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Pursuing Award From Firm in Bankruptcy Requires Court's OK

November 19, 2000

Q: Last December, I was laid off along with 20 to 30 others. Our employer refused to pay accrued vacation time.

I filed a complaint with the Labor Board and was awarded my pay three months later. I then filed a complaint seeking 30 days' pay as allowed under the law.

Soon after I filed this complaint, the company filed for bankruptcy. I was awarded the 30 days' pay, but instead of receiving the money I got a letter from the Labor Board saying the claim was dismissed because of the bankruptcy.

Considering the timing of the bankruptcy and the fact the company continues to advertise, I suspect the filing was to avoid the liability of 20 to 30 penalty claims. What is my recourse? At the least, shouldn't I be considered a creditor expecting some consideration after the company emerges from bankruptcy?

--N.C., Huntington Beach

A: A bankruptcy filing stays all legal action pending against the debtor.

A creditor must seek special permission from Bankruptcy Court to continue legal proceedings designed to fix the amount of the creditor's claim, but in no event can such a creditor attempt to collect ahead of other creditors.

It appears that the labor commissioner dismissed the penalty action before the penalty award became a judgment of the court. Therefore, you must file a proof of your claim with Bankruptcy Court if you wish to continue to pursue the penalty award. Bankruptcy Court will determine whether you are entitled to receive a penalty award, but even if it decides in your favor, you will be competing for payment of the award on a pro rata basis with the other unsecured creditors of the company. You should also be aware that strict deadlines apply to the filing of such a proof of claim.

--James J. McDonald Jr.

Attorney, Fisher & Phillips

Labor law instructor, UC Irvine

Exempt Employees' Pay Not Tied to Hours Worked

Q: Is there a law that prohibits our company from requiring exempt, salaried employees to clock in and out?

We feel some employees are not working their full eight hours a day, using work hours for personal business and taking long lunch hours. Our employees insist that it is illegal for salaried employees to use a time clock, that only hourly employees have to clock in and out.

--B.G., Pico Rivera

A: Although it is not a common practice, an employer can legally require exempt employees to punch a time clock as long as their salaries are not affected by the hours they work.

Exempt employees are supposed to be paid a true salary; that is, their pay should reflect the value of their work rather than the hours that they spend on the job. The exemption can be lost if their pay is measured by the hours they work. As a result, an employer can't dock an exempt employee if the time clock shows that the employee came in late, left early, exceeded lunch breaks or engaged in personal business during work hours.

In fact, an employer can lose the exemption if it regularly makes deductions from exempt employees' salaries for absences of less than a full day. In that were to occur, the employer would be liable to the employees for unpaid overtime premiums and other potential damages.

--Joseph L. Paller Jr.

Union, employee attorney

Gilbert & Sackman

Overtime Due for More Than 40 Hours a Week

Q: As a nonexempt worker, I clock in and out and am paid for the hours I work.

I am a laboratory worker and have a number of slides that I am expected to screen, although the word "quota" is carefully avoided for legal reasons.

To fulfill my quota, I usually work more than eight hours a day.

Is it legal for my employer to pay hourly, but not overtime? I'm afraid if I confront them on this they will reduce my quota, which may affect my salary and, potentially, my position.

--S.S., San Diego


If a nonexempt employee works more than eight hours a day or 40 hours in a week, overtime compensation must be paid.

If your employer pressures you to work overtime and tells you not to write it down on the official time sheets, you still are entitled to overtime compensation.

It is illegal for the employer to reduce your hourly pay to offset overtime payments. The company could reduce your "quota," however, to avoid overtime.

You would have to prove that you worked overtime. I suggest you keep track of the hours you work so you can submit the total to your employer. You would have to file a claim within three years.

You also should decide whether filing a complaint outweighs the possible risk of retaliation. It is illegal for the company to retaliate against you. But it might be difficult to prove whether some actions, such as delaying a pay raise, constitute retaliation.

--Don D. Sessions

Employee rights attorney

Mission Viejo


If you have a question about an on-the-job situation, please mail it to Shop Talk, Los Angeles Times, P.O. Box 2008, Costa Mesa, CA 92626; dictate it to (714) 966-7873, or e-mail it to Include your initials and hometown. The Shop Talk column is designed to answer questions of general interest. It should not be construed as legal advice. Recent shoptalk columns are available at

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