New Overtime Law Causing Confusion

Overtime after eight hours of daily toil is back in California.

That means the state’s workers may earn as much as $1 billion more annually than they did during each of the last two years, when overtime pay kicked in only after 40 hours a week, say supporters of the new daily overtime law.

But some employers say the latest rules have proved so costly and confusing that they have cut wages and benefits, ended flexible scheduling and even eliminated jobs.

Through 80 years of California history, hourly workers received overtime at the rate of 1 1/2 times their base pay after eight hours on the job in a single day.

In 1998, daily overtime ended for 8 million hourly workers in a variety of industries thanks to a vote by the Republican-dominated Industrial Welfare Commission. The appointed commission, at the direction of then-Gov. Pete Wilson, brought California rules into line with those of the federal government and most states.

Employer groups supported the change, contending it would increase flexibility in the workplace. Democratic legislators and labor were furious and produced Assembly Bill 60, known as the “Eight-Hour-Day Restoration and Workplace Flexibility Act,” which was signed last year by Gov. Gray Davis.

AB 60 is part of an unprecedented series of new employment laws that changed a multitude of workplace rules on Jan. 1.

“Employers are just going nuts,” said Michael Karcis, a lawyer with Arter & Harris. “I don’t think [employment law attorneys] could have a better situation now with a Democratic Legislature and a Democratic governor.”

Labor advocates think employer grousing is a thinly veiled attempt to influence how AB 60 and other laws are enforced.

“We’re going to see a lot of lobbying,” said Art Pulaski, executive secretary-treasurer of the California Labor Federation, AFL-CIO. “For the vast majority of the employers and the vast majority of the workers, we’re simply reinstating daily overtime, so there shouldn’t be that much confusion.”

Among the new laws employers must learn and implement:

* Sick leave (AB 109): Employers who offer sick leave must allow workers to use up to half their allotment to care for a sick child, spouse or parent.

* Age discrimination (SB 26): Employers cannot fire high-wage workers over 40 to replace them with lower-paid workers who happen to be younger.

* Cal/OSHA penalties (AB 1127): The maximum fines for violations of worker health and safety regulations increased substantially.

* Off-duty conduct (AB 1689): Employers may be liable for lost wages if they demote, discipline or fire employees for lawful conduct outside of working hours.

* Workers’ compensation disclosure (AB 435): Insurers are further limited on how much medical information they can release to an employer about an employee who has filed a workers’ comp claim.

Of particular concern is the overtime law because of ambiguous language that has left employers puzzling over how to implement the complex law, said Julianne A. Broyles, a lobbyist for the California Chamber of Commerce.

The law covers more than 8 million hourly workers in nearly every industry. The rest of California’s 15 million workers are salaried managers or professionals, known as “exempt” workers; public employees; some transportation employees; and unionized workers.

AB 60 does more than restore overtime after eight hours and double-time after 12, Broyles said. The law regulates meal breaks, outlines procedures for setting up alternative work schedules such as four 10-hour days, permits workers to take time off for personal obligations and make up the time during the same week without triggering overtime, grandfathers some alternate schedules, and hikes penalties for overtime violations.

The law also sharply boosts the lowest pay of an exempt employee to a monthly salary twice the current minimum wage for full-time employment. At today’s $5.75-an-hour minimum wage, the monthly salary for exempt workers must be at least $1,993.33.

This leads to one of AB 60’s interesting quirks: Corporations hiring highly paid hourly computer consultants will find them even more highly paid after eight hours of daily work.

That’s because the law specifies a minimum monthly salary, where the old rules spoke more vaguely of “remuneration.” And unlike hourly consultants in other industries, computer professionals are exempt employees under federal law.

Now in California, because they are paid by the hour and not by the month, the state’s estimated 100,000 computer consultants are no longer exempt and are eligible for overtime.

Legislation already has been introduced to restore the exemption for computer consultants, and the Industrial Welfare Commission is assembling a wage board to review the issue.

Similarly, because the law makes no allowance for proration of the monthly salary, it effectively eliminates the job of part-time manager, commonly found at retailers and fast-food restaurants.

AB 60 captures four industries--construction, mining, oil drilling and logging--that had considered themselves exempt from wage and hour laws. And registered nurses and pharmacists lost their previous exempt status as professionals, making them eligible for overtime and eliminating the standard 12-hour shifts in hospitals after July 1 unless the Industrial Welfare Commission grants an extension.

Employer groups say AB 60 reduces flexibility in scheduling workers and increases costs.

George Oliveira makes his living in a peculiarly Southern California way: He plasters pools. In nearly 25 years of business, Oliveira has never paid overtime because construction companies were exempt.

“We trowel until the plaster is dry,” Oliveira said, which can take three hours on a hot day or seven hours on a cool day. “If we do two pools a day and if it takes 10 hours, we’re into overtime.”

To keep up with the booming demand for pool plastering without sharply increasing payroll costs, Oliveira said he might be forced to hire more workers and cut the hours of his current workers.

Francine Alba, co-owner of four Sisley Italian Kitchen restaurants in Southern California, said the new requirements are “a disaster.” Alba said her 350 employees miss the more casual scheduling they enjoyed in the last two years.

Employers can set up secret elections for workers to vote on alternative schedules, but the schedules must be regular and follow certain guidelines. Alba said the regulations are so confusing that she is afraid to attempt alternative schedules and so has put all her employees on eight-hour or shorter days to avoid paying overtime, which she says she can’t afford.

“I prided myself on letting everyone set their own schedules. I find that makes for happier employees,” Alba said. “Now it’s this eight-hour thing and a lot of glum faces.”

Some employers are not only venting their anger, they’re circumventing the law, unions contend.

In December, several California hospitals reduced base wages for nurses on shifts longer than eight hours so that if overtime pay is required in the health-care industry, payroll costs will not increase. Such a move is forbidden as of Jan. 1.

Nurses testified before the Industrial Welfare Commission that base pay has been reduced 14% to 16%. Hospital representatives testified that overall paychecks have not been reduced and that the medical facilities cannot afford increased overtime costs.

Similarly, several oil services companies have “recalibrated” base wages so that new overtime requirements don’t boost payroll payout, said Theo Pahos, a lobbyist for the California Independent Petroleum Assn.

Assemblyman Wally Knox (D-Los Angeles), author of AB 60, blasted these reductions. “I have to say it is astonishing and of dubious legality--at best, dubious legality--for a person’s base pay to be cut expressly in anticipation of the implementation date of a bill, the policy of which is to foster good pay for employees,” Knox said. “That flies in the face of the fundamental policy of the bill itself.”

Although an employee’s paycheck might remain the same with the adjustments, benefits such as retirement that are tied to base pay might be hurt, said Sharon Cornu, spokeswoman for the California Labor Federation, AFL-CIO. Similarly, home loan and other credit agreements might be affected by lower base wages, she said.

The California Nurse-Midwives Assn. has been able to verify the firing of one nurse-midwife in Central California because of the new law, and other layoffs are rumored. Many nurse-midwives have seen their hours and base pay slashed, said B.J. Snell, California Nurse-Midwives Assn. president and a USC assistant nursing professor.

Nurse-midwives and other advanced-practice nurses say their jobs don’t end after eight hours, and some hospitals plan to replace them with physicians or other still-exempt health professionals.

Paying daily overtime helps curb long hours that leave workers prone to accidents, said Terence Street, who pays overtime to his 300 employees under a collective bargaining agreement.

“Sure, my guys work overtime,” said Street, chief executive of Roebbelen Contracting, which builds large commercial and industrial projects. “But too many long days and all of a sudden stuff starts happening. The exposure is not worth the overtime.”