California employers will be receiving immediate relief under the new Private Attorneys General Act (PAGA) reform law.  The California Legislature passed AB 228 and SB 92 on June 27, 2024, and Governor Newsom signed both bills into law on July 1, 2024.  Our analysis of the reform is set forth in our previous article here.  This article focuses on what steps California employers should be considering in light of the new reform law.  Because the new law applies to any PAGA cases file on or after June 19, 2024, employers should consider the following action items as soon as possible:

1. Conduct periodic payroll audits

    Employers who can show that they took reasonable steps to comply with the Labor Code, PAGA penalties can be reduced by as much as 85%.  The reformed PAGA framework caps the penalties for employers who take reasonable steps to comply with the Labor Code.  If prior to receiving a PAGA notice required under Section 2699.3 or prior to receiving a request for records under Section 226, 432, or 1198.5 from the aggrieved employee or their counsel, the employer takes reasonable steps to be in compliance, the penalty is limited to no more than 15% of the applicable penalty. To establish reasonable steps were taken to comply with wage and hour laws, California employers will need to conduct periodic wage and hour audits to ensure compliance with at least the following:

    • meal and rest break obligations
    • prohibiting off the clock work was being performed
    • correct recording and payment of overtime for all work over 8 hours in a day and 40 hours in a week
    • reimbursement for all work-related expenses to employees
    • all pay stubs provided to employees comply with the required information under Labor Code section 226

    Quarterly audits by an experienced employment law counsel would be a good practice in order to be able to show good faith compliance with the Labor Code. 

    2. Establish compliant policies and handbook policies

    Employers will need to ensure that their wage and hour policies and employee handbooks are current, and continually update them to ensure they follow California law.

    3. Train supervisors on Labor Code compliance

    Training supervisors about the requirements under the Labor Code regarding time keeping, policies prohibiting working off the clock, meal and rest break obligations, among other items will also be evidence of reasonable steps to comply with wage and hour requirements.  The training should be documented, and the employer should record the topics covered, who attended, and date of the training.

    4. Take appropriate corrective actions with supervisors who violate company policy

    In addition to training supervisors on company policies and the Labor Code obligations, employers need to monitor and take corrective action with any supervisors who violate company policy or who violate the Labor Code.  Again, documenting the action taking against supervisors or managers who violate company policy will be evidence of this obligation. 

    5. Implement arbitration agreements with class action waivers

    While the California Supreme Court has ruled that employees cannot waive their right to bring a PAGA representative action through arbitration agreements, arbitration agreements that bar employees from bringing a class action lawsuit are enforceable.  The U.S. Supreme Court has determined that employers can require employees to waive their right to bring class action lawsuits, which remains a significant advantage for employers. Implementing an arbitration agreement with a class action waiver offers substantial benefits for most employers, even though employees can still pursue a PAGA representative action.  Especially given the new reform to PAGA, employers should carefully consider implementing arbitration agreements with class action waivers. 

    Employers need to work with employment counsel in developing enforceable arbitration agreements, consider translating the agreements into common languages spoken at their workplace, and ensure the agreements are stored in a secure and easy to access file system or stored electronically. 

    Expense reimbursement may seem like a small issue in comparison with the other areas of liability facing California employers, but the exposure for not appropriately reimbursing employees can be substantial. In Gattuso v. Harte-Hanks Shoppers, Inc., the California Supreme Court clarified the parameters of mileage reimbursement under California law, as well as the three different methods available for employers to reimburse employees for their mileage reimbursement.  This Friday’s Five post discusses five issues employers need to know about automobile and mileage reimbursement under California law.

    1. Mileage reimbursement based on IRS mileage rate is presumed to reimburse employee for all actual expenses

    The IRS publishes standard mileage rates each year (and sometimes adjusts these rates during the year). The 2024 IRS mileage rate is as follows:

    • 67 cents per mile driven for business use, up 1.5 cents from 2023.
    • 21 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, a decrease of 1 cent from 2023.
    • 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2023.

