WE previously discussed the question of whether an employee’s signature to an independent contractor agreement binds the employee to the terms of that agreement. We noted that the law determines the worker’s status, not the parties’ agreement. Even if there was such an agreement, workers who are treated as employees will not be bound by its terms.
Another scenario where “agreements” between the employers and employees may exist is in the area of wages. Consider the situation of Carlos Arechiga.
When Carlos Arechiga started working as a janitor for Dolores Press, Inc., he and his employer orally agreed he would work 11 hours a day, six days a week, for a total of 66 hours per week. As a nonexempt employee, his work schedule entitled him to 26 hours of overtime pay each week. By agreement, Dolores Press paid him $880 per week. This agreement was later put in writing.
Arechiga had worked for over 5 years for Dolores Press when he was terminated. He later filed a lawsuit against the employer alleging unfair business practice because his employment agreement violated the law with respect to calculating his overtime pay. Arechiga argued that since he was a nonexempt employee, the law required his overtime pay to be calculated by dividing his regular hourly rate by 40. He said his salary of $880 per week only compensated him for a 40-hour work week, not his agreed-upon workweek of 66 hours (which included 26 hours of overtime). Therefore, Dolores Press owed him overtime pay for three years.
The employer countered that the law authorized employers to enter into explicit mutual wage agreements with their employees. The trial court ruled in favor of Dolores Press, finding that the explicit mutual wage agreement was valid and that the fixed salary Arechiga received adequately compensated him for both overtime and regular pay. Arechiga appealed.
Unfortunately for Arechiga, the California Court of Appeals upheld the trial court’s decision, finding that Dolores Press had an explicit mutual wage agreement with Arechiga. The law regarding overtime pay for nonexempt employees does not abolish this agreement.
California’s law-making body expressed a concern that the court ruling may allow employers to estimate overtime and include it in a fixed salary. This practice will open the door to workers being required to work additional overtime without being fairly compensated.
In response to the court decision, California passed a new law. The law states that the payment of a fixed salary to a nonexempt employee will be considered compensation only for the employee’s regular, non-overtime hours, even though there may be a private agreement to the contrary.
Hence, wage agreements that purport to pay a fixed weekly salary to non-exempt employees to cover the overtime hours worked is illegal.
Wages are a product of negotiations between employers and employees. Employers will generally offer an amount to the employee and the employee may either accept or reject the offer. Employers, anticipating that the employee may work more hours, may create agreements on how the employees will be paid for the extra work. Some of these agreements include paying the employee a salary per month to cover all the hours that an employee could possibly work, including overtime.
Just because these agreements are signed do not make them legal. With the help of an experienced employment attorney, employees should examine whether the amounts contained in the agreements really pay for all their hours worked.
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C. Joe Sayas, Jr., Esq. is an experienced trial attorney who has successfully obtained significant results, including several million dollar recoveries for consumers against insurance companies and big business. He is a member of the Million Dollar-Advocates Forum—a prestigious group of trial lawyers whose membership is limited to those who have demonstrated exceptional skill, experience and excellence in advocacy. He has been featured in the cover of Los Angeles Daily Journal’s Verdicts and Settlements for his professional accomplishments and recipient of numerous awards from community and media organizations. His litigation practice concentrates in the following areas: serious personal injuries, wrongful death, insurance claims, unfair business practices, wage and hour (overtime) litigation. You can visit his website at www.joesayas law.com or contact his office by telephone at (818) 291-0088.