Public Meeting







October 29, 2001

Isaac Newton Senter Auditorium

Santa Clara County Government Center

70 West Hedding Street

San Jose, California



Industrial Welfare Commission









BRIDGET BANE, Executive Officer














Proceedings 5

Approval of Minutes 5

Request to Modify Section 11, Wage Order 1-2001 5

ANN O'REGAN, New United Motor Manufacturing, Inc. 6

JONATHAN WEISSGLASS, United Auto Workers 7

Deductions from Exempt Employees' Salary 11

JIM ABRAMS, California Hotel & Motel Association 13

JULIANNE BROYLES, California Chamber of Commerce 18

CARL GUARDINO, Silicon Valley Manufacturing Group 26

BRYAN CRABB, Office of Assembly Member 27

Kevin Shelley

MARSHALL ANSTANDIG, Knight-Ridder, Inc. 29

FRAN KEEGAN, Electroglas 31

TEFERI GEBRE, California Labor Federation 32

SHANE GUSMAN, Teamsters; Amalgamated Transit 35

Union; Hotel and Restaurant Employees;

United Food and Commercial Workers;

Engineers and Scientists of California;

Machinists Union

ROBERT TOLLEN, Seyfarth Shaw 38

KELLY MILTON, American Electronics Association 43

WILLIE WASHINGTON, California Manufacturers 44





INDEX (Continued) Page

JIM ABRAMS, California Hotel & Motel Association 57

Amendments to Wage Order 5-2001 59

New Business 76

Adjournment 77

Certificate of Reporter/Transcriber 78



(Time noted: 10:19 a.m.)

COMMISSIONER DOMBROWSKI: Let's call the meeting to order of the Industrial Welfare Commission.

Let the record show that all five commissioners are present.

The first item on the agenda is approval of the minutes for the public meetings held April 24th, 2001, and June 15th, 2001.

Do I have a motion?




COMMISSIONER DOMBROWSKI: All in favor, say "aye."

(Chorus of "ayes")


I've had a request -- so I think this will be relatively short -- to bring up Item 4, staff counsel report on the request for Section 11 of Wage Order 1-2001 to be modified to allow employees covered by a collective bargaining agreement to agree to a meal period after 6 hours of work.

And I believe we have two speakers, Ann O'Regan and -- I'm sorry, I can't -- Jonathan Weissglass.

MS. O'REGAN: I wasn't sure if the staff was reporting something first or if we were supposed to -- is the staff making a report?

MS. BANE: Hello? Is this on?

COMMISSIONER DOMBROWSKI: There you go. It's a reversal of normal: when the light is on, it's off.

MS. BANE: When the light is on, it's off. I can do that.


MS. BANE: Ms. O'Regan, we're going to wait until after you speak to the issue to make the report.

MS. O'REGAN: Oh, okay.

Essentially, we're just, again, here to request that a wage order -- a wage board be convened to allow for a meal period to convene (sic) within 6 hours, as opposed to 5 under Wage Order 1, in those situations in which there is a collective bargaining agreement, which therefore protects both the employees' and the employer's interests.

This is somewhat patterned after what already exists in Wage Order 12, which is the motion picture industry wage order, which does permit for a meal period to occur within 6 hours. And then, of course, in Wage Order 16, which governs the construction industry, there is a provision within the meal periods section that states that if there's a collective bargaining agreement, the entire requirement of a meal period is no longer applicable.

So, we are requesting that within the manufacturing industry, that there be -- Section 512(b) of the Labor Code be invoked to allow for this meal period to occur within 6 hours.

And Mr. Weissglass is here on behalf of the UAW, which joined with NUMMI in making this request.

MR. WEISSGLASS: Hello? Hello? Okay.

My name is Jonathan Weissglass, from the law firm of Altshuler, Berzon, Nussbaum, Rubin and Demain in San Francisco. We represent UAW Local 2244.

And I'm just here to second what Ms. O'Regan just said and say that the union fully joins with NUMMI in this request and is there to protect the interests of the employees through the collective bargaining process.


MS. BANE: Mr. Chair and committee, we have looked at this issue over time and entertained anything that was brought forward in either the prior meetings or in letters or phone calls afterwards. And we have reported previously that there is no other remedy, as you had requested us to look at, and that if this is to be rectified in the manner in which the proponents are asking, that it would require a wage board.

COMMISSIONER DOMBROWSKI: Okay. Procedurally, then, I guess the next step is for us to take a vote on whether -- or have comment.

Is there any comment from anyone?


COMMISSIONER DOMBROWSKI: Let's take a vote for the wage board.

MS. BANE: All right. Do you want me to call the roll, Mr. Chair? Or is there a motion?





MS. BANE: Mr. Rose.


MS. BANE: Mr. Cremins.


MS. BANE: Ms. Coleman.


MS. BANE: Mr. Bosco.


MS. BANE: Chairman Dombrowski.


MS. BANE: If my count is right -- which sometimes it isn't -- that's five ayes, so there will be a wage board appointed.

COMMISSIONER DOMBROWSKI: So, procedurally now, what do they need to do?

MS. BANE: Procedurally, they will submit names to the IWC staff, which we will then forward to the commissioners recommending people who will be on the wage board or who will be eligible for appointment to the wage board. And then, that decision would be made by you.

MS. O'REGAN: Is there a particular number that you would like to be submitted? I know -- I understand there should be an equal number representing the manufacturing side and the union side, but is there a particular number?

COMMISSIONER DOMBROWSKI: It's pretty open. We'd encourage you to keep it relatively smaller rather than large.

MS. O'REGAN: Would four be too small? Four? Six?


little --

MS. O'REGAN: Okay. So something --

COMMISSIONER DOMBROWSKI: I was thinking more along the lines of four and four or five and five.

MS. O'REGAN: Okay. Very good.



COMMISSIONER ROSE: Also alternates.

COMMISSIONER DOMBROWSKI: Yeah. And we need alternates as well.


COMMISSIONER DOMBROWSKI: Bridget, you'll have to find someone to chair the wage board.

MS. BANE: Yes. We will do that.

COMMISSIONER DOMBROWSKI: Okay. And it would be probably helpful if we could get those names, say, within the next couple of weeks.

MS. O'REGAN: I can probably get those to you within the next week.

COMMISSIONER DOMBROWSKI: Okay. Then we can put it on the agenda to name the wage board at the next hearing, which I don't think we've picked a date yet -- have we?

MS. BANE: No. I think we should probably pick a date for the submission of names, which will be perhaps advisable a week from this Friday.

MS. O'REGAN: Very good.


MS. BANE: And that would be the 9th of November, I believe.

MS. O'REGAN: I think that's right.

MS. BANE: All right. And if you'd like to set the number now, Mr. Chair, you possibly could set it at five members each and two alternates, if you --


MS. O'REGAN: Very good.

MS. BANE: That's fine.

MS. O'REGAN: Thank you.


I'd like to now take up Item Number 3, the discussion and possible action regarding the May 30th, 2001, opinion letter written by Miles Locker. And we have -- let's see -- five speakers, five cards I've gotten in here.

Julianne Broyles, from the California Chamber; Carl Guardino, Silicon Valley Manufacturers Group.



COMMISSIONER CREMINS: As you know, I've got some questions on the basic jurisdiction of the Commission to deal with this. Does it make sense to get that -- ask that question now and get it dealt with? I believe some of the folks will address that in their testimony. Would you rather have testimony first?

COMMISSIONER DOMBROWSKI: You can ask the questions now. That's fine.

COMMISSIONER CREMINS: Okay. Mr. Chairman, I've submitted some questions to counsel on the basic jurisdiction of the Commission to deal with this issue, and I've given them to counsel. And I will admit to all of you, I just gave it to her about ten minutes ago, and I don't know whether she's had time to think about it or address it.

The basic question is: does the Commission itself have authority to deal with this? And specifically, Labor Code Sections 1178 and 1182. And there's --

MS. STRICKLIN: When you say "to deal with the question," I guess I need a more specific --

COMMISSIONER CREMINS: Well, what specific authority does the IWC have to issue an official interpretation of statute? I guess that's the first question.

MS. STRICKLIN: Well, other than a regulation, I know of no authority -- other than a wage order.

COMMISSIONER CREMINS: Other than under a wage order?


COMMISSIONER CREMINS: Okay. And we have not issued a wage order on this yet, obviously, or we have not made a finding that we need to establish a wage board?

MS. STRICKLIN: To deal specifically with the salary issue?



COMMISSIONER CREMINS: And in regards to Sections 1178 and 1182, that offers procedures which we're supposed to follow, specifically, wage boards, I think.

MS. STRICKLIN: Yes, as well as Labor Code 1178.5.

