Are you tired of employmSacramentoent lawyers’ obnoxious headlines asking if you are sick over California’s paid sick leave law yet?  I’ll spare you the play on words and get to some of the major amendments to California’s paid sick leave law, which took effect immediately upon the Governor’s signature of AB 304 on July 13, 2015.  Therefore, the amendments apply to employers going forward.  For today’s Friday’s Five, here is a summary of five of the major amendments employers should note:

1.      Employers may now use a different accrual method other than one hour of paid sick leave for every 30 hours worked.

In order to simplify the math for employers, the law was amended to provide that an employer may use an alternative accrual method as long as it is (1) on a regular basis, and (2) the employee has no less than 24 hours or three days paid sick leave or paid time off by the 120th calendar day of employment, or each calendar year, or in each 12-month period.

2.      If an employer pays out accrued paid time off to an employee at time of termination, the employer does not have to reinstate the previously accrued and unused paid sick days.

The law requires that if an employee separates from employment, but is rehired within one year, the previously accrued and unused paid sick leave must be reinstated.  This amendment clarifies that if the employer pays the accrued but unused sick leave out at the time of separation (which is not required under the sick leave law), then the employee is not entitled to reinstatement of the paid sick leave that was already paid out to them earlier.

3.      If an employer provides unlimited paid sick leave or unlimited paid time off to an employee, the employer meets its reporting requirements on the employee’s pay stub by indicating “unlimited” on the wage statement. 

4.      Employers have different options for calculating the amount of pay owed to employees while taking sick leave.

The amendment clarifies that the employer can use any of the following calculations when determining how much to pay employees while on paid sick leave:

a) For non-exempt employees, the regular rate of pay can be calculated in the same manner as the regular rate of pay for overtime purposes in the workweek.  This is a new option for employers provided under the amendment.

b) For non-exempt employees, the regular rate of pay can be calculated by dividing the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment.  This method was permitted for employers to use under the original law.

c) For exempt employees, employers can calculate paid sick leave in the same manner as the employer calculates wages for other forms of paid leave time.

5.      Employers are not required to inquire into or record the purpose of why the employee uses paid leave.

Employers have many other record keeping requirements under the new law, but now it is clear that they are not required to maintain the reasons why employees used the sick leave.  The original requirement created under the paid sick leave law, and unchanged by these amendments, requires employers to document and keep records of the hours worked and paid sick days accrued and used by an employee for at least three years. Employees (as well as the Labor Commissioner) have the right to access these records. Failure to keep the required records creates a presumption against the employer that the employee is entitled to the maximum number of hours provided for under the law.

Photo: Franco Folini

1)      Gratuities

All tips are the empMoney close uployee’s property, and cannot be taken by the employer.  Labor Code section 350 states unequivocally that “Every gratuity is hereby declared to be the sole property of the employee or employees for whom it was paid, given or left for.” In addition, Labor Code section 351 clearly states that “[n]o employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer.”  For more information about gratuities, click here.

2)      Costs of photographs

Labor Code section 401 prohibits the employer from requiring employees to submit a photograph from an applicant or an employee without paying for the cost of the photograph.

3)      Cost of uniforms

Employers are required to pay for the costs of uniforms.  Now, what qualifies as a uniform?  That’s a more difficult question.

4)      Business expenses

Labor Code section 2802 prohibits employers from passing on the costs of running a business to an employee.  Therefore, an employer must reimburse its employees for any costs incurred by the employee that is in direct consequence of the employee’s work.  The primary example of this requirement is that employers must reimburse employees for mileage driven in their personal cars for work errands.

5)      Cost for medical or physical exams

If an employer requires an employee or applicant to undergo a medical or physical examination as a condition of employment, the employer must pay for the exam as required by Labor Code section 222.5.

Photo: Kevin Dooley

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

WhFourth of Julyen 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 that the Founders took.  By all means, they were the establishment, the elite of the American society, if anyone had an interest in preserving the status quo it was them.  It is great that 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 say what you want to say freely and believe in whatever you want.  It is also great be free to practice or not practice 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 has been the exception for how a government normally behaves.

