California Wage Statements and Exempt Employees

California Labor Code section 226 requires that an employer provide its employees with wage statements, sometimes known as pay stubs, when it pays their wages.  Section 226(a) provides a list of the specific information that must be included in wage statements.  Employers that ignore these requirements face liability both under section 226(e), and, through PAGA, under section 226.3.

One of the requirements of section 226(a) is that the employer state the total number of hours that an employee worked.  This requirement is important for most employees, because it is the most effective way to figure out whether you are paid for all hours worked.  But what about employees who are not paid by the hour, like salaried employees or employees who are paid on a commission basis?

In Garnett v. ADT LLC, 14-2851 (E.D. Cal. Oct. 6, 2015) a federal judge found that section 226 required employers to report the total number of hours worked even for employees paid solely on a commission basis.

However, in response to an outcry from California employers, on July 22, 2016, Governor Jerry Brown approved Assembly Bill 2535.  AB 2535 amends section 226 to limit the categories of employees for whom employers must provide the total number of hours worked.

Previously, the exception to that requirement applied only to employees who were exempt from overtime and paid only by salary.  Under AB 2535, the exception has been expanded to cover employees who are exempt from minimum wage requirements and overtime under either statutes or the orders of the Industrial Welfare Commission.

Specifically, AB 2535 identifies seven categories of employees for whom employers do not have to report the number of hours worked:

1. Exempt administrative, executive, and professional employees;
2. Exempt outside salespersons;
3. Exempt computer professionals paid by salary;
4. Parents, spouses, and children of employers;
5. Particular employees of certain rehabilitation programs;
6. Crew members on certain fishing boats; and
7. Employees participating in national service programs.

Notably, AB 2535 does not provide that inside salespersons are exempt from the requirement of reporting hours, even though by definition inside salesperson receive more than half of their wages from commission.  (Outside salespersons spend more than half of their time working away from their employer’s place of business.  Inside salespersons receive more than half of their wages in commissions, and are primarily engaged in sales activities.)

If you have questions about whether your wage stubs meet the requirements of California law, please feel free to contact Hunter Pyle Law for a free consultation.  We can be reached at 510.444.4400 or at inquire@hunterpylelaw.com.  You can also chat with us during normal business hours by visiting our website:  www.hunterpylelaw.com.