California Delivers More Flexibility With Alternative Workweek Schedules

As companies look for ways to restructure their workforces and minimize operating costs in creative ways during this economic downturn, California has made welcome revisions and clarifications to its existing law regarding "alternative workweek arrangements." These alternative workweek schedules, governed by California Labor Code § 500 et seq., are unique to California and allow non-exempt employees to work more than eight hours per day without incurring daily overtime. New legislation, Assembly Bill No. 5 ("AB 5"), effective May 21, 2009, amends California Labor Code § 511, further aligning the law with the realities of business operations and making alternative workweek arrangements more attractive to employees.

Labor Code § 511 allows for customized schedules better suited for employers' business needs and for employees' desires for greater flexibility without the cost prohibitive effects of overtime payments. An employer can implement these alternative workweek schedules, after proper disclosures, through statutory and regulatory procedures following a two-thirds vote of all affected employees in a work unit. Under the current law, an employer can propose an alternative workweek in the form of a single schedule that would become the standard schedule for all workers in the work unit or, alternatively, a "menu" of schedules from which each employee in the work unit can choose. The proposed menu can include any combination of hours up to twelve per day within a workweek as long as overtime is paid for all hours over ten in a day and over forty in a workweek.

Prior to the enactment of AB 5, the California Department of Labor Standards Enforcement ("DLSE") interpreted the language of Labor Code § 500(c) to preclude an employer from offering as part of its menu the option of a regular 8-hour day and from allowing an employee to rotate between the proposed alternative schedules. The new language of AB 5, however, expressly allows for these options. An employer will be able to offer a regular 8-hour day as part of its menu, and employees, with their employer's consent, can switch back and forth between the proposed menu options on a weekly basis. These new provisions greatly increase the likelihood that such a proposed alternative workweek schedule will receive sufficient votes for passage.

Alternative workweek arrangements are not intended for the few employees within a department who want flexibility in their schedules. With limited industry-specific exceptions, every employee within a work unit must work the alterative workweek schedule. Labor Code § 511, however, has lacked any definition of "work unit." AB 5 now clarifies this by defining "work unit" as "a division, a department, a job classification, a shift, a separate physical location, or a recognized subdivision thereof." Under this newly-added definition, a single employee may also qualify as a "work unit" so long as that employee's position satisfies the criteria for an identifiable work unit, such as a one-person human resources department.

Creating an alternative workweek schedule requires meticulous planning and thorough recordkeeping. There are significant variations among the industry-specific California Industrial Welfare Commission ("IWC") Orders interpreting these laws, with respect to both the schedules which may be adopted and the election procedures which must be followed. A careful review of the relevant provisions, IWC Orders and DLSE opinions must be made in order to ensure compliance with the governing law. Failure to comply with even a single requirement could cause the California Labor Commissioner to invalidate the alternative workweek schedule resulting in considerable back overtime awards to those employees who worked the invalidated alternative schedule. If you are thinking of proposing an alternative workweek arrangement, or have questions regarding the new amendments, please contact any of the attorneys listed below or your usual Crowell & Moring contact.