CHARGE TO WAGE BOARD

FOR WAGE ORDER 5

(Revised May 4, 2001)

Pursuant to Labor Code sections 1173, 1178, and 1178.5, the Industrial Welfare Commission (hereinafter "IWC"), conducted a preliminary investigation, which included an investigative hearing, regarding the employees covered by Wage Order 5 who have direct responsibility for children under eighteen (18) years of age receiving twenty-four (24) hour care in facilities generally referred to as group homes. Following the investigation, and as part of its continuing duties to ascertain the wages, hours, and conditions of labor and employment of employees in the State, the IWC determined that current provisions in Wage Order 5 regarding overtime, meal periods, and rest periods may be prejudicial to the health, safety, and welfare of such employees. The IWC has therefore decided to convene this wage board and has selected an equal number of employee and employer representatives, and a non-voting chairperson, to consider whether any amendments should be made to the overtime, meal period, and rest period provisions of Wage Order 5.

Prior to 1998, Wage Order 5-89 (as amended in 1993) provided that the employees at issue had a partial exemption from daily overtime. As long as an employee’s work time did not exceed 54 hours or 6 days in a workweek, employers were not required to pay overtime. In emergency situations an employee could work over 54 hours or 6 days in a workweek provided the employer paid overtime at one and one half times the employee’s regular rate of pay. However, in non-emergency situations, if an employee worked over 54 hours or 6 days in any workweek, employers were required to pay daily overtime for all hours worked in excess of 8 in a day during that workweek.

In 1998, the IWC promulgated amendments to Wage Order 5 which included language eliminating the partial exemption from daily overtime. Instead, the IWC conformed Wage Order 5 to the federal standard of weekly overtime, rather than daily overtime, after working 40 hours in a workweek. Under that standard, as long as an employee’s work time does not exceed 40 hours in a workweek, employers are not required to pay overtime.

Pursuant to the "Eight-Hour-Day Restoration and Workplace Flexibility Act" of 1999 (commonly referred to as "AB 60"), the Legislature restored daily overtime in general, and temporarily restored the provisions of Wage Order 5-89 until the IWC could promulgate new regulations to implement the statute. The new regulations became effective October 1, 2000.

According to the new Wage Order 5, the employees at issue continue to have a partial exemption from daily overtime. However, the partial exemption now provides that, as long as an employee’s work time does not exceed 40 hours or 6 days in a workweek, employers are not required to pay overtime. In emergency situations an employee can work over 40 hours or 6 days in a workweek provided the employer pays overtime at one and one half times the employee’s regular rate of pay. In non-emergency situations, if an employee works over 40 hours or 6 days in any workweek, employers are required to pay daily overtime for all hours worked in excess of 8 in a day during that workweek.

The IWC has received public comment regarding this partial exemption via the U.S. mail, hand delivery, and facsimile and electronic transmissions. The IWC has also heard testimony from representatives of this industry at its public meetings. Proponents of amendments to Wage Order 5 state that the current provisions are too restrictive. Under the current provisions of Wage Order 5, if an employee works a 50-hour workweek of two 20-hour shifts and one 10-hour shift, the employer would pay daily overtime for the entire workweek because the employee’s workweek schedule is in excess of 40 hours. The employee would receive one and one-half times his or her regular rate of pay after working 8 hours and two times his or her regular rate of pay after working 12 hours. Proponents of amendments to Wage Order 5 would like to return to language that provides for daily overtime only after an employee works 54 hours. Using the example above to explain the effect of this change, if an employee works a 50-hour workweek of two 20-hour shifts and one 10-hour shift, the employer would pay federal weekly overtime after 40 hours, but no daily overtime.

The IWC has received public comment to the effect that the employment settings at issue generally are residential group homes that are small, home-like environments for foster care children, the developmentally disabled, and assisted residential care for the elderly, where, from a therapeutic sense, it is ideal to provide longer shifts to simulate parenting and or family life for the individuals living in the home. Long shifts allow the residents to have the benefit of having the same care giver at night and at breakfast the next morning. For the same reasons on-duty meal and rest periods are preferable to an employee leaving the premises to eat or rest.

Testimony given suggests that these "long shifts" are also attractive to many employees who prefer to work 40-plus hours per week in three or four days and find the flexibility to be compatible with their schedules. Long shifts and short weeks are also ways in which to supplement income from another job.

In addition, these facilities are nonprofit agencies that receive 100-percent of their funding from the government. They have no ability in today’s market, at today’s government rates, to go out and recruit the numbers of employees necessary to have all work time covered without payment of overtime, nor do they have the ability to pass on the cost of overtime to their customers, because government is their customer.

However, the IWC received testimony and written comment from the Service Employees International Union in California and others who represent employees working in these types of facilities. They stated that the union contracts provide for 8-hour days and the employees have no trouble working such shifts. They also reminded the IWC that, in enacting AB 60, the Legislature reaffirmed the 8-hour day as the standard in California. In addition, they advised the IWC that last year the state government increased rates for foster care group homes by 13 percent, 3 percent of it across the board and 10 percent for wages. They acknowledged that this increase was still not enough to provide adequate pay for employees, but that the IWC should not subsidize these facilities by decreasing overtime obligations when it is the Legislature that has not provided sufficient funding. They suggested that the more appropriate course of action is to seek relief from the Legislature.

After studying the materials sent to you for review, the IWC requests that you report your

recommendations on the following matters:

1. Whether the partial exemption from daily overtime should be amended such that, if an employee works over 40 hours or 6 days in any workweek, employers are required to pay weekly overtime; however, only if an employee works over 54 hours in any workweek, are employers required to pay daily overtime for all hours worked in excess of 8 in a day during that workweek.

2. Whether the partial exemption from daily overtime should be expanded to include employees who have direct responsibility for children under eighteen (18) years of age, or for young adults who have not yet graduated from high school, receiving twenty-four (24) hour care in facilities generally referred to a as group homes.

3. Whether on-duty meal and rest periods should be required for employees of twenty-four (24) hour care facilities who have sole responsibility for clients who are: children under eighteen (18) years of age; young adults who have not yet graduated from high school; or elderly or developmentally disabled individuals.

4. Whether there should be any other modifications to this partial exemption from daily overtime.

Title 8, California Code of Regulations §11534 provides in part that the wage board shall consider such data as is submitted to it by the IWC, and that any additional information necessary to the deliberations of the wage board shall be furnished by the IWC upon request of the chairperson of the wage board, insofar as feasible. The information provided by the IWC will include transcripts of testimony, and other documents previously presented to the IWC. The IWC requests that the wage board review these materials prior to the date of its first meeting.