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(323) 652-9451Most employees are entitled to receive overtime premium pay when they work beyond a certain number of hours in a day or week. Under both state and federal law, certain employees, because of their job duties and compensation, can be considered “exempt” from overtime. The most common exemptions are the so-called “White Collar” exemptions, for executive, administrative and professional employees.
On May 18, 2016, the US Department of Labor published its Final Rule updating the Fair Labor Standards Act (FLSA) to increase the minimum compensation required for an employee to be properly classified under one of the White Collar exemptions. The Final Rule increases the minimum salary level from its present $455 per week ($23,660 annualized) to $913 per week ($47,476 annualized). Employers can count nondiscretionary bonuses and commissions toward up to 10% of this annual minimum.
Importantly, all of the other stringent “duties” requirements for an employee to be considered exempt remain unchanged. Finally, the Rule, which becomes effective December 1, 2016, provides for automatic increases in the salary levels every three years (beginning January 1, 2020).
What you should do: This is an excellent time to evaluate whether exempt employees are properly classified. This means, not only determining whether they will meet the increased salary requirements, but equally important is evaluating whether their job duties meet the specifications set forth under the FLSA (and California Wage Orders). We encourage you to involve your employment law counsel in this important analysis.
In Castro-Ramirez v. Dependable Highway Express, the California Court of Appeal for 2nd Appellate District, which includes the Los Angeles Superior Courts, held for the first time that an employer has a duty to reasonably accommodate an applicant or employee who is related or associated with a disabled person who needs the applicant/employee’s assistance.
The facts underlying the case are interesting. Luis Castro-Ramirez was a driver for Dependable Highway Express (DHE). His son required dialysis. Before accepting DHE’s job offer, Castro- Ramirez explained that he would need to leave work early enough to go home and operate his son’s dialysis machine. Although DHE initially accommodated this request, scheduling early routes, a new supervisor refused and warned Castro-Ramirez that if he did not take a later route he would be fired. Castro-Ramirez refused and was fired.
The trial court ruled in favor of DHE, reasoning that Castro-Ramirez could not show that the termination was motivated by his association with his disabled son. The Court of Appeal reversed, holding that California’s Fair Employment and Housing Act (FEHA) creates a duty on the part of employers to accommodate employees who are associated with a disabled person.
At this juncture, Castro-Ramirez is only binding in the 2nd Appellate District. It is likely DHE will seek review of the decision by the California Supreme Court, which could result in a reversal. However, until such review, if it occurs, other appellate courts throughout California could find the court’s reasoning persuasive and follow it.
What Employers Should Do Given This Ruling
Disability discrimination, including claims of failure to reasonably accommodate a known or perceived disability, is a particularly thorny area for California employers. Castro-Ramirez further complicates matters. Employers must take care whenever a request is made for accommodation of a disability or medical condition. When in doubt, it is wise to seek the advice of employment law counsel.
In Kilby v. CVS Pharmacy, the California Supreme Court clarified when employers must provide employees with seating at work. The applicable California state wage orders require employers to provide suitable seats to employees when the “nature of the work reasonably permits the use of seats.” Prior to the Kilby case, there was a lack of controlling precedent about the meaning of the phrase “nature of the work.”
To place the dispute into perspective, the employers argued that the decision whether seating was needed required analysis of an employee’s duties as a whole during a complete shift, as well as the layout of the workplace and the employer’s own business judgment. The employees’ position, by contrast, was that each particular task had to be examined; if any task could be performed while seated, the employer should be required to provide seating.
The Supreme Court adopted a middle ground. It held that the “nature of the work” element referred to the actual tasks performed by an employee at a particular location, rather than the “holistic” analysis urged by the employers. Focusing on the actual work done at a particular location would, according to the Court, enable courts and, presumably, employers, to determine objectively whether the “nature of the work reasonably permits the use of seats” based on a totality of the circumstances test. The circumstances to be considered include the frequency and duration of tasks as well as the feasibility and practicability of providing seating.
What Employers Should Do Given This Ruling
Recognizing the Kilby opinion is riddled with legalese and provides little clear guidance, California employers with employees who may be entitled to seating—particularly if a request has been made—should seek advice from their employment counsel.
Effective April 1, 2016, significant amendments to the California Fair Employment and Housing Act (FEHA) will take effect. These impact every employer, including out of state employers, with at least 5 workers in California. Here are the critical highlights of these amendments.
Mandatory Written Anti-Discrimination/Harassment Policy
Of greatest import, the amendments require every covered employer to have a written policy that:
In order to ensure that employees receive the written policy, employers may publish the policy through various means. These include: providing a copy to existing employees and during the hiring process, posting it in the workplace, and obtaining a written acknowledgement. Translation of the policy is required into every language that is spoken by at least 10% of the workforce.