    2. Mileage reimbursement rates do not necessarily have to be set at the IRS rate, but use caution

    The California Supreme Court held that the reimbursement rate can be negotiated by parties as long as it fully reimburses the employee, and the amount does not have to be set at the IRS mileage rate. The Court also warned that employee cannot waive the right to be fully reimbursed for their actual expenses:

    We agree that, as with other terms and conditions of employment, a mileage rate for automobile expense reimbursement may be a subject of negotiation and agreement between employer and employee. Under section 2804, however, any agreement made by the employee is null and void insofar as it waives the employee’s rights to full expense reimbursement under [Labor Code] section 2802.

    Gattuso, at 479.

    3. Employees who challenge a mileage reimbursement amount set by the employer bear the burden in establishing their actual costs

    If the employee challenges a predetermined amount set by the employer and agreed to by the employee, but then challenges the amount set later on, the employee bears the burden to show how the “amount that the employer has paid is less than the actual expenses that the employee has necessarily incurred for work-required automobile use (as calculated using the actual expense method), the employer must make up the difference.” Gattuso, at 479.

    4. There are different methods employers can use to reimburse mileage

    The Count in Gattuso explained that there are three different methods employers may use to reimburse employees mileage:

    Actual expense method

    In examining the different methods of reimbursement, the Supreme Court held that the actual expense method is the most accurate, but it is also the most burdensome for both the employer and the employee. Gattuso, at 478. Under the actual expense method, the parties calculate the automobile expenses that the employee actually and necessarily incurred and then the employer separately pays the employee that amount. The actual expenses of using an employee’s personal automobile for business purposes include: fuel, maintenance, repairs, insurance, registration, and depreciation.

    Mileage reimbursement method

    The Court recognized that employers may simplify calculating the amount owed to an employee by paying an amount based on a “total mileage driven.” Gattuso, at 479.

    Under the mileage reimbursement method, the employee only needs to keep a record of the number of miles driven for job duties. The employer then multiplies the miles driven by a predetermined amount that approximates the per-mile cost of owning and operating an automobile. The Court recognized that the mileage rate agreed to between the employer and employee is “merely an approximation of actual expenses” and is less accurate than the actual expense method. It is important to note that while this amount can be negotiated, the employee still is unable to waive their right to reimbursement of their actual costs as mentioned above.

    Lump sum payment method

    Under the lump sum method, the employee need not submit any information to the employer about work-required miles driven or automobile expenses incurred. The employer merely pays an agreed fixed amount for automobile expense reimbursement. Gattuso, at 480. This type of lump sum payment is often labeled as a per diem, car allowance, or gas stipend.

    In Gattuso, the Court made it clear that employers paying a lump sum amount have the extra burden of separately identifying and documenting the amounts that represent payment for labor performed and the amounts that represent reimbursement for business expenses.

    5. Don’t forget about other expenses incurred in the “course and scope” of working

    In addition to mileage, employers may also have to reimburse employees for other costs they incurred in driving their personal cars for business under Labor Code section 2802. In making the determination about whether an employee’s actions are in the “course and scope” of their job, courts examine whether the expense being sought by the employee is “not so unusual or startling that it would seem unfair to include loss or expense among other costs of the employer’s business.” Employers need to be mindful about reimbursing employees for cell phone use, printing and office supplies (if employee is required to maintain a home office or use personal printer for work), and other work-related expenses.

    I have published this post since 2015 recognizing the Fourth of July (one of my favorite holidays).  Hopefully I’ll be able to keep publishing it for many years to come.  Wishing you a great Fourth, and hope you have some time to put aside your work for a bit and enjoy some time with your family.  Happy Fourth of July!

    Five things I’m thankful for this Fourth of July:

    1.     For the great risk and sacrifice our Founding Fathers took to establish the country. 

    When learning about the Founding Fathers in high school history class I did not have a perspective about the risks the Founders took in establishing the country.  Only now that I have a business, a family, and am relatively successful, can I realize the huge risks the Founders took.  By all means, they were the establishment, the elite of the American society, and if anyone had an interest in preserving the status quo, it was them.  Their sacrifices of life (theirs and their family members) and their fortunes helped build the foundation we benefit from today.

