California Employment Law Report

California Employment Law Report

The latest litigation trends, court decisions, & issues on California Employment Law

Los Angeles area employers: checklist to comply with July 1 minimum wage and paid sick leave laws

Next week Los Angeles employers need to comply with new minimum wage and paid sick leave requirements.  I have written about the new laws a lot recently, but wanted to provide five items in today’s Friday’s Five to review in ensuring your company is ready for the new laws for next week’s deadlines:

  1. Understand where your employees work and which laws apply to them.

Just because your business is not located in the City or County of Los Angeles, Pasadena, or Santa Monica does not mean your company can ignore the new laws.  The ordinances passed all include similar provisions that state if an employee works two hours within the City or County the employer must comply with the law:

  • Santa Monica:  Law applies to any employee working a minimum of two hours within Santa Monica in a given week (even if employer is located outside of Santa Monica).
  • City of Los Angeles: “An employee is an individual who performs at least two hours of work in a particular week within the City of Los Angeles….”
  • County of Los Angeles: “Anyone who works at least two hours in a one-week period within the unincorporated areas of Los Angeles County is entitled to the County minimum wage for the hours worked in the unincorporated area of the County.”
  • Pasadena: Applies to employees who perform at least two hours of work in Pasadena.
  1. Don’t assume Los Angeles City’s paid sick leave requirements are the same as state law.

As of July 1, 2016, the City of Los Angeles requires employers to provide employees with 48 hours of paid sick leave.  Employers within the City of Los Angeles must review the new law carefully to ensure they are following the City’s paid sick leave requirements, and while there are some similarities with California’s paid sick law, there are many differences.  The City of Los Angeles has very specific requirements about the accrual methods and caps on accrual.  For example, California’s state law allows employers to require employee to use paid sick leave in two hour increments, but the City of Los Angeles does not permit this, so if an employee uses less than two hours the employer can only deduct the actual amount of paid sick leave used by the employee from their sick leave bank.  Also, the City’s law allows employees to use paid sick leave to take care of “any individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship.”  Who is someone with the “equivalent” of a family relationship?  Good question.  Employers must review the new requirements carefully to ensure compliance with these new requirements (and update handbooks and policies if necessary).

  1. Don’t forget to post new notices.

Santa Monica notices:  https://cityofsantamonica.app.box.com/s/nuccal4on935m43p0nhmuzgy65f5mbwl

City of Los Angeles notice: http://wagesla.lacity.org/#information

County of Los Angeles notice: http://file.lacounty.gov/dca/cms1_245570.pdf

Pasadena notice:  http://www.cityofpasadena.net/minimumwage/

  1. Need to know if you are in an incorporated or unincorporated city within Los Angeles County.

Employers who have workers working in any unincorporated area in Los Angeles County must comply with the County’s ordinance.  If workers work in an incorporated city within the County, the incorporated city’s laws would apply, and if the city does not address minimum wage or paid sick leave, then the employer must follow California state law.  However, if an incorporated city, such as Santa Monica, implemented a law, employers must comply with the law that provides the employee with the most benefits and protection.

Click here for resource to determine if your workers work in an incorporated or unincorporated city within Los Angeles County.

  1. Review new hire packets to ensure you are providing all required notices to employees.

 The new laws have some intricacies that employers need to be aware of.  For example, the County of Los Angeles’ new law requires that employers provide employees with written notices setting forth the employer’s tip policy, including any tip sharing, pooling, or allocations policies, if applicable.

Likewise, Santa Monica’s law also sets out requirements pertaining to service charges collected by employers.  Santa Monica requires that all service charges must be distributed to workers who generally performed services for which the charge was collected, and it permits employers to share the service charge with back-of-house employees.  Employers must inform employees of the service charge distribution keep records of the distributions.

 

Los Angeles County minimum wage ordinance – traps for employers

Following the City of Los Angeles, the County of Los Angeles implemented a new minimum wage increase for all unincorporated cities within Los Angeles County.  The minimum wage law follows the City’s requirements, but there are a few areas where the County differs, which can be a trap for employers:

1) County of Los Angeles minimum wage poster.

The County published a poster this week that all employers subject to the County’s law are required to post.  According to the County of Los Angeles’ website: “Every Employer shall post this notice in a conspicuous place at any workplace or jobsite located within the unincorporated areas of the County where any Employee works.”

The County’s poster can be downloaded here.