Definitions
The amendments also contain definitions that are important in the context of gender discrimination.
Recordkeeping Requirement
Employers with 50+ employees are required to provide sexual harassment prevention training to supervisors at least every 2 years. The amendments require employers to retain materials related to this training, including sign-in sheets and course materials, for at least 2 years.
What Employers Should Do
Covered employers (5+ employees) should immediately review their policies to ensure they are in compliance with the amended regulations before April 1st. If you have any doubt whether your business is in compliance, we recommend you contact your qualified employment law counsel.
Each new year brings challenges for employers and their Human Resources management, as a slew of new laws take effect, creating new traps for the unwary. 2016 is no exception. Here is a list of four new laws (or amendments) that can impact virtually every California employer.
The New Minimum Wage is $10.00
At first, this doesn’t seem like real news, as almost everyone has known the California minimum wage has been climbing since 2014. The information important to many employers, however, is the role the enhanced minimum wage plays in classification of salaried exempt vs. non-exempt employees.
Remember that an exempt employee in California must be paid a salary that is no less than two times the state minimum wage for full-time employment. Accordingly, as the state minimum wage increases from $9.00 to $10.00 per hour, the minimum annual salary for an exempt employee increases from $37,440 to $41,600. What you should do: Review compensation for all salaried exempt employees to ensure it equates to at least $41,600 annually.
Changes to Piece-Rate Compensation Requirements
Are some or all of your employees paid according to a piece-rate method? A business school definition of piece-rate compensation is: A wage determination system in which the employee is paid for each unit of production at a fixed rate. It is common in the automotive repair and garment industries, among others.
Assembly Bill 1513 added section 226.2 to the California Labor Code. It requires employers to pay piece-rate employees a separate hourly wage for “nonproductive” time, as well as “rest and recovery” periods. These hours and pay must be separately itemized on employees’ paystubs.
An additional challenge created by the new law relates to determination of the correct rate of pay. For “rest and recovery” breaks, employees must be paid the greater of (1) the minimum wage, or (2) the employee’s average hourly wage for all time worked (exclusive of break time) during the work week. For “nonproductive” time, the employee must receive at least minimum wage. What you should do: If you have employees paid on a piece-rate basis, make sure you understand and comply with the above. If not, contact your employment lawyer to get in compliance.
California Fair Pay Act
Senate Bill 358, amends California Labor Code Section 1197.5, which prohibits an employer from paying employees of one sex less than employees of the opposite sex for “substantially similar work.” Prior to the amendment, an employee seeking to prove unequal pay had to demonstrate that he or she was not being paid at the same rate as someone of the opposite sex at the same establishment for “equal work.” As amended, an employee need only show he or she is not being paid at the same rate for “substantially similar work” as measured by a composite of skill, effort and responsibility performed under similar working conditions.
Additionally, the amended law makes it unlawful for employers to prohibit employees from disclosing their wages to others, discussing their wages or inquiring about the wages of another employee. It also creates a new private cause of action whereby an employee may bring suit in court seeking reinstatement and reimbursement for discrimination or retaliation. What you should do: Audit your compensation structure to ensure both genders are paid equally for substantially similar work. Where changes are required, you may only increase the underpaid employee. Involve your employment lawyer if you need clarification or help.
Requesting Reasonable Accommodations is a Protected Activity
Assembly Bill 987 amends the California Fair Employment and Housing Act (FEHA) to expand the protections for employees who request a reasonable accommodation for disabilities or religious beliefs, regardless whether the request is granted. This means that, once an employee has requested a reasonable accommodation for a disability or religious belief, the employer may not take an adverse employment action (i.e., discipline, reduction in hours or pay, termination) in retaliation for the accommodation request. What you should do: Be sensitive to an employee’s request for accommodation, even if s/he does not use the term “reasonable accommodation.” If an employee tells you (or you perceive) s/he is disabled or has a particular religious belief/preference that requires accommodation, take the situation seriously. It may be a good idea to consult with your employment counsel.
Conclusion
Employers should remain mindful of these changes as we embark upon a satisfying and, hopefully, productive new year!
The new federal budget signed into law on November 2, 2015, requires the federal Occupational Safety and Health Administration (OSHA) to increase its penalties for the first time since 1990.
What is OSHA and why is this important?
OSHA is a federal agency (part of the Department of Labor) that ensures safe and healthy working conditions for Americans by enforcing standards and providing workplace safety training. OSHA is empowered to enforce its regulations by imposing penalties that most employers feel are already steep.
From 1990 through 2015, OSHA was one of only three federal agencies that were exempt from a law requiring such agencies to raise fines to keep pace with inflation. A section of the 2015 budget bill–the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (no that’s not a typo!)–eliminated this exemption.
