CMTA Legislative Weekly

Legislative Weekly
November 21, 2001
Issue 46, Volume 3

A weekly publication from the
California Manufacturers & Technology Association
detailing legislative and regulatory developments in Sacramento

IWC RULES IN EMPLOYERS FAVOR ON EMPLOYEES PAY STATUS DURING TEMPORARY
PLANT SHUTDOWN

At the October 29th hearing in San Jose, the Industrial Welfare
Commission (IWC) approved an amendment of the Statement as to the Basis
of Wage Order 5, rejecting the controversial letter written by Mr. Miles
Locker, former Chief Counsel, Division of Labor Standards Enforcement
(DLSE), that prohibited any deductions from exempt employee's salary in
increments of less than one-month during temporary plant shut down. The
amendment makes it clear that the IWC believes that employers are
required to pay exempt employees their full predetermined salary for any
week in which any work is performed instead of any month in which any
work is performed with limited exceptions. That's good news for
employers.

CMTA, along with other employer representatives, testified at the
commission hearing requesting that the IWC clarify whether California
businesses should continue to follow the federal rules regarding exempt
employees salary deductions. Under the federal Fair Labor Standards Act
(FLSA) the salary deduction for exempt employees is measured in weeks
and not months as opined by Mr. Locker under California law. Locker's
much maligned interpretation was believed to be based on AB 60 (Chapter
134, Statutes of 1999) ? a bill that made sweeping changes to California
wage and hour laws. However, AB 60 did not contain any language that
specifically prohibited wage deductions from exempt employees in
increments of less than one month. On the contrary, Section 515 © of
the Labor Code specifically provides that ?for purposes of this section
'full-time employment' means employment in which an employee is
employed for 40 hours per week.? In CMTA's opinion, this language
clearly provides that salaries may be paid weekly, clearly comporting
with the FLSA that permits weekly deduction.

Advocacy on this issue is not yet over. While the amendment clearly
indicates where the commission stands on the issue, according to
Commission Chair, Bill Dombrowski, (amendment passed on a 4-1 vote) it
only applies to Wage Order 5 (Public Housekeeping) and not to the other
14 orders. The IWC is authorized to amend without hearings the Statement
as to the Basis of any wage order that is open. Wage Order 5 was the
only order open at the October 29 meeting so the commission did not have
the authority to clarify the issue by revising all of the wage orders.
Also important to employers is that the IWC voted to set an
investigation hearing with regard to the issues set forth in the Locker
letter, and requested that the commission staff establish a schedule for
completing that investigation and amending all of the wage orders to
reflect the commission's position on this issue, in as short a time as
possible.

The commission's action is good news for California employers especially
when they are about to enter the most frequent periods of temporary shut
downs, the weeks of Thanksgiving and Christmas. Employers are facing
many economic challenges in a slowing economy and flexibility is needed
to improve efficiencies and control cost if employers are to remain
competitive and minimize layoffs. Employers are already faced with
high-energy costs and double-digit cost increases in health care and
workers? compensation insurance premiums that only seem to grow.

CMTA believes that the commission's ruling brings clarity and reason to
the issue, indicating that temporary plant closures in California will
continue to follow the federal rules concerning exempt employees salary
deductions.

DTSC STEPS UP PRESSURE ON MERCURY

The California Department of Toxic Substances Control (DTSC) recently
released a comprehensive report on mercury, a metal that is ubiquitous
in the environment and can be found in manufacturing processes and
consumer products. Examples cited in the report include ash,
contaminated soil, cement manufacturing, sewage sludge, pharmaceuticals,
paint, pesticides, electrical switches, fluorescent lamps and
batteries. Mercury is the subject of increasing regulatory attention
due to the fact that certain forms are highly toxic and known to
bioaccumulate (i.e., concentrate in organisms). DTSC?s report examines
mercury uses, health effects, behavior in the environment and regulatory
options.

The report recommends regulating all mercury-containing waste, whether
present in manufacturing process wastes, consumer products or naturally
occurring mercury liberated in mining or construction activities, as
hazardous waste. This broad-brush listing approach would be a dramatic
departure from the current concentration-based regulatory scheme, and
raises numerous policy questions concerning the extent of DTSC?s
regulatory authority, the point at which a material or product is
determined to be a waste, collection and handling requirements and class
1 (hazardous waste) disposal capacity. This approach also calls into
question the future viability of existing recycling programs where
postconsumer recyclable materials may contain trace quantities of
mercury. Presumably, consumers, haulers and recyclers would find
themselves in the business of managing hazardous waste.

