Can you imagine how it would feel to be a small business owner hit with a lawsuit? In California, this is a reality for many.
If you own or operate a business with employees, it's important to be aware of the importance of not only what the labor laws are, but how to comply with them so your books are in order should a lawsuit come around.
Employers operating in the state of California are at increased risk for lawsuits related to labor code violations due to the state’s Private Attorneys General Act (PAGA), which took effect in 2004.
Since its enactment, multiple rulings by the California Supreme Court have led to dramatic increases in the number of PAGA lawsuits being filed against employers.
So what does that mean, and how can you protect you and your business from being sued?
What is a PAGA lawsuit?
Let's explore what a PAGA lawsuit is, and what you need to know.
PAGA lawsuits pose a serious threat to California businesses. Under PAGA, employees can bring “representative action” against employers on behalf of themselves, other “aggrieved” employees, and the state of California. In effect, PAGA has deputized employees to act as private attorneys general, allowing them to pursue civil penalties that, prior to PAGA’s enactment, could only be sought by the Labor Commissioner.
Oftentimes, PAGA lawsuits stem from things like break violations, inaccurate paystubs, and record-keeping violations. Penalties are awarded on a per-payroll basis, are calculated per aggrieved employee, and can be stacked. While courts do have discretion when awarding these penalties, it’s not uncommon for them to add up to hundreds-of-thousands or even millions of dollars! That's a hard pill to swallow for any small business owner.
The way the law is set up makes it very difficult for employers to get out from under these lawsuits once they’re filed, so it’s extremely important to take preventative measures and make sure you’re operating in full compliance with California labor laws in order to protect you and your business.
What are labor laws?
Labor laws are based on the rights and responsibilities of employees and may vary by state. In California, the laws are strict and penalties are heavy.
PAGA lawsuits can be based on just about any violation of the California labor code, but many cases centre around inaccurate paystubs, failure to provide adequate meal breaks and rest breaks, miscalculated overtime pay, and improper record keeping.
For example, in the state of California, employers are required to give every employee one uninterrupted, 30-minute meal break for every 5 hours worked and one 10-minute paid rest break for every 4 hours worked (or “major fraction thereof”). If the break is missed, a labor law has been broken.
Under the California labor code, meal breaks may be waived by mutual consent if the shift does not exceed 6 hours, and the second meal break can be waived (assuming the first was not) if the shift does not exceed 12 hours, but proof of mutual consent is key to protecting yourself as a business owner.
Finally, meal breaks need not be paid, as long as the employee is fully relieved of their duties for the entirety of the break. In contrast, rest breaks must be paid and the employee must be fully relieved of their duties for the entirety of the break and be allowed to leave the premises. Failure to provide a compliant break results in one hour of premium pay. Is your head spinning yet?
It's hard to keep track when you have a large quantity of employees, who need to take their breaks in a fast-paced work environments. That is why it’s important to have an automatic payment system in place to make sure premium pay is given to employees who miss their breaks.
How can I stay compliant with labor laws?
In order to make sure you are in compliance with these and other labor laws, experts say you should take the following steps:
- Create, implement, and distribute legally compliant handbook policies.
- Remind employees of their right to meal and rest breaks frequently.
- Develop anonymous reporting avenues.
- Have employees review time records on a daily or weekly basis to ensure accuracy and place the burden on them to notify you if they miss a meal or rest break.
- Put a systematic plan in place to investigate meal period violations when they occur and pay penalties when appropriate.
- Have policies and memos that reinforce the rights of employees to take breaks.
- Train managers in compliance.
- Conduct your own random audits to ensure your policies are in compliance and are being followed.
- Develop a plan for tracking de minimis (“insignificant”) time (the time employees spend locking up after clocking out, for example).
How technology can help save you from a lawsuit.
If you’re operating a business in the state of California, compliance is key in order to prevent PAGA lawsuits from threatening your bottom line. Workforce management software can help you implement compliance policies and procedures in a convenient, cost-effective way.
Workforce management software like Push integrates all aspects of employee management into one simple platform that can streamline your operations and help you stay with labor laws, all while leaving a digital footprint for authorities to review. Here's how
Time tracking software with facial recognition.
Time tracking software that uses facial recognition software verifies the employees work behaviours, and ensures that punch in's and out's are done by the employee alone. This can be used to record break times.
Time tracking software with built in customizable survey features.
Time tracking software that allows business owners to customize survey questions for employees is a great way to have employees sign off on their break behaviours. Before signing out for the night employers can ensure employees check off the "break taken" function. These functions can be used to ensure the employee gives their digital sign off on record, to avoid any lawsuits in the future.
Integrated payroll software
Payroll software that integrates with time tracking features ensure that employees are paid for the hours that they are worked, thanks to facial recognition technology.
Using a system that has automated calculations means that employees are always paid the right amount, for the right amount of time.
Payroll software with automated calculations
Investing in software with automated calculations means you can set up your payroll to pay out automatic payment of break premiums without having to make manual changes at the end of every shift. Another key feature payroll software can automate and track is tip pooling management.
Want to stay compliant?
Although we aren't lawyers, we did connect with one of the top attorneys in California to collaborate on a compliance checklist for your business!
Download the checklist and use it to make sure you are staying compliant with PAGA laws, and avoid a lawsuit!