DEPARTMENT OF INDUSTRIAL RELATIONS DIVISION OF LABORSTANDARDS ENFORCEMENT 7575 Metropolitan Dr., Room 210 San Diego, CA, 92108 Before the Labor Commissioner of the State of California In the Matter of the Civil Penalty FINDINGS AND ORDER Citation/Assessment Against State Case No. 35?128782 Wage Citation FAMILY RESIDENTIAL CARE, No.: WA-262175 GERALD COMO, AN INDIVIDUAL, EACH IOINTLY AND SEVERALLY Appellant The above-entitled matter was heard April 17, 2017, in San Diego, California. APPEARANCES FOR PETITIONER: Elizabeth H. Murphy Gerald Como APPEARANCES FOR DEPARTMENT OF INDUSTRIAL RELATIONS: Emilee Mullen Hilda Kalohelani WITNESS: Lorna Agustin OBSERVER: Tiffany Zenor Evidence having been introduced and the matter submitted, the Hearing Of?cer finds: Page 1 u?Appellant?), filed a timely appeal of Wage Citation No. WA-262175, issued by Industrial STATEMENT OF THE CASE Family Residential Care, LLC and Gerald Como, an individual, (hereinafte? Relations Representative Emilee Mullen on August 29, 2016, in which Appellant was found to have violated: 1. California Labor Code Section 1197 by failing to pay employees California?s State mandated minimum wage; and 2. California Labor Code Section 510 by failing to pay employees California State mandated daily and/or weekly overtime wages. The citation was written for the minimum wages, overtime wages, and liquidated damages. The citation did not include any civil penalties. I The above entitled matter was heard before the Division of Labor Standards Enforcement (hereinafter ?Division") in the San Diego office of the Labor Commissioner on April 17, 2017, pursuant to the provisions of Labor Code Section 1197.1. Emilee Mullen, Industrial Relations Representative, and Hilda Kalohelani, EDD Associate Tax Auditor, appeared on behalf of the Division. Elizabeth Murphy, Attorney, and Gerald Como appeared on behalf of the Appellants. The matter was heard before the undersigned hearing officer, authorized by the Director of the Department of Industrial Relations, to consider the appeal. SUMMARY OF THE EVIDENCE EVIDENCE SUBMITTED BY THE DIVISION According to Mullen, on August 5, 2015, Deputy Deidre Buffington and Hilda Kalohelani conducted an inspection of the Appellants? four residential homes. Mullen testified that Buffington and Mullen Spoke with the employees that were present at the fOur homes. Although ?all of the employees were interviewed, workers? questionnaires Page 2 were only completed for those employees that were willing to sign them. Buffington also spoke with Lindsay Apple, administrator, at the Hacienda location. Mullen entered into evidence copies of the eight questionnaires. (Division?s Exhibit With the exception of the employees? signatures, the questionnaires are all in the same handwriting. Mullen testified that based on the questionnaires, the employees were paid in cash twice per month and worked for five days straight for 24 hours each day. Murphy, Attorney, objected to the questionnaires as hearsay. Mullen testified that she visited the Appellants? Hacienda Heights location on May 3, 2016. While at the Hacienda Heights location, Mullen observed one male caregiver and one female caregiver. The caregivers were assisting with cleaning up lunch and informed Mullen that they did not have time to speak with her. The caregivers called the administrator and shortly thereafter he appeared. Mullen spoke with Montgomery Ostrander, Administrator. Ostrander informed Mullen that he took over mid-June 2015 and that he was paying the workers an hourly rate and not deducting for meals or lodging. Ostrander verified that Maria and Gerald Como were still the owners. Mullen returned to the office and mailed out an Order to Appear Before the Labor Commissioner (OTA). (Division?s Exhibit TWO of the items requested were timd records and payroll records covering the period June 1, 2013 through May 30, 2015. On May 13, 2016, Gerald Como appeared and provided Mullen with most of the documents she requested. Mullen?s request for time records produced daily work schedules for the years 2013, 2014, and 2015. (Division?s Exhibit Mullen testified that two caregivers were assigned at all times. Exhibit #6 lays out that the caregivers had a staggered scheduled. One shift was from 6:00 AM to 8:00 PM while the other shift is from 6:30 AM to 7:30 PM. For 2013 through June 2014, the schedule lists the caregivers pay as 8 hours at $8.00 per hour and 4 hours at $12.00 per hour for a total of $112.00 per day and that $25.00 per Page 3 day was deducted for lodging and that $10.85 per day was deducted for meals leaving a minimum daily rate of $76.15. For July 2014 through December 2015, the schedule lists the caregivers pay as 8 hours at $9.00 per hour and 4 hours at $13.50 per hour for a total of $126 a per day and that $25.00 per day was deducted for lodging and that $10.90 per day was deducted for meals leaving a minimum daily rate of $90.10. The caregivers were not paid for their three thirty minute meal periods or for theirJ two fifteen minute breaks. The caregivers were not paid for the overnight hours.1L Gerald Como also provided a records indicating the number of 24 hour days the caregivers worked in a pay period as well as the caregivers? daily rate of pay. (Division?s Exhibit In addition to the daily rates of pay there is a category called ?Xtra?. According to Mullen, Como informed her that the ?Xtra" column indicated extra pay that the caregivers received for undesirable tasks. Mullen testifiedthat the caregivers informed her that they received an extra $10.00 per night when they were required to sleep in a patient?s room. The last column on the records lists the caregivers? net pay after taxes after been deducted. Using the records received, Mullen conducted an audit2 on fifteen employees. Mullen only audited the employees for which she had recores. The date of the start of the audit was September 1,2013 or the date an employee was hired, whichever was later. The audit went through May 31, 2015. - I As the Appellants did not keep actual time records, Mullen used a 1:00 PM through 2 midnight for the first day, then four consecutive 24 hours days as the caregivers did not leave the facility, and then from midnight to 1:00 PM on their last day. Mullen testified that there was no agreement to deduct for meal periods nor was an on?duty meal period 1 From 8:00 PM to 6:00 AM or from 8:30 AM to 6:30 PM. 2 Division?s Exhibit #12 is a copy of the complete audit. Page 4 waiver signed. Mullen further testified that there was no agreement to deduct for sleep time. As a result, Mullen found that all 24 hours were compensable as time worked. As the Appellants had no established work day, Mullen used from midnight to 11:59 PM. The entire 24 hour period was counted as time worked. During each 24 hours period, there were 8 regular hours, 4 overtime hours, and 12 double time hours. As a pay rate for each caregiver, Mullen used the state minimum wage depending on the year being audited.3 For the workweek, Mullen used Sunday through Saturday. For gross wages paid, Mullen took the caregivers daily rate and multiplied it by the number of days the caregivers worked in the pay period. Mullen testified that the difference between her calculations and the gross amount paid equaled the. amount due for minimum wage and overtime. Once the total' minimum wage was calculated, Mullen took the total minimum wages plus ten percent to calculate liquidated damages. As a result of the audit, Mullen testified that she found 15 workers that were owed wages. As a result, Mullen issued and personally served Wage Citation o. dated August 29, 2016, in the total amount of $1,111,602.62. The citation was only issued for wages. No civil penalties were assessed. The citation cited the Appellant for $331,843.00 in minimum wages due; $386,601.75 in overtime due, and $393,157.87 in liquidated damages. The Appellant?s attorney objected to the calculations in the audit. The Appellant?s Attorney noted that under the Appellant?s circumstances, Industrial Welfare Commission Wage (IWC) Order No. 5 does not require paying the caregivers for all 24 hours they were at the facility but only for the time carrying out tasks is considered hours worked under the IWC Wages Order No. 5 . Mullen responded that the employers in the state of 3 $8.00 was used for the period September 1, 2013 through June 30, 2014. $9.00 was used for the period July 1, 2014 through May 31, 2015. 