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

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

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

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

As of July 1, 2016, the City of Los Angeles requires employers with 26 or more employees to provide employees with 48 hours of paid sick leave.  Employers within the City of Los Angeles must review the new law carefully to ensure they are following the City’s paid sick leave requirements, and while there are some similarities with California’s paid sick law, there are many differences.  The City of Los Angeles has very specific requirements about the accrual methods and caps on accrual.  For example, California’s state law allows employers to require employee to use paid sick leave in two hour increments, but the City of Los Angeles does not permit this, so if an employee uses less than two hours the employer can only deduct the actual amount of paid sick leave used by the employee from their sick leave bank.  Also, the City’s law allows employees to use paid sick leave to take care of “any individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship.”  Who is someone with the “equivalent” of a family relationship?  Good question.  Employers must review the new requirements carefully to ensure compliance with these new requirements (and update handbooks and policies if necessary).

  1. Don’t forget to post new notices.

Santa Monica notices:

City of Los Angeles notice:

County of Los Angeles notice:

Pasadena notice:

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

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

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

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

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

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


If you know Garyvee, you may be asking yourself how could an employment law blog rely upon advice from someone who has not only admitted, but takes pride in, the fact that he checked out of school in the third grade, does not read books, and uses language that makes most standup comedian’s performances seem tame?  However, to underestimate Gary is a huge mistake, and he brings a refreshing and realistic view of the workplace as it exists in 2016, that many companies could learn some important lessons from.

Gary is an entrepreneur who has a noted career in growing his family wine business from $3M to a $60M business in five years.  After that, he started Vayner Media, a digital marketing company, that now employees over 600 employees.  His is also an angel investor and venture capitalist.  I’ve recently listened to the audio version of his new book, The #AskGaryVee Book, twice in the last couple of weeks.  In listening to the book, I realized that his perspective on the workplace is the modern perspective that I’ve often advocated for on this blog.

For today’s Friday’s Five, here are five lessons from The #AskGaryVee Show (Gary’s Youtube channel) that employers must understand:

1)      Where are the best place to hire employees these days?

Search key terms on twitter search and do the homework.  Do the work.  Search terms about the items the employee would be doing, going to the person’s home page, and then email them asking if they are looking for a job.  It takes time, but you have to put in the work.


2)      How do you handle “Eeyore” employees?  The one that always sound like they’re whining and pessimistic.

Fire them.  Energy is very important, and dragging down the team is bad.  Not having the smarts is better than being a downer on the team.  It is pretty easy to see who is enthusiastic about their work.  Also, it is incredible how a small group of employees can affect the company.  Managers have to be careful not to confuse this with being an introvert.  Being introverted is something that needs to be recognized, and not looked down upon.  Moping is different than being quiet and introverted, and being introverted is not necessarily a bad quality to have.


3)      On your team, is it better to have employees that specialize in one thing or someone who can wear multiple hats?

Both work, but Gary is a fan of a jack of all trades.  He hates when people use the excuse that they are great at one thing to stop from getting better at another thing.


4)      Would you support Vayner employees writing their own books and curating their own content streams/personal brands?

Yes.  You cannot say you want to build around the employees, and then suppress them.  Leaders have to believe so much in themselves that they are not afraid to help employees grow.


5)      As a guy who loves hustle and people, what is the “unforgivable sin” one of your employees could make?

Gary is not worried about people’s work ethic.  While hustle may be the leader’s skill, and being able to work long hours, it does not have to be the skill of employees.  The only sin is to not figuring out a way to play nice with the boys and girls they work with.  Being disrespectful or being selfish is completely unacceptable, as is creating conflict.

Another Friday, another Friday’s Five.  If you are new to the Employment Law Report, I write about a topic and include five items employers should understand on that topic every Friday.  This Friday’s Five discusses the documents employers should consider providing to employees at the end of employment.