2) Unlike the City of Los Angeles, the County requires the employer to provide written notice of certain items to all employees, which includes new items employers have not had to provide previously – such as tip policies.

Specifically, the County’s ordinance requires the following:

At the time of hire, Employers shall provide each Employee with a written statement disclosing: (1) the Employer’s name, any trade (“doing business as”) names, the physical and mailing address of the Employer’s main office, email address, and the Employer’s telephone number; (2) the Employee’s rate or rates of pay; (3) the Employer’s tip policy, including any tip sharing, pooling, or allocation policies, if applicable; (4) the Employee’s pay basis (e.g., hour, shift, day, week, commission); (5) the formula by which the DCBA can determine the Employee’s rate of pay and total pay; (6) Employee’s established Pay Day for earned wage compensation; (7) each deduction that will be collected from the Employee’s pay each Pay Period; and (8) additional information specified in the Director’s Rules.

Title 8 – Consumer Protection and Business Regulations of the Los Angeles County Code Chapter 8.101.060 B.

The City of Los Angeles does not have a similar provision requiring these written notices to employees.  In addition, while the County’s notice requirements closely track the state of California’s notice requirements under Labor Code section 2810.5 (click here to read more about California state requirements set forth in Labor Code section 2810.5), the County requires additional disclosures to employees, such as:

  • The employer’s tip policy
  • Each deduction that will be collected from the Employee’s pay each pay period

Therefore, employers (especially restaurants) subject to the County’s ordinance, must review the notices provided to employees to ensure that they are complying with all state and County requirements.

3) Having a hard time figuring out if the County’s ordinance applies to your business?

The County published an article explaining how to discovery if the employer’s business is in an unincorporated area of the County, and therefore subject to the County’s minimum wage law.

Here is a list of incorporated cities in the County of Los Angeles, and because they are incorporated, neither the Los Angeles City nor the Los Angeles County minimum wage laws will apply within these cities.

Five local minimum wage and paid sick leave laws applicable to Southern California

Surfing - Crab BoyWelcome to this weeks Friday’s Five.  In the last two weeks in early June 2016, many local governments in Southern California have passed laws increasing the minimum wage and the amount of paid sick leave benefits to employees.  This Friday’s Five is a summary of five minimum wage and paid sick leave requirements that employers in Southern California should understand.  Employers are required to comply with the law that provides the most benefits to the employees, therefore it is important for employers to understand which laws apply to their operations and to take steps to comply with the quickly approaching deadlines.

State/City Minimum Wage Paid Sick Leave
1) California $10/hr January 1, 2016; $10.50 January 1, 2017; $11/hr January 1, 2018; $12/hr January 1, 2019; $13/hr January 1, 2020; $14/hr January 1, 2021; $15/hr January 2022* Current: 3 days or 24 hours
2) Los Angeles – City (click here for a previous article about Los Angeles City’s minimum wage and paid sick leave laws) July 1, 2016: $10.50/hr; July 1, 2017 $12; July 1, 2018 $13.25; July 1, 2019 $14.25; July 1, 2020 $15.00 * (click here for more information about Los Angeles’s minimum wage ordinance) July 1, 2016: 48 hours
3) Los Angeles – County Same as LA City No specific requirement – state law applies
4) San Diego City July 2016: $10.50 (date not set yet – likely effective in first half of July 2016); January 1, 2017 $11.50; January 1, 2019 $11.82; January 1, 2020 $12.15; January 1, 2021 $12.49; January 1, 2022 $12.84 5 paid sick days (date not set yet – likely effective in first half of July 2016)
5) Santa Monica (click here for Santa Monica’s website setting for details of the new law) $10.50 July 1, 2016; July 1, 2017 $12.00; July 1, 2018 $13.25; July 1, 2019 $14.25; July 1, 2020 $15.00* January 1, 2017: 32 hours for small businesses, 40 hours for large businesses; January 1, 2018: 40 hours for small business, 72 hours for large businesses*
*Employers with 25 or fewer employees the implementation is delayed one year.