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

People that like creating things and being productive want to practice their trade where the government will basically leave them alone and provide a good environment to protect their gains 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 note that if you were lucky enough to be born in the U.S., it is a great reason to remain in the U.S.

4.     My right to practice any profession I want and unlimited resources to learn the 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 have an open almost free way to sell your 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 basically 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 it 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.  I have to go start the grill.

Photo: Kim Seng

July 1 is here – the deadline for California employers to begin offering up to three days or 24 hours of paid sick leave.  Here is a short three-minute video from a recent presentation I conducted discussing some common questions about California’s Paid Sick Leave law:

  • Do employees receive 24 hours or 3 days of paid time off?
  • Can employers require a doctor’s note in order for employee to receive paid time off?
  • What anti-retaliation provisions exist in the law and how should employers be careful not to violate them?

Another short five-minute video providing a general overview of California’s paid sick leave law can be viewed here.

I’ll be posting some short clips of a recent presentation I conducted on complying with California’s paid sick leave law.  In this first video, I discuss some general rules California employers need to consider to comply with the July 1, 2015 deadline to offer paid sick leave to employees.  Topics include:

  • how to calculate pay rates for employees with fluctuating pay
  • impact of services charges on the employee’s regular rate of pay
  • the 90 day waiting period before employees can use the paid leave
  • required notices employers must use
  • key deadlines to comply with the law

Please subscribe to the California Employment Law Report Youtube channel here.

Businesses that have employees on standby waiting to be called for work must review whether this on-call time needs to be paid time.  It is a vOn Call Timeery fact intensive inquiry, that employers must ensure they get correct.  Any mistake in not paying employees for compensable on-call time can result in potential exposure for overtime, minimum wage, and additional penalties.  Here is a list of five items employers should understand about on-call time under California law.

1.      Courts generally look to the extent of control over employee in determining whether on-call time is compensable. 

In Mendiola v. CPS Security Solutions, the California Supreme Court held that, “[i]t is well established that an employee’s on-call or standby time may require compensation.”  The Court, quoted Armour & Co. v. Wantock, a seminal case on this issue, for the proposition employee on-call time may have to be paid:

Of course an employer, if he chooses, may hire a man to do nothing, or to do nothing but wait for something to happen. Refraining from other activity often is a factor of instant readiness to serve, and idleness plays a part in all employments in a stand-by capacity. Readiness to serve may be hired, quite as much as service itself, and time spent lying in wait for threats to the safety of the employer’s property may be treated by the parties as a benefit to the employer.

2.      Courts look to a number of factors in making the determination of when on-call time must be paid.

Generally courts will look at the following factors in determining whether the on-call time should be paid:

  1. whether there was an on-premises living requirement;
  2. whether there were excessive geographical restrictions on employee’s movements;
  3. whether the frequency of calls was unduly restrictive;
  4. whether a fixed time limit for response was unduly restrictive;
  5. whether the on-call employee could easily trade on-call responsibilities;
  6. whether use of a pager could ease restrictions; and
  7. whether the employee had actually engaged in personal activities during call-in time.

3.      Sleep time may be compensable when employee works 24-hour shifts.

The California Supreme Court held that security guards who were required to reside in a trailer provided by the employer at construction worksites would still need to be paid for the time they slept while on-call.  In that case, during weekdays the guards were on patrol for eight hours, on call for eight hours, and off duty for eight hours.  On weekends, the guards were on patrol for 16 hours and on call for eight hours.  The Court held that the employer was not permitted to exclude the time guards spent sleeping from the compensable hours worked in 24-hour shifts.  See Mendiola v. CPS Security Solutions, Inc.