The documents include:

  1. Notice of change of relationship
  2. For Your Benefit, California’s Program for the Unemployed – pamphlet published by the EDD
  3. HIPP notice
  4. COBRA notice
  5. For layoffs, potential WARN Act and California’s Baby-WARN Act

To download these documents and more information click here.

Click here to subscribe to the Employment Law Report Youtube Channel.

Employers should review the issue with legal counsel to ensure that they are providing the required documents for their particular situation.

Happy Friday.  Big data has entered into the employment context.  The EEOC is proposing changing the EEO-1 report to require employers to report about an employee’s earnings based on their race, gender and ethnicity.  Here are five things employers should know about the EEOC’s proposal:

1.      Proposal to add wage data about employees to EEO-1 reporting.

Currently, employers must collect EEO-1 data from any pay period occurring in the months of July through September of the current survey year. The EEO-1 must be filed by September 30th of the same year.  The EEOC also proposes that beginning in 2017, all employers will be required to submit the proposed EEO-1 report electronically.  The sample form can be found here.

The EEOC’s proposal would require employers to report the number of employees by their sex, race and ethnicity according to the employee’s W-2 income.  The proposal would require this information to be reported for certain wage bands.  The EEOC wants this data in order to “compute within-job-category variation, across-job-category variation, and overall variation, which would support the EEOC’s ability to discern potential discrimination while preserving confidentiality” (more about the EEOC’s claim about confidentiality below).

The EEOC believes that the W-2 income reporting is the most accurate and easiest data for employers to use in preparing the report:

W-2 gross income includes wages, salaries, fees, commissions, tips, taxable fringe benefits, and elective deferrals. Amounts withheld for taxes, including but not limited to income tax, Social Security, and Medicare taxes, are considered “received” and are included as gross income of the given year they are withheld.  The W-2 encompasses all earned income, including supplemental pay components such as overtime pay, shift differentials, and nonproduction bonuses (e.g., year-end bonuses, hiring and referral bonuses, and profit-sharing cash bonuses).  Nonproduction bonuses account for over 11 percent of cash compensation for management, business, and financial operations occupations, while shift differentials are a significant component of compensation for healthcare workers.

2.      Total hours worked must be reported

Employers will also have to report the total number of hours worked by the employees included in each EEO-1 pay band cell.  The EEOC states that this “data will allow analysis of pay differences while considering aggregate variations in hours. The total hours worked also will permit an analysis that accounts for periods when the employees were not employed, thus reflecting part-time work.”  The EEOC is not sure about how to have employers report hours worked for exempt/salary employees, and is seeking comments from employers about this issue.

3.      EEOC proposes to use software to determine “statistics of interest”

According to the EEOC:

The EEOC and OFCCP plan to develop a software tool that will allow their investigators to conduct an initial analysis by looking at W-2 pay distribution within a single firm or establishment, and by comparing the firm’s or establishment’s data to aggregate industry or metropolitan-area data.  This application would highlight statistics of interest.

This raises the question though about how the software will exactly make the determination what constitutes “statistics of interest?”  It obviously does not take into account the wide range of factors that determine an employee’s rate of pay: experience, education, seniority with the company, management skill, etc….  There may be additional factors that skew the statistics as well, such as geographic and local issues about the workforce.  I’m afraid that this type of statistical calculation can place employers in the situation that they will be presumed guilty if the EEOC’s software flags a concern based on the EEO-1 report, and then the employer will have the burden to justify its pay scale.

4.      Confidentiality issues

The EEOC attempts to belie any confidentiality concerns in its proposal, but many issues are unaddressed.  Some of the confidentiality issues that need to be addressed:

  1. Employees’ privacy rights are a concern.  The employees’ information about race, gender and income is shared with yet another governmental agency.  In addition, the EEOC is also in charge with enforcing discrimination based on religion.  The proposal does not seek information about the employee’s religion as this time, but will the EEOC seek this information in the future to assist in religious discrimination cases?  Towards this end, will the EEOC also ask the owner or president of the organization to disclose their religion in order to determine if she discriminates against other religions in the hiring or promotion process?
  2. Competitor’s access to wage information.  Is it possible for the data collected on the report to be released by a Freedom of Information Act request to be used by competing firms?  Could the information be used in setting salaries and wages to in hopes to poach employees?
  3. Attorneys may be able to subpoena these filings in current lawsuits for free discovery.  In addition, could attorneys seek the information from the EEOC to conduct their own analysis regarding pay distribution in order to find cases?