    2.     The ability to speak freely and practice (or not practice) any religion I want.

    It is great being able to freely speak your mind and believe in whatever you want.  It is also great be free to practice (or not) any religion you want.  We live in a very tolerant society, and it is even better when the government is not telling you how to live your life.  It is important to remember that throughout history, this is the exception for how a government normally behaves.

    3.     Our Country’s ability to attract creative people.

    Creative and productive people want to practice their trade where the government will basically leave them alone and provide a good environment to protect their gains derived from their hard effort (see item #5 below).  The U.S. provides this environment, and that is why so many people come to the U.S. to create a business or to practice their trade.  It is also important to recognize how lucky we are to be in the U.S.

    4.     My right to practice any profession and access unlimited resources to learn required skills.

    No one is dictating what students need to be after they graduate high school or college.  Everyone is free to pursue their interest, and the market decides the value of the effort.  With basically any information freely available on the Internet, anyone can learn almost any skill, and like no other time in human history individuals have an almost free method to sell their services or products over the Internet.  In your mid-40’s and want to make a career change?  Perfect, and you don’t even need to go back to school as the information is freely available on the Internet.  Didn’t finish college and are 20 years old with an idea?  Perfect.  Venture capitalists don’t care about your pedigree, they are only interested if you work hard and don’t give up.

    5.     Our legal system.

    Yes, it sounds trite.  But while I don’t think our legal system is perfect by any means, it is the best system established in the history of mankind.  Everyone living in the U.S. presently is very lucky to have this benefit.  It is a foundation for many of the items I mentioned above.  Because people have a good basis for predicting the outcomes of their actions, such as being able to retain property legally obtained, and knowing if someone breaches a contract there will be repercussions, it creates an environment that attracts hard effort and the best talent from around the world.  This is why the U.S. has been the leader in ideas and new businesses.  However, just because the system is established does not mean our work is done.  We have to be vigilant not to lose the fairness, reasonableness, and lack of corruption in the legal system.

    Happy Fourth of July!

    [Update: The California Legislature passed AB 228 and SB 92 on June 27, 2024, and Governor Newsom signed both bills into law on July 1, 2024.]

    The potential new law reforming the Private Attorneys General Act (PAGA) is set to bring significant changes to California’s labor landscape. If enacted, AB 2288 and SB 92 will apply to civil actions brought on or after June 19, 2024, introducing stringent standing requirements for plaintiffs and reducing penalties for employers demonstrating compliance with the Labor Code. This reform aims to curb frivolous lawsuits and provide more reasonable penalty structures. Key provisions include specific penalty amounts based on the nature of violations, caps on penalties for employers who take proactive compliance measures, and options for early resolution of claims. The proposed bill also emphasizes judicial discretion in managing cases and offers relief for employers who pay on a weekly basis. As the legislative process unfolds, Zaller Law Group will keep you informed on the bill’s progress and its implications for both employers and employees.

    The new law modifying PAGA would apply to civil actions brought on or after June 19, 2024. 

    If passed by the legislature and signed into law by the Governor, the new law would only apply to PAGA cases filed on or after June 19, 2024. 

    New stringent standing requirement.

    Under the proposed bill to reform PAGA, in order to bring a lawsuit against an employer under PAGA, the plaintiff is required to have “personally suffered each of the violations alleged” within the applicable statute of limitations, which is one year.  This is a major limitation, as plaintiffs were permitted to bring PAGA cases on behalf of all employees for violations that the plaintiff did not suffer for violations dating back further than one year. 

    Reduction of PAGA penalties.