In advancing this recommendation, the report fails to assess the
anticipated environmental and human health benefit and the associated
cost to consumers and the regulated community. Moreover, it fails to
address at least one major source of mercury exposure ? legacy waste
from past placer mining activities. While DTSC acknowledges that legacy
mining waste is one of the largest contributors of mercury to the
state's environment, the report does not contemplate strategies to
mitigate this source.

These issues should be addressed in a subsequent iteration of the
report, before DTSC initiates any regulatory action. Now more than
ever, the state must ensure that its regulatory initiatives make wise
use of limited resources to target the sources that drive public health
risks and environmental exposures.

MORE BAD NEWS FROM FINANCE: MANUFACTURING JOB LOSSES GROW

According to just-released figures from the California Department of
Finance, a clearer picture of the California economy is emerging
subsequent to September 11, 2001. It appears California suffered less
than the nation as a whole, with the state's 4,300 drop in nonfarm jobs
amounting to only 1 percent of the nationwide loss of 415,000 jobs. The
Manufacturing sector continued to take the brunt in California losing
over 10,000 jobs in October, now totaling over 76,000 lost jobs during
the last 12 months.

* Industry employment estimates for October show a decline in all
private industry sectors, with the exception of a small gain in
finance, insurance and real estate. The state appears, however, to
be faring better than the nation as a whole.
* The impact of the September 11 attacks is difficult to gauge. Air
transportation lost 4,300 jobs, which is about 10% of the national
losses. Hotels shed 3,500 jobs, which represent about 8% of the
national loss. Eating and drinking places actually added 4,600
jobs, even though the nation as a whole dropped 37,000.
Transportation services, which include travel agents, lost 300 jobs
in California, compared to 12,000 nationally.
* Manufacturing employment dropped 10,900 in October with weakness in
both high-tech industries?computers, electronics, aerospace, and
instruments?and in construction-related fields. Chemicals posted
the only gain in October. Nationally, manufacturing dropped
142,000 jobs.
* Local government employment rose 18,200 during the month, after
dropping more than 22,000 in September, reflecting difficulties in
seasonally adjusting beginning of school year figures.
* On a year-over-year basis, total industry employment grew by
103,200 or 0.7 percent, while the nation lost 378,000 jobs, a drop
of 0.3 percent. Wholesale and retail trade added the most jobs,
41,800. Services were not far behind, adding 40,800 jobs.
Manufacturing employment has fallen by 76,600 jobs over the year,
with over half of the losses coming from the state's high tech
sectors. The motion picture industry lost 2,000 jobs, in the
aftermath of heavy strike-hedge activity in the first half of the
year.
* California's unemployment rate rose 0.3 percent to 5.7 percent in
October, with the unemployment rolls growing by 47,400.
Nationally, the jobless rate jumped 0.5 percent to 5.4 percent.

Revenue Update

* Preliminary General Fund Agency Cash for October was $220 below the
2001 Budget Act Forecast of $4.63 billion. Year-to-date, revenues
are $827 million below expectations. These revenue figures reflect
activity subsequent to September 11 with the exception of that 3rd
quarter sales tax data are not yet finalized.
* Year-to-date bank and corporation taxes are down $314 million from
forecast and personal income taxes are $698 million under forecast.

REPORTS ON NATURAL GAS

Rumblings of a looming natural gas ?problem? are surfacing, however
there is little expectation that this ?problem? will expand into a
crisis of electricity proportions. Legislation was passed in 2001
requiring the California Public Utilities Commission to look at and
report long-term natural gas forecasts. Preliminary studies have been
completed, and likely will be released in the next week or so.

The California Energy Commission also has released a draft report that
evaluates the interrelationships between natural gas and electricity and
the price of energy resources. This draft report is available online at
http://www.energy.ca.gov/reports/.

www.cmta.net
California Manufacturers & Technology Association
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Sacramento, CA 95814
(916) 441-5420 phone
(916) 447-9401 fax

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