5.      Employers may comment about the proposal

Want to share your comments about the proposed regulation with the EEOC?  The EEOC established a relatively easy way to post a comment on its website here.  I actually have to hand it to the EEOC in making the comment process very easy.  Comments are due by April 1, 2016.

As we approach the close of 2015, employers should take the time to review their employment law policies and practices.  I’m often asked where should the process start?  Here are five areas employers can focus on to start the audit process:

1.      Employee handbooks

Employers need to ensure their policies are up to date, and a few areas that saw updates that may need attention in regards to employee handbooks are the revisions to California’s paid sick leave, the enforceability of arbitration agreements that contain class action waivers, and equal pay protections.

Employers should review new laws taking effect in 2016 to ensure compliance.

2.      Ensure compliance with minimum wage increases

California minimum wage increases to $10 per hour effective January 1, 2016.

Employers need to remember that the state minimum wage also sets the salary basis for exempt employees, and therefore the minimum salary that must be paid to exempt employees will also be increasing.

3.      Wage and hour issues

There are so many wage and hour areas that employers need to ensure compliance with, but here are few to help start the audit process:

4.      Meal and rest breaks

Even though it is widely known by employers of their obligations to provide meal and rest breaks, there is still substantial litigation over this issue.  Therefore, employers should continually review their meal and rest break policies and practices to ensure compliance with the law.  To start, here is a link to a previous article about five things California employers should not forget about meal and rest breaks.

5.      Correct information is listed on employee pay stubs and new requirements for piece-rate employees

Employers should ensure their pay stubs provided to employees comply with the requirements of Labor Code section 226.  The DLSE provides a sample of what information a compliant pay stub should list for an hourly employee, but don’t forget about the requirement to report an employee’s accrued paid sick leave.

Employers should especially conduct this review if they paid employees on a piece-rate basis.  A new law, AB 1513, adds various Labor Code sections and places new requirements on employers who pay on piece-rate basis.  The law now mandates that employers pay piece-rate employees separately for the following activities:

  • Rest breaks
  • Recovery periods (for employees who work outside)
  • Non-productive time (defined by the law)

The law requires employers to calculate the regular rate of pay for each workweek, and then pay the piece-rate employees the higher of this regular rate of pay or the applicable minimum wage for rest break time.  The law also requires employers to pay piece-rate employees for “nonproductive time” which is defined as “time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis.”  The nonproductive time is required to be paid at a rate no less than the applicable minimum wage rate.  Employers paying employees on a piece rate basis should review the new obligations with an employment law attorney to ensure compliance.

To qualify as an exempt employee, an employee must be “primarily engaged in the duties that meet the test of the exemption” and “earns a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.” Labor Code section 515.  This forms the two part test the employees must meet to be exempt: (1) the salary basis test and (2) the duties test.  Yes, this Friday’s Five post is published on a Saturday, but a holiday party obligation got in the way (it did cross my mind, but I saved my readers from the obligatory “how to throw a holiday work party and avoid litigation” article – so I figured this will make up for the late post).  Here are five general issues employers should know about the salary basis test:

1.     To qualify for a “white collar” exemption, employees must be paid at least twice the state minimum wage.

To be exempt from the requirement of having to pay overtime to the employee, the employee must perform specified duties in a particular manner and be paid “a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.” (Lab. Code, § 515, subd. (a).)  As of July 1, 2014, the minimum wage in California increased from $8.00 to $9.00 per hour.  It is set to increase again to $10.00 per hour on January 1, 2016.  With the increase in the state minimum wage, there is a corresponding raise in the minimum salary required to qualify as exempt under the “white collar” exemptions.  Therefore, on July 1, 2014, in order to qualify for a white collar exemption, the employee must receive an annual salary of at least $37,440, and as of January 1, 2016, the threshold annual salary increases to at least $41,600.  This salary basis will increase with each increase in the California state minimum wage.