    The proposed bill also sets forth specific penalties available to plaintiffs, and reduces penalties for employers who show that they have taken reasonable steps to comply with the Labor Code (thereby reducing frivolous lawsuits for technical wage and hour violations):

    • $25 for each aggrieved employee per pay period for violation of Labor Code Section 226 (wage statements).  If the alleged violation is under paragraph 8 of Section 226 regarding the name and address of the employer, the penalty is $25 only “if the employee would not be confused or mislead about the correct identify of their employer…”
    • $50 for each aggrieved employee per pay period if the alleged violation resulted from an “isolated, nonrecurring event that did not extend beyond the lesser of 30 consecutive days or four consecutive pay periods.” 
    • $200 for each aggrieved employee per pay period if (1) the agency or court issued a finding or determination to the employer that its policy or practice was unlawful or (2) the court finds that the employer’s conduct was “malicious, fraudulent, or oppressive.” 

    Cap on penalties for employers taking reasonable steps:

    The proposed bill also sets forth a framework to cap the penalties for employers who take reasonable steps to comply with the Labor Code.  If prior to receiving a PAGA notice required under Section 2699.3 or prior to receiving a request for records under Section 226, 432, or 1198.5 from the aggrieved employee or their counsel, the employer takes reasonable steps to be in compliance, the penalty is limited to no more than 15% of the applicable penalty.

    Reasonable steps include conducting period payroll audits and taking action in response to those audits, having compliant policies, training supervisors on Labor Code compliance and appropriate corrective action with regard to supervisors. 

    If within 60 days of receiving the notice of violation required by Section 2699.3, the employer takes all reasonable steps to prospectively be in compliance with all alleged violations in the notice, the civil penalty that may be recovered is capped at no more than 30% of the applicable penalty. 

    The proposed bill also clarifies that courts have the discretion to reduce penalties. 

    Prohibit stacking of derivative penalties:

    The proposed bill also provides that an aggrieved employee can only recover one penalty for an underlying wage violation.  For example, an employee alleging that they were not paid all of their wages would be limited to one penalty, and would not be entitled to stack on additional penalties that this one violation would have created under Labor Code Section 201 (timing of payment of wages), 202 (waiting time penalties for late payment of wages), 203 (waiting time penalties for unpaid wages for employees who are terminated or quit), 204 (timing requirements for payment of wages), and 226 (wage statements).

    The proposed bill also sets forth that the civil penalties recovered by aggrieved employees shall be distributed as follows: 65% to the Labor and Workforce Development Agency and 35% to the aggrieved employees. 

    Provides for judicial discretion for trial management.

    The proposed bill also provides powers to courts to limit both the scope of claims and the evidence presented at trial. This provision gives judges the discretion to manage cases more effectively.

    Provides relief for employers who pay weekly.

    The proposed bill also reduces penalties by one-half for employers who pay weekly, rather than biweekly or semimonthly.  Because PAGA penalties are based on pay periods, employers who pay weekly effectively exposed to double the applicable penalties that could be assessed against them, i.e., weekly (52 pay periods) vs. semi-monthly (24 pay periods) or bi-weekly (26 pay periods).  If passed, the bill will rectify this issue for employers who pay weekly. 

    New options for small and large employers to cure alleged violations early in the litigation process.

    The proposed bill establishes a new Early Evaluation Conference that would be available to employers starting October 1, 2024, to resolve PAGA claims early in the litigation process:

    Employers with under 100 employees:

    For small employers, defined as those with fewer than 100 employees during the applicable period, there is an option to address alleged violations by notifying the Labor and Workforce Development Agency (LWDA) with a confidential proposal to cure the alleged violations. Upon notification, the LWDA may decide that the actions to cure were sufficient, or it can organize a settlement conference involving the plaintiff and the employer. The conference with the parties would determine whether the proposed cure is sufficient, what additional information may be necessary to evaluate the sufficiency of the cure, and the deadline agreed upon by the parties for the employer to complete the cure.  If the LWDA determines that the alleged violation has been cured, the aggrieved employee may not proceed with a civil action.

