At a hearing in Washington, D.C., earlier this month, the Internal Revenue Service heard opposing arguments on permitting employers to provide tax-free public transit benefits through cash reimbursement rather than vouchers or passes. As we’ve reported, proposed IRS rules would make it easier for employers to set up transportation spending accounts, which let you pay up to $240 of an employee’s monthly commuting costs without including the benefits in the employee’s taxable income. But companies would be permitted to offer cash reimbursement only if transit passes or vouchers aren’t readily available for direct distribution by the employer. During the hearing, public transit groups complained that allowing employers to reimburse workers with cash could lead to abuses. We’ll keep you posted on further developments on the IRS’ new transportation-plan rules. 

The State Assembly recently passed a bill (AB196) that would prohibit employment discrimination based on perceived gender, which includes trans-gender individuals and those who do not fit gender stereotypes. In Washington, the House passed a bill (HR 100) that would permit employers to offer retirement investment advice to employees and require that employers provide plan statements to employees on a regular basis. The bill would also require that employers diversify company stock in 401(k) plans. We'll keep you posted on these and other legislative developments in coming months.

The U.S. Supreme Court will take up several workplace-related cases this year. In one, the court will review a Ninth Circuit ruling regarding the type of evidence a terminated employee can use to prove job discrimination when an employer has both legitimate and illegal reasons for the discharge. Other cases on the court's docket involve whether an employer can require wage-and-hour lawsuits involving federal law to be heard in federal court (which is generally more advantageous to employers) rather than in state court, and whether a disability plan is required to defer to a treating physician's findings. We'll keep you posted.

A California court of appeals has given the go ahead to a lawsuit charging that Cintas Corp., a company that leases and launders uniforms, didn’t comply with the Los Angeles living wage ordinance and regulations as to employees at its Whittier, Pico Rivera, and Ontario facilities who worked at least 20 hours per month performing tasks related to Cintas’ contract with the Los Angeles Department of Water and Power (DWP).1 The Los Angeles ordinance prescribes minimum wage rates for employees of private firms who work on service contracts benefiting the city; employees are covered by the ordinance if they work at least 20 hours a month on the service contract. The suit alleged that Cintas paid hourly wages less than those required by the ordinance.

The HR Management & Compliance Report: How To Comply with California Wage & Hour Law, explains everything you need to know to stay in compliance with the state's complex and ever-changing rules, laws, and regulations in this area. Coverage on bonuses, meal and rest breaks, overtime, alternative workweeks, final paychecks, and more.

One of Cintas’s arguments was that the suit could not be certified as a class action because it wasn’t

possible to determine from company records which employees worked at least 20 hours per month on the DWP contract. But the appeals court said that Cintas couldn’t defeat class certification because it failed to keep track of which employees worked on DWP contracts, particularly because its contract with the DWP required it to keep such records.

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1 Aguiar v. Cintas Corporation No. 2, Calif. Court of Appeals (Dist. 2) No. B182477, 2006

A California grower has agreed to shell out $3.5 million to settle a long-running lawsuit challenging its pay practices for travel time. We’ll explain the case and review the rules for when you must pay for time your employees spend traveling.

Mandatory Transportation Policy

D’Arrigo Brothers Company of California grows vegetables in the Salinas Valley. The company had a mandatory work transportation policy that required agricultural employees to report before work to a designated departure point (a parking lot) and board buses that D’Arrigo provided. The buses then transported the workers to various worksites. Employees were not permitted to drive directly to a work site, even if it was closer to their home than the designated meeting point. At the end of each workday, employees couldn’t leave the worksite immediately, but had to wait for their foreman to finish up administrative tasks before the bus could transport everyone back to the parking lot.

D’Arrigo paid employees on a piece rate basis, determined by the quantity of vegetables picked, but employees received a guaranteed hourly minimum instead if that worked out to more than the piece rate for a particular day, as the law requires. D’Arrigo neither paid employees extra for the travel time from the parking lot to the work site and the return trip—each of which took up to 50 minutes—nor for the time the employees spent waiting at day’s end before they could board the buses, which sometimes added up to another 20 minutes.