4 Division?s Exhibit #9 is a copy of the citation. Page 5 California were responsible for keeping track of the employees? hours and that employees cannot be tasked with keeping those hours. Mullen testified that Gerald Como was listed as a managing member with the CaliforniaISecretary of State. According to Mullen, on the day of the Order to Appear, Como appeared and stated that he was the one that had written out the timesheets. Como also made out the paystubs given to the caregivers. As a result, Como was named as an individual on the citation as is allowed under Labor Code Section 558. Since Como had written out the timesheets and the paystubs were made out by him, Mullen named him as one of the Appellants on the citation. In Mullen?s opinion, Como caused the violations. Mullen testified that during the period of time of the audit, California Labor Code Section 558 had not-been amended to include individual. Accordingto Mullen, the 'code was amended in 2016. Mullen testified that the citation was written in August 2016. Mullen testified that her calculations for the audit did not take out any time that the caregivers did not carry out duties because the caregivers are on duty 24 hours per day. Mullen testified that the exemptions for residential care employees in Wages Order No. 5 did not apply for the case at hand. Mullen testified that the employees were not allowed to leave the premises for 24 hours therefore they were on duty for the 24 hours. Mullen testified that the audit was based on Federal Law and current FLSA. Mullen testified that there was no express or implied agreement to deduct sleep time. According to Mullen, the employees were merely told that they would be paid a daily rate. Mullen testified that the employees were not told to track the hours they worked nor were they told to record the time they spent working when they worked at night therefore it was considered a 24 hour work day. I Mullen testified adequate sleeping facilities must be provided and that included a private room. According to Mullen, the caregivers were not provided with a private room. Mullen testified that there was no agreement to deduct the sleep time. Page 6 Mullen testified that the residents had hand bells or motion alarms. According to Mullen, the residents got up in the middle of the night and the caregivers were required to get up and assist the residents with using the restroom facilities. Thecaregivers were also required to assist dementia patients that wandered out of their rooms. Mullen testified that there were also bedridden patients-that were required to be turned every two hours. Mullen testified that the expectation was that if a resident woke up at night than the caregiver was to attend to him/her. Mullen testified that the caregivers were not told to record the hours for work at night. Mullen testi?ed that she did not assume that the caregivers worked all night long but that they were on duty for 24 hours each shift. Mullen testified that Deputy Buffington reported her findings in the Workers? Questionnaires. Although the Workers? Questionnaires show a start and stop time of 8:00 AM to 6:00 PM, Mullen testified that the start and end times on the questionnaires were the delineated dutiesand that sleep can only be deducted if an implied or expressed agreement has been entered into and that a private room in a home-like environment is provided, otherwise, sleep time could not be deducted. Mullen did not consider Exhibit #6 to be an implied agreement that staff Was off duty before they started in the morning and after they ended f?at night.? Mullen testified that the caregivers could not leave the premises and had to be on the premises in case a resident needed assistance. Mullen testified that the audit was based on a 24 hours workday and that. no deductions were made for time not carrying out tasks. Mullen testified that based on the workers? questionnaires, at least one employee stated that no care was needed at night. Mullen testified that she did not deduct for night hours for that employee as the employees were not allowed to leave the premises at night. Mullen testified that she did not consider one of the two caregivers to be resident managers. Mullen testified that the caregivers are simply tasked with the day to day care such as cooking or cleaning. Mullen testi?ed that none of the caregivers had management duties. Mullen testified that if something happened then they called Gerald Como. Page 7 Mullen testified that if an agreement is entered into ahead of time then meal periods may be deducted. Meal periods and lodging were not listed on the deduction statements. Mullen testified that food was provided to the caregivers. Mulled testified that at she went to the Hacienda location the two caregivers shared a bedroom. Mullen testified that she did not consider the sharing of a room to be private. Mullen testified that if the Ashland hOme was full then there was only one bedroom for- staff. Mullen testified that the Weinrich location had a large room with a room with two beds in it for the caregivers. The Bob location also had a separate room with a door designated for staff. Mullen testified that Gerald Como informed her that he paid the caregivers the ways he did because that was the only way he could keep the homes open and that when the minimum wage went up it would be impossible for the homes to Operate. Mullen did not recall if Gerald Como informed her that he was relying on information from the Employment Development Department for the amounts he deducted for meal and lodging. When assessing the wages that were due to the caregivers, Mullen did not take into consideration of how full or empty the homes were. Mullen testified that the hours were not tracked by the Appellants only the days that the caregivers worked. Mullen testified that there was no differentiation between one day in which there were five and another day in which there would be six residents. Lorna Agustin, caregiver, testified that she trained with the Appellants for four days staring November 21, .2016. Agustin then started working on December 1, 2013. Agustin testified that ?Trish? informed her that she would be making $90.00 per hour. Agustin worked with the Appellants until May 30, 2015. When she left she was earning $110.00 