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California’s Industrial Welfare Commission dove into one of the most heated debates in labor law last week when it said companies can require workers to take time off without fear that those employees will lose their exempt status. But the impact of the “statement of basis” — a document expressing the IWC’s view of the law — may do little to clarify just what companies should be doing in respect to complying with state overtime statutes. While some employment defense attorneys hailed last Monday’s statement as a victory, others contend that the action by the IWC was nothing short of illegal. Last Monday, the panel said 4-1 that a May interpretation of the eight-hour workday statute by Miles Locker, the former head of the Division of Labor Standards Enforcement, was wrong to say that an employee’s exempt status is based on a monthly test. In an opinion letter, Locker had maintained that under California’s newly enacted overtime law, workers who work just one hour a month are required to be paid a full salary plus overtime pay. He added that companies could not force exempt workers to take vacation days if they are ready, willing and able to work. Locker was later demoted, though the Davis administration denies that action was related to his letter. Locker’s opinion last summer shocked many companies that had planned to have salaried employees not work the week of July 4. Following the release of the letter, many companies, like Sun Microsystems, chose to retreat from those plans out of fear that under Locker’s interpretation, those workers would have to be paid anyway. The IWC statement was intended to put an end to the five months of uncertainty by allowing employers to institute partial shutdowns without risking millions in overtime pay. Still, employment lawyers disagree on just how much of an impact the IWC action will have. It’s likely, some say, that the courts will eventually have to decide what the California Legislature truly intended when it passed AB 60 last year. “Miles Locker [was] mistaken,” said Richard Simmons, an employment partner at the Los Angeles office of Sheppard, Mullin, Richter & Hampton and the attorney who sounded the alarm on the Locker opinion letter. Reaction from lawyers like Simmons eventually resulted in the letter being rescinded. Simmons said the IWC statement harmonizes state and federal law by allowing employers not to pay exempt workers for any full week in which they didn’t work or require them to use vacation time if they want to be paid. “This decision affects every single employer in California,” Simmons said. He added that the timing of the decision was perfect considering that the Thanksgiving holiday is approaching. “It’s clear that you can have people take time off,” he said. In his defense, Locker said Thursday that the IWC action did nothing to change the meaning of the statute. He said it’s up to each company to decide how it wants to interpret the statement. “It’s not a statement of Legislative intent,” said Locker, who is now a staff attorney at the division he used to run. “Our official position is that the law is in flux,” Locker said. “At some point there will be a court decision settling that flux.” Shane Gusman, an associate at the Law Offices of Barry Broad, a Sacramento union-side firm, went further and said the statement is not binding because it’s illegal. Gusman, who testified before the IWC, said the wage order that the statement was attached to had nothing to do with the salary docking issue, and the IWC was, in his view, attempting to rewrite Legislative history. “It’s completely unrelated,” he said. “It went completely beyond the IWC’s authority,” he added. Gusman said Assemblyman Paul Koretz, D-Beverly Hills, Calif., who chairs the Assembly Committee on Labor and Employment, even wrote to the IWC, saying that it would be illegal. Koretz sponsored a bill last year that Gusman said would have fixed the perceived problems with the Locker letter by allowing companies to allow staff reductions for a week without violating the monthly test. AB 1667 was left to die on the Senate floor because, Gusman said, “[Employers] want to grab more than what they said was wrong with the Locker letter.” He said the state of the law is just as it was prior to Locker writing his letter. “If someone sues, it’s going to get overturned,” he said of the IWC statement.

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