COMMISSIONER CREMINS: I've gotten -- I got a letter, for instance, from the chair of the Labor Committee -- and I think we've all got it in our packets -- suggesting that we don't have authority also. Apparently, there's been an opinion offered to leg counsel, the Legislature's chief counsel, pending also.

And I hope in testimony, if you've got a chance to address this issue also, to keep this in mind in your testimony.

MS. BROYLES: Julianne Broyles, California Chamber of Commerce.

I'm going to defer for a moment, if it is -- with the permission of the IWC members -- to Jim Abrams, who is an attorney and very experienced in the authority that has been granted to the IWC, both through the Constitution and the state Labor Code, as well as other -- as well as other court decisions that have supported that.

But I'm going to let him lead off, with your permission, and then follow.

MR. ABRAMS: Thank you, Mr. Chairman, for your indulgence, and members of the Commission.

I think the question that Mr. Cremins has raised is really the starting point of all of this. And not to presume what your counsel might have as an ultimate opinion after she's had some opportunity to think about all this, but I think the basic question, first and foremost, is: are the items that are -- that were discussed in Mr. Locker's letter items that are, in fact, fixed by statute? In other words, are they positions which are required by the Labor Code? -- in which case we obviously have a statute, then. If one assumes that that's the conclusion of all of this, we have a statute that lays out, possibly subject to some interpretation, exactly what rules ought to apply in those kinds of circumstances that he was discussing.

Even in that situation, however, the Legislature has delegated to the Industrial Welfare Commission the authority to implement and carry out the statutory mandates that it has created over time in the Labor Code, by means of wage orders. And that then calls into play the procedures that you just discussed with respect to Wage Order 1: wage boards need to be called, proposals need to be made, and the Commission needs to consider them.

I guess the trouble that everybody is having, I assume on both sides of the equation, both from the employer or management side and from the employee side of this, has to do with what is the status of the substance of that letter. We know that the letter itself has been withdrawn, and we understand that, from a legal standpoint, it itself doesn't exist. However, whether it was issued in a letter form or orally, whether it came from Miles Locker, who at that point was the general counsel to the Labor Commissioner, or it came from somebody else, the issues are still the same issues. And we would like to submit that the Commission needs to address those.

If your counsel concludes -- and I don't want to presume what your counsel might offer as an opinion -- if your counsel concludes that the matter is cut-and-dried and that the matters that Mr. Locker opined on are either -- his opinions are either correct or incorrect in terms of the statute, that sets a stage -- that sets the stage for going forward and discussing it.

If, on the other hand, your counsel concludes -- and we think, I will offer on behalf of our -- my employer, the California Hotel and Lodging Association -- that the statute does not mandate the conclusions that Mr. Locker drew, then it is certainly up to the Commission, on its own initiative or on petition from any interested party, to look at whether or not it wants to develop a wage order change, either for some of the wage orders or all of the wage orders, in any manner it deems fit, consistent with the statute.

So, I think one of the first questions, Mr. Cremins, if I'm understanding your question correctly -- and we certainly would agree needs to be addressed -- is: to what extent, if any, does the IWC have any leeway at all to agree or disagree with the positions that Mr. Locker opined, whether he opined them or anybody else? Once that decision is made -- and you start with your legal counsel's opinion, obviously, on that -- we don't believe that there are any final conclusions that the statute and the Labor Code set forth, and you're free to do what you want. But that's the first question, if I understand, Mr. Cremins.

COMMISSIONER CREMINS: More importantly, I think what's generating a lot of discussion is the agenda item reads "possible action" today.

MR. ABRAMS: Right.

COMMISSIONER CREMINS: In your mind, do we have authority to take any "possible action" today?

MR. ABRAMS: Well, I -- with all due respect to -- and I would defer to your legal counsel -- if the action is to -- is to move forward with proposals to make amendments to any or all of the wage orders, my understanding of the Administrative Procedure Act and your own statutes of operation would require that there be some prior notice.

I suppose it is possible --

COMMISSIONER DOMBROWSKI: Let me -- can I interject here --

MR. ABRAMS: Of course.

COMMISSIONER DOMBROWSKI: -- before we waste a lot of time?

What I am thinking of is that we are looking at Wage Order 5 today, the adoption and the language on personal attendants. As part of looking at that language -- and I -- to go back to the original question, I believe that the IWC has been put in this position, not only by Miles' letter, but by the later request by the Labor Commissioner to clarify it. And what I'm trying to find is the way to do that, given all the parameters of our authority.

The advice I've gotten from outside counsel, not our counsel here, is that we can look at the personal attendant. We can look at establishing that exemption. And as part of clarifying how that exemption is different from the other exemptions, we can explain how we view those.

MR. ABRAMS: Certainly.

COMMISSIONER DOMBROWSKI: That is all we are doing.


COMMISSIONER DOMBROWSKI: Now, is that subject to legal challenge? I would assume it is. But I also think, in terms of the correspondence we've gotten, the coverage this has gotten, the uncertainty in the employer community, the uncertainty for the employees, that it's our obligation to take some risk, if that's what the risk is, and to at least put on the record how we view that. What happens after that is whatever the world -- you know, whatever happens.

MR. ABRAMS: Mr. Chairman, I certainly would agree with that. And what I did not understand from your agenda was that Item 3 was -- that basic public policy question was going to be considered as part of Item 2 as well. And that certainly is something, I agree with you full well, is something you have the authority to do. If that's how you wish to proceed, then I think that probably my response to Mr. Cremins might have been a bit premature, and I apologize.

MS. BROYLES: Good morning once again, commissioners. Julianne Broyles, from the California Chamber of Commerce.

Thank you for the opportunity today to talk with you regarding the issues and the controversy surrounding salary deduction issues for exempt workers. There is a number of items that California employers have found is of concern to them. And if I might be permitted, I will address Commissioner Cremins' questions at the end of my testimony.

Now, on behalf of our members, our 13,000 members of the California Chamber of Commerce, I do offer our comments that we do support the restatement of what California policy is, was, and continues to be on exempt worker salary deductions.

Now, when on June 22nd of this year the letter was rescinded and taken -- the opinion letter by Miles Locker was taken out of circulation, the Labor Commissioner made a very specific appeal to the IWC, and, in fact, had stated that:

"In withdrawing the letter, the DLSE would also seek clarification of the criteria for determining the correct interpretation of 'salary' in this context and follow the policy which results on both current and future claims and cases."

Now, that is a very direct appeal for clarification and guidance on a very important issue.

Additionally, Labor Code 1177(b) also gives authority to the Industrial Welfare Commission to adopt a "Statement of the Basis" that -- whenever it is amended, to ensure that the explanation of what the wage order is supposed to do is clear and available to those who have to implement it in their workplace.

Now, since that letter was rescinded in June, I know that the IWC, from the California Chamber, from the American Electronics Association, from the California Manufacturers Association, and a number of other organizations, plus exempt workers, have sent letters in to the IWC specifically asking for clarification on this very important issue. And as we're here today, we do understand that the issue still sits out there unresolved.

Now, California employers specifically believe that the salary basis test that is contained in the wage orders has always been interpreted in a manner that is consistent with the federal Fair Labor Standards Act, and that's in 29 CFR 541.118. And we do believe that it was unchanged by the enactment of AB 60 in 1999, Statute 134.

I was there, I believe, at every single hearing of AB 60 as it went through the Legislature. In all of the testimony that was offered to the Legislature, the issue of the salary basis changing in terms of anything other than increasing the base salary requirement was never mentioned and it was never contemplated.

Now, businesses in California are facing some very difficult times right now. We have very significant economic challenges based on -- that have resulted from the attacks from September 11th on the World Trade Center. We have a very significant lower demand for goods and services in this state. Our tourism issues are very, very important to California; that has dropped off over a billion dollars in the last months alone. And as a result, employers are facing some very serious decisions about their workforce and, in fact, even about their businesses overall.

Now, what we need to do for -- and what employers had traditionally been able to do when faced with situations like there where you've had a drought, an extended drought, where you had people that were -- needed to be laid off because there were no crops either to bring in, or if you had situations wherein the economy had turned south, as it did in the early 1990's, employers had always been able to look at temporary layoffs rather than permanent layoffs as some way to keep most of their workers employed, rather than having to put them on the unemployment line altogether.

We do believe that prior letters that had been issued by the Division of Labor Standards Enforcement, letters such as the ones issued in both 1993, 1997, and 1998, that specifically laid out what the rules were on salary deductions for exempt workers, were actually following -- and they were very clear to state that they felt that it was the goal of California wage and hour policy to be consistent in every way possible where the Legislature had not specifically spoken saying that California policy was something different, that the IWC had an obligation to sit and fill in the blanks, so to speak, on what the actual interpretation of wage and hour statutes passed by the Legislature.