'per day. Agustin testified that she only worked at the Wenrich location. Agustin testified that she worked four or five days straight in a week. Agustin reported. to work at 1:00 PM on Page 8 the ?rst day and then worked four or five days straight. On her last day of work Agustin left work around 1:00 PM. Agustin testified that she first worked with Mamerto De Leon. Agustin could not recall the name of the other lady that she worked with. Agustin testified that sometimes De Leon or the other lady would start around 3:00 PM. They left around 1:00 PM. The work being performed depended on the needs of the resident. According to Agustin, there were always two caregivers at the facility when she worked. Agustin testi?ed that the caregiver was either assigned to work with the residents or in the kitchen. Agustin testified that if she was assigned to work in the kitchen she would wake up around 5:00 AM and brew the coffee. Agustin testi?ed that while brewing the coffee she would set the table and prepare the residents? medications. Agustin would then prepare the breakfast. Afterwards Agustin would get dressed and then serve the breakfast. Agustin estimated that she spent 30 minutes getting ready for work. Agustin testified that if the caregiver was assigned to the residents then around 6:00 AM the residents were given their pills. The residents were then cleaned and the brought to the dining table. Agustin testified that if she was working in the kitchen then the other caregiver was waking up the residents and taking them to the bathroom. Agustin testified that after breakfast the caregiver. assigned to the kitchen would clean the ?facility? and then prepare for lunch. The other caregiver would be helping the residents. - Agustin testified that there were some hospice patients at the facility and that some of the hOSpice patients were bedridden. According to Agustin, the caregiver had additional duties with the hospice patients. If a hospice patient had a catheter then the caregiver would have to see if it was full and if so, throw it out. The caregiver may have to give morphine to the resident if the nurse has authorized it. In some cases the morphine was Page 9 given every two to four hours. Agustin testified that some patients had to be turned ever two hours, including at night, to prevent hcdsores. Agustin testified that the other caregiver5 helped her with the hospice patients. Agustin testified that during the time that she worked for the Appellants there were three hospice patients. One patient -Nas at the facility from the time she started working for the Appellants until ]anuary 20, 2015' During the last 24 hours of his life, -received morphine every four hours. Agustin helped the person administer the morphine. Prior to- last 24 hours, Agustin would have to pull -up when he slid down in bed. - was put into bed around 3:00 PM. Around 9:00 PM and then at 4:00 AM,-would have to be pulled up in the bed and be changed. Agustin testified that the other caregiver helped her with - According Agustin, about 10 to 15 minutes were spent with- at 9:00 AM and about 30 minutes were spent witl- at 4:00 AMA Another hospice patient was at the facility for approximately one week. While at the facility, Agustin had to check the patient' 5 catheter. At night, Agustin checked the catheter at 9:00 PM, midnight, and 5:00 AM or 6:00 Agustin testified that it too approximately 15 minutes to check the catheter to see if it was full. 11 the catheter had to be changed or emptied it would take another 15 to 20 minutes to do. Agustin further testified that every two hours the patient had to be turned During the last 24 hours of the patient's life, the nurse instructed "us" to give the patient morphine every two hours. Agustin testified that -was also a resident at the facility when she started and sometimes would not sleep through the whole night. Agustin testified that she had sleep in the room with .the whole night Agustin and the other caregiver took turns sleeping in order to he with her. Agustin was paid $10.00 per night when she slept in - room with her. Agustin testified that on her days off she went home to her apartment. 5 Sonya and Elizabeth Page 1 Agustin testified that there was one resident at the facility diat the family asked the caregivers to stay with the patient every night Agustin testified that the caregivers too turns staying with her. Agustin testified that the caregivers knew the needs of the residents and that there was one resident that she stayed with because if the resident woke up she would call he husband as she did not want to be alone. The resident would get up and start walking around Agustin testified that she would stay with the resident so she would not feel like she was alone. Agustin testified that if she was asked to sleep with a resident overnight then she would be paid an extra $1000 per night. According to Agustin, she has been awakened at night to help residents use the restroom as well as change their adult diapers or pull ups. Agustin testified that she was never instructed by the Como to write down the hours that she spent helping the residents at night. Agustin testified that she never wrote down the hours she worked on a umesheet or on a time clock. Agustin testified that she had no idea that the Appellants were taking money for meals. Agustin testified that she ate the same food as the residents or brought her own to work. Agustin denied ever receiving a copy of the Appellant's Personnel Policies.e Agustin could not recall seeing Exhibit Agustin testified that the schedule of the work was listed in a calendar. According to Agustin, Gerald Corno would come to the facility and ask her how many days she worked and how many nights she stayed with. Agustin testified that if she was on a break and a resident needed assistance she would get up and help him/her. Agustin testified that she had her coffee the first thing in the morning because she did not really know what time she would be able to take he meals. Agustin testified that the Como never told her anything about leaving during her shift. 5 Defendant's Exhibit Page 11 Agustin testified that most of the times Gerald Como would bring her her paychec stub and cash but sometimes the administrator did so. According to Agustin, the Appellants did not list any deductions for meal or lodging. The paycheck stub only Listed deductions for taxes, social security, and Medicare. Agustin testified that she was never told to record her hours. Agustin testified that no written record on the care provided the residents was kept except when morphine had to be administered to hospice patients. Agustin testified that during her employment she worked with Sonya, Elizabeth Rey, Ernie, Rose, and another girl. According to Agustin they also did the same type of work she did. Agustin testified whether or not one caregiver or both caregivers got up to help a patient depended on the patient's needs. Agustin testified that the caregivers arranged with each other on who would get up to help the residents at night; however, i Agustin was taking care of-then the other caregiver would have to help a resident if the need arose. Agustin never worked at another facility. Agustin had no direct knowledge of the other facilities practices. Agustin testified that the Wenrich property had a small room where the caregivers could sleep. The room