In my last post, I wrote about what steps employers should talk to comply with the new employment laws for 2015. This post discusses more generally what employers should audit on a yearly basis. And with the year coming to a close, now is a great time to review these five items:
1. Expense reimbursement and mileage policies.
Employees must be reimbursed for all out of pocket expenses incurred while performing their jobs under Labor Code Section 2802. This includes reimbursing employees for their out of pocket expenses for driving their personal vehicles for business purposes. There are a number of different methods employers may utilize in calculating and paying expense reimbursement, as I have previously written here.
While not required, the employer can utilize the IRS mileage rates established each year to pay employees for their vehicle expenses. The IRS mileage rate for 2015 has been set at 57.5 cents per mile (up from 56 cents in 2014).
2. Deductions from wages.
Generally, employer cannot make deductions from employees’ pay for ordinary business expenses or losses. For example, employers are not allowed to deduct the following items employee’s wages:
- Ordinary damage or wear and tear to equipment
- The outstanding balance owned on a loan to an employee in one “balloon payment” for the remaining balance of a loan owed to the employer
- Deductions from employee’s current pay for past payroll errors
- For returned items from customers
- Lost equipment
- Shipping fees to return items to the employer
3. Reporting time pay
California law requires an employer to pay “reporting time pay” under the applicable Wage Order, which states:
Each workday an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee's usual or scheduled day's work, the employee shall be paid for half the usual or scheduled day's work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee's regular rate of pay, which shall not be less than the minimum wage.
This issue comes up often times when the employer requires employees to attend meetings during days the employees normally have off. It is important for employers to understand this requirement and schedule employees accordingly.
4. Handbook updates
With California’s new paid sick leave requirement, it may be a good time to review your company’s handbook policies to ensure they are compliant and add a policy for the new law. We are currently reviewing a number of our client’s handbooks. It is like going to the dentist, if you wait too long to update your handbook, it will end up costing you more than if the handbook is revised at least once a year.
5. Review employees who are paid on commissions.
A) Must have written agreements with commissioned employees.
As of January 1, 2013, when an employee is paid commissions, the employer must provide a written contract setting forth the method the commissions will be computed and paid. The written agreement must be signed by both the employer and employee. Commission wages are “compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount or value thereof.” Commissions do not include (1) short-term productivity bonuses, (2) temporary, variable incentive payment that increase, but do not decrease, payment under the written contract, and (3) bonus and profit-sharing plans, unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed.
B) If the commissioned employee is non-exempt, ensure the proper overtime rate is being calculated.
If the employee is non-exempt and the employer is required to pay overtime for work longer than eight hours in one day or more than 40 hours in one week, ensure that the employee’s regular rate of pay is properly calculated for overtime purposes. The DLSE provides a good overview of how to calculate the appropriate regular rate of pay here.