Silver Lining In A California Wage And Hour Cloud

Seyfarth Synopsis: Employers adopting an Alternative Workweek Schedule (AWS) must follow the specific rules in the applicable wage order or face liability for unpaid overtime. But employees cannot recover penalties for accurate wage statements, even if the statements do not record unpaid wages that are due. Maldonado v. Epsilon Plastics, Inc.

Legal Background

California Labor Code section 511 provides that an employer may adopt an AWS only if two-thirds of the affected employees approve the AWS in a secret vote. Specific AWS requirements appear in the applicable wage orders.

Wage Order 1, for the manufacturing industry, permits adoption of an AWS only upon satisfying these requirements: (1) the employer proposes an AWS in writing, (2) two-thirds of the affected employees vote to adopt the proposed AWS, in a secret ballot conducted during regular working hours at the work site, (3) the employer has made a written disclosure regarding the effects of the proposed arrangement on wages, hours, and benefits, and has held at least one meeting at least 14 days before the vote, (4) the results of the election have been timely reported to the Division of Labor Statistics and Research, (5) employees have not been required to work the new hours for at least 30 days after election results were announced, and (6) the employer has not coerced any employee's vote.

Labor Code section 226, meanwhile, requires that employers issue wage statements for each pay period that accurately record such things as the wages earned, the number of hours the employee has worked, and the pay rate assigned to each hour of work.

The Facts

Olvin Maldonado operated a production machine for Epsilon Plastics, Inc., manufacturing plastic bags. Maldonado worked under an AWS by which employees worked 12-hour shifts that paid them at their regular rate for their first 10 hours of work and at an overtime rate for the next two hours.

Maldonado sued Epsilon on behalf of a class of production employees, claiming unpaid daily overtime wages for the time worked after eight hours. The lawsuit involved four periods in which Epsilon's plant operated on an AWS.

The first period began in April 2007. The AWS then in effect had been in place since Epsilon acquired the plant from Apple Plastics in 2002. The trial court found no evidence that Apple had met the AWS requirements of a written disclosure, a meeting, a vote, a 30-day waiting period, or a report to the state. In January 2008, Epsilon...