had a door and had two beds in it Agustin testified that if th other caregiver was a female then the female slept in the 100m. Male caregivers slept the couch or the floor in another room. Agustin testified that most of the other caregiver were women. Agustin testified that she went to bed at 9:00 AM and woke up at 5:00 AM. Agustin testified that in four days she would have two nights in the room and two nights with - Agustin testified that on the nights with-she would not sleep. Agustin testified that she understood that she was not being paid for when she was sleeping. Agusn'n testified that she was able to rest a little after lunch while watching them during the time the residents watched television. According to Agustin, it was up to the residents took take a nap if they wanted. Page 12 interrupted. Agustin testified that she was usually able to eat her breakfast-uninterrupted. Agustin testified that there were six residents. Agustin testified that the other caregivers and the other administrators (Trish) told her what her work duties were. Agustin testified that she ate her meals by herself. Agustin testified that her meals were Agustin took about ten minutes for her coffee. -Agustin testified that she could not estimate how many times her lunch was interrupted. Agustin testified that most of the time her dinner was uninterrupted. Agustin usually took 15 to 20 minutes to eat hef dinner. Agustin never complained to the Como or the administrators regarding concerns or complaints that she had. Agustin testified that she never went to the other facilities and she did not know how those facilities worked. Agustin never left while working to run errands. Agustin testified that the other caregivers informed her that she was not allowed to go out. Agustin testified that she never asked a manager if she could leave. Hilda Kalohelani, Employment DeveloPment Department Associate Tax Auditor, testified that she was present at the inspection with Deputy Deidre Buffington. Kalohelani testified that she and the Division conduct joint inspections. If Kalohelani determines that an employer has been under reporting wages, she refers the matter to an auditor. Kalohelani testified that she did write up an audit lead on the Appellants. Kalohelani was unaware that Arlene Toledo had conducted an audit of the Appellants in 2013. Kalohelani did know if Maria Gonzalez was involved in the 2013 audit. Kalohelani testified that she met with Paul Chua. Chua informed Kalohelani that he was ?been hired? six years ago. Kalohelani testified that she met with Hugo Espinosa and he informed her that he had worked with the Appellants for five years. Chua and Espinosa also informed Kalohelani that they were caregivers. Page13 (Ti EVIDENCE SUBMITTED BY THE APPELLANT Gerald Como testified that he has been in the residential care business for 35 years. COmo testified that he was currently unemployed. Como testified that none of his homes were currently operating. Como testi?ed that during the 35 years of operation he has never been sued or cited for any wage or hour issues by a state agency. Como testified that he has never been sued by an employee. Como testified that he has never been cited by EDD or the Department of Labor. Como testified that in order to run the facilities he was required to maintain a license. Como testified that his licensing7 status was never in jeopardy. The California Department of Social Services (DSS) was responsible for making sure that the Appellants complied with the licensing requirements. Como testified that he was inSpected anywhere from annually to every three or four years. Como testified that the DSS did visit him as a result of complaints of insufficient staff as well as complaints regarding a resident being aggressive towards another resident. DSS does not tell the facility who registered the complaint. When the DSS completes its investigation, a findings is issued and the Appellantd receive a copy of it. Como testified that each finding received found that the complaint(s) were unsubstantiated. Como testified that he has never received any complaint from any employee regarding their pay. Como testified that no employee has ever come to him and told him that they were not being paid overtime. Como testified that none of the employees ever complained to him about not getting enough sleeping time or that his/her sleeping 7 The license is issued by the California Department of Social Services. Page 14 (m3 facilities were inadequate. None of the employees ever informed Como that they were unhappy working for him. Como testified that in the Hacienda facility that there was a room for each one of the caregivers and that each room had an individual bed. Como testified that the clients were not permitted to go into the staffs? rooms. Como testified that in the Wenrich facility the staff had one room with two beds. Como testified that the Ashland facility had one room and two beds for the staff.? Como testified that the Bob Avenue facility had one room with one bed. Como testified that Exhibit #6 was the work schedule for two employees separating their times by one-half hours and identifies when they take their breaks and lunches. Exhibit #6 also identifies when the employees are off the clock. Como testified that the Exhibit #6 identifies a breakdown of the employee?s pay. According to Como, the employees receive more than the breakdown. Como testified that he calculated their total pay based on minimum pay of $8.00 per hour for the time in 2013 multiplied by 8 hours and then overtime (time and one~half the regular rate of pay) for 4 hours. The food and lodging was the amount that EDD allowed him to factor into their pay. Como testified that the food and lodging amounts came from EDD. Como testified that once per year EDD send out a newsletter that provides a chart with ?gures that can be credited towards one?s income. The chart is broken down by three meals per day and lodging based on the average rental of the area. Appellants? Exhibit is one of the newsletters sent out. Como testified that Exhibit is speci?c to the residential care industry. Exhibit #13 contains a chart. Como testified that he arrived at the amount he deducted for food from the chart. The amount deducted was $10.85 per day. I Como testified that Exhibit #6 has the maximum lodging per month for 2013 as $1,224.00. Como testified that the minimum per week for lodging was $39.90. Como testified that he had an apartment building and that he used the studio rental of $750.00 as Page 15 27- his base rate. Como used $25.00 per day as the rate lodging rate that was deducted from the caregivers? wages. Exhibit #6 states, under the title ARE that ?Wages are all payments made to employees for personal services, whether paid by check, cash, or the reasonable cash value of noncash payments, such as meal and lodging.? The actual chart being referred by Como in his testimony is titled ?Tax Rates, Wages, and Value of Meals and Lodging?. Appellants? Exhibit is a copy of the US. Department of Labor?s Fact Sheet No. 33 covering Residential Care Facilities (Group Homes) Under the Fair Labor Standards Act.? Como testified that he receives the fact sheet annually and that it was his understanding that the fact sheet was a pronouncement of What the law required. Based on Exhibit Como thought he could deduct up to eight hours of sleep per