Photo: crab boy

Los Angeles increases paid sick leave – employers must comply by July 1 2016

Los AngelesLos Angeles city past a new law on June 1, 2016 requiring employers to provide employees with 48 hours of paid sick leave per year.  This is twice the amount required by California state law.  The kicker: employers must develop policies, adjust payroll, and put the new requirement into effect by July 1, 2016.  Employers in the City of LA must comply with the law that provides more benefits to the employee, and this means many employers must immediately start implementing payroll and policy changes to meet this short deadline.  This Friday’s Five reviews five items Los Angeles city employers need to know about the new law to comply in less than 30 days:

1. Accrual methods

Employees who on or after July 1, 2016 work in the City of Los Angeles for the same employer for 30 days or more within one year from starting work for the employer is entitled to paid sick leave under the city law.  Paid sick leave accrues on the first day of employment or July 1, 2016, whichever is later.  Even though the employee is accruing paid sick leave, the employee is not entitled to use paid sick leave until the beginning on the 90th day of employment or July 1, 2016, whichever is later.

Two methods of providing paid sick leave:

  • Up front grant – by providing the entire 48 hours to an employee at the beginning of each year of employment, calendar year, or 12-month period or
  • By providing the employee one hour of sick leave per every 30 hours worked.

LA city’s law is different than state law in this regard.  State law allows for different options for employers to accrue paid sick leave, and under state law if the employer uses the up front grant method, there is no carry over requirement into the new year.  However, the LA city law requires up to 72 hours to carry over to the next year, even under the up front grant.

2. Caps on accrual

Employees are entitled to take up to 48 hours of sick leave in each year of employment, calendar year, or 12-month period.  Accrued unused paid sick leave shall carry over to the following year of employment and may be capped at 72 hours.

3. Employee’s notice requirements and doctor’s note requirement

An employer must provide paid sick leave upon the oral or written request of an employee for themselves or a family member, or any “individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship.”  What is an individual relationship that is the equivalent of a family relationship?  Good question, and the law does not clarify what is meant to be covered by this requirement.

Differing from state law, the LA city law does set that an employer may require an employee to provide “reasonable documentation” of an absence from work to use paid sick leave.

4. No payout of unused paid sick leave upon separation

Accrued and unused paid sick leave does not need to be paid out at separation from employment.  This is similar to state law.

If employee separates from the employer, and then is rehired by the employer within one year, the previously accrued and unused paid sick time must be reinstated.

An employee may not waive their rights to the city’s paid sick leave law.

5. Minimum wage increase

As a reminder, the ordinance also increases the minimum wage for workers within Los Angeles city (as previously written about here).

Starting July 1, 2016, the minimum wage in the City of Los Angeles will increase according to the following rate:

Effective Date Employers With 26 or more Employees Employers with 25 or fewer Employees or Non-Profit corporations with 26 or more Employees with approval to pay a deferred rate
7/1/2016 $10.50 Deferred
7/1/2017 $12.00 $10.50
7/1/2018 $13.25 $12.00
7/1/2019 $14.25 $13.25
7/1/2020 $15.00 $14.25
7/1/2021 $15.00 $15.00

Los Angeles County also passed an ordinance that tracks this schedule, and applies to Los Angeles County, except for any incorporated cities within the County.

As a reminder, I will be speaking about this new law, and other mid-year legal updates at our seminar and mixer on June 22, 2016 at the Westside Tavern in Los Angeles.  Registration and additional information can be found here.

Five things to know about biometrics in the workplace

biometrics

Fingerprint scans, facial recognition, and retinal scans only a few years ago sounded like farfetched futuristic technology, but given the quickly advancing technology, these items are being used more and more in the workplace.  Today’s Friday’s Five discussed five items California employers should know about their legal obligations regarding the employee’s biometric information obtained during employment:

1. California Labor Code section 1051 – prohibition on employers from sharing biometric information with third parties.

This little known Labor Code section prohibits California employers of obtaining fingerprints or photographs from employees and then sharing this information to a third party.  Violation of the section is a misdemeanor.  Therefore, employers are not prohibited from collecting fingerprint information from employees, but are restricted from sharing this information with an outside third party.

2. Biometrics in timekeeping systems.

While there is no prohibition in using biometrics such as finger prints or hand prints in time keeping systems to verify an employees’ identity, employers must use caution in implementing these types of systems.  As discussed above, Labor Code section 1051 prohibits employers from sharing this information with a third party.  Therefore employers must take steps to ensure the vendor providing the technology does not have access to the biometric information.  Moreover, employers that obtain this information must be careful to protect the information from inadvertent disclosures to third parties.  Disclosures from from being hacked or unintentional inadvertent disclosure by the employer would likely be actionable under Labor Code section 1051 and California’s constitutional right to privacy.

