Happy Friday! This Friday’s Five, I discuss five issues California employers should consider given the minimum wage increase that took effect in many Southern California cities and counties on July 1, 2017.
Happy Friday! This Friday’s Five covers five areas that employers can start with in conducting an employment practices audit. Coming up on the mid-point of the year, it is a good time to conduct an employment law practices audit to ensure that policies are compliant, managers are properly trained, and the company is maintaining the required records for the necessary length of time. Here are five areas to start with in conducting an audit and a few recommended questions for each topic:
1. Hiring Practices
- Are applications seeking appropriate information?
- For example: Be careful about local ban the box regulations.
- Are new hires provided with required policies and notices?
- Are new hires provided and acknowledge recommended policies?
- For example: meal period waivers for shifts less than six hours
- Are hiring managers trained about the correct questions to ask during the interview?
- Does the company provide new hires (and existing employees) with arbitration agreements with class action waivers?
- Are employee files maintained confidentially and for at least four years?
- Are employee time records maintained for at least four years?
- Are employee schedules maintained for at least four years?
- Do the managers have set forms for the following:
- Employee discipline and write-ups
- Documenting employee tardiness
- How is the employee documentation provided to Human Resources or the appropriate manager?
- Who is involved in reviewing disability accommodation requests?
- How are employee absences documented?
3. Wage and Hour Issues
- Does the company have its workweeks and paydays established?
- Are paydays within the applicable time limits after the pay period as required under the law?
- Are employees provided with compliant itemized wage statements?
- Are employees provided a writing setting out their accrued paid sick leave each pay period?
- Are employees properly classified as exempt or nonexempt?
- For exempt employees, review their duties and salary to ensure they meet the legal requirements to be an exempt employee.
- Any workers classified as independent contractors, and if so, could they be considered employees?
- Are nonexempt employees properly compensated for all overtime worked?
- Is off-the-clock work prohibited?
- Policy in place?
- Are managers trained about how to recognize it and what disciplinary actions to take if find employees working off-the-clock?
- Does the company’s time keeping system round employee’s time?
- If so, is the rounding policy compliant with the law?
- Are meal and rest period polices set out in handbook and employees routinely reminded of policies?
- Does the company pay “premium pay” for missed meal and rest breaks? If so, how is this documented on the employee pay stub?
- Do employees record meal breaks?
- Are managers trained on how to administer breaks and what actions to take if employees miss meal or rest breaks?
- Is vacation properly documented and tracked?
- Are all deductions from the employee’s pay check legally permitted? (use caution, very few deductions are permitted under CA law)
- Are employees reimbursed for all business expenses, such as uniforms, work equipment and miles driven for work?
4.End of Employment Issues
- Are employees leaving the company provided their final wages, including payment for all accrued and unused vacation time?
- Does the employer deduct any items from an employee’s final paycheck?
- If so, are the deductions legally permitted?
5. Anti-harassment, discrimination and retaliation
- Are supervisors provided with sexual harassment training every two years? (If employer has 50 or more employees, supervisors are legally required to have a two-hour harassment prevention training that complies with AB 1825 and amendments to this law).
- Are supervisors and managers mentioning the open-door policy of the company to employees at routine meetings with employees? Is this being documented?
Please let me know if you have any other items your company considers during review of employment policies – it would be great to update this list to share with readers. Have a great weekend.
This Friday’s Five comes on Cinco de Mayo – how appropriate. The U.S. House of Representatives passed the Working Family Flexibility Act, now it is being considered by the Senate. President Trump has indicated that he would sign the bill if it makes it to his desk. Five issues California employers need to understand surrounding comp time:
1. What does the Working Family Flexibility Act provide?
The law passed by the U.S. House of Representatives adds sections to the Fair Labor Standards Act (FLSA) by allowing employers to offer employees compensatory time instead of paying them for overtime worked. The bill provides for the following:
- Comp time is accrued at the rate of not less than one and one-half hours for each hour of overtime pay is required under the FLSA;
- Private employers that are not unionized are required to enter into a written agreement with the employee about the comp time, and the agreement must be voluntarily entered into by the employee; and
- The employee must have worked for the employer for at least 1,000 hours for the employer for a continuous period in the 12-month period before being eligible for comp time.
2. The Federal legislation will unlikely effect California employers
California law generally prohibits most employers from offering comp time in lieu of paid overtime. California law requires employers to pay overtime on a more stringent basis than the FLSA (below is a description of California’s daily overtime requirements). California’s Labor Code specifically prohibits any employee from waiving their rights to overtime under the Labor Code. See Section 1194. Therefore, because California law is more stringent and provides employees more protection than the FLSA (and the proposed Working Family Flexibility Act), California employers would still need to comply with California law even if the Working Family Flexibly Act is passed into federal law.