4.      Employers may pay a lower rate of pay for controlled standby time.

Employers are permitted to pay employees a lower hourly rate for controlled standby time as long as the rate is set before the work is performed, and the rate for any hour worked does not fall below minimum wage.  In order to calculate overtime owed, the weighted average of the two rates is used to determine the regular rate of pay.

5.      Travel time may be compensable under some circumstances.

In Morillion v. Royal Packing Co., the California Supreme Court held that, “we conclude the time agricultural employees are required to spend traveling on their employer’s buses is compensable under Wage Order No. 14-80 because they are ‘subject to the control of an employer’ and do not also have to be ‘suffered or permitted to work’ during this travel period.”  Generally, travel time is considered compensable work hours where the employer requires its employees to meet at a designated place and use the employer’s designated transportation to and from the work site.

With summer upon us, the California legislature is busy working on bills that could impact employers.  Here are five employment bills being considered by the state legislature that California employers should keep an eye on:

1. SB 3 – Increase in minimum wage and indexing to inflation

Currently, California minimum wage is set to increase from $9.00 per hour to $10.00 per hour on January 1, 2016.  This bill proposes to increase the minimum wage to $11 per hour on January 1, 2016, and then again to $13 per hour by July 1, 2017.  Then, beginning on January 1, 2019, minimum wage would be indexed to inflation and would be adjusted upward every January 1 thereafter.

2. SB 406 – Broadening scope of employees and employers covered by California Family Rights Act

Currently, the California Family Rights Act requires employers with 50 or more employees within a 75 mile radius to provide up to 12 workweeks of unpaid leave for certain medical issues.  This leave is job protected leave, so the employer must provide the same job to the employee upon their return from leave.  This bill would expand coverage of the law to employers with 25 or more employees.  It would also expand the employees covered and purposes for which leave is required to be provided (for example, removing any restrictions on age or dependent status in the definition of “child”).

3.  AB 359 – Employee retention mandate for grocery stores

This bill would require any purchaser of an existing grocery store to hire the employees of the previous owner and employ them for 90 days.  The bill prohibits the new owner from terminating any employees without cause during the 90-day period, and then “consider offering continued employment to those workers.”

4.  AB 465 – Prohibiting mandatory employment arbitration agreements

This bill would prohibit “any person from requiring another person, as a condition of employment, to agree to the waiver of any legal right, penalty, forum, or procedure for any employment law violations.”  The bill also shifts the burden of proof onto the employer enforcing the waiver to show that the waiver was “knowing and voluntary.”  The bill is seeking to limit the use of arbitration agreements in the employment context.  Should an employer violate this bill, the penalty is set at $10,000 per violation plus attorney’s fees to the prevailing employee.

5.  AB 67 – Double pay required on holidays

Bill would require an employer to pay at least two times the regular rate of pay to specified employees for work during Thanksgiving.

Earlier this week Uber appealed a California Labor Commissioner ruling against it holding that a driver was misclassified as an independent contractor.  In this video, I briefly discuss the ruling and the lesson it holds for employers.

Misclassification of employees as independent contractors can carry many damages and penalties.  For example, Sections 226.8 and 2753 of the Labor Code impose a civil penalty of $5,000 to $25,000 depending on whether the misclassification is willful.  In addition, the misclassified worker can recover back unpaid overtime wages, unpaid minimum wages, and expense reimbursement.  Therefore, employers need to be extremely cautious in classifying workers as independent contractors.

For more information about the factors that differentiate an employee from an independent contractor click here.

The Labor Commissioner’s can be viewed here:

This Friday’s Five article is busting its own rule with a list of ten rules (it is California, and I should have realized the limitations of lists of five).  While there are many aspects of the new law that I cannot cover in a short article like this, here is a general checklist of ten items to keep in mind when preparing to comply with California’s Healthy Workplaces, Healthy Families Act of 2014 and its July 1, 2015 deadline:

1.     Employees can use their accrued sick days beginning on the 90th day of employment.

2.     Employers may limit the amount of sick leave used to 24 hours or 3 days per year.  Note that the employer must notify the employee of any caps imposed prior to implementation.

