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2017 Employment Law Update

Employment and Labor Law

By Leonard Brazil, Esq.

Court Decision

When Is a Rest Break Not a Rest Break?

In December 2016, the California Supreme Court published an opinion (Augustus v. ABM Security Services, Inc.) which exposes many employers to an unknowing violation of the rest break law.  Security guards filed a class-action against their employer alleging rest break violations.  The guards were required to keep their pagers and radio phones on during their rest breaks and to respond when the need arose even if they were on their rest break.

The Supreme Court concluded that “[d]uring rest breaks, employers must relieve their non-exempt employees of all duties and relinquish any control over how employees spend their break time.” The Court reasoned that because the guards were on call to respond, if needed, the employer had not relinquished control over the guards during their rest break.  As a result, the Court ruled that the guards’ rest break rights were violated and reinstated a class action judgment of $90 million.  Significantly, no evidence was presented that any of the guards ever had their rest break interrupted by having to respond to a page or call.

Statutes

A. Minimum Wage.  California’s minimum wage increased to $10.50 on January 1, 2017 for employers with 26 or more employees.  Employers with less than 26 employees will be increased to $10.50 on January 1, 2018.  Employers also need to be mindful of city ordinances regulating the pay of employees in specific cities, such as Los Angeles, Santa Monica, San Francisco and San Jose which have established separate minimum wage requirements. Other cities are likely to do the same thereby increasing the burden on employers to keep track of local government wage and hour decisions.

The minimum wage in California will increase to $11 on January 1, 2018 for employers with 26 or more employees and a $1/year thereafter until the minimum wage increases to $15 on January 1, 2022. The increases for employers with less than 26 employees will follow one year after minimum wage increases are imposed on employers with more than 25 employees.  For example, on January 1, 2019, the minimum wage for employers with less than 26 employees will be $12.

B. Marijuana Legalized. California legalized marijuana in November of 2016. Employers are not affected by the new law.  Employees cannot smoke marijuana at work or come to work under the influence even if they have been prescribed marijuana for medical purposes.  Employers can continue to test employees for drug use when they have “reasonable suspicion.”

C. Restrictions on Employment Agreements.  Out of state employers often times have California employees agree to what is referred to as a choice of laws and venue provision––meaning employee claims must be (i) determined under the laws of another state and (ii) filed and litigated outside of California.  Labor Code §925 is a new statute which prohibits employers from including such a provision in an agreement with an employee.

  1. This new statute applies to an employee who “primarily resides and works in California.”  However, the new law allows a choice of law and venue provision in an agreement if the employee is individually represented by an attorney in negotiating the contract.
  2. Employees can collect attorney’s fees if they enforce their rights under this statute which provides a motivation for plaintiff’s attorneys to file lawsuits.

D. Sick Leave

  1. There are a number of local jurisdictions which have passed their own sick leave laws.  Currently, these include San Diego, Los Angeles, Santa Monica, San Francisco, Oakland and Emeryville.  These sick leave laws provide greater benefits that the California sick leave law and generally apply if an employee works two hours per week or more in that City even if the employer is not located there.  These laws differ in who is considered a family member, whether sick leave can be accrued or front loaded, as well as in other areas.

Accordingly, employers need to maintain an awareness of changes in sick leave laws in cities where they have facilities or have employees working.

E. Gender Wage Equality (Labor Code 1197.5)

This law was revised and effective January 1, 2016. The law prohibits employers from paying any employee less than an employee of the opposite sex for “substantially similar work, when viewed as a composite of skill, effort and responsibility.”

Additionally, the amendment prohibits employers from prohibiting an employee from disclosing the employee’s own wages, discussing the wages of others, inquiring about another employee’s wages, or aiding or encouraging any other employee to exercise his or her rights under these provisions.

As of January 1, 2017, the law has been expanded to also prohibit paying an employee less based on that person’s race or ethnicity. It also prohibits an employer from justifying an employee’s salary disparity based on that person’s prior salary.

F. Amendment to Labor Code Section 432.7 – Criminal History of Applicants – Also Known as “Ban the Box.”

The amendment prohibits employers from asking an applicant for employment to disclose, through any written form or verbally, certain information concerning arrests without a conviction, participation in pretrial or post trial diversion programs, or to use such information as a factor in determining any condition of employment, including hiring.

Excluded from the definition of conviction is a judicial adjudication entered by a juvenile court or any other court order or action taken against a person who is under the process and jurisdiction of the juvenile court.  There are also carve outs for health care facilities as defined by Health and Safety Code Section 1250 (dealing with the health of humans).

