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Though the American employment market as a whole continues to stagnate, for the best computer science students, the current technology labor market echoes the high tech boom of the days of the dot com bubble. A recent report by Spencer Ante published in the Wall Street Journal this weekend, “Revenge of the Nerds: Tech Firms Scour College Campuses for Talent” discusses the race to snap up the best tech students in America, with companies promising enormous starting salaries, free food and other perks to woo the most sought-after students. For many students from undergraduate and PhD computer science programs, the promise of starting salaries reaching the six figures and bonuses in the tens of thousands is enough to lure them away from completing their degrees and moving directly into the workforce.

But for many of these most highly sought-after students, the excitement of high starting salaries and fun company perks should not take away from the serious business of carefully weighing their options and ensuring they protect their rights under the employment laws. This is the first part of a continuing series that will hopefully highlight the most important issues that might face these students as they embark into a new chapter in their lives and enter the workforce. From the negotiation stage to the employment contract and from a summer internship to a permanent employment offer, there are a number of considerations and issues that many students may be unaware of and which we hope to address in this series on the San Francisco Employment Lawyer Blog.

The first issue we will address today stems from the increasing pressure many of the top computer science students face to leave school early and start working directly with a start-up or other technology company. While computer science PhD students have faced such pressures for years, with the increasing demand for the best talent this pressure has become an issue for undergraduate computer science students as well, as highlighted by the report in the Wall Street Journal. One issue that many students faced with such luring offers should carefully consider is the nature of at-will employment in the United States. Many Americans who have worked for decades do not even fully understand the implications of this default rule in American law. At-will employment means that unless otherwise contracted for, an employer can fire her employee for any reason at all, as long as it is not otherwise restricted by the antidiscrimination laws or other very narrow exceptions. For many students who might decide to leave school early, this is an important consideration because unless the employee contracts otherwise with her employer for a more permanent employment contract, this may be a very large risk. Students may find themselves in a situation where they have left school early for a great job with a fat salary and benefits, perhaps leaving behind a substantial undergraduate scholarship or prestigious PhD fellowship, and then find themselves out of a job a few months later. While this situation may be rare, it is certainly something that must be kept in mind by many students faced with such an option.

Under the Private Attorney General Act (PAGA), California employees are in effect deputized to be roving labor code cops and enforce the law themselves. This law was passed in 2003 because the government did not have the resources to effectively enforce the labor code, so it gave all employees the ability to act as government agents. In most cases, money recovered under PAGA by employees is split 75/25 with the government. It is a great concept but certain questions have been unsettled. On February 27, 2012, the California Court of Appeals in Thurman v. Bayshore Transportation resolved several open questions.

Thurman was brought on behalf of bus drivers who were not paid for meal and rest breaks. One of the issues was wether the drivers were entitled to recover their unpaid wages under California Labor Code Section 558. Section 558 imposes a penalty on any employer, or other person acting on behalf of an employer, who violates any law that regulates the hours and days of work. The penalty consists of $50 for the first violation and $100 for each subsequent violation as well as an amount equal to any unpaid wages owed to the employee. Also, wages recovered under Section 558 are to be paid directly to the employee – meaning that the employee gets to keep their wages and is not required to share that part of the recovery with the government under the 75/25 split.

In Thurman, the defendants argued that unpaid wages cannot be recovered under Section 558. Not only did this argument fly in the face of the plain language of Section 558, but the California Supreme Court had already made it clear that wages were recoverable under Section 558 as a penalty in Reynolds v. Bement (2005) 36 Cal.4th 1075. In Reynolds, the Court held that “pursuant to section 558, subdivision (a), any ‘person acting on behalf of an employer who violates, or causes to be violated’ a statute or wage order relating to working hours is subject to a civil penalty, payable to the affected employee, equal to the amount of any underpaid wages.” The Thurman court found that unpaid wages are just part of the penalty included in Section 558 and they are recoverable.

The Ohio Employer’s Law Blog by Jon Hyman focused on a recent Department of Labor Press Release announcing a crackdown on Los Angeles restaurants for wage violations. The press release states that over “the past six years, the division’s Los Angeles office found that 72 percent of all restaurants investigated in its jurisdiction were in violation of the FLSA.” This statistic does not include the restaurants not investigated so the percentage of restaurants in violation is probably much higher.

Jon Hyman of the Ohio blog cited above believes that the high rate of wage violations can be attributed to the complexity of the wage laws. He states the “FLSA and its regulations are that complex, twisted, and anachronistic.” I agree that these laws are confusing, but I doubt many restaurant owners and managers ever look at the Fair Labor Standards Act. Also, even though the text of the FLSA is unclear, everyone knows the basics – pay employees the minimum wage and overtime. Pretty simple concepts. In my view, the unclear laws are part of the problem but not the real problem.

Restaurants and many other businesses violate the wage laws for another reason – because they think they can get away with it and most of them do. Violating wage laws makes good business sense. If they get away with it, companies save a fortune in unpaid wages. If caught, the penalty usually is just paying the employee what was owed anyway and often less. In most cases, the end result for employers is a nice interest free loan from the employees.

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