3. Cost of photographs for employment must be paid for by employer.

Labor Code section 401 prohibits employers from requiring employees to submit a photograph from an applicant or an employee without paying for the cost of the photograph.  Obviously employers cannot discriminate against applicants based on race, gender, age, or other protected categories, but just as this information could be learned from a photograph, it would likewise be learned by the employer during a face-to-face interview.  Therefore, other than having to pay for the costs of the photograph, employers may ask for or take photographs during the hiring process as long as all prohibitions against discrimination are likewise followed.

4. Use of photographs of employees.

California Civil Code Section 3344, prohibits the use of a person’s “name, voice, signature, photograph, or likeness” in advertising or selling a product without the person’s prior consent.  Penalties under this section are the greater of $750 or actual damages suffered by the person as a result of each unauthorized use, any profits that are attributable to each unauthorized use, and attorneys’ fees and costs.  Punitive damages are also available to the prevailing party.  Therefore, employers who use the employee’s likeness in any advertising materials should consider obtaining written consent from employees to use their likeness in any marketing or advertising literature.

5. Employers must be careful to comply with other states’ biometric laws.

Facebook, Google and other technology companies are quickly learning about the intricacies of Illinois’ Biometric Information Privacy Act (BIPA).  The companies have been subject to litigation for alleged violation of the Illinois’ law on the grounds that Facebook and other tech companies’ using facial recognition in pictures stored to its software do not comply with the notice and consent requirements of the BIPA.  The law, passed in 2008, requires anyone gathering biometric information to provide certain notifications to the person whose data is being collected, and written permission to collect the information.  Facebook, for example, has asked for the case to be dismissed since its terms of service establishes that California law applies to any dispute.  Therefore, Facebook is arguing that because California does not have a similar law to Illinois’ BIPA, the case should be dismissed.  So far, that argument has not been successful and the case is proceeding against Facebook.  Employers operating in multiple states should pay careful attention to state statutes to ensure they are compliant with any applicable laws.  It is also likely that more and more states will enact similar laws to Illinois’ BIPA in the near future given the quickly advancing technology.

Photo: Toshiyuki IMAI

Five questions about Los Angeles’ minimum wage increase all employers should understand

Businesses that have worksites or operate within Los Angeles City or County need to review the minimum wage laws that go into effect July 1, 2016.  While there are still many unanswered questions about the ordinances, there are key items employers need to start reviewing now to ensure compliance by the July 1, 2016 implementation.  For today’s Friday’s Five, here are five issues employers need to understand about the Los Angeles minimum wage law:

  1. What is the new Los Angeles minimum wage?

Starting July 1, 2016, the minimum wage in the City of Los Angeles will increase according to the following rate:

Effective Date Employers With 26 or more Employees Employers with 25 or fewer Employees or Non-Profit corporations with 26 or more Employees with approval to pay a deferred rate
7/1/2016 $10.50 Deferred
7/1/2017 $12.00 $10.50
7/1/2018 $13.25 $12.00
7/1/2019 $14.25 $13.25
7/1/2020 $15.00 $14.25
7/1/2021 $15.00 $15.00

Los Angeles County also passed an ordinance that tracks this schedule, and applies to Los Angeles County, except for any incorporated cities within the County.  See below for maps and further details.

  1. What are the potential penalties for violation of the City’s ordinance?

An employer who violates minimum wage requirements is liable to the employee for payment of back wages and an additional penalty of $100 for each day that the violation occurred or continued.  Where retaliation has occurred, the employee is entitled to reinstatement and a trebling of all back wages and penalties.

In addition, employers are subject to administrative fines as set forth below:

Administrative Fines

Failure to post notice of the Los Angeles Minimum Wage rate $500 per day per employee
Failure to allow access to payroll records $500 per day per employee
Failure to maintain payroll records or to retain payroll records for your years $500 per day per employee
Failure to allow access for inspection of books and records or to interview employees $500 per day per employee
Retaliation for exercising rights under the ordinance $1,000 per day per employee
Failure to provide employer’s name, address, and telephone in writing $500 per day per employee
Failure to cooperate with the Division’s investigation $500 per day per employee
Failure to post Notice of Determination to employee $500 per day per employee

The maximum administrative fine that could be paid to the City for each type of violation is $5,000 per employee per year, except for a retaliation violation the maximum is $10,000 per employee per year.  The County’s ordinance does not track the City’s penalties exactly, but the penalties are still very substantial.