2.     DOL proposal to increase the salary for required to meet the salary basis test under the FLSA is just a proposal (for now).

As I have previously written, the Department of Labor announced in June 2015 that it was considering a proposal to increase the salary basis amount under the Fair Labor Standards Act (FLSA) for the white collar exemptions from $23,660 to $50,400.  The Wall Street Journal is reporting that this proposal is not likely to become effective (if at all) until late 2016.  Employers need to understand that the DOL’s proposal pertains to federal law.  California employers need to abide by which ever salary basis level is higher – California state law or the FLSA.  It is important to understand the difference, and keep up to date on the DOL’s proposal in 2016.

3.     The employee’s salary cannot be reduced for quality or quantity of work.

In a recent case, Negri v. Koning & Associates (2013), an insurance claims adjuster challenged his employer’s exempt classification of his job.  The plaintiff was paid $29 per hour with no minimum guarantee, and when he worked more than 40 hours in a week, he still only received $29 per hour.  The employer attempted to argue that the plaintiff was an exempt employee under the administrative exemption.  The court rejected the employer’s position in holding that because the employee did not receive a guaranteed amount in “salary”, the employee did not meet the salary basis test to qualify as exempt.  In determining what constitutes a salary, the court looked to federal law:

An employee is paid on a “salary basis” if the employee “regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed. Subject to the exceptions provided in paragraph (b) of this section [(relating to absences from work)], an exempt employee must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked. Exempt employees need not be paid for any workweek in which they perform no work. An employee is not paid on a salary basis if deductions from the employee’s predetermined compensation are made for absences occasioned by the employer or by the operating requirements of the business. If the employee is ready, willing and able to work, deductions may not be made for time when work is not available.” (29 C.F.R. § 541.602(a) (2012)

Therefore, because the plaintiff’s pay varied according to the amount of time he worked, and was not guaranteed a base amount, he did not meet the salary basis test and was found to be non-exempt.

4.     If misclassified, the employee is entitled to unpaid overtime.

For all non-exempt employees, overtime is owed at a rate of one and one-half times the employee’s regular rate of pay for all hours worked in excess of eight hours up to and including 12 hours in any workday, and for the first eight hours worked on the seventh consecutive day of work in a workweek.  Double the employee’s regular rate of pay is owed for all hours worked in excess of 12 hours in any workday and for all hours worked in excess of eight on the seventh consecutive day of work in a workweek.  California’s Department of Industrial Relations FAQ on California overtime provides a good overview of the overtime requirements under California law.  In addition to the unpaid overtime that is owed to misclassified employees, employers also fact substantial penalties that accrue as a result of the employee not being paid all wages when earned.

5.     Approach with caution.

California courts have made clear that the employer bears the burden of proof when asserting that an employee is an exempt employee.  “[T]he assertion of an exemption from the overtime laws is considered to be an affirmative defense, and therefore the employer bears the burden of proving the employee’s exemption.”  Ramirez v. Yosemite Water Co. (1999).

Photo:  Justin Lynham

Today’s Friday’s Five is a short video about five employment law considerations employers should review at the end of 2015.  As mentioned in the video, I will be conducting a webinar on December 2, 2015 for employers to understand and comply with new employment laws taking effect in 2016.  I will also discuss new case law developments from 2015 including paid sick leave and enforceability of arbitration agreements and class action waivers.  There will also be a discussion about businesses’ obligations under Proposition 65 postings at their establishments.