We do think that the clarification, if it can be put out by the IWC today, will ensure that our employers here in California are not going to have to make that tough choice. We do believe that they are looking at a permanent layoff versus temporary layoff in this situation. You should keep that in mind, because that also will affect whether that business stays open or it closes. And then everybody's unemployed, including the owner of the business. None of that is good for the California economy.

Now, that's a very blunt way to put it, but that is really the truth. Our members are closing, our members are laying off workers, and we're very concerned about the overall impact on the California economy if this continues for the next year or even longer, depending on the after-effects of the terrorist attacks and other economic issues. In all honesty, California employers would rather have our people partially employed than out of a job altogether.

Since the beginning of 2001, there have been over 200 class action lawsuits that have been brought in the State of California against employers. The vast majority concern wage and hour issues surrounding AB 60. It is extremely likely that the plaintiffs' bar will look at further inaction of the IWC on this issue as a clear invitation to go and add in a new amendment to their current claim, saying that they now will add in the exempt worker salary deduction issue, that now would have been sitting out there since the beginning of 2000 with the enactment of AB 60 and its implementation put forward by the IWC at that time. That is just a lawsuit, class action size, to hit California.

Now, those 200 class action lawsuits, you've got to keep in mind that is more class action lawsuits in one year -- that's just until this month -- than has ever been filed in the State of California in all previous years combined. It is a significant problem. Just defending on those issues, if it's for a small or mid-size employer, defending, whether it's successful or not, is going to take you out of business. And that's not even considering the liability cost if you end up on the wrong side of a jury decision.

Historically, we have followed the salary basis rule in the Fair Labor Standards Act, and it does provide that deductions may be made from exempt worker salaries when the worker performs no work at all for that week, or under circumstances that are permitted by exceptions laid out in the FLSA. In addition, the U.S. Supreme Court and the Ninth Circuit Court of Appeals have also clarified that charging paid leave, vacation, and sick leave is permissible under federal standards. And that was a very clear intention of providing greater workplace flexibility to the workers in terms of finding another pot to pay the time when the employee was away from the office on workplace leave issues.

With leaving the policy unclear, you do leave a lot of questions unresolved regarding things such as jury duty leave, military leave -- which is a very significant issue for California employers now -- what happens after that 21 days of time is now impermissible -- you have leaves dealing with -- that are clearly permitted under state law but not federal law, pregnancy disability leave, you have conflicting actions and conflicting results in the Family Medical Leave Act and the California Family Rights Act. You have the Family School Partnership Act, which is very specific, and it says that you as the employer -- or you as the employee have the right to use either a paid leave time pool of some sort, whether it's vacation or personal leave or unpaid leave time, to participate in your school activities of your children. We also have a new law, enacted just last year, dealing with domestic violence protection that employers with more than 25 employees are required to comply with. Again, you have a very straight-out permission by the Legislature itself that it is permissible to use alternate pools of benefits, such as paid leave and vacation time, to pay for that time away. To do anything else and to decide anything other than that the salary exemption issue -- salary deduction issue for exempt workers is not what it was, what we believe it currently is and will continue to be, if the IWC acts, is something that actually harms the very workers that some people are pretending to protect in this instance.

Due to the uncertainty that is created when an enforcement agency both puts out and then rescinds an opinion, we do believe that this opinion letter had tried to set a very significant policy change without a statutory authority to do so. We were very glad to see the Labor Commissioner rescind that letter, but we do believe that it is necessary that clear and immediate action take place in order to make sure that employers have a chance to examine their workforce, decide whether a temporary rather than a permanent layoff or an actual business closure has to occur as a result of leaving this issue unresolved. If the IWC does not take action, we do believe that the door will be open to a number of new class action lawsuits as well as the employment and economic effects that I've described previously.

I am available to answer any questions you might have on this issue and can -- and hopefully, in some of this, I answered some of the issues that Commissioner Cremins had brought up at the beginning of this session.


(No response)


MR. GUARDINO: Chairman Dombrowski and members, welcome to Silicon Valley. We are delighted that the IWC is meeting here this morning. My name is Carl Guardino. I'm president and chief executive officer of the Silicon Valley Manufacturing Group. By way of reference, the Manufacturing Group was founded by David Packard, of Hewlett-Packard, back in 1978 and today represents 190 of the largest, most respected private-sector employers in Silicon Valley, who collectively provide about 275,000 jobs in this valley alone, and easily double that statewide, let alone their national and international workforces.

This issue, in a nutshell, is to preserve jobs by protecting flexibility. When Miles Locker issued his now-rescinded opinion, he said that the IWC had been silent. When Art Lujan wrote his clarification letter and rescinded the earlier letter by Mr. Locker, he asked for your clarification. And that is truly what we are seeking today as well.

I think it's important that we talk about what is at stake here. First, we're talking about something that has been an established practice in this valley and throughout the state for decades. We are talking about something that no one has ever even insinuated, let alone showed evidence of, of any abuse. And we're talking about the worst economic downturn in decades in California, especially when it refers to leading-edge, high-tech, and biomedical employers. And the flexibility to preserve jobs and protect working families that this established practice allows is critical and needs clear and immediate action. Stated another way, when employers are having to make incredibly difficult decisions during down economic times, they and their employees, here in this valley and throughout California, know it is better to have a job for 50 to 51 weeks a year than no job at all. And if we're going to protect working families, especially in a time like this, we all need to pull together, make sure that this is taken care of as quickly and expeditiously as possible, so that we can rally to make sure that California's economy, for all working families, continues and gets stronger during this tough time.

Thank you very much for your time.


MR. CRABB: Good morning, Mr. Chair and members. Bryan Crabb, on behalf of Assembly Majority Leader Kevin Shelley, who, unfortunately, was unable to attend today. And I'm here to voice his support for allowing the employer to have the flexibility to require time off and salary deductions for exempt employees on a weekly basis when necessary.

With this looming recession and the cyclical business cycle, businesses should have the ability to temporarily shut down and/or ask these exempt employees -- excuse me -- not to work for a week. And it's very unfortunate that this is even a salient issue. No business wants to even be faced with the prospect of asking an employee to take personal time off, but it is a needed cost-saving measure. The alternatives to allowing these salary and schedule deductions do seem clear: layoffs, business failure, and further economic downturn.

Thus, Mr. Shelley would like this resolved. And while it is imperative that we protect workers and employees, business does need the flexibility to ensure that there are jobs in the first place.

Thank you.


COMMISSIONER CREMINS: Does Mr. Shelley feel we're overriding our authority here, overriding the Legislature's authority?

MR. CRABB: I believe he feels it is within the IWC's jurisdiction and that they do have the authority to take action.



COMMISSIONER COLEMAN: Mr. Crabb, do you have a letter or anything from Mr. Shelley that we can refer to?

MR. CRABB: I do not have a letter. I do have a copy of the statement that he wanted me to enter, if the members would like a copy for the record.

COMMISSIONER COLEMAN: That would be very helpful for the record. Thank you.

MR. CRABB: Absolutely.

COMMISSIONER DOMBROWSKI: Okay. Marshall -- I hope I don't butcher this too bad -- Anstandig.

MR. ANSTANDIG: Good morning, members of the Commission. My name is Marshall Anstandig. I'm vice president/senior labor counsel for Knight-Ridder, Inc. We publish four newspapers throughout the State of California and throughout the United States.

As a member of both the Chamber and the Silicon Valley Manufacturing Group, we echo the comments of the first two speakers that you heard and would simply want to reiterate the fact that, from the standpoint of predictability, our company has functioned for decades operating under the standards of the Fair Labor Standards Act as it relates to the salaried exempt status of employees throughout the United States and California and would strongly urge that you continue to follow the practices that the State of California and the Commission has followed for decades as well as it relates to exempt worker status so that we can have some predictability throughout the country as well as in California.

Secondly, I strongly want to echo the comments about flexibility. These are very difficult times for all employers. And obviously, we've seen ups and downs throughout the economy for long periods of time. And in the down periods when employers are attempting to make hard choices on restructuring or cutting staff, whatever the case may be, a regulation such as what was included in the May, 2001, letter places severe restrictions on employers to be able to move flexibly. And it's not an effort to try and subvert or create difficulty for the employees; it's simply a matter of trying to preserve a company for a period of time. And for some instances, it's day to day, and for many companies it's week to week, but it's very rare that you see a situation where you have to take a month or a 30-day look. And the costs involved, simply, in that are really quite high. And this will have the negative result of creating decisions that might be made a lot earlier that didn't need to be made, because of the potential cost involved in keeping a company open longer or keeping certain workers employed longer than they would otherwise be employed.