day for the caregivers. Since Exhibit allowed for the deduction of sleep, he considered it as saying off duty time. Como testified that he has been audited by EDD. (Exhibit Como testified that his understanding of the audit was to check the payroll to make sure he was doing the correct procedures. The Preaudit questionnaire was completed by Como. Como provided records to Maria Gonzalez. The records provided included bank, statements and payroll statements. Part of Exhibit is an email between Gonzalez and Como. According to Como, Gonzalez had questioned the lodging and the meals. Como reSponded to an email stating that he was confused because Wages Order No. 5 stated something differently than what Gonzalez said. Gomo testified that Gonzalez sent another email back with a questionnaire. That email is contained in Exhibit In the email exchange that is part of Exhibit Gonzalez asked the Appellants some questions. The questions were Is lodging a condition of employment?? To obtain employment do they have to?live on the premises? What if they don?t want to stay overnight?? Page 16 How many meals are provided? For how many workers?? Do you have a contract of employment that stipulates the conditions of employment?? Can they bring their own meals? Use the facilities to warm their meals?? Como replied ?Maria Gonzales, Always good to get away and always good to be back home, thanks for the inquiry about the vacation and the time to complete the audit. Now the answers: 1. Lodging is a condition of employment. 2. Must be on the premises and stay overnight or else not hired. 3. Three meals a day plus snacks are provided. These are provided for 2 caregivers per home per day, for a total of 8 caregivers a day. 4. We do not have written contracts with our employees. 5 yes they can bring their own meals and cook or warm the food. Happens rarely for one meal. Look forward to the audit being completed.? Como testified that a condition of employment was that lodging was a condition of employment and the caregiver had to stay on the premises. Como testified that the employees did not have individual contracts. Part of Exhibit contains a letter titled ?Notification of Audit Results and Right to Review Audit File? dated May 7, 2014. The notice states, in part, ?An audit of your business was recently completed to determine whether or not you are in compliance with the employment tax laws of the California Unemployment Insurance Code.? As a result of the audit, ?No differences were disclosed based on audit tests performed.? Como testified that EDD audit concluded that he conducted himself in a manner that was appropriate. EDD did not cite the Appellants. Como testi?ed that prior to Mullen?s audit he had. no knowledge that there was a problem with his pay practices. Como testified that Gonzalez saw the way he conducted business and she did not say change anything. Como testified that he did intentionally believe that he was underpaying anybody or that he believed that he was underpaying anyone. Page 17 policy also identifies a facility manager as well as a facility relief manager. The policy Como testified that he personally did not employ anyone. Como testified that the employer was Family Residential Care, LLC. Como testified that he did not determine the caregivers? rates of pay, did not hire or ?re the caregivers, and did not manage the caregivers? day to day tasks. Como denied making the caregivers? work schedules. Como testified that he did not tell the caregivers what to do or how to do it. Como testified Exhibit is a personnel policy that was putltogether. Como drafted the policy approximately 35 years ago. Como testi?ed that since he drafted the policy that it would be fair to say that he set the caregiver?s hours. Como testified that a facility manager is a caregiver. The facility manager is the caregiver with the most experience. The policy is a required by D85 Licensing. The policy is required to be onsite. One of requirements is that the policy must be reviewed by employees within 7 days of hire. The contains their work schedule. The work schedule is from 6:00 AM to 8:00 AM. Como testified that the caregivers are on their time before 6:00 AM and after 8:00 PM. Como testified that an employee?s day would change from minute to minute based on the needs of the residents and the type of residents that are in the facility. Residents could go a long time with minimal care but as they age their care increases. Como testi?ed that the nature of a residential care facility adapts to the needs of the residents at that moment.? Como testified that during the period of the Division?s audit all the facilities were not full. Como testi?ed that within a one year period there might be three months out of the year in which the facilities were full. For the remaining nine months, there would be four to five residents at each facility. Como testified that he was not personally familiar with who the residents were during the audit and what their situations were. Como testi?ed that when he was deducting the meals and lodging he was relying on what EDD told him. Como testified that all caregivers had meal and rest periods deducted from their wages. Como testified that there was nothing in writing regarding the deductions that were signed by the caregivers. Page 18 Como testified that employees Were expected to help residents after 8:00 PM if necessary. Employees were not paid for any help to residents after 8:00 PM. Instead, the caregivers were compensated by time off the next day. For example, if an employee informed him that he/she had a rough night the night before than he tell him/her to take a nap. Como testified that the caregiver would not go into detail. Como testified that the caregivers very rarely reported anything that they did in the evenings. According to Como, the caregivers had to sign a letter stating that they were required to report what happened at night. Como testified that one caregiver had to stay all night but the other caregiver was free to leave to go home. Como testified that all of the caregivers stayed all night long because most of them did not have transportation. According to - Como, most of the caregivers came to work by bus. Como did not have time records because ?we? operated as a family and on trust. If the caregiver told him they worked that period then they worked that period. Como testi?ed that he provided Exhibit #7 to Mullen and verified that it was accurate. According to Como, the designation ?Xtra? means that the caregiver either spent the night in the resident?s room or the caregiver was doing something extra like a colostomy bag or some other thing determined by his wife. Como testified that pursuant to DSS regulations at least one caregiver had to remain overnight. Como testified that the reason that Paul Chua and Hugo Espinoza were not included in the listing of employees given to Mullen was that they were not legal employees. Como testified that they were being paid the same daily rate but were not reported as employees. In reference to Exhibit Como testified that he did not read that a common problem was failure to keep daily and weekly accurate records. Como testified that he did not read the part regarding uncompensated time or the statement ?Failure to pay for all the hours that an employee works. Como testified that he just focused on the part that he felt