    Employers with 100 or more employees:

    Large employers, those with more than 100 employees, have a different process. They may request a stay and Early Evaluation Conference from the trial court. This request pauses all discovery and responsive pleading deadlines. A neutral evaluator would then review the employer’s plan for addressing the violations, supervise compliance with this plan, and assess the employer’s efforts to mitigate potential penalties. Additionally, employers can file a motion for the court to approve their cure plan, even if the plaintiffs or the neutral evaluator believe the efforts have been insufficient.

    Zaller Law Group will continue to monitor and provide updates as the proposed bill makes its way through the Legislature this week, as it must be finalized by June 27, 2024. 

    On June 18, 2024, Governor Newsom announced a compromise to reform California’s Private Attorneys General Act (PAGA). This announcement follows intense negotiations prompted by a looming ballot measure to repeal PAGA this November. With PAGA cases skyrocketing and average settlements reaching $1.1 million, this reform package introduces crucial changes for California employers. Attorneys Anne McWilliams and Yaron Tilles join me to discuss how this will be impacting employers across the state:

    The reform will likely address the following items (as discussed in the video above):

    1. Employee share of the PAGA penalty
    2. The standing requirements for employees to bring PAGA cases
    3. Caps on the amounts of penalties that employees can recover under PAGA cases
    4. Employers right to cure defects to reduce or eliminate potential penalties
    5. Providing trial courts with discretion to manage PAGA claims during trial

    As of Friday, June 21, 2024, the text of the bill to reform PAGA has not been released yet. It is expected to be published as early as late on June 21 or over the weekend. Stay tuned for our analysis of the text of the bill once that becomes available.

    On June 18, 2024, Governor Newsom announced that a compromise had been reached to reform California’s Private Attorneys General Act (PAGA).  The negotiations were brought about by a ballot measure to repeal PAGA this November. PAGA cases have been increasing astronomically against California employers, exposing them to huge penalties, and on average PAGA cases settle for $1.1 million.  This reform package introduces several key elements that impact employees and employers alike, focusing on penalties, standing requirements, employer rights to cure, and strengthening enforcement mechanisms. While many details are still yet to be disclosed, here are a few core elements of this reform package and understanding of what they mean for both sides of the employment equation.

    Standing Requirements

    The reform package introduces more stringent standing requirements for employees (plaintiffs) bringing claims. Under the reform, an employee must have personally experienced the alleged violations to file a claim. Additionally, these alleged violations must have occurred within the past year. This is a significant change from the previous framework, where there was no time limitation. This measure aims to prevent frivolous claims and ensure that only current and directly impacted employees can pursue legal action.

    Penalty Adjustments

    The new reforms also introduce several changes to the penalty structure:

    • Caps on Penalties: Employers who proactively comply with the Labor Code before receiving a notice will face a maximum penalty of 15% of the full potential penalty amount. For those who take corrective steps after receiving a notice, the cap is set at 30%.
    • Reduction for Minor Violations: The maximum penalty is reduced for minor infractions, such as brief violations or wage statement errors that did not cause confusion or economic harm (e.g., omission of employer’s full corporate name on the employees’ pay stubs).
    • Equity for Employers Paying Weekly: The reform addresses the issue where employers who pay weekly were penalized more heavily since the PAGA penalties were calculated on a per pay period basis. Now, penalties will be adjusted to ensure fairness with employers who pay on other methods other than weekly. 
    • New Penalty for Malicious Acts: A new penalty of $200 per pay period will apply for employers who act maliciously, fraudulently, or oppressively.
    • Addresses Stacking of Penalties for Derivative Claims: The reform will also address a plaintiff’s ability to stack multiple penalties for labor code violations that occurred because of one violation. 

    Employer Right to Cure

    The reform package expands the Labor Code sections that employers can cure to reduce or eliminate potential penalties altogether. 

    Strengthening Enforcement Agency

    The package also sets out to expedite hiring and filling vacancies within the California Department of Industrial Relations (DIR), thereby improving and expediting the enforcement process. Strengthening the enforcement agency is crucial for ensuring that labor laws are upheld efficiently and effectively.