So, on behalf of Knight-Ridder, we would strongly urge that you continue to maintain the position that you've always had and not go forward with the change, which we feel was wrong.

Thank you.


MS. KEEGAN: Good morning. Thank you for this opportunity. I'm Fran Keegan. I am the vice president of human resources for a company named Electroglas. Electroglas isn't a household name. We have -- we're not known for making our employees multimillionaires, and we don't have flashy commercials. We don't have, unfortunately, soaring stock prices. What we represent, actually, is the unsung heroes maybe of Silicon Valley.

The company itself is 42 years old. And, yes, we're probably older than many people in this room. But let me take a moment to introduce you to our employees. In general, on average, they make less than $80,000 a year. On average, they're in their thirties. They own homes, they raise children, they pay taxes. They have a tendency to join our company and stay for a long time. I've only been there 17 years, but many have been there for 20 or 25 or even 30 years.

I'm here today not to ask for a special favor, although we could use it right now with this particular downturn in industry. I come here to request a fair shot at making it for this downturn. We need a fair shot at managing our business with the tools that we need. And today we'd request the tool for the flexibility to shut down and maintain our workforce.

I don't request this so we can turn a profit. No, last quarter our revenues were down 57 percent over the previous quarter. Last quarter we lost $14.4 million. But in spite of this, we are sure we can persevere and that we will eventually return and we will make money and we will have a successful business.

What does a shutdown mean to a small company like Electroglas? One day of shutdown means a savings of $125,000. Eleven days of shutdowns means a savings of over $1.3 million. No -- we can do the math -- it doesn't mean we're profitable. It means we can manage ourself into losing less money. That is our goal for this year and that is our goal for next year, is to lose as little money as possible.

So today I don't -- again, I don't ask for special treatment. I ask for the tools to run our business. If you provide us with these tools, we all can win. And I mean our company, and I mean our customers, but most of all, I mean our employees.

And again, thank you for this opportunity.

COMMISSIONER DOMBROWSKI: Again, I'll apologize if I don't get this name right -- Teferi Gebre.

MR. GEBRE: Good morning. My name is Teferi Gebre. I'm with the California Labor Federation.

I'm just going to make this short. I'm here to just state that, first of all, I don't think the IWC should have actually been scheduled to decide on the agenda today. This is clearly beyond your authority. The concerns expressed by the employers over this issue can only be addressed by the Legislature and by changes of statute, and the IWC should leave this matter to where it belongs, to the Legislature, so it can be properly addressed. The Legislature, like it was stated earlier, did not delegate legislating to the IWC, only implementing legislation.

So, with that, the California Labor Federation feels that there is legislation pending as we speak right now in the Legislature, AB 1677, which is in the Senate, so we feel like this is beyond your authority.

Thank you.

COMMISSIONER DOMBROWSKI: I would just point out, sir, that there are a number of people in the employer community who don't agree that that legislation addresses the issue. And, you know --

MR. GEBRE: They have a venue in the Legislature to amend or change the statute, and their grievance can be heard at the Legislature. And with that, there is legislation pending. In early January, we believe, it will be gone through the Senate. And that would be the way to address it.


COMMISSIONER COLEMAN: Yes. I have one question. So, thank you.

Do you believe, then, that Commissioner Art Lujan and Miles Locker were in error, then, when they sought clarification from the IWC in their written communication?

MR. GEBRE: I believe so. And I have heard very compelling testimony in here, which has been -- which would be a lot more clarified and which should be presented to the Legislature where it belongs. The Legislature amends statutes, the Legislature legislates, and as you know, you implement those changes.

COMMISSIONER COLEMAN: And one further question. In terms of the organization that you represent, is there an opinion one way or the other regarding the outcome of this? Do you feel it's better for the workforce to have the layoffs that had been previously mentioned by speakers? Or do you -- I was just wondering if you've heard any abuses of the current system. We haven't had any brought to our attention by the current interpretation of the law, and that's why I'm trying to understand why it would be a problem to continue that interpretation, in your view.

MR. GEBRE: For us, the problem is just clearly this is an issue which belongs in the Legislature, and this is an issue that we'll address with the Legislature, and this is an issue that the Legislature is in the process of addressing. And we're just saying that we don't think that the IWC should jump the gun and skip ahead of the Legislature.



MR. GUSMAN: Mr. Chairman, members of the Commission, my name is Shane Gusman. I represent the Teamsters, the Amalgamated Transit Union, the Hotel Employees and Restaurant Employees, the United Food and Commercial Workers, the Engineers and Scientists of California, and the Machinists on this issue.

I apologize -- I was late, so I don't know if you covered this issue with respect to what the IWC is proposing, what kind of action or what form of action the IWC is proposing on this issue. I do have a couple of brief points, though.

One is, I agree with the previous speaker that there is pending legislation. Obviously there's some disagreement on the scope of that legislation and does it adequately cover the problem. I think a fair and objective reading of that legislation is that it does cover the stated problem previous to the -- or immediately after the Miles Locker letter was issued. Subsequently, the letter has been rescinded, so I don't understand what the -- what the rush is for the IWC to make a clarification. I understand that there has been a request to look into the issue. I don't think there's anything wrong with that request. However, I think the -- an objective reading of the law would -- the appropriate response would be that the IWC does not have the authority to move ahead on this issue.

Certainly, with respect to looking at amending the "Statement of the Basis," if that's what the proposal I heard some mention of that, and 1177(b), which basically authorizes the IWC to approve a "Statement of the Basis," that section does not contemplate amendment without some underlying action. And I don't know if you've discussed some underlying action that you would take, either amending a wage order or adopting a new one. But without either of those two actions, the "Statement of the Basis" has to remain the way it is. You have no authority to go in after the fact and amend the "Statement of the Basis."

And from the employer standpoint, if clarification is what is sought on an expedited basis, if the IWC follows its own rules, even assuming for the sake of argument that you had the authority to tackle this issue, if you follow your own rules with respect to conducting an investigation, appointing wage boards, going through all that process, it's actually -- would probably be much slower than waiting out what -- and seeing what happens to AB 1677 that's pending in the Legislature. It's very well placed. It could move within days to the governor. I think that is the most prudent step to take, and I urge the IWC to take no action on this issue at this time.

Thank you.


COMMISSIONER COLEMAN: I have one question, similar to your colleague before. Are you aware of any abuses of the current interpretation of the salary statute among your members?

MR. GUSMAN: You're talking about the pre-Miles Locker letter? Aware of any abuses? I am not personally aware of any abuses. I don't know -- there may be some out there. I don't know.

But if there -- if there aren't any abuses under that system, and that is the system we are working under, I don't see what the rush is for the IWC to do something here.

COMMISSIONER COLEMAN: The system, of course, was called into jeopardy, though, with Mr. Locker's letter. And in --

MR. GUSMAN: Which was rescinded by official action, is my understanding.

COMMISSIONER COLEMAN: Um-hmm. And in terms of the rush, we're staring at quite a number of letters from employers large and small that really need this, because the economy, as you, I'm sure, are well aware and we certainly feel, here in the valley, is --

MR. GUSMAN: Right.

COMMISSIONER COLEMAN: -- rapidly declining at a speed we really have never seen before. And before these jobs diminish and leave our state, we feel compelled -- at least I, as one commissioner, feel compelled to take some action to protect the families.

Thank you.


COMMISSIONER CREMINS: Maybe I'll state the obvious. I think the debate here is over whether we're procedurally sound or not and how we accomplish our goals. I think there's -- both sides of the table agree we need to maintain our economic vitality, of course. It's how it's done. And I think, in our deliberation, we need to consider whether we're -- I'll simplify -- whether we're lawsuit-proof or not. So I think that needs to be clarified today. It's probably the most important question in my mind.


MR. TOLLEN: I'm Bob Tollen, of the management law firm of Seyfarth Shaw. I work in the San Francisco office.

I want to address primarily the issue of the Commission's authority to speak on this subject.

Let's be clear first what the subject is. The federal regulations have historically, since perhaps 1940, provided that if an exempt employee works any time within a workweek, that employee must be paid for the entire workweek.

Now, the Locker opinion expressed the view that California follows the federal regulations, with one simple exception, and that is that the workweek standard expressed in the federal regulations does not apply, that it is a monthly standard. In other words, if an employee works any amount of time in a given month, the employee has to be paid for the entire month. So these companies today that are trying to avoid layoffs by facing the present economic crisis and shutting down for one or two weeks cannot do that under the Locker interpretation, because if they shut down for one or two weeks in a given month, obviously they work the rest of the month, and under the Locker interpretation, if an employee works any amount of time in a given month, an exempt employee, then the exempt employee must be paid for the entire month.

