Complying with Compensation and Time-off Laws
Being an employer comes with a lot of responsibility – both to employees and to the government. Now that you’ve figured out who the employees are, it is important to understand how to comply with compensation and time-off laws.
Complying with Compensation and Overtime Laws
Paying Minimum Wage
Wage laws require an employer to pay at least minimum wage, which is currently $16.00 per hour in California (as of 2024) and may be higher in certain cities such as San Francisco, Berkeley, and Oakland. The Fair Labor Standards Act (FLSA) is the main federal law that affects workers’ pay. California Labor Code 1171 is the main state law related to wage requirements.
Withholding Wages from Worker Cooperative Members for the Purpose of Capital Contributions
Frequently, worker cooperatives require that members make a contribution of capital in order to become a member. In some cases, the worker cooperative withholds money from the member’s paycheck each pay period, in order to complete the capital contribution. The memo below describes the laws that govern when and how an employer may withhold wages for this purpose
Complying With Overtime Laws
The law also requires an employer to pay a worker extra for overtime work and comply with other rules regarding work hours, unless the worker can be considered an “exempt” employee. Generally, employees are exempt from overtime rules if they engage in certain categories of work, such as
Managerial
administrative,
or professional work.
California overtime rules can be found in Labor Code Sections 500-558.
Worker Cooperative Exemptions to Overtime Laws
This is a gray area and courts and labor agencies have yet to provide clear enough guidance. Since all members of a worker cooperative are managers of executives, many worker co-ops argue they are exempt from overtime laws. But this doesn’t always work because the law requires that the managers and executives be in a position to manage, direct, and supervise other people.
However, some leaders in the cooperative movement have argued that overtime rules should not apply to worker-owners of cooperatives/collectives, since such application would contradict the intent of the overtime laws. Overtime rules should apply to non-member employees of cooperatives, and in cases where worker-owners can be compelled by supervisors to work overtime. However, overtime rules do not make sense in the context of a true collective, where workers set their own hours by consensus.
Here is a cooperative advocate and attorney Tim Huet’s explanation of this:
“Perhaps the clearest indication of the legislature’s intent in passing the Eight-Hour-Day Restoration and Workplace Flexibility Act of 1999 is in the legislative findings underpinning the Act”:
- Ending daily overtime would result in a substantial pay cut for California workers who currently receive daily overtime.
- Numerous studies have linked long work hours to increased rates of accident and injury.
- Family life suffers when either or both parents are kept away from home for an extended period of time on a daily basis.
This is based on the assumption that an employer orders an employee to work extended hours; the logic fails when a worker is responsible for her or his own scheduling since, under those conditions, premium pay (additional pay provided to employees for working certain types of hours or under certain types of conditions) becomes an incentive to work extended hours. There would be a powerful incentive to work longer hours, even at the risk of injury/accidents and at the cost of family life. The effect would be the exact opposite of that intended by the legislature.
Complying with Meal, Break, and Time Off Requirements
Employers must comply with rules governing breaks and meal periods during the work day. Every state has different laws on breaks for employees. Federal Law states that all breaks lasting under 20 minutes are considered part of the workday and must be paid. Meal breaks lasting 30 minutes or longer can be unpaid, so long as employees don’t work during that time. For California, employers must provide non-exempt employees one day off per week, and provide a 30-minute meal break for any shift of 5 hours of more, and a 10 minute break for every 4 hours worked, with a few exceptions.
Here is a Breaks and Meals by State fact sheet.
Worker Cooperative Exemptions to Meal, Break, and Time Off Requirements
For some of the same reasons that some people argue that worker collective members should be exempt from overtime, they may also be exempt from meal, break, and time off requirements. Remember, this is a gray area, so the safest thing to do is to schedule breaks for cooperative members.
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