pertained to ?us? regarding special conditions. Como testified that he knew what was Page 19 front and admitted that he did not know the difference between state and federal law. Como testified that he was not in control of when a caregiver could work and when they could be off. Como admitted that he could tell the caregivers to take a few hours off. Como testified that one caregiver was free to leave between the hours of 8:00 PM and 6:00 AM. Como did not find it necessary to express to the caregivers that they were free to leave as they reported to work by using the bus. The locations of the homes were put next to bus stOp knowing that was how the employees traveled. Como testified that on occasion when he would come by during the day and one of the caregivers was not there it was due to the caregiver taking time off to go to the store. Como testified that the caregivers were under the impression that one could leave as long as one remained. When Como found out that one of the caregivers went to the store he did not ask that caregiver to record the hours that he/she was gone. Como testified that break times in Exhibit #6 were not identified as compensated rest periods. Como testified that he knew the caregivers were taken rest periods. Rest periods are taken when rest periods were available due to the nature of the homes. Como testified that caregivers could take naps and he did not believe that Reynald Redoblo was terminated for taking naps. Como testified that he did not submit payroll to Mullen on Redoblo. Como testified that he did not remember Redoblo. Como testified that if a caregiver is ill then the caregiver will be taken care to a doctor. The caregiver would notify Maria Como, Trisha Pena, or Como if a caregiver became ill. The caregiver would have to notify them if they had to leave. Como testified that Maria Como was responsible for the caregivers? schedule and rates of pay. The Division and the Appellants submitted legal briefs. The Appellants legal brief argues that a reasonable agreement of the parties as the hours worked is acceptable under 29 CRF, Section 785.23. The Appellants? brief also argues that liquidated damages should not be assessed because the Appellants? acted in good faith and under reasonable belief Page 20 that the wages being paid to the caregivers were correct. The Appellants? brief further argues the Appellant Gerald Como should not be listed as an Appellant as Labor Code Section 558.1 was not added to the Labor Code until January 1, 2016 and as such he cannot be held personally liable for any alleged violations that took place prior to January 1, 2016. LEGAL ANALYSIS In administrative hearings, the Division of Labor Standards Enforcement (hereinafter ?Division?) has the initial burden of proof. California Evidence Code (CEC) Section 115 defines ?Burden of proof? as the obligation of a party to establish by evidence a requisite degree of belief concerning a fact in the mind of the trier of fact or the court. In these administrative hearings, the trier of fact is the Hearing Officer. CEC 115 also provides ?Except as otherwise provided by law, the burden of proof requires proof by a preponderance of the evidence.? CEC Section 140 defines ?evidence? as testimony, writings, material objects, or other things presented to the senses that are offered to prove the existence or non-existence of a fact. Preponderance of Evidence means the greater weight of the evidence; superior evidentiary weight that, though not sufficient to free the mind wholly from all doubt, is still sufficient to incline a fair impartial mind to one side of the issue rather than the other. The Appellant appealed Wage Citation No. which was issued for the alleged violation of the minimum wages provisions and the alleged violation of the overtime provisions. The penalty assessment was for $331,843.00 in minimum wages, $386,601.75 in overtime and $393,157.87 in liquidated damages. The total wages and liquidated damages equaled $1,111,602.62. California Labor Code Section states, "Eight hours of labor constitutes a day's work. Any work in excess of eight hours in one workday and any work in excess of 40 hours in any one workweek and the first eight hours worked on the seventh day of work in any one workweek shall be compensated at the rate of no less than one and one-half times the Page 21 regular rate of pay for an employee. Any work in excess of 12 hours in one day shall be compensated at the rate of no less than twice the regular rate of pay for an employee. In addition, any work in excess of eight hours on any seventh day of a workweek shall be compensated at the rate of no less than twice the regular rate of pay of an employee. Nothing in this section requires an employer to combine more than one rate of overtime compensation in order to calculate the amount to be paid to an employee for any hour of overtime work.? California Labor Code Section 558 states" any employer or other person acting on behalf of an employer who violates, or causes to be violated, a section of this chapter or any provision regulating hours and days of work in any order of the Industrial Welfare Commission shall be subject to a civil penalty as follows: (1) For any initial violation fifty dollars ($50.00) for each underpaid employee for each pay "period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages. . California Labor Code Section 1197 states ?The minimum wage for employees fixed by the commission or by any applicable state or local law, is the minimum wage to be paid to employees, and the payment of a lower wage than the minimum so fixed is unlawful. This section does not change the applicability of local minimum wage laws to any entity.? California Labor Code Section 1197.1 states, in part, Any employer or other person acting either individually or as an officer, agent, or employee of another person, who pays or causes to be paid to any employee a wage less than the minimum fixed by an applicable state or local law, or by an order of the commission shall be subject to a civil penalty, restitution of wages, liquidated damages payable to the employee, and any applicable penalties imposed pursuant to Section 203 as follows: (1) For any initial violation that is intentionally committed, one hundred dollars ($100) for each underpaid employee for each pay period for which the employee is underpaid. This amount shall be in addition to an amount sufficient to recover underpaid Page 22 wages, liquidated damages pursuant to Section 1194.2, and any applicable penalties imposed pursuant to Section 203. (2) For each'subsequent violation for the same specific offense, two hundred fifty dollars ($250) for each underpaid employee for each pay period for which the employee is underpaid regardlessof whether the initial violation is intentionally committed. This amount shall be in addition to an amount sufficient to recover underpaid wages, liquidated damages pursuant to Section 1194.2, and any applicable penalties imposed pursuant to Section 203. (3) Wages, liquidated damages, and any applicable penalties imposed pursuant to Section 203, recovered pursuant to this section shall be paid to the affected employee. If, upon inSpection or investigation, the Labor Commissioner determines that a person has paid or caused to be paid a wage less than the minimum under applicable law, the Labor Commissioner may issue