Now, where did Miles Locker get that interpretation? He got it out of the difference between the definition of an exempt employee under the federal regulations and under the California regulations. The California -- the federal regulations historically have defined an exempt employee in terms of a person who earns so many dollars per week. The California law defines an exempt employee in terms of a person who earns so many dollars per month. On no more than that difference, Miles Locker concluded that the rules on deductions and shutdowns from the salaries of exempt employees must as well be applied on a monthly basis rather than on a weekly basis. And he also based that on the fact that AB 60 codified the monthly salary basis.

But the Industrial Welfare Commission, for years and years before AB 60, had as well defined the exemption for executive, administrative, and professional employees on a monthly basis. And the Industrial Welfare Commission had, over all of that period of time, taken the position that the rules on deductions from salaries of exempt employees applied as they applied under the federal regulations, that is, on a weekly basis.

So, when the Legislature decided to codify the monthly salary basis for an exempt employee, the conclusion that Locker's letter reached was that the Legislature also decided to -- also decided to change the rules on exemptions -- the rules on deductions from the salaries of exempt employees in order to place that on a monthly basis as well. But that would have been a change, because even though the Industrial Welfare Commission had previously defined the exemptions based on monthly salaries, it had taken the position that the deductions from the salaries were analyzed on a weekly basis.

Now, if you went to any legislator and asked, "Did you know, when you codified the monthly approach to the exemptions, that you were also changing the rules on the approach to deducting from the salaries of exempt employees?" The legislators would say, "I never dreamed anything like that was happening. I had no idea. We never discussed it." And Juli Broyles has said that that never came up in the legislative history.

So, all the Legislature was trying to do in adopting AB 60 was codify the approach of the Industrial Welfare Commission. And people now ask, "Well, what was the approach of the Industrial Welfare Commission?" Well, the Division of Labor Standards Enforcement said in its 1998 manual, at Section

"The employee's predetermined salary may not be subject to reduction because of variations in quality or quantity of work performed during the course of any workweek. An employer cannot make deductions because of a lack of available work during any part of the workweek. An employer is not required to pay salary for a workweek during which the employee performs no work."

I think it's clear that the IWC always followed a workweek approach. AB 60 codified the IWC's approach to the exemptions. And now, when this question has been raised, I don't see how there can be any question that the IWC can express its opinion as to what it meant all through its history when it said that exempt employees must receive so much per month, but also provided that the deductions from the salaries of exempt employees would be analyzed on a weekly basis. All the IWC is being asked to do is express what it itself intended, because we know that the Legislature adopted what the IWC had intended.

I just want to say a couple of other things, not of a legal nature. But these days -- and I do wage and hour law probably 95 percent of my time -- I am constantly having clients telephone and ask questions or send emails in and ask questions. The single most frequent question that I get these days is on this subject, what is the status of the law on this subject? And the answer I have to tell them is, "The Labor Commissioner withdrew the Locker letter. It's not likely that you're going to face a challenge from the Labor Commissioner or the Division of Labor Standards Enforcement. But that letter and its thinking is out there in the public domain, and there are plaintiffs' attorneys who have said that they think it's right, and that they're going to bring class action lawsuits based on that same legal theory. And I can't tell you, I think, if a class action lawsuit of that nature is brought, the employer will win the lawsuit, based on what I've just said here. But do you want to take the chance? Do you want to run the risk of being sued and run the risk of losing a lawsuit?" And that is the quandary in these difficult economic times that all of these employers are facing.

And that's why the industry does need some support now from the Industrial Welfare Commission, at least to go on the record and say what we always thought was the law with regard to deductions from the salaries of exempt employees remains the law. It is the weekly approach.

Thank you.


MS. MILTON: Good morning, commissioners. Kelly Milton, with the American Electronics Association, representing over 1,500 high-tech companies in California.

I'm here to ask that the IWC clarify this issue, continuing the interpretation of wage and salary requirements to be based on a weekly, not a monthly, standard. We do believe that the IWC has constitutional authority to take action on this.

We are concerned that employers will lose flexibility. And rather than having the option of shutting down operations for a temporary period, as previously spoken to, employers may have to lay off workers to cut costs. This would not be in the best interests of workers, employers, or California's economy as a whole.

So, thank you.


MR. WASHINGTON: Good morning, Mr. Chairman and members of the IWC, commissioners. My name is Willie Washington. I'm with the California Manufacture and Technology Association. We are a statewide organization. We represent about 800 of the major manufacturers in the State of California. We've been doing this since about 1913.

And just to bring a little history along with the California Manufacturers Association, I'd like to address a couple of questions that were asked early on and give some support.

On your "Notice of Public Meeting," there was a reference that you might be able to pick up this information by going to the Web site. And by going to the Web site and opening up, the very first thing that's on the IWC Web site is its authority for the action that it takes. And amongst those would be the two references to the Labor Code, and also a reference to a constitutional reference, that allows the IWC to take the actions that it's taking. So, before you do anything with the IWC, according to its Web site, it has already stated its authority to act on the hours and wages and things of that nature.

Having said that, I too am here, like other employer representatives, asking the Commission to take action to make it absolutely clear that now that the letter from Miles Locker -- the letter has been rescinded, that indeed we revert back to the pre-Locker letter days, and that that be done by the Commission so that the Labor Commissioner and anyone else will have clear guidance as to what the state of law is in the State of California.

We have a major concern, the manufacturers, because the decision of that letter, as you've heard earlier, has left that in flux. Nobody knows. People are afraid to use this. The manufacturers, I can say that I've had the personal experience of having worked with this, and we're now entering the season in which this process or this procedure, or the closure of manufacturing plants, are most likely to occur. For example, in November during the Thanksgiving holiday, most manufacturers have lumped together the day of Thanksgiving and the day following that, that Friday. So that's two days of that week that are off now on holidays. You can see the logic and the sense that it makes, that if you choose to close down, that you would do this for that week. An individual who takes three days of vacation is actually off for nine full days. It's a mini-vacation at a very desirable time, because most people think of Thanksgiving as being a family-oriented period. I might also add that the same thing would be true of Christmas, where the individual employee gets not only the benefit of being off and getting the maximum utilization of the vacation time that they might use.

You might also be aware that under this process, taking the vacation time in order to be paid is voluntarily. However, that would not be the case if the Miles Locker letter was allowed to stand, or if you were to allow this to just stay in flux with no direction for the employer and also for the legal community.

One of my first duties when I came back to California and I began to work in the private sector was to deal with a major, major change that occurred in 1979. In 1979, the Industrial Welfare Commission changed Wage Order 1-80. And under Wage Order 1-80, the Industrial Welfare Commission said that that wage order applied equally to men as well as to -- as well as to women. Up until that time, that wage order had only applied to women and minors. The California Manufacturers Association headed up a major lawsuit. And that particular wage order was held up for more than three years as we went through the legal process. In the end, the manufacturers and the employer community lost. The court said clearly the IWC had the authority to make that decision. That was by far -- still is -- the most major decision that the IWC has ever made, as far as we're concerned, in the manufacturers.

Then in 1998, the IWC had also made a decision that rescinded the 8-hour day per se, as we had known it in California. And it was challenged, again, by the AFL-CIO. And again, going all the way to the California Supreme Court, again the court ruled that the IWC indeed has the authority to make those decisions.

So, on both sides of the equation, we have seen evidence again and again and again that indeed the authority conveyed (sic) on the IWC by the Legislature is very broad and certainly enforceable, as those of us who have already been to court have learned.

I want to add one other thing that the IWC has that no other commission that I'm familiar with has. In your deliberation, in making your decisions, you have a particular thing that you're able to use that no one else has, to the best of my knowledge. For example, if you take a look at the Labor Code, Section 512(b):

"After listening to the employers and employees talk about the impact that it would have on employment and the impact on individuals, the IWC has broad authority to make a decision simply based on the health and welfare of the employee."

If it would negatively impact employees, you have the authority to take action, on that basis alone. Without having to have all of the legal terms and so forth that we went through with Mr. Locker, you have the authority, just under that particular section alone. In fact, that's pretty much how that was determined in 1980, whenever the IWC was able to make that order applicable to men as well as to the females and minors that it had previously only applied to.

Like Ms. Broyles, I believe I attended every meeting that there was on AB 60 as it went through the legislative process. There's nothing in AB 60 that prohibits, that strictly prohibits or otherwise removes the authorities that I've already discussed on the part of the IWC. And, in fact, there's at least three references that even after they've made statements, they come back and said, "There's nothing here that precludes you from acting whenever there is a need, that -- after taking testimony and going through this process, there's nothing that precludes you from doing your duty," and that is making a decision that it affects the employer -- employees, rather, in the State of California.