3. California’s unwaivable daily overtime requirements
Under California’s Labor Code, time and a half overtime is due for (1) time over eight hours in one day or (2) over 40 hours in one week or (3) the first eight hours worked on the seventh consecutive day worked in a single workweek; and double time is due for (1) time over 12 hours in one day and (2) hours worked beyond eight on the seventh consecutive day in a single workweek. The DLSE provides a good summary here.
4. California employers can offer makeup time to employees, but there are strict requirements that must be meet
California employers are not without any options however, as it is easy to forget the one form of flexibility provided to California employers: makeup time. This provision allows employers to avoid paying overtime when employees want to take off an equivalent amount of time during the same work week. There are, however, a few requirements that must be met to ensure that the employer is not required to pay overtime for the makeup time. For instance:
- An employee may work no more than 11 hours on another workday, and not more than 40 hours in the workweek to make up for the time off;
- The time missed must be made up within the same workweek;
- The employee needs to provide a signed written request to the employer for each occasion that they want to makeup time (and if employers permit makeup time, they should have a carefully drafted policy on makeup time and a system to document employee requests); and
- Employers cannot solicit or encourage employees to request makeup time, but employers may inform employees of this option.
5. Will the federal legislation influence California to provide similar flexibility to workers?
If the Working Family Flexibility Act becomes federal law, it is unlikely to influence California’s legislators to draft a similar state law. The Democrats in the U.S. House all voted against the bill, and the left is vehemently opposed to the bill, even though it provides for the payment of all comp time accrued but not used when the employee leaves employment. Such opposition from the Democrats make it unlikely to be considered in the California legislature.
Many cities and counties across California are set to increase their minimum wages in July 2017, and employers need to start preparing now. For example, Los Angeles City and County are increasing the minimum wage for employers with 26 or more employees to $12 per hour on July 1, 2017 (currently at $10.50 per hour). This Friday’s Five video covers five issues that employers should start to review in order to comply with these increases in the minimum wage.
For more information about the local minimum wages in place throughout California:
San Diego: http://www.californiaemploymentlawrep…
Southern California overview of various minimum wage requirements: http://www.californiaemploymentlawrep…
Sample model pay stub: https://www.dir.ca.gov/dlse/PayStub.pdf
Employers across the nation have been preparing to increase salary levels for managers to meet the higher salary level requirements implemented by the Department of Labor earlier this year under the Fair Labor Standards Act (FLSA). The DOL rules were set to take effect on December 1, 2016, and require that employers must pay employees that qualify to be exempt executive, administrative or professionals (referred to as the “EAP” exemption) a minimum salary level of at least $921 per week or $47,892 annually. 21 states filed a lawsuit to prevent the DOL’s rule to take effect, arguing that in raising the minimum salary level, the DOL exceeded its delegated authority from Congress. While not issuing a final ruling, the court determined that the plaintiff states have shown a likelihood of success on the merits justifying the preliminary injunction. The merits of the case and a final determination will be made at a later date.
Therefore, the court issued an injunction preventing the DOL’s overtime rules from taking effect on December 1, 2016. An issue addressed by the court was whether the injunction applied only to the 21 states involved in this case, or to all states. The court’s opinion is unambiguous that the scope of the injunction applies to all states and all employers:
A nationwide injunction is proper in this case. The Final Rule is applicable to all states. Consequently, the scope of the alleged irreparable injury extends nationwide. A nationwide injunction protects both employees and employers from being subject to different EAP exemptions based on location.
Now employers that started the process of raising salary levels for managers in order to comply with the DOL’s overtime rules must make a decision to continue with the raises or hold back on any implementation until there is further guidance from the courts. It is also likely that President-elect Trump’s administration will not look favorably on the DOL’s overtime rules. This adds further uncertainty about whether the increase in the salary level will ever go into effect once President-elect Trump takes office.
Employers also need to remember that the minimum salary requirement is only one part of the exemption test, and California employers need to ensure that they are still complying with California’s requirements.
The DOL’s change in the federal overtime rules requiring a higher salary threshold ($47,476 paid annually) for employees to qualify as an exempt employee takes effect December 1, 2016. This Friday’s Five discusses five final checklist items California employers should consider when reclassifying from exempt employees to nonexempt employees.
1. The DOL rule changes are still going into effect December 1, 2016.
This week, a few people asked me if the DOL changes are still going into effect since Donald Trump was elected as president. Mr. Trump is unable to change the DOL’s rule that requires exempt employees be paid $47,476 in an annual salary until he is inaugurated as president. Therefore, employers still must comply with this deadline.
2. Notice to Employee may be required.
Section 2810.5 of the California Labor Code requires employers provide notice to employees of their rate(s) of pay, designated pay day, the employer’s intent to claim allowances (meal or lodging allowances) as part of the minimum wage, and the basis of wage payment (whether paying by hour, shift, day, week, piece, etc.), including any applicable rates for overtime.