  1. Which agency will enforce compliance with the City’s ordinance?

 The Department of Public Works, Bureau of Contract Administration, is the Designated Administrative Agency for the Ordinance and has the administrative responsibilities to implement the guidelines and rules.  The BCA will be the agency that investigates any claims for minimum wage violations, enforcement of the notice, posting, or payroll records requirements, and complaints of retaliation.

It is important to note that the ordinance provides that any adverse action against an employee within 90 days of the employee’s exercise of protected rights may be construed as retaliation for the exercise of such rights.

  1. What are employer’s new notice requirements?

Under Los Angeles City’s ordinance, every employer must post in a clearly visible place at any workplace or job site where any employee works, the notice published each year by the Division informing employees of the current minimum wage rate and of their rights under the Ordinance.  The notices made available by the Division can be downloaded from its website here: http://wagesla.lacity.org/#information.  The English and Spanish poster is embedded below.

Notices must be translated if at least 5% of the employees at the workplace or job site speak a different language.  It is not clear which “workplace” should be evaluated if an employer does not have a job site not within Los Angles city or county.  Just another unanswered question about this regulation.

Los Angeles County’s ordinance also sets forth that employers within the County must post a similar notice that is to be developed by the County’s Department of Consumer and Business Affairs (“DCBA”), which is required to make this notice available to employers to post.  However, at the time of this article, the DCBA’s website does not have the notice available.

  1. How can a company determine the city or county boundaries?

The city of Los Angeles published a FAQ that “recommend visiting http://zimas.lacity.org/ as a reference” to determine the City’s boundaries.  The city’s ordinance only applies to companies located or conduct business in the incorporated city limits.  The County of Los Angeles also passed an ordinance that closely tracks the city’s ordinance as discussed above, and the County ordinance will apply to businesses within the County, but not within the City of Los Angeles, or other incorporated cities within the County.  Click here for a map of the County of Los Angeles that also sets forth the incorporated cities.

It is important for employers to understand if the City or County requirements apply to their workforce, and understand the difference between the two.  I’m sure this is not the last article I write on this topic.  Stay tuned.

Also, if you would like to learn more about this topic, I am having a seminar on June 22, 2016 that will discuss these minimum wage developments, as well as other legal developments that employers need to be aware at this mid-point in 2016.  More information about the event can be found here.

Employment law mid-year update and mixer

Employment Law - Mid Year Update - LinkedinJoin me for a seminar for a mid-year update on California employment law issues.  Learn how to keep your company compliant with new developments in California.  Topics will include:

  • Top five pitfalls facing California employers in 2016
  • How to prepare for the Department of Labor’s changes to the overtime rules going into effect on December 1, 2016
  • Local city minimum wage and paid sick leave developments
  • Revisions to anti-harassment and discrimination regulations potentially requiring revisions to handbooks and policies
  • Q & A – bring your questions to discuss with the attorneys from my firm
  • Mixer – network with other business owners, human resource professionals, and other professionals

The event is from 4 p.m. to 7 p.m. on June 22, 2016  (seminar from 4 to 5 p.m., mixer from 5 to 7 p.m.).

Location: Westside Tavern, 10850 W Pico Blvd, Los Angeles, CA 90064 (click here for map)

1.0 SHRM and HCRI credit for HR Professionals.

$150 Regular Price/$40 for clients of VTZ and California Restaurant Association Members. If you are a client, or a CRA member, email cpeck@vtzlaw.com for promo code.

Space is limited.

For more information and registration, click here

Hope you can join us.

DOL overtime rule changes: Five action items for employers

Worker

The DOL’s Final Rule was issued this week (see my previous article for the details), and we have had a few days to digest the new rules.  Now employers need to start putting together a plan to ensure compliance with the federal rules, and take time to ensure they are also complying with applicable California law.  This Friday’s Five is five suggestions to start the process:

1. Understand that the DOL’s changes apply to the FLSA, not California law.

At risk of sounding like a lawyer, the analysis to determine if an employee is properly classified as an exempt employee is very detailed and complex.  California’s requirements differ from the Federal requirements in many ways.  Therefore, it is imperative that California employers understand which laws apply to their employees, and that they are following the correct laws.  The set of rules that provides the employee with more rights and protections is usually the law that governs.  For example, to qualify as an exempt employee under California law, the employee must be paid the equivalent of two times the state minimum wage for full-time employment.  As of January 1, 2016, with the state minimum wage at $10 per hour, the annual salary must be at least $41,600 to qualify for the California white collar exemptions.  This is less than the annual salary of $47,476 or $913 per week as set by the DOL in the Final Rule.  Therefore, in order to avoid paying overtime for work over 40 hours in a week, California employers will need to pay at the higher salary required by federal law by the December 1, 2016 deadline.