    Employee Share of Penalty

    The reform package also increases the share of penalties employees receive from labor law violations. Previously, employees were entitled to 25% of any penalty awarded, and the state of California would receive the other 75%. With the new reform, this share has been increased to 35% to the employees. 

    Judicial Discretion (Manageability)

    The reform also provides powers to courts to limit both the scope of claims and the evidence presented at trial. This provision gives judges the discretion to manage cases more effectively.

    Injunctive Relief

    Finally, the reform package allows for injunctive relief, providing courts with the power to issue orders that prevent ongoing violations.

    The reform still must be drafted into a bill, passed by the legislature, and signed by the Governor by June 27.  It is expected that this will be accomplished given the support behind this PAGA reform deal.  If this deadline is met, the ballot measure to repeal PAGA will be taken off of the November 2024 ballot.  We will continue to monitor any developments on the PAGA reform deal, be sure to subscribe for any updates. 

    By July 1, 2024, California employers will be required to implement specific measures for workplace safety. This legislation compels most non-health care related businesses to review and develop certain workplace violence measures by mandating the creation, execution, ongoing maintenance, and employee training of a Workplace Violence Prevention Plan (WVPP). Below, we outline five issues California employers need to understand in meeting these requirements by the July 1 deadline:

    1. Determine if your business is a covered employer that must develop a WVPP.

    The new requirements under the new law apply to all employers, employees, places of employment, and employer-provided housing, except for the following:

    1. Employees teleworking from a location of the employee’s choice, which is not under the control of the employer.
    2. Places of employment where there are less than 10 employees working at the place at any given time and that are not accessible to the public, if the places are in compliance with Section 3203 of Title 8 of the California Code of Regulations.
    3. Health care facilities, service categories, and operations covered by Section 3342 of Title 8 of the California Code of Regulations.
    4. Employers that comply with Section 3342 of Title 8 of the California Code of Regulations in the health care setting.
    5. Facilities operated by the Department of Corrections and Rehabilitation, if the facilities are in compliance with Section 3203 of Title 8 of the California Code of Regulations.
    6. Employers that are law enforcement agencies that are a “department or participating department,” as defined in the California Code of Regulations and meet other requirements.

    The exceptions are vary limited, and most employers in California will need to take steps to comply with the requirements by July 1, 2024.

    2. Prepare a written plan by July 1, 2024.

    For covered employers under the law, an essential first step in violence prevention is conducting comprehensive risk assessments to identify potential hazards that could lead to workplace violence. Factors such as working conditions, the nature of the employment, and interactions with the public can all contribute to risk. Employers need to evaluate these factors to develop targeted prevention strategies.

    Covered employers must craft a detailed WVPP that outlines the responsibilities of all parties involved, incorporates employee and representative involvement, and establishes clear protocols for handling and responding to incidents of workplace violence. This plan should include procedures for emergency responses, effective training programs, and methods for identifying, evaluating, and mitigating violence hazards.

    Cal/OSHA published a model written Workplace Violence Prevention Plan for General Industry (Non-Health Care settings), which is available as a resource guide for employers.  Employers may download the model form as a Word document here. 

    3. Conduct employee training about the plan by July 1, 2024.

    Employers are required to train the employees by July 1, 2024, and annually thereafter.  Employers may prepare and conduct the required training on their own, and there is not a required length of time for the training (as opposed to the 1 hour or 2-hour training requirements for sexual harassment prevention training).  However, the regulations do set out some parameters for the training.  For example, the training material must be appropriate in content and vocabulary to the educational level, literacy, and language of employees

    The training needs to cover all of the following topics:

    (A) The employer’s plan, how to obtain a copy of the employer’s plan at no cost, and how to participate in development and implementation of the employer’s plan.

    (B) The definitions and requirements of this section.

    (C) How to report workplace violence incidents or concerns to the employer or law enforcement without fear of reprisal.