The law requires that the notice is provided to employees at the time of hiring or within 7 days of a change if the change is not listed on the employee’s pay stub for the following pay period. The notice must be provided in the language the employer normally uses to communicate.
Employers should carefully review the need to provide the notice to employee given any reclassification of employees from exempt to a nonexempt employee. A template Notice to Employee can be downloaded from the DIR’s website here.
3. Consider how the change will be communicated and documented with employees.
Employers should explain to employees who are being reclassified from exempt to nonexempt about how they will be paid. The notice should inform workers they will be paid overtime for work over 8 hours in a day and over 40 hours in a week. The communication should also explain any changes in bonuses (don’t forget that nondiscretionary bonuses must be figured into the employee’s regular rate of pay for overtime purposes) and benefits. Finally, the communications should set out the different duties the employee may be required to perform given the change in classification.
4. Meal and rest breaks.
In addition to communicating the change in pay to employees, the company should also distribute its meal and rest break policy. The company should distribute any meal and rest break forms to the employees who are being converted to nonexempt that are normally given to new hires.
5. Off the clock and timekeeping policies.
Finally, employers need to implement compliant timekeeping policies to ensure that all nonexempt employees clock in and out for all work time. In addition, California requires that employers record when nonexempt take their meal breaks, and any reclassified employees must understand this requirement. Employers need to be careful about allowing employees who are reclassified as nonexempt to continue to use a company cell phone or laptop, as now any work performed once they leave the office must be compensated. Employers should consider limiting nonexempt employees’ access to company cell phones, e-mail, and computers to avoid off the clock claims.
Any reclassification and audit regarding the proper classification of employees should be done with caution, as there are many different issues to consider that are outside of the scope of this article.
With attention on the DOL’s salary increase required to meet the white collar exemptions, it is important for employers to remember that this is only one-half of the test to qualify for as an exempt employee. The law also requires that the employee perform more than 50% of their time performing exempt duties. For this week’s Friday’s Five, here are five examples of duties that qualify as exempt duties for the administrative exemption (click here for a description of some of the different exemptions that exist):
1. Insurance claims adjusters
Insurance claim adjusters whose duties include activities such as interviewing insureds, witnesses and physicians; inspecting property damage; reviewing factual information to prepare damage estimates; evaluating and making recommendations regarding coverage of claims; determining liability and total value of a claim; negotiating settlements; and making recommendations regarding litigation.
2. Financial services industry employees
Employees in the financial services industry whose duties include work such as collecting and analyzing information regarding the customer’s income, assets, investments or debts; determining which financial products best meet the customer’s needs and financial circumstances; advising the customer regarding the advantages and disadvantages of different financial products; and marketing, servicing or promoting the employer’s financial products.
3. Executive assistants
An executive assistant or administrative assistant to a business owner or senior executive of a large business generally meets the duties requirements for the administrative exemption if such employee, without specific instructions or prescribed procedures, has been delegated authority regarding matters of significance.
4. Human resource managers
Human resources managers who formulate, interpret or implement employment policies and management consultants who study the operations of a business and propose changes in organization generally meet the duties requirements for the administrative exemption.
5. Purchasing agents
Purchasing agents with authority to bind the company on significant purchases generally meet the duties requirements for the administrative exemption even if they must consult with top management officials when making a purchase commitment for raw materials in excess of the contemplated plant needs.
6. (bonus) Property managers
In McKee v. CBF Corp. C.A. 5 (Tex) the court held that under the Fair Labor Standards Act (FLSA), that a “property manager” was an exempt employee under the administrative exception when her duties including overseeing the employer’s properties, ensuring they were properly maintained. She also supervised five maintenance employees, approving their schedules and vacation time. In addition, the property manager had employees reporting to her, as managers would generate a list of issues to be addressed on a daily basis. She would decide which of these issues would be handled by outside contractors and tasking her employees to individual assignments.
Employers must be careful about this analysis, as California law can differ from federal law. Therefore, experienced counsel should be consulted when conducting an audit regarding whether an employee is properly classified as an exempt employee.
This Friday’s Five is a bit of everything: news, new California employment laws, and reminders about October 1 deadlines for the City of San Diego:
1. House moves to delay DOL overtime rule implementation.
There is a great article by Lisa Jennings from Nation’s Restaurant News summarizing the House’s move to delay the overtime rule implementation, which is set to go into place on December 1, 2016. The White House has already threatened to veto the bill if it makes it to the President’s desk. For more information about the DOL overtime rules, visit my posts here.
