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Several California industries – trucking and agriculture in particular – have utilized “piece-rate” pay for many years, commonly to the benefit of management and employees alike. Drivers have earned by the miles traveled or loads delivered, field workers have made their wages by the bushel or basket, and mechanics have received their pay based on repair jobs completed. At its best, the arrangement has encouraged higher production for higher wages well above hourly norms while generating greater
Several California industries – trucking and agriculture in particular – have utilized “piece-rate” pay for many years, commonly to the benefit of management and employees alike. Drivers have earned by the miles traveled or loads delivered, field workers have made their wages by the bushel or basket, and mechanics have received their pay based on repair jobs completed. At its best, the arrangement has encouraged higher production for higher wages well above hourly norms while generating greater company profits.
California’s Rude Awakening for Piece-Rate Employers: However, beginning with two 2013 California appeals court decisions, since expanded by new Labor Code 226.2, this state has applied a unique approach. While federal law permits employers to average total piece pay to ensure each employee is receiving at least the applicable minimum wage over all hours worked in a given pay period, California directs businesses to pay its piece workers separately for state-directed rest and recovery breaks and for payable “non-production” time. See, Piece Work Compensation is a Wreck Waiting to Happen; The Perils of New Labor Code Section 226.2 for Trucking, Auto Repair and Other Industries (December, 2015).
This new take on piece pay exposed thousands of companies statewide to huge liabilities through class action suits for not having specifically paid up to that point for rest-recovery periods and/or for so-called compensable “non-production” time, e.g., a driver’s work time when not actually on the road, a field worker’s tailgate meetings with foremen and co-workers.
California Legislature Offers “Safe Harbor” Rescue for Past Piece-Rate Underpayments: No doubt the product of industry lobbying in Sacramento, Labor Code 226.2, effective January 1, 2016, among other things offered such employers a “safe harbor” option for avoiding such potentially devastating back pay liabilities: a payment of up to 4% of gross wages to affected piece-rate workers earned between July 1, 2012 and December 31, 2015 (Safe Harbor Period), as long as the employer submitted a public notice by July 1, 2016. Some 2,500 businesses statewide gave such notice.
Last Step of Safe Harbor Compliance is a Payment to the State with Proper Documentation: Those employers who submitted public notice must complete by December 15, 2016 a series of detailed and potentially time-consuming steps to achieve this safe harbor protection. Among these, a business must apply “due diligence” to locate each affected individual to provide him/her the required back pay payment. See, Employer Due Diligence Required To Locate Former Workers Under California’s Piece Work Safe Harbor; All Steps Must Be Taken by December 15, 2016 (November 8, 2016)
Section 226.2 anticipates that employers will not be able to locate every affected former employee despite such conscientious efforts. In this event, a company must by specific procedures pay the aggregate amount of the “3%-4%” safe harbor wages for all “un-locatable” employees to the “Industrial Relations Unpaid Wage Fund,” administered by the California Department of Industrial Relations (DIR). The employer must also pay the state an administrative fee equal to one-half of one percent of the “aggregate payments made” or $2,500, whichever is less. Section 226.2(d)(1). With the documentation, an employer is to submit along with the payment, any of those previously “lost” former workers may make application to the DIR to recover his/her safe harbor amount.
The DIR’s Frequently Answered Questions on Section 226.2 (226.2 FAQs) offer details for an employer’s submission of that remaining aggregate amount and accompanying documentation to the state:
“1. A statement in both printed and electronic format that lists the following information for each employee covered by the payment:
“2. One check for the total of all amounts being paid into the Fund at that time for employees who could not be located.
“Make this check payable to:
INDUSTRIAL RELATIONS UNPAID WAGE FUND
“3. A second check equal to ½ of 1% (.005) of the amount in item 2 or $2500.00, whichever is less.
“Make this check payable to:
LABOR ENFORCEMENT AND COMPLIANCE FUND
“Please send all of these items by no later than December 15, 2016, to the following address.
Department of Industrial Relations
Division of Labor Standards Enforcement
CASHIERING UNIT
2031 Howe Avenue, Suite 100
Sacramento, CA 95825
“We recommend sending everything by certified mail, return receipt requested, in order to confirm timely delivery and receipt.”
The 226.2 FAQs also remind employers that all safe harbor back pay to affected workers are net checks, after deduction of payroll taxes and tax withholding, and subject to tax payment. This also applies to an employer’s payment to the Unpaid Wage Fund: for those former employees who could not be located: “[i]f an employer is making a payment into the Unpaid Wage Fund for a former employee who could not be located, the employer should perform all tax withholding, tax payment and tax reporting for that payment, and pay only the net amount due to the employee into the Unpaid Wage Fund.”
The 226.2 FAQs also direct employers with questions on payroll taxes, withholding and reporting on any safe harbor payments to the California Employment Development Department (EDD) Taxpayer Assistance Center at 1-888-745-3886.
Safe Harbor Employers Must Retain Pertinent Records Until December 16, 2020: As the 226.2 FAQs also point out, affected employers must “preserve all records of hours worked, calculations of hours worked, and records of payments made to employees and the Labor Commissioner . . . until December 16, 2020, and furnish the records related to an employee on request by the employee.” Labor Code 226.2(d)(3).
The Time is Now to Complete All Remaining Safe Harbor Steps: With just a few weeks remaining in front of the immovable December 15, 2016 deadline, any employer opting to comply with the “safe harbor” requirements should have a clear plan and “critical path” to complete all steps.
Please contact any of our lawyers Tim Bowles, Cindy Bamforth, and Helena Kobrin should you need further information.