The other factor that I want to -- I lost it.

Oh, the other factor I did want to make a comment on is that for the many, many years that we went through this process of using these temporary -- temporary plant closures, the one factor has always been one of economics. And you've heard that again and again today, that this is an economic measure, where an employer who may be under economic stress, it's one of the ways in which they're able to help relieve that for a short period of time. And you're able to do this without doing damage or great damage to your employees.

The fact that this is done, the announcements are made, in many instances, for -- in my industry, for example, we knew at the beginning of the year that we were going to be closed over the Thanksgiving week and we knew that we were going to be closed over the Christmas week.

Employees now have greater flexibility. For example, if you work in the manufacturing industry, and if you were in a union industry in particular, you only get to choose your vacation time by virtue of your seniority. So you don't get a choice as to when you're going to take vacation, other than what your seniority allows. In this particular instance, it allows that employee to use three or more days of that vacation during the time that they're able to be with their family, whereas they may not be able to get those holidays at all if they were having to sign up for those based on their seniority. So, in many, many instances, in addition to the economic provision, there's also a social issue here, and that is, by allowing this flexibility on the part of the employer, it is the employees and the employer who are able to benefit.

So, I ask that you make this decision and make sure that everyone in California is aware that we are going to abide by the Fair Labor Standards Act.

Thank you.


Rick Rowe.

MR. ROWE: Mr. Chairman and members of the Commission, thank you very much. My name is Rick Rowe. I'm the chief executive officer for a company by the name of MCMS. So I am one of these people who get to make the decisions that you're all talking about.

And the reason why I wanted to come today -- I thought it was very important -- is two things. One is that I live in California. And our company is a global company; we're $600 million scattered around the world. Like a lot of companies right now, we have hit very tough economic times. We've had to lay off about 35 percent of our workforce around the world. You will find nothing worse in a job, in a job like mine, is to have to face that.

But the reason why I wanted to talk to you is a little bit different. I'm not an attorney, so I'm not cognizant of all of the rules, but one thing I did want to point out is that, as the leader of a multi-national company, one thing I am concerned about, since I plan to retire and live in California, is the competitiveness of the state. One thing you may or may not realize is that, obviously, within the United States, and certainly around the world, people are always competing and want you to locate your plants in their state. During the recent energy crisis, probably at least two or three letters a day I would receive would be from some state in the United States telling me they had electricity.

So, the thing I would ask you also to think about is, you know, please do not make California be a state that's harder than it is already to do business in. It's very difficult. And, in fact, my board questioned my wisdom several years ago in expanding in California. We're known as having a high state tax rate. We're known as having lots of issues in energy; it was certainly one that's been on the forefront through the summer. But now the last thing I want to do is worry about rules like this in terms of how it plays out.

And during this time period, again, if you pay attention to a lot of the manufacturing activities that are going on, we're being faced right now with some very hard decisions, and primarily it comes around plant closings. So, if you're a company like ours and you have plants around the world and in multiple states, and you look at which plant are you going to close, you don't want to close any of them, but I will guarantee you will make the decision to close in a state that's hard to do business in. So, I'd be very concerned about that.

The second point is the employees, because at the end of the day, this really is all about them. And I would just tell you, for exempt employees, over the years we've used many different strategies when times have been hard, and I'm old enough to have lived through about four different recessions now. And one of the strategies always used is the things that the speakers have talked about here, either shutting down a plant for a week where there's a holiday, where you can make it three or four days, you can make it good for the employees.

One of the other options I would like to have you think about that, when I've talked to employees, is you will other companies at times cut pay as a way to preserve the job, but will cut pay to try and preserve the employment. And I will tell you employees time and again have said, "Don't do that because that affects my life; it affects my retirement, it affects the multiple on my life insurance; and it affects many things." So, what we prefer to do is keep people, and particularly exempt employees, is keep their pay level the same and find ways where we can cut back in the amount of expenses we have through temporary shutdowns.

So, I think all of the other speakers have talked about it, and I will just tell you, as one of the people who have to make these decisions, it would simply be two things: One, the urgency to make the decision now and give us some guidance -- it's very insidious. I just -- you don't know how many CEOs right now are making decisions on closing plants or cutting back jobs. And the longer we wait in this time period, the more employees you're going to put at risk.

The second thing is, I think that you do have a responsibility and authority to give your opinion on it, because whether it's been taken back or not, there's an opinion out there. And I wouldn't be here today if I didn't think that this was important.

Thank you.


Last speaker, Frank Jesse.

MR. JESSE: Good morning, Mr. Chairman and members of the Commission. I too come from industry. I'm -- my name is Frank Jesse. I'm vice president of real estate and corporate services for BEA Systems. We're a large, global software company.

And we want to make -- I want to emphasize that the current flexibility that's available under California law is very critical to a business like ours. I want to echo the same sentiments you've been hearing.

Our company is a member of the Chamber of Commerce and Silicon Valley Manufacturing Group. And as I say, we're a $1 billion global company. We've been a very rapidly growing company, founded in late 1995 as a start-up. And today we employ some 3,300 employees. We have a passionate desire to retain staff. We go through a great deal of effort to get these very high skill level software engineers and other support staff. But we need to -- and so, our desire is to be able to retain the staff and yet continue to grow the business successfully.

However, business also needs to correlate financial performance closely to market trends. We developed strategic partnerships that helped grow not only our company, but also the California economy. So, by being able to be attractive here in California, it helps us to grow many industries besides our own. For example, BEA, as a platform software company, has very strong strategic relationships with companies like Peoplesoft, Siebel, Oracle, Unisys, just to name a few. So, if we are handicapped as a business doing business in California, it will make it much more difficult for us to grow not only our business, but other related businesses that depend on our platform as part of the development software and the dominance of California as a -- and here, especially in Silicon Valley -- as a key to the software industry.

I'd like to ask the Commission to give very strong consideration to go ahead and make the decisions necessary to preserve California's competitiveness worldwide.

Thank you very much.


I got one more card here. Diane Ritchie.

MS. RITCHIE: I'm a local employment attorney, and I represent employees. I'll be starting with the Legal Aid Society next week, and so I represent relatively low-income workers.

I just want to make the point which is clear in Miles Locker's letter, that the federal statute already holds that if an employer deducts from an employee's wages because the employer will not allow the employee to work, that is going to convert the employee to an hourly worker. And certainly, that's what any of the companies can do. And I think, by taking a different position than the federal law -- and I think you essentially will wind up doing that if you deviate from Mr. Locker's letter -- it's going to send a message to California employers that the standard in California is beneath the federal standard. And what that's going to do is to cause litigation.

For someone like me who represents employees against employers, if I have an employee who is forced to take the hardship of a week of vacation or -- in many cases, not even vacation -- but still, even if it's a week of vacation, I'm certainly just going to use the federal statute to pursue that employer. So, the idea that somehow this will make California less friendly is not true, since it really makes the United States less friendly. It's an even standard throughout the country.

And I just -- I just want to say that the arguments that say, "Please don't make California a less friendly business place," doesn't really accomplish anything.

COMMISSIONER DOMBROWSKI: I heard some of the things he said, and I can agree with you that we are not going to be lowering the federal standard.

MS. RITCHIE: Okay. And I think it -- I mean, from my reading of Mr. Locker's letter, it doesn't really -- to do anything less than the federal standard, to allow employers to force employees to take vacation time, I think it's only going to cause litigation in the federal courts. So, that's my only point.


Mr. Abrams, you've asked to speak again. I'm really not inclined to start giving people second chances.

MR. ABRAMS: Fair enough.

COMMISSIONER DOMBROWSKI: Did I -- as a favor -- as a favor, I'll give you some -- a minute or so, but I'd really like to move this along, if we can.

COMMISSIONER CREMINS: I think he may have been addressing a question I had initially too.


MR. ABRAMS: No, that's quite all right, Mr. Chairman. No, I appreciate the need to move forward.

Two points: One, I represent the California Hotel and Lodging Association. The lodging industry represents about -- or has about 170,000 employees in California. We received a call about a week ago from the Employment Development Department asking about the number of layoffs in the industry, which are very significant, both exempt employees and non-exempt.