The City of Los Angeles passed an Ordinance, which is effective January 22, 2017, applies to all employers with 10 or more employees who are located in or doing business with the City of Los Angeles and provides:

  1. Covered employers are prohibited from asking any applicant about their criminal history or requiring disclosure of any criminal history.
  2. After a conditional offer has been made (defined as an offer of employment conditioned on the applicant’s criminal history), the employer can ask the employee about their criminal background, but must then perform a written assessment that links aspects of the applicant’s criminal history with the job duties for the position sought.
  3. If employers decide to deny the applicant the position, they must go through the “Fair Chance Process” which requires written notification to the applicant and gives the applicant five business days to provide information or documentation. Then the employer must perform a written reassessment before taking the adverse action of not hiring the applicant.
  4. There are carve outs for specific jobs, such as police officers or jobs that require use of a gun, or positions for which the employer is prohibited from hiring an individual convicted of a crime, etc.

G. Smoking in the Workplace (AB 7; Labor Code Section 6404.5)

This statute became effective June 9, 2016. Existing law prohibits smoking of tobacco products inside most enclosed spaces at a place of employment.

The new law expands the prohibition on smoking to an owner-operated business which is defined as one where the owner-operator is the only worker–meaning there are no other employees, independent contractors or volunteers working there. The new law also eliminates most prior exemptions that permitted smoking in certain work environments.

H. Janitorial Workers (AB 1978; Labor Code Sections 1420 et. seq)

This bill enacts new record-keeping, registration and training requirements for the janitorial industry. The intent is to protect janitorial workers from wage theft and sexual violence or harassment.

Effective July 1, 2018, an employer must register its business with the Division of Labor Standards Enforcement (“DLSE”) requiring the employer to make various disclosures and meet certain conditions. Thereafter, there are specified dates by which the DLSE and employers must be taken certain steps intended to minimize incidents of wage theft and sexual violence or harassment against janitorial employees.

I. Agricultural Employee Overtime (AB 1066; Labor Code Section 857 et. Seq)

Existing law states agricultural workers who work more than 10 hours per day are entitled to overtime at 1 1/2 times their regular rate of pay. Agricultural employers are also exempt from the requirement to provide one day’s rest in seven worked.

Effective January 1, 2017, agricultural employers are no longer exempt and cannot require employees to work more than six days in seven. The new law will phase in increased over time requirements for agricultural employees over a period of four years beginning January 1, 2019.

J. Single-User Restrooms (AB 1732; Health & Safety Code Section 118600)

  1. Effective March 1, 2017, all single-user toilets in any business establishment, place of public accommodation, or state or local government agency must be identified by signage as all-gender toilet facilities and designated for use by no more than one occupant at a time, or for family or assisted use. “Single user toilet facility” means a toilet facility with no more than one toilet and urinal with a lock.

K. Employment Protections for Victims of Domestic Violence, Sexual Assault or Stocking (AB 2337; Labor Code 230.1)

Existing law prohibits an employer with 25 or more employees from discharging or discriminating against an employee who is a victim of domestic violence, sexual assault or stalking for taking time off from work for specified purposes.

Effective July 1, 2017, employers must also inform, in writing, each employee of such rights at the time of hire or at any other time upon request of the employee. The Labor Commissioner must develop and post on its website a form an employer may use to comply with this notice requirement.

L. Itemized Wage Statements (AB 2535; Labor Code 226)

Existing law requires an employer to provide employees with an accurate itemized statement in writing which discloses certain information related to hours worked and wages paid. The new law clarifies that employers are not required to include in itemized wage statements the total number of work hours by an exempt employee.

M. Minimum Wage Violations (AB 2899; Labor Code 1197.1)

Under existing law, employers who pay less than the required minimum wage are subject to a civil penalty and damages. The new law requires that, prior to an employer appealing a Labor Commissioner’s decision to a court, the employer must post a bond with the Commissioner equal to the total amount the Commissioner ordered the employer to pay, excluding penalties.  The bond must be in favor of the employee and is forfeited to the employee if the court enters judgment against the employer and the employer fails to pay the amount owed within 10 days from entry of judgment.

N. Unfair Immigration Practices (SB 1001; Labor Code 1019.1)

Under existing law it is unlawful for an employer to require an employee to provide more or different documents then are required under federal law, or to refuse to honor documents provided which, on their face, reasonably appear to be genuine. The new law permits applicants or employees to file a complaint with the Division of Labor Standards Enforcement and recover a penalty of up to $10,000 against the employer.

