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Your Legal Corner - Client Alert Blog

Shortened Statute of Limitations in Employment Agreements Are Void

Written By: Melissa C. Marsh, Esq., California Attorney, February 2010 Add to Favorites
On January 28, 2010, the Fourth Appellate District Court of Appeal held that employers cannot by agreement limit the time period in which an employee can file a lawsuit for wage and hour issues.

In Pellegrino v. Robert Half International, Inc., six former employees sued their temporary staffing company for various Labor Code violations including the failure to pay overtime, the failure to pay commissions, the failure to provide itemized wage statements (pay stubs), and the failure to provide meal breaks. The defendant employer argued that there were no violations of the Labor Code as the employees were properly classified as exempt from overtime pay under the administrative exemption. The employer also argued in the alternative that the employees’ claims were barred by the "Limitation on Claims" provision in their employment agreement that shortened the statute of limitations for filing such claims from 4 years to 6 months. The plaintiffs argued that the Limitation on Claims clause in their employment agreement providing a mere 6 months to bring a claim was unenforceable, and both the California trial court and the Fourth Appellate Court agreed.

According to the California Fourth Appellate Court, although California law permits parties in certain situations to agree to shorten the time period in which they can sue, it is not permissible to limit the statute of limitations provided under the California Labor Code as these provisions were enacted to protect the public. The Court reasoned that Labor Code section 219 that provides in pertinent part "… no provision of this article can in any way be contravened or set aside by a private agreement, whether written, oral, or implied." The Court further citied prior cases in which the courts have held that the statutory rights to minimum wage, overtime, meal and restaks, and itemized wage statements (pay stubs) cannot be waived. See, Gentry v. Superior Court, 42 Cal.4th 443 (2007), Franco v. Athens Disposal Co,. Inc., 171 Cal.App.4th 1277 (2009), and Zavala v. Scott Brothers Dairy, Inc., 143 Cal.App.4th 585 (2006). See also, Martinez v. Master Protection Corp., 118 Cal.App.4th 107 (2004), which held that an arbitration agreement that requires an employee to file all employment related claims within six months of the date the claim arose is unenforceable.

Overtime and The Administrative Exemption.

When an employee makes a claim for overtime pay, the employer bears the burden of proving that the employee does not qualify for overtime pay under one of the exemptions provided. In this case, the employer argued that the employees were exempt under the Administrative Exemption, but the Court held that the plaintiffs did NOT meet the criteria necessary to fall within the administrative exemption. According to the Court, the employees did not perform work "directly related to the management policies or general business operations" of the company, they had no supervisory duties, and they did not participate in the formation of any company policy. To the contrary, the employees performed duties that constituted sales work such as placing a candidate with a client, selling the services of the company to clients, and soliciting potential clients for sales. The employees’ performance was evaluated on how well they met or exceeded their sales goals. The court also noted that the Division of Labor Standards Enforcement (DLSE) in an opinion letter advised an employer that the Administrative Exemption does NOT apply to recruiters who worked at a temporary staffing company (See, DLSE Opinion Letter. See also, Administrative Exemption as it applies to Insurance Company Claims Representatives).

To qualify for the administrative exemption, the employer must prove all 5 of the following:

  1. the employee performs office or non manual work directly related to management policies or the general business operations’ of the employer or its customers (this means policy making and general business decisions regarding the operations of the business, not merely carrying out the day-to-day core functions or operations of the business),
  2. the employee customarily and regularly exercises discretion and independent judgment,
  3. the employee performs his or her work under only general supervision and the employee's work involves specialized or technical skills,
  4. at least 50% of the work engaged in by the employee involves specialized or technical skills and does not require general supervision, and
  5. the employee earns at least twice the state’s minimum wage (at least $16 per hour).
California employers must exercise caution when seeking to classify an employee as exempt from overtime pay. The California courts will strictly apply the overtime pay exemption claimed and the employer will bear the burden of proving that each and every element of the claimed overtime pay exemption has been satisfied.

Tags: overtime pay, overtime pay claim
Posted In: Business Law Bulletin  Corporate Client Bulletin  Employment Law News 

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Located in Los Angeles, California, the Law Office of Melissa C. Marsh handles business law and corporation law matters as a lawyer for clients throughout Los Angeles including Burbank, Sherman Oaks, Studio City, Valley Village, North Hollywood, Woodland Hills, Hollywood, West LA as well as Riverside County, San Fernando, Ventura County, and Santa Clarita. Attorney Melissa C. Marsh has considerable experience handling business matters both nationally and internationally. We routinely assist our clients with incorporation, forming a California corporation, forming a California llc, partnership, annual minutes, shareholder meetings, director meetings, getting a taxpayer ID number (EIN), buying a business, selling a business, commercial lease review, employee disputes, independent contractors, construction, and personal matters such as preparing a will, living trust, power of attorney, health care directive, and more.