage orders, solely on the basis of where the particular job is performed.  For example, if you work as an office assistant at a company that builds cars, you are under Wage Order #1 which covers the manufacturing industry.  However, if you do that same job at a law firm, because law firms are not covered by an industry order, you would be covered by Wage Order #4 (an occupational order).  Similarly, nurses who work in a doctor’s office are covered by Wage Order #4 – doctor’s offices, like law firms, are not covered by an industry order – but nurses in hospitals fall under Wage Order #5 which covers the public housekeeping industry. 

Confusion may also occur where a business engages in more than one type of operation, each of which, if operating independently, would fall under different wage orders.  In those circumstances, one looks to the main purpose of the business to determine the wage order that applies to all employees.  Take, for example, XYZ Corp. the main purpose of which is operating a warehouse, but the company also employs a sales staff to sell goods.  If the businesses were separate, Wage Order #9 – which covers the transportation industry – would cover employees who work in the warehouse operations business, while Wage Order #7 would cover the employees in the sales business.  Because the business is “under one roof,” however, and the main purpose of the business is to operate the warehouse, all of the employees will be covered by Wage Order #9. 

As one would expect, there are some employees and occupations – such as attorneys, doctors, teachers – which are exempt from specified sections of the wage orders.  However, bear in mind that even if one is exempt from a wage order, the provisions of the Labor Code still apply.

Knowing which wage order applies, the next question is why it is important to know the wage orders in the first place?  The wage orders are important because they contain many detailed requirements with which employers are often not familiar.  Some of the items that employers must observe that appear in most wage orders include:

  • Providing clocks in the workplace;
  • Furnishing paystubs or wage statements containing specific information;
  • Providing suitable seating for employees;
  • Making changing rooms and resting facilities available;
  • Maintaining reasonably comfortable temperatures in work areas; and
  • Requiring employers to keep detailed wage and time records.

Moreover, when an employer fails to comply with those requirements, the employer may be sued for damages suffered by an individual employee, or by a class of employees.  Take, for example, an employer who does not properly pay overtime and then compounds that error by providing a wage statement that does not accurately reflect the correct amount of wages earned.  Not only is that pay stub wrong – and thus a violation – but each subsequent pay period could be incorrect, because the year to date hours and wages may not be accurate.  Each time an incorrect statement is issued, another violation occurs.  Multiply that by several hundred employees, and one realizes how penalties can escalate rapidly.

Recognizing which wage order applies to your business and ensuring that you are in compliance with that order’s requirements are vital to your business.  Do not let wage orders get you!

 

Matthew Schechter is a partner at McManis Faulkner. He has a varied civil litigation practice with a particular emphasis on employment law.