 O. Revisions to the Regulations Governing the Fair Employment and Housing Act (“FEHA”). 

In April 2016, California Regulations were amended to require employers to specifically list all of the bases of discrimination prohibited by FEHA.  For example, an employer’s Equal Employment Opportunity Policy must list each such protected classification.

Employers are also required to amend their discrimination, sexual harassment and retaliation policies to include specific provisions regarding their complaint and investigation procedures.

For most employers, if their employee handbook’s discrimination, sexual harassment and retaliation policies have not been updated since April 2016, those policies are probably not compliant with the amended regulation.

 P. New I-9 Form Must Be Used By Employers

  1. U.S. Citizenship & Immigration Services (“USCIS”) has revised and issued a new I-9 Form effective November 14, 2016. Employers are required to begin using the new I-9 Form on January 22, 2017.
  2. Employers are required to have every new employee fill out Section 1 of the I-9 Form on their first day of hire and Section 2 of the I-9 Form within three (3) days of their hire.
  3. Employers must retain I-9 Forms while the employee is employed and for at least one year after the employee leaves the employer.
  4. Applicants should not be requested to fill out an I-9 Form until they have been offered employment.
  5. Employers can be penalized if they fail to have employees fill out I-9 Forms and if they fail to retain the completed I-9 Forms. Employers can also be penalized for failing to properly fill out the I-9 Form.
  6. The form can be filled out in hard copy or on the computer and printed. Employers can ask to see and copy documents which support an employee’s right to work in the United States.  The best practice is to copy those documents and maintain them with the I-9 Form.
  7. Employers are subject to audit and should keep I-9 Forms in a file separate from employee personnel files. The file containing the I-9 Forms can then be handed to the government agent for review and there is no reason to review the employees’ personnel files.
  8. The USCIS has an Employer Handbook online to assist employers with their obligations.
  9. The new I-9 Form is available on the USCIS website at https://www.uscis.gov/i-9.

Thank you for joining us on CIarkTalk! We look forward to seeing you again on this forum.  Please note that views expressed in the above blog post do not constitute legal advice and are not intended to substitute the need for an attorney to represent your interests relating to the subject matter covered by the blog.  If you have any questions about the new employment laws, please feel free to contact Leonard Brazil by email at lbrazil@clarktrev.com or Deborah Petito at dpetito@clartktrev.com or telephonically by calling the author at (213) 341-1359.

 

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Will Your Exempt Employee Still Be Exempt?

By Deborah Petito|

In March of 2014, President Obama asked the Department of Labor to update the overtime regulations under the Fair Labor Standards Act (FLSA).  On May 17, 2016, the Department of Labor released its Final Rule (“Final Rule”) which only provides changes for the minimum salary requirements for exempt (white collar) employees.  The Final Rule revises the federal regulations related to the FLSA.  The last time overtime regulations were revised for while collar workers was in 2004.  Normally, federal laws and regulations do not impact California employees because California’s laws are generally more stringent than federal laws and regulations, however, this new rule will impact California exempt employees.

New Federal Salary Minimum for Exempt Employees

Under both California and federal law, in order to classify an employee as exempt from overtime and other wage and hour requirements, the employee must meet both a salary and duties test.  The Final Rule provides that exempt employees must earn a minimum salary of $46,467 in order to be exempt.  The new federal salary requirement is effective beginning December 1, 2016.  In California, the salary minimum for an exempt employee is two times the minimum wage which is currently $41,600 (2 x $10 x 2080 hours).  As of December 1, 2016, California exempt employees will also need to be paid a minimum of $46,467.

Under both California and federal law, employees must also meet the duties test (executive, administrative, professional) to be exempt.  The duties test for an exempt employee has always been more stringent under federal law which requires that exempt employees spend more than 80% of their time on exempt duties as compared to California which only requires that exempt employees spend more than 50% of their time on exempt duties.  The Final Rule does not affect the duties test for exempt employees.

Many California employers took a business risk that their determination of which employees were exempt would never be reviewed by the Department of Labor.  Now that the federal salary minimum will be higher, California employers may see more Department of Labor complaints which may result in a review of whether not exempt employees are actually exempt under federal law.  This article does not discuss the specific duties test for each exemption, but they are similar under federal and state law and can be found in the California wage orders or in the federal regulations.
Under the Final Rule, exempt salaries will be automatically updated every three years based upon wage growth over time.  The Department of Labor anticipates that the minimum salary will rise to $51,168 in 2020 and will post new salary levels six months prior to their effective date with the first posting on August 1, 2019.