    (D) Workplace violence hazards specific to the employees’ jobs, the corrective measures the employer has implemented, how to seek assistance to prevent or respond to violence, and strategies to avoid physical harm.

    (E) The violent incident log required and how to obtain copies of records.

    (F) An opportunity for interactive questions and answers with a person knowledgeable about the employer’s plan.

    Cal/OSHA requires additional training when a new or previously unrecognized workplace violence hazard has been identified and when changes are made to the plan. The additional training may be limited to addressing the new workplace violence hazard or changes to the plan.

    Employers may consider implementing this training at the end of the sexual harassment prevention training for new employees.  However, remember that the violence prevention plan training must be done each year, and the sexual harassment prevention training is only once every two years, so employers will still need to conduct standalone violence prevention plan trainings each year. 

    4. Review Cal/OSHA’s FAQs and other resources to stay informed.

    Cal/OSHA’s FAQs on the WVPP are published here.  Employers should review the FAQs, and revisit them regularly to learn about any updates or additional clarifications made by Cal/OSHA. 

    5. Maintain and review compliance records.

    Compliance with the new legislation includes thorough documentation and record-keeping related to the WVPP. Employers must keep detailed records of all violence prevention efforts, including hazard identification and mitigation, training sessions, incident responses, and investigations. Examples of incident logs are included in the model Workplace Violence Prevention Plan published by Cal-OSHA.  Violent incident logs are required to be kept by the employer for five years. 

    HR often gets sidelined in executive suite meetings, but its role is far too important to be overlooked. Effective HR departments and leaders who connect with employees and help them develop create more profitable organizations with reduced litigation costs. Here are five compelling reasons why HR should play a more critical role in your company:

    1. The Personal Touch Matters

    Regardless of your title—CEO, CFO, HR, or even corporate pilot—having a personal touch is crucial. Just think of the connection that you would have if you were able to meet your sports hero as a kid. Not even a very long interaction, but maybe just a high five and a few words would endear you to the athlete for the rest of your life. One-on-ones, lunches, and really getting to know co-workers has a similar effect in the workplace. This kind of personal engagement can differentiate top performers and foster loyalty and support. In the business context, personal connections with employees can significantly enhance workplace culture and morale.

    2. Authenticity in Engagement

    Personal touch cannot be faked. Employees can easily discern genuine engagement from obligatory interactions. If an organization tries to feign interest in its employees, it risks being seen as hypocritical. Authentic relationships and genuine concern for employee well-being are essential. Pretending to care is worse than not engaging at all, as it can damage trust and credibility.

    3. Reduced Litigation Through Fair Treatment

    Treating employees with fairness and respect can reduce litigation costs. While being harsh or disrespectful to employees isn’t illegal, it often leads to disgruntled employees seeking retaliation through lawsuits, whether meritorious or not. High turnover and dissatisfaction can escalate employment litigation. A respectful and supportive HR approach can mitigate these risks by fostering a positive work environment.

    4. Reduced Turnover = Reduced Litigation

    It goes without saying, a higher employee retention rate reduces litigation. From a purely numerical perspective, reducing employee turnover decreases litigation exposure. Moreover, high turnover is a red flag that companies and HR departments must constantly monitor. When there is an uptick in turnover, an immediate review is necessary to identify potential causes. Employee turnover can be due to external factors beyond the company’s control. However, if a problematic employee or a toxic culture exists within the company, it will likely lead to more litigation.

    A-players who create discord can be detrimental to the organization. Employees who are disruptive, regardless of their skill level, can lower overall morale and productivity. Organizations that foster a respectful and collaborative work environment where all employees feel valued and supported will see better overall performance, higher retention rates, and reduced litigation.

    5. HR’s Role Beyond Paperwork and Birthdays

    HR should be more than just the department that handles paperwork and enforces policies. Administrative tasks like new hire paperwork and policy compliance can be delegated to other departments. HR’s focus should be on employee development and satisfaction, and providing a place for employees to be heard. By prioritizing relationships and engagement over administrative duties, HR can significantly contribute to a positive company culture and employee retention.