And the point I want to bring to your attention is that about 25 years ago, the Legislature adopted a work-sharing program under EDD that -- and if you look at the EDD's Web site, the example they have there is an employer faces the choice of laying somebody off completing, giving the person no job, no salary for a while, or finding a way to make them share. And the legislative goal at that point was finding a way to make it possible for people to share. And this involves getting partial unemployment benefits. The goal of the Legislature then and now -- and we certainly urge you to take action now to make it clear that people have the flexibility to allow people to job-share. Some people take a week off, whatever, and keep their benefits, keep everything going. And we would submit to you, the Legislature has already told everybody that that's the preferred way to proceed.

I will also mention, though, in terms of the rush, employers -- and you've heard this now several times -- employers are making decisions, "Do I lay this person off, no salary, in some cases no benefits, perhaps no accrual of retirement, other things, or can I do some sort of a job-share?" And no employer in his or her right mind is going to make a choice that will subject him or her to liability downstream, when the simpler choice, the cheaper choice, and the choice that most attorneys would counsel them to make is, "Don't opt for getting involved in a lawsuit. Lay the people off. That is the safe thing to do."

And that's what the rush is. People need to know right now -- today, hopefully -- what the answer is. If they can continue to do this, that's fine. If the Legislature doesn't feel that that's right, then it's up to the Legislature to do what it feels is appropriate in January or whenever.

But even if we leave it to the Legislature, most likely we are looking at January of 2003 before something becomes effective. And that's just too long a time to let everybody wait.

And thank you for your indulgence, Mr. Chair.


Anyone want to make any comments at this point?

(No response)

COMMISSIONER DOMBROWSKI: What I want to do, as I've said earlier, is move to Item 2, consideration of proposed amendments to Wage Order 5-2001, regarding employees covered by Wage Order 5 with direct responsibility for children under 18 years of age receiving 24-hour care. And what I want to do is use the opportunity, since this Wage Order 5 is open, to address the issue -- not only to adopt Wage Order 5, which unanimously was supported by the wage board, and put those amendments on the personal attendants in the wage order, but also to use this opportunity to clarify what we meant when we brought the wage orders in line with AB 60.

Considering that right now we have a wage order open that's considering hours, conditions, and wages, including overtime regulations, I think, if nothing else, it gives some direction and some filling the void that we have sitting out there from the Commissioner's request, the Labor Commissioner's request.

I've circulated some language. It's a draft. It would not be the final "Statement as to the Basis." But what I'd like to do is have us vote, not only on the wage order amendments, but also to take a vote on the direction of this language, give Marguerite direction as she prepares the "Statement as to the Basis."

Any comments, any questions?

MS. BANE: Mr. Chair, are you attempting to do that at this point?

COMMISSIONER DOMBROWSKI: No, I'm just -- I'm making my observations and having -- consider some comments, and then we'll move into, actually, Wage Order 5, because Marguerite, I believe, has some amendments we have to talk about.

MS. BANE: All right.

Before we conclude, then, I would like to offer a few comments, but they're premature right now.

COMMISSIONER BOSCO: Could I ask, procedurally, then, Mr. Chairman, what would you anticipate that we vote on? What would basically be just a statement of our intent in the future in adopting the final language, or instructions to Marguerite to include that in our final language?

COMMISSIONER DOMBROWSKI: I would want instructions to include.

COMMISSIONER BOSCO: And so that the business and other communities out there would be able to extrapolate from that what the Commission's position --


COMMISSIONER BOSCO: -- is now or is going to be?

COMMISSIONER DOMBROWSKI: Is now and has been. This is a clarification.

COMMISSIONER BOSCO: Oh. The vote we would take on that, anyone would have a right to interpret that as what the Commission's position is?


COMMISSIONER BOSCO: Even though it wouldn't officially be adopted?

COMMISSIONER DOMBROWSKI: But we would at least have -- we'd have a transcript and a public record at this point, then, which I think is important.


COMMISSIONER CREMINS: I would ask a question -- maybe I'm a bit off-base. Are we intending, then, to set a precedent-setting body of regulations here as we adopt regulations? This would set precedent for other adopted regulations? Are you intending to contain this only to this proposed wage order?

COMMISSIONER DOMBROWSKI: I'm not sure I understand. What I'm trying to do, I'm not adopting any new regulations. I'm trying to simply get a record clarifying what we thought we were adopting on this issue that was raised. And I'm trying to do that through the opportunity we have with Wage Order 5 being open. And that's all I'm doing.

COMMISSIONER CREMINS: To oversimplify, this would only be contained to Wage Order 5, then?

COMMISSIONER DOMBROWSKI: No, no. I think the issue is broader than that, because it affects all of the wage orders. But what we're saying as a Commission is, "Here's what we were thinking when we adopted that."

COMMISSIONER COLEMAN: If I can clarify, then, because Wage Order 5 talks about overtime exemptions, then we're taking this opportunity to avoid confusion, to make sure that we clarify what we mean when we're talking about overtime exemptions in general, because any employer that's looking at Wage Order 5 is going to be compelled to look at the larger body of law related to overtime exemptions. And so, this is an opportunity for us to clarify what we mean when we're talking about treatment of overtime-exempt employees.

Is that what you mean?


MS. BROYLES: Mr. Chairman, just a question --

THE REPORTER: Please come to the podium.

MS. BROYLES: This is just a question. You're not amending Wage Order 5 with the change; you're amending --

COMMISSIONER DOMBROWSKI: The "Statement as to the Basis."

MS. BROYLES: -- just the "Statement as to the Basis" only.


MS. BROYLES: So -- which is a completely different process.


MS. BROYLES: You don't have the requirements on the hearings or anything else.


MS. BANE: And that "Statement as to the Basis" that we -- that you are proposing possibly to amend applies, per se, to 1 through 14, because that is -- it is the statement of the basis as to --


MS. BANE: -- as to that.


Okay. Marguerite, I believe you have language for Wage Order 5?

MS. STRICKLIN: It's not a change in the language; it's just a movement.

Section 3(A) of Wage Order 5 deals with "Daily Overtime - General Provisions," and it appears that the way that the proposed --



MS. STRICKLIN: I can only give you the section. I don't know the page number. It's Section 3(A).

MR. McCONKIE: Page 10.

MS. STRICKLIN: It appears that the way the proposed language was sent out, the overtime provisions for foster-care employees was put into Section (A), and I'm just proposing that, to be consistent with the way the order was written before, that it be put back down into Section (E), which dealt with the issue before, and that it become (E)(2), Section (E)(2).

Any questions?

COMMISSIONER DOMBROWSKI: Any comments on that?



Any other comments on the wage order, questions?

COMMISSIONER CREMINS: I wonder if I could get a two-minute caucus with some folks?


COMMISSIONER CREMINS: And maybe a little advice from counsel.

COMMISSIONER DOMBROWSKI: Sure. Let's take five minutes.

(A short recess was taken.)

COMMISSIONER DOMBROWSKI: All right. I'm going to call the meeting back to order. We're on Item 2, the consideration of Wage Order 5.

We've talked about Marguerite's proposed amendment.

Does anyone have any other comments they want to make?

MS. BANE: Mr. Chair, I would -- I did have an observation that I know that the Commission has considered, but I did want it in the record, that when the IWC, in a prior year, amended 1 through 13, Wage Orders 1 through 13, to come into line with AB 60, that they did so on legislative authority without a wage board at the time, and that a majority of the members who are now on the Commission were on the Commission at the time that those amendments and that "Statement as to the Basis" was acted upon by the Commission.


COMMISSIONER CREMINS: On that issue, I would -- it's my understanding that the statute was -- gave the Commission authority to do that solely for minimum wage changes and specifically contained to that issue. I would

-- I think it was the intent of the Legislature to keep it contained just to that, and not to other wage orders or pending wage orders beyond the AB 60 changes.


MS. STRICKLIN: I don't know if you made a misstatement, but AB 60, yes, the particular things in that bill related to several different issues, and there was a special procedure whereby you did not have to have a wage board. And that ended in July of 2000.

Moving forward, there's no procedure for acting otherwise.


COMMISSIONER DOMBROWSKI: That was in -- we had authority that expired at that point in time.

And again, to clarify what we're doing here, adopting the amendments to Wage Order 5 on the personal attendants, and then also adopting language addressing this workweek issue as part of the "Statement as to the Basis" for Wage Order 5.

And I think Commissioner Bosco had another comment he wanted to make.

COMMISSIONER BOSCO: Yes. Thank you, Mr. Chairman.

First, I'd like to say that I think the quality of the testimony that we've had today has been excellent, and I think it was very helpful. And I want to thank the participants.

We're in an awkward position of having to unring the bell. The bell has kind of been unrung already, in that the legal opinion that started this controversy has been officially withdrawn. But the reverberations are still out there, and the number of letters we've gotten and some of the testimony today indicates this has been very unsettling in the business community and may give rise to a number of lawsuits and such things that, particularly right now in our current economic situation, I don't think the state wants or should invite.