a citation to the person in violation. The citation may be served personally or by registered mail in accordance with subdivision of Section 11505 of the Government Code. Each citation shall be in writing and shall describe the . nature of the violation, including reference to the statutory provision alleged to have been violated. The Labor Commissioner shall take all appropriate action, in accordance with this section, to enforce the citation and to recover the civil penalty assessed, wages, liquidated damages, and any applicable penalties imposed pursuant to Section 203 in connection with the citation.? The first issue the Hearing Officer will address is whether or not Appellant Gerald Como, an individual, was appr0priate1y named on the citation. The Appellants? attorney argued that Gerald Como should not be held individually liable pursuant to Labor Code Section 558.1 as Labor Code Section 558.1 was added to the code on January 1, 2016, prior to the violations. Labor Code section 558.1, specifically allows for ?other person acting on behalf of an employer? to be individually liable and includes ?an owner, director, officer, or managing agent of the employer.? Page 23 This Hearing Officer respectfully disagrees. If the liability for the violation. existed prior to January 1, 2016, then the Division can pursue claims back to the date the liability was first legislated for the type of violation being cited. In the case of overtime, Labor Code Section 558 became effective January 1, 2000. In the case of minimum wage, Labor Code Section 1197 became effective January 1, 2012. In the case of liquidated damages, the effective date is January 1, 2014. Based on the evidence submitted, Appellant Como prepared the schedules of the caregivers (Exhibit and prepared the policies (Exhibit Appellant Como also informed Mullen that he paid the caregivers the way he did in order to keep the facilities Open. Appellant Como admitted that he was responsible for the caregivers? rate of pay and their schedules. The evidence supports that Appellant Como caused the violations. The Appellants operate a residential home for the elderly. Residential homes are regulated by Industrial Welfare Commission (IWC) Wage Order 5-2001 (Title 8, California Code of Regulations, section 11050) and both parties agree that the application of IW Wage Order 5-2001 is appropriate. The parties do not dispute that the caregivers were required to reside on the Appellant?s premises which resulted in the caregivers being on the premises 24 hours per day. The issue before the Hearing Officer is whether the full 24 hours the caregivers spent at the facility constitutes hours worked. Based on IWC Wage Order No. 5-2001, the hours the caregivers worked are to be interpreted in accordance with the provisions of the Fair Labor Standards Act. Section of the IWC order defines hours worked as ?the time during which an emplOyee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so, and in the case of an employee who is required to reside on the employment premises, that time spent carrying out assigned duties shall be counted as hours worked. Within the health care industry, the term hours worked means the time during which an employee is snjj?ered or permitted to work for the Page 24 employer, whether or not required to do so, as interpreted in accordance with the provisions of the Fair Labor Standards Act.? (emphasis added) 29 CF.R. Section 785.22 states General. Where an employee is required to be on duty for 24 hours or more, the employer and the employee may agree to exclude bona fide meal periods and a bona fide regularly scheduled sleeping period of not more than 8 hours from hours worked, provided adequate sleeping facilities are furnished by the employer and the employee can usually enjoy-an uninterrupted night?s sleep. If sleeping period is of more than 8 hours, only 8 hours Will be credited. Where no expressed or implied agreement to the contrary is present, the 8 hours. of sleeping time and lunch periods constitute hours worked. (Armour v. Wantoclc, 323 US. 126 (1944); Skidmore Swift, 323 US. 134 (1944); General Electric Co. v. Porter, 208 F. 2d 805 (CA. 9, 1953), cert. denied, 347 US. 951, 975 (1954); Bowers 2). Remington Rand, 64 F. Supp. 620 (SD. Ill, 1946), aff'd 159 F. 2d 114 (CA. 7, 1946) cert. denied 330 US. 843 (1947); Bell v. Porter, 159 F. 2d 117 (CA. 7, 1946) cert. denied 330 US. 813 (1947); Bridgeman Ford, Bacon 6? Davis, 161 F. 2d 962 (CA. 8, 1947); Rokey o. Day 8 Zimmerman, 157 F. 2d 736 (CA. 8, 1946); McLaughlin v. Todd 8? Brown, Inc, 7 W.I-I. Cases 1014; 15 Labor Cases para. 64,606 (ND. Ind. 1948); Campbell 0. Jones 8? Laaghlin, 70 F. Supp. 996 (WD. Pa. 1947).)? Interruptions of sleep. If the sleeping period is interrupted by a call to duty, the interruption must be counted ashours worked. If, the period is interrupted to such an extent that the employee cannot get a reasonable night's sleep, the entire period must be counted. For enforcement purposes, the Divisions have adOpted the rule that if the employee cannot get at least 5 hours? sleep during the scheduled period the entire time is working time. (See Eustice v. Federal Cartridge Corp, 66 F. Supp. 55 (D. Minn. 1946).)? Section 785.23 ?An employee who resides on his employer's premises on a permanent basis or for extended periods of time is not considered as working all the time he is on the premises. Ordinarily, he may engage in normal private pursuits and thus have enough time for eating, sleeping, entertaining, and other periods of complete freedom from all duties when he may leave the premises for purposes of his own. It is, of course, Page 25 difficult to determine the exact hours worked under these circumstances and any reasonable agreement of the parties which takes into consideraiion all of the pertinent facts will be accepted. This rule would apply, for example, to the pumper of a stripper well who resides on the premises of his employer and also to a telephone operator who has the switchboard in her own home. (Skelly Oil Co. v. Iackson, 194 Okla. 183, 148 P. 2d 182 (Okla. Sup. Ct. 1944; Thompson 0. Loring Oil Co., 50 F. Supp. 213 (WD. La. 1943).)? 29 C.P.R. Section 785.23 notes that employees residing on an employer?s premise must be able-to ?engage in normal private pursuits and thus have enough time for eating, sleeping, entertaining, and other periods of complete freedom from all duties When he may leave the premises for purposes of his own.? An employee is deemed to reside on the employer?s premises if the employee is on duty at the group home and is compensated for at least eight hours in each of five consecutive 24-hour periods; and (2) the employee sleeps on the premises for all sleep periods between the beginning and end of this 120-,hour period.?3 Based on the testimony of Como at least one caregiver had to remain on the premises at all time. In his email to EDD (Exhibit Como stated that lodging was a condition of employment and that caregivers must be on the premises and stay overnight or else the caregiver is not hired. The email clearly states that the caregivers must stay overnight. If a caregiver does not want to stay overnight then the caregiver is not hired. Considering the email sent to EDD, the Hearing Officer must question the truthfulness of Como?s statement that at least one caregiver can leave the premises overnight. Based