3.     Employers may also set a minimum increment not to exceed two hours for use of paid sick leave.  For example, if the employee needs to go to the dentist for a one hour appointment, the employer can only require that the employee use 2 hours of paid leave.

4.     Employers are not required to provide compensation to an employee for accrued, unused paid sick days upon separation of employment.

5.     Employers cannot require employees to find a replacement worker in order to take paid sick leave.

6.     Leave must be the greater of 3 days or 24 hours per year.  Therefore, a part-time employee who works 4 hour shifts will be entitled to 6 days off, and a full-time employee who usually works 10 hour shifts will be entitled to 3 days off (which is 30 hours).

7.     Employers cannot require a doctor’s note in order for the employee to qualify for paid sick leave.

8.     Employees with fluctuating pay rates, the regular rate of pay use to pay an employee using sick leave is calculated by dividing the employee’s total earnings by their total hours worked for the previous 90 days.

9.     Payment for sick leave must be made no later than the payday for the next regular payroll period after the sick leave was taken.

10.  Employers must show the amount of sick leave available on the employee’s pay stub or other writing given to the employee at the time of pay and should already be using the revised Notice to Employee for all non-exempt employees hired in 2015 and going forward.  Therefore, employers should be working with their payroll companies to ensure the paystubs issued to employees show the required information.

Employers should also review the DIR’s frequently asked questions page setting forth details of the law and compliance considerations.

Is your company in an industry that is likely to be targeted by the Department of Labor (DOL) for FLSA violations, or by the California Labor Commissioner for California Labor Code violations? A review of the Department of Labor’s Wage and Hour statistics for fiscal year 2014, in connection with California’s Division of Labor Standards Enforcement most recent reporting for 2012-2013, establishes a clear pattern of industries that are targeted for wage and hour violations:

  1. Restaurants
  2. Garment manufactures
  3. Guard services
  4. Car washes
  5. Agriculture

Here is a summary of the DOL’s statistics:

DOL 2014 Statistics

Here is a summary of California’s DLSE’s most recent statistics:

DLSE 2012-13 wages collectedWhile there are some differences between the two agencies’ statistics, restaurants lead both lists. It is also important to note that not every business can fit into these predetermined categories (note that the “other” category in the DLSE’s lists is very large), so there are many other industries affected.

It is also important to note the amount collected from the various industries that the DLSE found was due. According to the DLSE, the worse collection efforts was in the garment industry, with only 2.8% of the wages found to be due were actually collected. The next lowest collection rate per industry was in the car wash industry at only 10% collection rate. It is important to review these collection rates, because it is informative about how the DLSE or DOL will view your particular establishment when investigating potential claims. The lower collection rates are probably due to the result of the employer’s simply going out of business or taking other steps to avoid collections of the penalties and fines, or what I refer to as the bad actor presumption (rightly or wrongly).

Bad actor presumption (rightly or wrongly)
Imagine if you were in charge of collecting the penalties issued by the DLSE or DOL, these collection figures would color your view of employers operating in these industries. Going into the investigation, the government already has a predisposition that certain employers are more likely to have violations, and then when told they must pay fines, the employer likely to still simply refuse to abide by the determination. I’m not making a presumption that these penalties and fines were rightly or wrongly issued, but am only commenting about how these numbers skew the view from the perspective of the governmental agency. The agencies go through the process of making a determination and issue a citation, and then even after the determination has been made and the employer had an opportunity to appeal the agencies’ determination, the employer still refuses to pay the citation. In effect, employers therefore are harming the reputation of every business operating in that industry, and make it more difficult to overcome the predisposition the investigator has about the particular industry.

This illustrates the importance of companies operating in these targeted industries to be especially vigilant about compliance with Federal and California employment laws. An employer can gain a higher level of credibility with the investigator if they can show compliant policies, good record keeping, and proper payment of wages. Next week I will discuss violations most likely to be assessed by the DOL or the DLSE.