2. Understand which law – federal or California – applies to your workforce.

Again, this analysis is complex and needs to be done carefully with competent legal counsel.  Generally, the law that gives employees the most protections or benefits must be followed.  The FLSA had a much lower salary basis test in the past, so California employers generally had to comply with California law regarding exempt status because it set a higher salary basis (the equivalent of two times the state minimum wage for full-time employment, which equals $41,600 annually, or $3,466.67 per month based on $10 per hour) and a stricter duties test than federal law.  Now, California employers will likely need to focus on compliance with the higher salary required under Final Rule, which becomes effective December 1, 2016, but still must also likely comply with California’s stricter duties test.  This is territory where advice from an employment lawyer particular to the client’s situation is critical.

3. Take time to evaluate workforce and reclassify employees if needed.

Employers should use the DOL’s Final Rule changes as an opportunity to audit their workforce to determine if employee classifications need to be reclassified prior to the December 1, 2016 implementation date of the Final Rule.  While the DOL changed the salary level required to qualify as exempt, employers cannot forget to ensure that exempt employee must also meet the requirements of the duties test, which generally requires employees to perform high level managerial duties for a substantial portion of their worktime.  As mentioned above, California applies a different, stricter duties test on employers, and because this provides more protection to the employee, California employers usually have to meet the California duties test.

It would also be an ideal time when the DOL’s regulations take effect to reclassify employees as nonexempt without raising the question of why the reclassification is taking place.

4. Update timekeeping systems and policies.

The increase in the salary basis test will likely result in many employers reclassifying employees as nonexempt.  Therefore, with more employees needing to clock-in an out for their start and stop times (in addition to tracking the start and stop times for meal breaks as required under California law), employers need to ensure their timekeeping system is up-to-date and compatible with their workforce.

5. Enforce a strict policy prohibiting off-the-clock work and implement policies designed to limit the amount of overtime worked to keep costs under control.

With many more employees likely being reclassified as nonexempt, it is even more critical that employers ensure they take all appropriate steps to protect themselves from off-the-clock work claims.  Employers should have an effective timekeeping policy and train their managers about preventing off-the-clock work.  In addition, employers need to develop a policy and train managers on the correct policies to control unauthorized overtime worked.  Managing overtime costs requires effective policies and manager training to ensure all wage and hour laws are complied with.

Department of Labor issues overtime rule changes

DOL

On May 18, 2016 the Department of Labor issued long awaited changes to the Federal rules setting forth the requirements for employees to qualify as exempt under the white collar exemptions.  Exempt employees are “exempt” from some labor laws governing employees, such as overtime pay.  Exempt employees are designated as such because they are “exempt” from certain wage and hour requirements due to their duties and level of pay (more information about exempt employees can be found here).  Generally speaking, in order to qualify as an exempt employee, the employee must meet (1) a salary basis test and (2) a duties test.  If the employee does not earn a high enough level of pay, or does not perform managerial duties for a certain percentage of their work time, the employee cannot qualify as exempt, and would be entitled to overtime pay and other labor law protections.

The DOL reviewed both the salary basis test and the duties test to “update and modernize the regulations governing the exemption of executive, administrative and professional (‘EAP’) employees” from the minimum wage and overtime pay protections of the Fair Labor Standards Act (“FLSA”).  The DOL’s Final Rule issued on May 18, 2016 makes the following changes to the FLSA requirements necessary for employees to qualify as an exempt executive, administrative, or professional employee:

  1. Exempt professional employees must earn at least $913 per week, or $47,476 annually for a full-year worker.  This is an increase from the $455 per week, or $23,660 annually for a full-year employee that is currently required under federal law.
  2. The higher salary requirement is effective December 1, 2016.
  3. The salary level that must be paid to employees to meet the salary basis test under federal law will increase automatically every three years.  Therefore, the first increase from the amount set forth above will take effect on January 1, 2020.
  4. Employers may count nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the salary requirement.  The nondiscretionary bonuses and incentive payments must be paid on a quarterly or more frequent basis in order to apply.  Examples of nondiscretionary bonuses include bonuses set for meeting production levels, retention bonuses, and commissions based on a fixed formula.  Discretionary bonuses, such as bonuses provided to employees at the employer’s sole discretion and not according to predetermined standards cannot apply towards this 10 percent requirement.  Therefore, tips cannot be including when calculating the amount of salary the employee earns to meet the salary requirement pay.
  5. The Final Rule also allows employers to make “catch-up” payments to employees if they do not receive enough compensation in nondiscretionary bonuses in a given quarter to remain exempt.
  6. There is no change in the standard duties test.
  7. Set the total annual compensation requirement for highly compensated employees (HCE) subject to a minimum duties test to at least $134, 004.  The pay requirements for HCEs are effective as of December 1, 2016, and will also be reviewed and increased automatically every three years.

It is important to note for California employers that these changes apply to the FLSA, not California law.  Therefore, employers need to evaluate which law governs their situation (generally the law that provide more benefits or protections to the employee will apply, but this can be a complicated analysis, so approach with caution).  I’ll write more about how these changes will effect California employers in the coming days, as well as publish some resources for California employers to help navigate these changes.

Five interview practices every employer should know

Interview

Yes, it is that time again: Friday’s Five.  This week I address five interview practices that every California employer should know:

1.      Understand which questions employers cannot ask that may be viewed as discriminatory.

Employers cannot ask questions that relate to an applicant’s marital status, children, plans to have children, religion, age, national origin, and other protected categories.  Even questions that can be interpreted as being discriminatory towards a protected category can lead to discrimination claims, therefore employers should carefully consider the interview questions and plan questions in advance of the interviews.

2.      Develop a list of good interview questions to test how applicants think on their feet.

Some of my favorite questions:

  • Tell me something that’s true that almost nobody agrees with you on. (Peter Thiel)
  • On a scale of one to 10, how weird are you? (Tony Hsieh)

3.       No interview questions at all – use “try outs”

From Seth Godin:

There are no one-on-one-sit-in-my-office-and-let’s-talk interviews. Boom, you just saved 7 hours per interview. Instead, spend those seven hours actually doing the work. Put the person on a team and have a brainstorming session, or design a widget or make some espressos together. If you want to hire a copywriter, do some copywriting. Send back some edits and see how they’re received.

If the person is really great, hire them. For a weekend. Pay them to spend another 20 hours pushing their way through something. Get them involved with the people they’ll actually be working with and find out how it goes. Not just the outcomes, but the process. Does their behavior and insight change the game for the better? If they want to be in sales, go on a sales call with them. Not a trial run, but a real one. If they want to be a rabbi, have them give a sermon or visit a hospital.

California employers need to be careful about not having the applicant perform actual work to create something that is then sold to customers, this may qualify as compensable work that the employer would have to pay the applicant at least minimum wage for.  The DLSE Enforcement Policies and Interpretations Manual provides the following guidance on “try out” time:

Try Out Time. There may arise situations where an employer may wish to have a prospective employee exhibit skills such as typing, shorthand, or operation of machinery, before employment. The DLSE will accept such “try out time” as non- compensable if:

1. This time is not, in fact, training as opposed to testing skills;

2. there is no productivity derived from the work performed by the prospective employee, and

3. the period of time is reasonable u under the circumstances.

Each case must be reviewed on its facts. For instance, the period of time to test skills of a sewing machine operator will be much less than that needed to test the skills of a computer programmer. While no particular time frame can be given, the rate of pay for the occupation can usually be used as a guide to determine the amount of time necessary for a “try out”.

4.      Obtaining reference checks.

It is a good practice to follow-up with the applicant’s references provided.  I’m also a big proponent of conducting a search of the applicant’s background on the Internet.  For some issues that may arise when an employer uses the Internet to do a search on an applicant, my previous article on the topic can be read here.

5.      Use background checks with caution.

When conducting background checks on applicants and employees, employers need to take time to review the applicable state and federal laws that apply to background checks.  LinkedIn was sued previously for violation of the federal Fair Credit Reporting Act (FCRA) for certain background reports it generated for users of the site.  In addition, under California law, the Investigative Consumer Reporting Agencies Act and the Consumer Credit Reporting Agencies Act could apply to background checks in the employment context.  These laws are very complex, and employers should enter this area with the knowledge of their obligations before conducting background checks.  For more information about background checks, please see my previous article here.

Photo: World Relief Spokane

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