The budget bill further requires OSHA to make a one-time “catch-up” increase, which cannot exceed the inflation rate from 1990 through 2015 as measured by the Consumer Price Index (CPI). Based on the recent CPI, the maximum increase is expected to be in the range of 75-80%. Further, given consistent comments by OSHA leadership about the benefits of imposing stiffer regulatory punishments, it is believed that OSHA will implement most, if not all, of the increase.
To illustrate the impact of this increase, an 80% increase in the current schedule of maximum penalties would result in the following fines:
Cal/OSHA
California is among several states that have a State Plan: an OSHA-approved job safety and health program that is operated by an individual state instead of federal OSHA. Federal OSHA still provides up to 50 percent of the funding for these programs and the State Plan must be “at least as effective” as federal OSHA.
Cal/OSHA has recently hit employers with staggering penalties. Since June, 2015, Cal/OSHA imposed penalties against a meat byproducts processing company, a door manufacturer, a refinery and two construction firms amounting to $1.6 million.
Who is at risk?
Any employer that does not fully comply with OSHA safety standards is at risk for penalties. Unfortunately, many employers in industries that do not typically focus heavily on safety standards are equally at risk, not only for accidents and injuries, but also for stiff OSHA penalties. For example, retail businesses have been heavily penalized for such violations as blocked exits, fire extinguishers and similar non-obvious safety risks. Often ownership and management of such “white collar” businesses are unsophisticated about safety issues.
What should employers do?
Fortunately, employers have several months to take steps to avoid OSHA penalties. These should include making safety and compliance with applicable OSHA standards a priority. Where there is doubt about the specifics of a safety standard, employers should consult with their employment counsel, who may also recommend or involve safety specialists to ensure full compliance.
On October 6, 2015, California Governor Jerry Brown signed Senate Bill 358, amending California’s Equal Pay Act, which prohibits an employer from paying employees of one sex less than employees of the opposite sex for “substantially similar work.” This Bulletin briefly discusses this amendment and how it could impact California employers.
What is required for an employee to prove unequal pay?
Prior to the new law, an employee seeking to prove unequal pay had to demonstrate that he or she was not being paid at the same rate as someone of the opposite sex at the same establishment for “equal work.”
The new law, effective January 1, 2016, relaxes this standard, making it much easier for an employee to prove unequal pay. Under the new law, an employee need only show he or she is not being paid at the same rate for “substantially similar work” as measured by a composite of skill, effort and responsibility performed under similar working conditions. It is not necessary that the employees of opposite sexes perform the same or equal work.
What can an employee recover?
Employees have the option of pursuing a claim through the Labor Commissioner or filing a civil lawsuit. An employee who prevails through a claim with the Labor Commissioner may recover pay differential plus an equal amount as liquidated damages. An employee who successfully sues in court may recover pay differential damages, interest, litigation costs and attorneys’ fees.
How can an employer defend a claim or suit?
Even if there is a gender-based wage differential, an employer can escape liability if it can show that the differential is based on:
These factors were included in the law, as it existed prior to the October 6th amendment. However, the fourth factor has been changed to require an employer to show with competent evidence that any difference in compensation is not sex-based, is related to the position in question and there exists a “business necessity” for the wage differential. A “business necessity” is an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is intended to serve.
Additional “Wage Transparency” requirement
As amended, the law makes it unlawful for employers to prohibit employees from disclosing their wages to others, discussing their wages or inquiring about the wages of another employee.
Extended record keeping period
The amendment extends the time period for employers to keep records pertaining to employees’ terms and conditions of employment (including wages and job classifications) from two to three years.
What Should Employers Do?
Commentators suggest this amendment may cause a significant uptick in claims and lawsuits alleging unequal pay–this remains to be seen. However, there are unquestionably steps employers should take to protect themselves against an unequal pay claim:
If you have questions about this amendment, you should consult with experienced employment law counsel.
California’s new Paid Sick Leave Law, the Healthy Workplaces, Healthy Families Act of 2014 (“Act”), took effect January 1, 2015, with leave benefits to accrue starting July 1, 2015. Although the Act was already in effect, the California legislature passed additional amendments, which were signed into law by Governor Jerry Brown on July 13, 2015.
Here are some of the key amendments:
Accrual
In addition to the accrual method in which an employee gains one hour of paid sick leave for every 30 hours worked, employers have the option to use their own accrual method, provided accrual is (1) on a regular basis; and (2) the employee will have 24 hours of accrued sick leave by his or her 120th calendar day of employment.
