Company Loses by Management Inattention to California Compliant Pay Policies and Practices
A Los Angeles superior court judge has ruled McDonald’s in violation of California’s daily overtime laws in 119 restaurants. Maria Sanchez v. McDonald’s Restaurants of California, Inc., L.A. County Superior Court No. BC499888, April 20, 2017 order. The decision is a lesson in the close care required on employer overtime pay practices.
California requires that hourly employees receive overtime pay for time worked beyond forty hours in any one workweek or after eight hours in a workday. A “workday” is any consecutive 24-hour period commencing at the same time each calendar day. An employer has the prerogative to begin that 24-hour period at any time of day.
The court found McDonald’s payroll computer program was fudging on this 24-hour workday standard, and thus shorting workers on overtime pay, when: (a) an employee worked an “overnight shift” that started in the evening of Day One and ended after midnight on Day Two; and then (b) worked another shift later during that Day Two. Although the company regarded its 24-hour day to begin at midnight and end at 11:59 p.m., its payroll software was nevertheless counting all of the overnight shift hours above as work during Day One only. Only the later day-shift hours on Day Two were counted as work on that Day Two.
Thus, for example, if an employee worked an overnight shift that started at 10:00 p.m. on Day One and (with half-hour unpaid meal break) ended at 6:30 a.m. on Day Two and then came back to work another Day Two shift between 2:00 p.m. and 10:30 p.m. (with another such meal break), McDonald’s counted the whole overnight shift as Day One hours and only the later 2:00 p.m. – 10:30 p.m. day shift as Day Two hours. This would mean no overtime pay for this worker, since each shift in this example was only eight hours long.
The court found this practice in violation. Again, the company admitted that for the purpose of daily hours’ calculations, its 24-hour day began at midnight and ended at 11:59 p.m. Thus, McDonald’s was required to count all Day Two hours from midnight that day. In the example above, that would mean only two hours worked for Day One and 14 hours worked for Day Two, with 1.5x regular pay rate for the 9th through 12th hour and 2x regular rate for the 13th and 14th hours. See: Working Overtime in California.
Ironically, if McDonald’s had been careful to clearly define its 24-hour workday in policy and practice as beginning at 6:30 a.m. and ending at 6:29 a.m. the next day, it would have owed no California daily overtime on this night-shift, next day-shift scheduling. With that break point between workdays, the company could have properly counted each of the shifts in the example above as eight hours long.
If this ruling applied to only one or a few workers, its actual impact on the employer would of course be minimal. However, this Sanchez case is a certified class action lawsuit, meaning that thousands of workers employed in the 119 restaurants from January, 2009 to the present may be affected, with significant total back pay, penalties and interest assessed at the trial scheduled for later this year. Targeting larger employers as McDonald’s, such “class action” suits have become big business in the courts across the United States, including California.
Moral: careful and continuing management attention to the details of workforce timekeeping, wage calculations and the many other related procedures is essential.
For additional assistance understanding and implementing California’s overtime rules, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.
See also:
The Devil Is in The Details: Employment Class Action Suits
Contractor Misclassification … Class Action?
Brinker Case Settles for $56 Million
Tim Bowles
April 28, 2017