2. San Diego employers need to ensure they are in compliance with the October 1, 2016 deadline.
The City of San Diego’s new paid sick leave law (and its “implementing ordinance”) requires employers to provide written notice to employees about the paid sick leave law by October 1, 2016 (yes – that is tomorrow). The Implementing Ordinance requires that every employer must also provide each employee at the time of hire, or by October 1, 2016, whichever is later, written notice of the employer’s legal name and any fictitious business names, address, and telephone number and the employer’s requirements under the law. The notice must also include information on how the employer satisfies the requirements of the law, including the employer’s method of earned sick leave accrual. The notice must be provided to employees in English and in each employee’s primary language, if it is a language if it is spoken by at least five percent of the employees at the employer’s workplace. Employers may provide this notice through an accessible electronic communication in lieu of a paper notice. The City published a form notice to comply with these requirements, which can be downloaded here.
3. Governor signs law making it illegal for out-of-state employers to have their disputes heard outside of California.
Governor Brown signed S.B 1241 into law that restricts employers from requiring employees who primarily reside and work in California to adjudicate claims outside of California when the claim arose in California, or deprive employees of California law with respect of claims arising in California.
Employers should carefully review their arbitration agreements with California employees to ensure that the agreement does not have a choice of law provision that applies another state’s law to the agreement or require any claims be adjudicated outside of California. The effective date for the law is January 1, 2017.
4. New CA law prohibits employers from asking about juvenile convictions.
A.B. 1843, signed into the law by Governor Brown on September 27, 2016 prohibits employers from asking or taking into consideration juvenile convictions. The law states, “employers [are prohibited] from asking an applicant for employment to disclose, or from utilizing as a factor in determining any condition of employment, information concerning or related to an arrest, detention, processing, diversion, supervision, adjudication, or court disposition that occurred while the person was subject to the process and jurisdiction of juvenile court law.”
5. NCAA and Pac-12 sued by former USC football player for unpaid wages.
An interesting class action lawsuit was filed by a former USC football player claiming that the NCAA and Pac-12 violated the Fair Labor Standards Act and California law by not paying football players minimum wage or overtime. This is a different twist to the often debated issue of whether college athletes should be allowed to accept endorsement money. It will be interesting to see how the lawsuit develops: on one side there is an argument that as the college sports programs have turned into huge profit generating centers sports, not academics could be seen as the primary focus for these athletes, but on the other hand the players are still students and many school programs do not generate huge revenues for the schools.
Welcome to Friday’s Five! Here are five video excepts from a presentation I conducted in September 2016 to a group of restaurateurs:
- exempt employee overview
- the DOL’s increase in the salary basis test and what it means for employers
- California’s minimum wage – state and local considerations
Please let me know if you have any questions or suggestions for topics you would like to see discussed. Have a great weekend.
This week’s Friday’s Five covers five misconceptions about California employment law that can land employers in a lot of hot water:
- Meal and rest breaks seem so trivial.
The topic for the uneducated (or out of state) employer does seem trivial. However, with the penalty owed to employees of one hour of pay for each missed meal or rest break (i.e., up to two hours of penalty pay per day) these violations add up to significant amounts of liability very quickly. Wal-Mart’s 2005 verdict in California for meal and rest break violations for $172 million is a good example.
- My payroll company understands the laws about wages and itemized pay statements.
Payroll companies are not law firms and they will not notify you if you are not paying your employees properly, calculating overtime correctly, or even ensure that the paystubs they generate for your employees comply with the law. It is the employer’s responsibility to ensure the employment laws are being complied with, and it is wise to have an experienced employment lawyer review these practices and audit the practices of the payroll company.
- The employee’s title determines if they are owed overtime.
An employee’s title is not determinative of whether they qualify as an exempt employee. See my previous article on the various exemptions that employees may qualify for, and the requirements necessary for employees to meet those exemptions.
- Employees can be provided “comp time” instead of paid overtime.
While it is true employers may provide employee’s comp time in lieu of overtime, there are many technical restrictions that must be met in order for comp time plans to be legal under California law. Labor Code section 204.3 only authorizes employers to provide nonexempt employees with compensated time off instead of pay for overtime if the following requirements are met:
- Payment for comp time must be at the overtime rate of pay (i.e., not less than one and one-half hours for each hour of employment, or double time if applicable)
- Must be in writing before work begins
- Employees cannot accrue more than 240 hours of compensation time off
- Employee has to make a written request for comp time in lieu of overtime
- Employee must be scheduled to work at least 40 hours a week
- Employee must be paid at rate of pay in effect at time of payment
- Payment at termination must be at high of current or three-year average rate of pay
- Employee must be permitted to use comp time within reasonable period
- Employer must keep records of comp time accrued and used
- My company is too small to be a target for employment litigation.
If you have been a reader of this blog for any time period, you understand that every employer in California needs to understand their legal duties when it comes to employing workers. And with competent employment law counsel [:)] it is not hard to comply with the law, but it is difficult to keep current with the law and ensure all legal obligations are being met.