Employers who already have their own PTO policy
Employers who had a preexisting Paid Time Off (“PTO”) policy as of January 1, 2015, may continue that policy provided: (1) PTO/PSL accrues regularly; (2) employees accrue at least one day/eight hours of PTO/PSL within 3 months of employment each calendar year; and (3) employees accrue at least 3 days/24 hours PTO/PSL within 9 months of employment.
Rate of pay for Paid Sick Leave
For nonexempt employees, pay during PSL can be calculated using one of two methods: (1) the “regular rate of pay” for the workweek in which the employee uses paid sick leave; or (2) by dividing the employee’s total wages, not including overtime premium pay, by the total hours worked in the full pay periods of the prior 90 days of employment.
Other Amendments
Again, California employers are encouraged to consult with their employment law counsel to ensure they are in compliance with all aspects of the new Paid Sick Leave law.
On July 15, 2015, the United States Department of Labor (DOL) issued a guidance memorandum (Administrator’s Interpretation No. 2015-1) clarifying whether workers can properly be characterized as Independent Contractors, rather than employees. This Bulletin explains this development and its implications for employers who treat any workers as Independent Contractors.
What is The DOL and Why is This Important?
The DOL is the federal agency charged with enforcing laws and regulations enacted to protect employees. The DOL’s Administrator periodically issues “guidance” memoranda interpreting a law or regulation. While these memoranda are neither law nor legally binding, they are frequently cited and given weight by courts when interpreting law in a particular case. They may also be considered in the legislative process, as federal and state laws are enacted which directly impact employers.
This guidance is also important because it provides clarity and may help employers avoid misclassifying workers as Independent Contractors. Employers who misclassify risk a costly claim or civil lawsuit by the worker claiming she did not receive overtime or rest and meal periods as a result of the misclassification.
The “Economic Realities” Test
Determination whether an employer can properly treat a worker as an Independent Contractor has long required application of the “economic realities” test. This test asks the following questions about a worker classified as an Independent Contractor:
Is the work performed by the individual an “integral part of the employer’s business”?
Does the individual’s “managerial skill” affect his or her opportunity for profit or loss?
How does the worker’s investment compare with that of the company?
Does the work performed require special skill and initiative?
Is the relationship between the worker and the company permanent or indefinite?
What is the nature and degree of the employer’s control?
What Does the DOL Guidance Add?
The DOL guidance memorandum adopts the economic realities test. But the agency makes clear that the test must be applied in the context of the definition, from the federal Fair Labor Standards Act (FLSA), of “employ,” as “suffer or to permit to work.” An individual who is “economically dependent on an employer is suffered or permitted to work by the employer,” and thus cannot be properly classified as an Independent Contractor (emphasis added).
In other words, only a worker who is financially independent of the employer can properly be classified as an Independent Contractor. In one telling sentence, the memorandum says that “Only carpenters, construction workers, electricians, and other workers who operate as independent businesses, as opposed to being economically dependent on their employer, are independent contractors.”
The guidance also clarifies that work away from the employer’s premises does not necessarily support Independent Contractor classification, since that work can still be integral to the employer’s business.
What Should Employers Do?
The issuance of this guidance is an excellent reminder for employers to work with their employment law counsel to evaluate whether they are properly classifying any worker who is treated as an Independent Contractor.
The Division of Occupational Safety and Health (DOSH), better known as CalOSHA, protects workers from health and safety hazards in almost every workplace in California. The amendments to certain CalOSHA regulations, effective May 1, 2015, will impact any business that includes an “outdoor place of employment.” The amendments require action by employers, including (1) revision of written policies covering heat illness prevention; (2) updates to training protocols and materials; and (3) adoption of expanded workplace procedures, practices and protections to better prevent heat illness from occurring.
A key amendment relates to the temperature at which shade must be provided. Previously, the regulation required a shaded area when the temperature reached 85 degrees. The threshold is now 80 degrees.
Certain industries, including agriculture, construction, landscaping, oil and gas extraction, and transportation or delivery of agricultural, construction or other heavy materials, face an even heavier burden when the temperature reaches 95 degrees. These include (1) conducting paid pre-shift safety meetings to go over the company’s high-heat procedures; and (2) implementing effective heat illness monitoring, defined as having a supervisor assigned to observe 20 or fewer employees, a mandatory buddy system, regular communication with each employee, and a designated person at the worksite authorized to call emergency services in the event of a heat illness.
Employers must also provide adequate fresh, pure and suitably cool water, at no cost, located as close as practicable to the areas where employees are working. Employers must encourage employees to take cool-down periods of at least five minutes (10 minutes every 2 hours for agricultural workers at 95 degrees).
Finally, employers must establish a written heat illness prevention plan in English and any other languages that will be understood by employees. This plan must be made available at the worksite.