The HR Management & Compliance Report: How To Comply with California Wage & Hour Law, explains everything you need to know to stay in compliance with the state's complex and ever-changing rules, laws, and regulations in this area. Coverage on bonuses, meal and rest breaks, overtime, alternative workweeks, final paychecks, and more.

Wage-Hour Suit Filed

A group of agricultural workers filed a class action suit against D’Arrigo, claiming that the company’s failure to pay for their travel and waiting time violated California wage and hour laws. The employees sought back wages and penalties. D’Arrigo asked the court to dismiss the suit, contending that it properly compensated its employees using the piece rate method and didn’t have to pay extra for travel or waiting time.

Court Sides with Workers

A federal trial court in Northern California ruled in the workers’ favor.1 The court explained that the California Industrial Welfare Commission wage order covering the employees here, Wage Order 14-80, provides that the employer must pay at least the minimum wage “for all hours worked…whether the remuneration is measured by time, piece, commission, or otherwise.” And, an earlier California Supreme Court case established that all time agricultural workers spend under their employer’s control, including mandatory travel and waiting time, counts as hours worked.

An employer may use a pay per hour scheme or piece rate scheme, said the court, as long as that amount is at least the sum the employee would have been paid according to this formula: number of hours worked (including compulsory travel and waiting time) multiplied by the minimum wage. Thus, an employer is liable for unpaid wages if it paid less than that formula requires, even if a piece rate method was legitimately used.

The court rejected the employees’ argument that the wage order required D’Arrigo to pay for each separate hour of travel and waiting time regardless of how much it paid them for other work during the pay period. The court stressed that as long as the employer pays a piece rate sum for the pay period that is at least equal to the minimum wage for all hours worked, the hours don’t have to be separately parsed out and remunerated.

To complicate matters in this case, D’Arrigo didn’t keep records of time worked, so there was no accurate evidence of how many travel and waiting time hours the employees put in each week. The court thus relied on the workers’ estimate of approximately two hours per day of travel and waiting time. Based on this estimate, the court ruled, D’Arrigo’s payments were insufficient. The company’s practice of paying the piece rate or a guaranteed hourly minimum that didn’t count travel or waiting time meant that there were at least some instances when employees weren’t compensated for their travel and waiting time.

Big Settlement

The court’s ruling was handed down in 2004. And now, D’Arrigo and the workers have finally entered into a $3.5 million settlement for the unpaid wages. The settlement covers approximately 3,000 workers, who will receive average payments of $2,300.

Pointers

Here are three points to keep in mind based on this case:

1. Keep accurate records. D’Arrigo’s failure to keep records for the travel and waiting time not only violated the law but also deprived it of the opportunity to establish the actual amount of such time.

2. Pay at least the minimum wage for all hours worked. As the court made clear, whether payment is made on a piece rate method or is based on hours worked, the remuneration must be no less than a sum equal to the minimum wage for all hours worked, counting mandatory travel and waiting time.

3. Include mandatory travel time and waiting time as hours worked. Whether employees are entitled to compensation for travel time on employer-provided transportation depends on whether they’re subject to the employer’s control during that period. If they are, the time counts as hours worked. If employees are free to choose—rather than required—to ride their employer’s buses to and from work, time on the bus isn’t hours worked. If employer transportation to the worksite is mandatory, you will have to pay employees for the actual travel time and time spent waiting for the transportation to arrive after the designated time employees are required to be at the assembly spot. Further, when employees have to remain on the job at the end of the day to complete paperwork, prepare tools or machinery for the next day, or to wait for the company bus to transport them from the worksite, that time also counts as hours worked.

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1 Medrano v. D’Arrigo Brothers Company of California, U.S.D.C. (N.D. Cal.) No. C00-20826 JF (RS), 2006