On July 22, California Governor Jerry Brown signed AB 2535 that improves the definition of which workers need to track their hours and record those hours on their wage statements. The bill will be effective on January 1, 2017.
Before the signage of this amendment, California Labor Code section 226 made it mandatory for all employee paystubs to include hours worked, except individuals who are paid “solely” by salary and are “exempt from payment of overtime” according to Labor Code section 515(a) or the governing wage order. It also required hours on the paystub for exempt outside sales individuals and executives who are not exclusively paid by salary, but instead obtain bonuses and stock options. In most cases, these employees do not record hours worked and these hours are not a factor when calculating their wages.
However, in Garnett v. ADT, LLC, F. Supp. 3d 1121 (2015), the district court determined that exemption in Labor Code section 226 not apply to exempt outside salespersons because they were paid exclusively by commission (and not salary) and, therefore, must have their total hours worked included on their paystubs. The Garnett court stated that “[w]hile the usefulness of reporting total hours worked for employees paid solely by commission is not entirely clear, it is nonetheless required by Labor Code Section 226 (a).”
In summary, this amendment clarifies hours do not need to be reported and recorded for those who are exempt from overtime and whose pay is not dependent on how many hours worked.