I think there's two things that we really have to do in this context. One is to send a clear message as to what the IWC's official position is on this general issue. And then two is to institute a procedure to put that legally into effect. The former, I think, is something that we can do today; the latter is something that I think we should initiate today and do expeditiously. And I think expeditiously would mean probably in the course of three, maybe at the latest four, months.

That period of time, were we to first make a statement today and then proceed to go through the wage board procedure, I think would have a couple salutary -- three salutary effects: one, it would send a message to the employment community that -- of what our stance is; secondly, it would stay -- as a practical matter, it would stay a whole lot of lawsuits because, my guess is, the plaintiffs' bar, if there was some procedure in effect, would want to wait to see the outcome of that before expending a lot of time, money, and effort in instituting lawsuits; and then, three, it would give the Legislature, presumably, a chance to step into this if it wanted to. There's no doubt that the Legislature has a right to resolve this. I don't think anyone on this Commission or anyone in their right mind would challenge that, but I don't think the fact that the Legislature can resolve it necessarily means that we can't ourselves. If we take our stand and it can be used by the employment community, perhaps the court, and the Legislature disagrees with that and wants to overturn us, there would be no doubt in my mind they'd have a right to do that, and they would trump whatever it is that we did.

So, I would like to offer a motion that we do two things: one, that we amend the "Statement to the Basis" on Wage Order 5 and ask our counsel and staff to reflect the Commission's official position that insofar as that wage order, that we adopt the weekly standard to compute the amount -- well, that we adopt the weekly standard in this context; then, secondly, I move that we -- and this may not be appropriate right now -- but I would then later move that we institute a procedure to have that instituted as a separate wage issue.

So, I will make the motion now that we adopt a weekly or a workweek standard.

COMMISSIONER DOMBROWSKI: Can I ask -- procedurally, I think we should amend the wage order, adopt the amended wage order first.

Right, Marguerite?


COMMISSIONER DOMBROWSKI: So, before we take your motion, could I have -- are there any questions about the wage -- Harold?



COMMISSIONER CREMINS: Just a clarification on the motion.

COMMISSIONER DOMBROWSKI: I'm just asking that we have a motion to approve the changes in Wage Order 5 that both sides have -- that the wage board recommended, and with the amendment that Marguerite explained, the technical amendment.

COMMISSIONER CREMINS: Is that a two-part motion or bifurcated motion or one motion as a whole?

COMMISSIONER DOMBROWSKI: Just one motion. Just one motion. Then, secondarily, we'll take Doug's motion on the language on the "Statement as the Basis."


COMMISSIONER DOMBROWSKI: So, do I have a motion?

COMMISSIONER ROSE: Move on the -- I move on the first, yes.





Call the roll.

MS. BANE: Prior to that, commissioners, we -- I would like to make a statement that staff has consulted with Cal OSHA and that there is no conflict between the amendments that are proposed today and Cal OSHA regulations.


Call the roll.

MS. BANE: Mr. Cremins.


MS. BANE: Mr. Rose.


MS. BANE: Ms. Coleman.


MS. BANE: Mr. Dombrowski.


MS. BANE: Mr. Bosco.


COMMISSIONER DOMBROWSKI: Okay. Those amendments are adopted unanimously.

Now we have Commissioner Bosco's motion on the table, which is that, number one, we adopt the "Statement as to the Basis" language that's in front of us on the weekly issue; and secondarily, that -- secondarily, that we --

COMMISSIONER BOSCO: I think we'll make that as a separate motion.



COMMISSIONER DOMBROWSKI: Okay, just this -- the question on -- this is the motion on adopting the "Statement as to the Basis."

Comments, questions?

MS. BANE: I have a point of clarification.


MS. BANE: Is this language that which is reflected in a written document?

COMMISSIONER DOMBROWSKI: This is the language that I have given to all of you up here.

MS. BANE: And that is language, then, that will be --


MS. BANE: -- voted upon and given to counsel to incorporate.


MS. BANE: Thank you.



COMMISSIONER ROSE: And this is just to Wage Order 5.

COMMISSIONER DOMBROWSKI: Yes. That's all we have the authority to do.


COMMISSIONER COLEMAN: If I may comment briefly, I will be supporting Mr. Bosco's motion.

And just to clarify a couple of the questions that came up during testimony, I do share Mr. Cremins' impulse to make sure that we do this correctly. None of us want to be involved in any sort of litigation on this matter. So, just to clarify for the public, we are simply adopting a "Statement as to the Basis" related to the current wage order before us. We are not adopting -- taking on new wage orders, which would indeed require wage boards, nor are we going back and pulling out any other "Statements to the Basis" and amending those. We are considering this current "Statement to the Basis" for the current wage order that's before us.

This has been a basic function of the IWC since its inception. We have the authority to do this. And from the testimony again today, I think we are compelled to do this. And I think this will be a great service to employers and employees in this state.

Thank you.


COMMISSIONER CREMINS: I would respectfully disagree. I think we're maybe setting ourselves up for a potential lawsuit. I understand that there was an opinion solicited from the AG's office and maybe from leg counsel and the Legislature. Unfortunately, we don't have the luxury of seeing that today. I wish we did. And I really think we've got to be careful this is done properly.

I think the proper way to do this -- it's unheard of to me to go back and amend a wage board. I think we need to reconvene a board and redo the "Statement of Basis." I think this is, in my mind, new territory, and I really think we're taking a risk here.

And that's not an opinion of what's right or wrong. I do know we're in tough economic times and we do need to solve the problem, and we need to do it expeditiously. I understand that, but I'm afraid -- I'm really concerned about lawsuits here.

COMMISSIONER DOMBROWSKI: From my perspective, again, we are clarifying as a commission where we were coming from on this issue. Our opportunity to get that on the record is because we have Wage Order 5 open. I would hope that we could take the opportunity, going forward, to use whatever vehicles we have to then reaffirm that this was our viewpoint. But we'll leave that up to, I guess, counsel to determine what we have to do down the road, in terms of that.

But I just -- I just want to have this on the record to fill that void that's out there right now.

Any other comments, questions?

(No response)

COMMISSIONER DOMBROWSKI: Okay. I believe we have a motion on the table. Do I have a second?



MS. BANE: Mr. Cremins.


MS. BANE: Mr. Rose.


MS. BANE: Ms. Coleman.


MS. BANE: Mr. Dombrowski.


MS. BANE: Mr. Bosco.


MS. BANE: The amendment -- the motion passes, 4 to 1.


COMMISSIONER BOSCO: Now, Mr. Chairman, I have another motion.


COMMISSIONER BOSCO: I move that the Industrial Welfare Commission -- or that we as the Commission direct the staff to set an investigation hearing with regard to the issues set forth in Mr. Locker's letter regarding salary issues for the administrative, executive, and professional employee exemption from overtime, and that we request the staff to establish a schedule for completing that investigation and the subsequent wage orders in as short a time as possible.

COMMISSIONER DOMBROWSKI: Okay. Any questions on that motion?

Do I hear a second?



MS. BANE: Mr. Cremins.


MS. BANE: Mr. Rose.


MS. BANE: Ms. Coleman.


MS. BANE: Mr. Dombrowski.


MS. BANE: Mr. Bosco.


MS. BANE: That motion passes, five-zero.


Marguerite, do we need to do anything else on Wage Order 5? Is that -- did we address everything you need?

MS. STRICKLIN: So far, yes.


MS. BANE: I have a question. In regard to the motion that just passed, does -- will that, counsel, require that wage orders -- all wage orders be considered to be opened for review, or do you know?

MS. STRICKLIN: Yes. All wage orders which have that exemption would be open with regard to that investigation, yes.

MS. BANE: Thank you.


COMMISSIONER DOMBROWSKI: All right. I guess we're on Item 5 on the agenda. Any new business that anyone wants to raise?

Nobody wants to talk about sheepherding?


COMMISSIONER BOSCO: No. The Legislature resolved that one.

COMMISSIONER DOMBROWSKI: Do we have a -- do we have a motion to adjourn?



COMMISSIONER DOMBROWSKI: All in favor, say "aye."

(Chorus of "ayes")


(Thereupon, at 12:14 p.m., the public

meeting was adjourned.)




















I, Cynthia M. Judy, a duly designated transcriber, do hereby declare and certify under penalty of perjury under the laws of the State of California that I transcribed the tape recorded at the Public Meeting of the Industrial Welfare Commission, held on October 29, 2001, in San Jose, California, and that the foregoing pages constitute a true, accurate, and complete transcription of the aforementioned tape, to the best of my ability.

Dated: November 2, 2001 ______________________________