Non-Discretionary Pay and Catch Up Provisions

The Final Rule also allows employers to pay up to 10% of the increased salary in non-discretionary bonuses, commissions or other incentive payments.  The key word is “non-discretionary.”  Employers may pay any shortfall in the salary minimum if the employee does not earn the required amount in non-discretionary income at the end of any quarter.  Any shortfall must be paid by the employer in the first pay period following the quarter (the prior 13 weeks) and can only be used to catch up the amount paid to the employee in the prior quarter.

California law does not have a catch up provision and as the California or local minimum wage rises, the minimum salary for California exempt employees may be less than 10% of the newly established federal minimum of $46,467.  For example, in Los Angeles County the minimum wage will be $10.50 as of July 1, 2016 which means that an exempt employee will need to earn $43,680 as of that date under California law in addition to meeting the duties test for the exemption.  Therefore, employers in Los Angeles County would have to either pay a minimum salary of $46, 467 or pay non-discretionary bonuses, commissions, etc. in the amount of $2,787 to meet the federal minimum salary requirements.

Employers also need to be mindful of city ordinances regulating the pay of employees in specific cities.  Los Angeles, Santa Monica, San Francisco and San Jose have already established separate minimum wages for their cities and this trend will continue.  Thus an increased burden is placed on employers to keep track of what local governments are doing in cities where employers maintain their businesses or where employees perform work in those cities.

Highly Compensated Employees 

Under federal law, a highly compensated employee is exempt if they earn a minimum salary, have primarily office or non-manual duties and “customarily and regularly” perform at least one of the duties of the applicable exemption.  The Final Rule raises the minimum salary for highly compensated employees from $100,000 to $134,004.  California does not have a similar provision so any exempt employee would need to meet all requirements of the duties test to be exempt.

Steps California Employers Should Take

All employers should make sure that their exempt employees are paid the highest applicable minimum salary (federal, California or local) as of December 1, 2016.  If employees classified as exempt do not meet the salary test, employers can do one of the following:

  1. Increase the salary of the employee to maintain their exempt status (assuming they also meet the duties test); or
  1. Reclassify the exempt employee as non-exempt and have that employee record their hours worked, including their meal breaks each day.  In this case, you need to pay the employee overtime for all hours worked over 8 in a day or 40 in a week.  The overtime requirements are also contained in the California Wage orders.   (The Wage Orders can be found on the California Division of Labor Standards Enforcement website – dlse.ca.gov.)

If you need assistance in determining whether or not an employee is exempt or whether they are being paid appropriately, please contact Deborah Petito or Leonard Brazil in the Clark & Trevithick Labor and Employment Department.

Thank you for joining us on ClarkTalk!  We look forward to seeing you again on this forum.  Please note that the views expressed in the above blog post do not constitute legal advice and are not intended to substitute the need for an attorney to represent your interests relating to the subject matter covered by the blog.  You should certainly consult legal counsel of your choice if you need assistance in determining whether or not an employee is exempt or whether they are being paid appropriately.  If you wish to consult with the author of this post or another attorney at Clark & Trevithick, please contact Debbie Petito dpetito@clarktrev.com orLeonard Brazil lbrazil@clarktrev.com by email at or telephonically by calling the author at (213) 629-5700.

0 comments on “Are Your Exempt Employees Still Exempt?”

Are Your Exempt Employees Still Exempt?

By Deborah Petito |

Just a reminder that the minimum wage in California increased to $10/hour on January 1, 2016.   Some cities and counties, including San Francisco and San Jose, have set higher minimum wage rates and employers should check their local jurisdiction.  The California Labor Commissioner has the authority to enforce the local minimum wage rates effective January 1st.  Also, keep in mind that exempt employees must make a minimum of two times the minimum wage.  Hence, exempt employees must make a minimum of $41,600 per year.  The minimum annual salary will be greater if the local minimum wage is higher.  If an exempt employee’s salary is less than $41,600, it does not matter what their job duties and responsibilities are, they will not be considered exempt in California and must be paid overtime and provided rest and meal breaks.

This is a good time to review your exempt positions to ensure that they meet the California and federal requirements for exemption, starting with the salaries.

Thank you for joining us on ClarkTalk!  We look forward to seeing you again on this forum.  Please note that the views expressed in the above blog post do not constitute legal advice and are not intended to substitute the need for an attorney to represent your interests relating to the subject matter covered by the blog.  You should certainly consult legal counsel of your choice when considering this or any other employment issue.  If you wish to consult with the author of this post or another attorney at Clark & Trevithick, please contact Debbie Petito dpetito@clarktrev.com or Leonard Brazil lbrazil@clarktrev.com by email at or telephonically by calling the author at (213) 629-5700.

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