on the evidence, specifically Exhibit this Hearing Officer finds that the caregivers were required to remain on premises and are deemed ?on-duty? and entitled to compensation for hours that they were ?onncall? to respond to the residents? needs at night. a Muan v. Vitug, 2014 WL 141029 (ND. Cal. 2014) Page 26 The next issue before the Hearing Officer is whether or not the Appellants were in compliance with the requirements of 29 CPR. Section 785.23. If the Appellants were not in compliance, then, as a matter of law, the Appellants would be required to pay the caregivers for the full 24 hours they were on duty. One of. the requirements deals with the sleeping quarters provided to the caregivers. In the case of v. Vitug, 2014 WL 1410209 (ND. 1410209), the court held that ?When an employee resides on the employer?s premises, the employer may deduct ?sleep time? from the time for which an employee is entitled to compensation if three requirements are met. First, ?employees must be prOvidedprivate quarters in a homelike environment.? Second, ?a reasonable agreement must be reached, in advance, regarding compensable time.? Third, this agreement ?should normally be in writing to preclude any possible misunderstanding of the terms and conditions of an individual?s employment.? In 1988, the Department of Labor?s Enforcement (DOL) released an Enforcement Policy that contained a definition for private quarters. (1988 WL 614199) Private quarters ?means living quarters that are furnished; are separate from the ?clients? and from any other staff members; have as a minimum the same furnishings available to clients bed, table, chair, lamp, dresser, closet, etc.) and in which the employee is able to leave his or her belongings during on? and off-duty periods.? The DOL also addressed the issue of what constitutes a reasonable agreement in its June 30, 1988 letter. The DOL states that "They may also exclude a period of off-duty time during the day when the employee is completely relieved of all responsibilities. These exclusions must be the result of an employee-employee agreement and not a unilateral decision of the employer.? Based on Como?s testimony, three of the four houses did not have private quarters. Hacienda was the only facility that had a bedroom for each staff member. Even though Como testi?ed that Hacienda had a bedroom for each staff member, Mullen testified that when she visited the location the staff members were sharing a bedroom. At the minimum, the Appellants failed to provide private quarters at three of the facilities. Page 27 addition to providing private quarters, the Appellants were required to enter agreements with the caregivers regarding periods of off-duty time. The Department of Labor (DOL) states that the agreements should normally be in writing? Clearly, the caregivers were at the facilities for 24 hour shifts. As the Appellants have argued that they are subject to 29 OF. R. Section 785.23, the responsibility lies with them that an agreement with the caregivers was obtained. Como presented no testimony that he entered into any agreement regarding periods of off-duty time. Como?s email in Exhibit clearly states that the Appellants did not have written contracts with the caregivers and that the requirement to stay overnight was a unilateral decision of the Appellant. Exhibit #6 constitutes a daily work schedule and is not an agreement With the caregivers. Exhibit is a is of list of personnel policies created 35 years ago and do not constitute an agreement with the caregivers. The evidence supports a finding that the Appellants did not have agreements with the caregivers to exclude periods of off-duty time. Based on the evidence, the Appellants did not provide private quarters for. the caregivers in at least three of the four homes. As such, the caregivers are entitled to be compensated for all 24 hours spent at the facilities. IWC Order No. 5-2001, Section requires that employers keep time records ?showing when the employee begins and ends each work period. Meal periods, split shifts intervals and total daily hours worked shall also be record.? The Appellant kept no time records at all on the caregivers; not even a calendar showing the days that they worked. The Appellant?sgfailure to keep records cannot be countenance. The Appellant?s attorney objected to the Division?s audit calculations because of the lack of testimony concerning the actual hours worked. As the Hearing Officer has found that the caregivers are entitled to the full 24 hours they were required to be on premises, 9 1988 WL 614199, June 30, 1988 Page 28 the objection is overruled. The Hearing Officer finds that considering the Appellants failure to keep required time records the audit completed by the Division is reasonable. The Appellants? attorney has asked that the liquidated damages portion of the citation be dismissed. The Appellants? attorney argues that the Appellants acted in good faith when paying the caregivers and that as such the awarding of liquidated damages is not available. The Hearing Officer disagrees. Labor Code Section 1194.2 states that the Labor Commissioner ?may, as a matter of discretion, refuse to award liquidated damages. . The Appellants argument that they acted in good faith is unpersuasive. The Appellants were in business for 35 years and had more than adequate time to determine how. to pay their caregivers. - Based on Como?s testimony, the Appellants knew that IWC Order 5-2001 existed. Como testified that he contacted Gonzalez at EDD and informed her that Wage Order o. 5-2001 differed from what she had informed him. The Appellants knew that IWC Wage Order No. 5-2001 existed yet failed to follow it. As such, this Hearing Officer will not exercise his discretion and dismiss the liquidated damages. As individual liability for liquidated damages under Labor Code Section 558.1 can only go back to Ianuary 1, 2014, the Hearing Officer will remove $66,913.31 in liquidated damages, the amount assessed for 2013, from Appellant Como?s liquidated damages liability. For Appellant Gerald Como only, the Citation is affirmed, as modified, in the amount of $1,044,689.31. For Appellant Family Residential Care, LLC, the citation is affirmed in the amount of $1,111,602.62. Page29 ORDER Based on the foregoing Findings of act, IT IS HEREBY ORDERED that: 1. Wage Citation No. WA-262175 is affirmed, as modified, against Appellant Gerald Como, an individual, in the amount of $1,044,689.31. 2. Wage Citation No. WA-262175 is afformed against Family Residential Care, LLC, in the amount of $1,111,602.62. The total amount of Wage Citation No. WA-262175 is $1,111,602.62. Appellant Family Residential Care, LLC is liable for the full amount of $1,111,602.62, and Appellant Gerald Como, an individual, is liable for a portion of this full amount. Once a final judgment based on the citation is entered in court against any non-appealing Appellant, the Division of Labor Standards Enforcement may seek to recover the amounts set forth in the judgment against that non-appealing Appellant but Division of Labor Standards Enforcement can only recover a total of $1,111,602.62 from all Appellants together. The Division of Labor Standards Enforcement will immediately proceed to obtain a final judgment against any Appellant who does not appeal this findings. Dated: May 3, 2017 By: Dan Minchey, Hearing Officer Page 30