    As workplace technology increases, direct personal contact becomes even more critical. Creating a genuine culture goes beyond perks like unlimited vacation or ping pong tables. It requires meaningful engagement and a dedicated HR department that prioritizes employee well-being and development. It’s time for HR to take on a more critical and central role in your company’s success.

    As we discussed last week, makeup time provides flexibility for California employers and employees to offset time taken off within the same workweek without incurring overtime obligations. Additionally, the California Labor Code permits the use of compensatory time, commonly known as “comp time.” However, the federal Fair Labor Standards Act (FLSA) imposes significant limitations on how California employers can implement comp time. Here are five key issues that California employers need to understand about comp time:

    1. Definition and Purpose of Comp Time

    Compensatory time off, often referred to as “comp time,” allows employees to take time off instead of receiving overtime pay. This concept is frequently used to address the needs of both employers and employees. However, many California employers implement comp time without fully understanding the applicable rules and regulations.

    2. Legal Framework in California

    In California, the rules governing comp time are detailed in Labor Code section 204.3. According to this code:

    • Comp time must be provided at the same rate as the overtime rate, typically one and one-half hours per hour of overtime worked.
    • There must be a written agreement between the employer and the employee before the overtime work is performed.
    • Employees must request comp time in writing.
    • Employees must be regularly scheduled to work at least 40 hours per week and cannot accrue more than 240 hours of comp time.
    • Upon termination, any unused comp time must be paid out at the employee’s final regular rate of pay or the average rate over the last three years, whichever is higher.

    3. Use and Accrual Limits

    Under California law, employees can request to use their accrued comp time within a reasonable period after making the request. Additionally, employees can ask for their accrued comp time to be paid in cash if it has been accrued for at least two pay periods. However, certain industries governed by specific Industrial Welfare Commission Orders are exempt from these provisions.

    4. Federal Law Prohibits Comp Time by Private Employers

    While California’s Labor Code section 204.3 sounds promising for employers, Federal law, specifically 29 U.S.C. §207(o), influences how comp time can be used. This federal regulation only applies to state and local government employees, not to private employers. Therefore, California employers must be cautious when using comp time to avoid violating federal laws, which mandate overtime pay for hours worked over 40 in a week.

    5. Practical Implications

    While comp time may seem like a useful tool for managing overtime, the overlap of state and federal laws can complicate its implementation. For most California employers, comp time must be taken within the same workweek it is earned (and comply with the other parameters set forth above) to comply with federal overtime requirements. Failure to do so can result in legal issues, making it essential for employers to understand both state and federal regulations thoroughly before offering comp time to employees.

    As difficult as it is to comply with California’s daily overtime rules, it is easy to forget the one form of flexibility provided to employers — make-up 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. This Friday’s Five covers what make-up time is, and the general requirements for it to apply under the California Labor Code.

    What is make-up time?

    Make-time time can offer employees and employers some flexibility in scheduling.  For example, it offers employees the ability to take time off work without having to use their paid time off (PTO), sick leave, or vacation time.

    For example, take an employee who is scheduled to work from 8 a.m. to 5 p.m. five days a week, leaves work 1 hour early on Wednesday in order to pick up his child from school. On Thursday, the employee asks if he can work until 6 p.m. to make up the missed time on Wednesday.  If the employer agrees to this, the employee can work the 9 hours on Wednesday, and the employer would not be required to pay overtime for this hour of work. 

    California Labor Code section 513 set forth the requirements of how and when make-up time can be used.  Make-up time is different than comp time, which we will cover in a different article soon.

    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:

    Requirement #1: An employee may work no more than 11 hours on another workday, an not more than 40 hours in the workweek to make up for the time off;

    Requirement #2: The time missed must be made up within the same workweek;

    Requirement #3: 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

    Requirement #4: Employers cannot solicit or encourage employees to request makeup time, but employers may inform employees of this option.

    Remember, 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.