Registration and more information is here (  Hope you can join us for the webinar.

California passed a new law in October 2015 that provides employers some potential protection against penalties imposed by the Private Attorney General Act of 2004 (PAGA). Employers need to understand the intricacies of PAGA, and the importance of seeking legal counsel immediately upon receiving a copy of the letter a plaintiff must send to the Labor and Workforce Development Agency (LWDA). Today’s Friday’s Five provides five highlights to assist in this understanding, and what potential relief employers are provided under the amendment of the law:

1. PAGA authorizes individuals to collect penalties only previously obtainable by the state’s LWDA.

PAGA (sometimes referred to as the bounty hunter law) was designed by the California Legislature offer financial incentives to private individuals to enforce state labor laws. As the Court noted in its opinion, at the time the legislation passed, the state’s labor law enforcement agencies did not have enough resources or staffing necessary to keep up with the rapid growth of California’s workforce. Therefore, PAGA allows aggrieved employees to act like a private attorney general in collecting civil penalties for Labor Code violations. The employee must give 75% of the collected penalties to the Labor and Workforce Development Agency, and the remaining 25% is to be distributed among the employees affected by the violations.

2. PAGA claims are representative suits, which are very different than class actions.

First, because the plaintiff under PAGA is seeking penalties set out in the statute, a one year statute of limitations applies. This varies drastically from the four year statute of limitations that apply to most wage and hour class actions when a Business and Professions Code section 17200 cause of action is alleged.

Second, the California Supreme Court in Arias v. Superior Court held that a plaintiff does not have to have the class certified as a class action in order to recover damages on behalf of all of the other employees plaintiff seeks to represent.

3. PAGA claims cannot be waived by employees.

The California Supreme Court also clarified that employees may not waive their right to bring a representative action under PAGA (even though the Court held that class action waivers in arbitration agreements are enforceable). The Court held in Iskanian v. CLS Transportation that, “we conclude that an arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy.”

4. Before bringing suit, a plaintiff must notify the state of their intention to file suit to recover PAGA penalties.

Employees seeking recovery under PAGA must comply with requirements that place the Labor and Workforce Development Agency and the employer on notice that the employee will be seeking remedies under the Act and give the Agency a chance to investigate itself. If the Agency does not investigate, then the plaintiff can proceed with the claim. As discussed below, this is important because in October 2015, employers now have the ability to cure problems set forth in the plaintiff’s letter to the LWDA, which could bar the plaintiff from obtaining any penalties.

5. In October 2015, legislation was passed to provide employers an additional right to cure defects in pay stubs, and potentially bar plaintiffs from recovering any penalties.

AB 1506 amended PAGA to allow employers the ability to cure certain violations in order to avoid penalties. The law went into effect as of October 2, 2015. The amendments provide that employers can fix paystubs that do not list the inclusive dates of the period for which the employee is paid (required under Labor Code section 226(a)(6)) and the name and address of the legal entity that is the employer (required under Labor Code section 226(a)(8)). In order to cure the defects, within 33 calendar days of the postmark of the notice to the LWDA by the plaintiff, the employer must give written notice by certified mail to the aggrieved employee or their representative, and the LWDA that the violation has been cured, describe the actions taken, and set out that no civil action pursuant to Section 2699 may commence. The employer must also provide a fully compliant itemized wage statement to each aggrieved employee for each pay period for the three-year period prior to the date of the written notice by the plaintiff. It is vital that employers who receive a PAGA notice seek counsel immediately to potentially cure any defects pursuant to this new legislation, and potentially avoid large PAGA penalties.

It may not be a topic on the minds of many business owners, human resource managers, or in-house counsel, but developing an effective relationship and engaging employment law counsel is essential in saving the company money and avoiding litigation. This Friday’s Five is a video in which I discuss five ways companies should be engaging their employment law attorney help minimize risk and avoid litigation.

Please drop me an email if you have any questions or topics you would like me to address in the Friday’s Five.