See also:
Tim Bowles
November 14, 2016
For some 15 years, Luis Castro-Ramirez was the only family member qualified to administer daily dialysis treatments to his ailing son. When Dependable Highway Express, Inc. (DHE) hired Castro-Ramirez in December 2009, his supervisors accommodated his request for morning shifts so that he would arrive home afternoons in time to tend to his son’s needs.
For some 15 years, Luis Castro-Ramirez was the only family member qualified to administer daily dialysis treatments to his ailing son. When Dependable Highway Express, Inc. (DHE) hired Castro-Ramirez in December 2009, his supervisors accommodated his request for morning shifts so that he would arrive home afternoons in time to tend to his son’s needs.
In March 2013, Castro-Ramirez’s new supervisor purportedly ceased accommodating his morning schedule requests. Despite Castro-Ramirez’s complaints to management, DHE terminated his employment for refusing to work the new afternoon work shifts.
Castro-Ramirez promptly filed a lawsuit against DHE. In addition to retaliation and wrongful termination claims, he alleged DHE was liable under an unsettled legal theory: “associational disability discrimination,” including an employer’s duty to accommodate non-disabled employees “associated” with a disabled family member.
It is well established that employees who are themselves disabled are protected from discrimination under the Americans with Disabilities Act (ADA) and Title VII of the Civil Rights Act of 1964, as well as California’s Fair Employment and Housing Act (FEHA). See, California’s Anti-Discrimination Legislation. Likewise, employers have a duty to explore and provide reasonable accommodation to disabled employees. See, Employers Duties To Reasonably Accommodate Worker Disabilities (May, 2015). It’s less clear whether employers must accommodate based on theories of associational disability.
The Court of Appeal reversed the trial court’s ruling, holding employers have a duty under FEHA to prevent associational disability discrimination and provide reasonable accommodation to an applicant or employee who is associated with a disabled person. Castro-Ramirez v. Dependable Highway Express, Inc. (2016) 2 California Appellate Reporter, fifth series (Cal.App.5th) 1028.
California employers should thus proceed deliberately and with caution when faced with an employee’s scheduling or other requests to care for disabled family members.
For more information, please contact one of our attorneys Tim Bowles, Cindy Bamforth or Helena Kobrin.
Cindy Bamforth
November 11, 2016
In the few weeks remaining before the mid-December 2016 deadline, thousands of California businesses must complete all required steps to accomplish “safe harbor” protection from potentially significant piece rate back pay liabilities. Specified inLabor Code 226.2(b), These actions include:
In the few weeks remaining before the mid-December 2016 deadline, thousands of California businesses must complete all required steps to accomplish “safe harbor” protection from potentially significant piece rate back pay liabilities. Specified in Labor Code 226.2(b), These actions include:
(1) accurate calculation of the safe harbor amounts owing to each employee (essentially 4% of each worker’s gross earnings for “piece work” pay periods between July 1, 2012 and December 31, 2015 (Safe Harbor Period);
(2) timely payment of that compensation to each such worker; and
(3) an accompanying detailed statement explaining the basis for the payment and its calculation.
For greater detail, see The End Is Nigh; California’s Piece Work Employers Must Convey All Back Payments and Statements by December 15, 2016; There is No Provision for Extensions (Deadline Article).
As the Deadline Article explains, waiting until the last minute to issue the safe harbor checks will likely not afford the protection the law provides. Section 226.2(d) requires employers to use “due diligence, including the use of people locator services, to locate and pay former employees” in the event those individuals have relocated. For any and all former piece rate workers employed for any portion of the Safe Harbor Period that the employer cannot find despite such “duly diligent” efforts, that employer must submit a lump sum payment to Labor Commissioner by December 15, along with detailed description of the ex-workers included, in both hard copy and electronic form. No business is going start and finish that process on the eve of that deadline.
Due Diligence and People Locator Services: What actions satisfy an employer’s “due diligence” requirement to track down affected former employees? The Labor Commissioner’s Frequently Answered Questions on Section 226.2 (226.2 FAQs) state there is no definite answer:
“Labor Code section 226.2 does not define what constitutes ‘due diligence,’ other than to state that it includes, but is not limited to ‘the use of people locator services.’ … There are a variety of people locator services available on the Internet through which someone may search a name in an attempt to locate a current address. Many of these services offer a one-month pass, for a small fee, that allows for an unlimited number of searches. Given the statute’s reference to the use of people locator services, ‘due diligence’ on an employer’s part likely would require use of one of these services for at least one search per employee for whom the employer does not have a current address.
“Beyond this specific requirement, what constitutes ‘due diligence’ would depend on the circumstances. In general, the concept of due diligence incorporates elements of both reasonableness (what is reasonable under the circumstances?) and good faith (was a genuine effort made?). As such, relevant factors would include the size of the payment being made to an employee and the nature and extent of the information the employer has about that employee. For example, if the employer does not have current contact information for a former employee, but continues to employ the former employee’s brother, “due diligence” might require the employer to ask the brother if he has a current mailing address for the former employee. If, on the other hand, the employer does not have a current address for a former employee, a people locator search is unsuccessful because the former employee has a very common name, and the employer has no other direct information about how to locate that person, then the employer may have done its ‘due diligence’ as to that particular employee.
“Another way to approach this question is to put oneself in the shoes of someone who has left the area but is now owed some money by a former employer – what efforts would you reasonably expect that employer to make to find you and make sure you get paid?”
The 226.2 FAQs do not go far enough in explaining the use of people locator services. Just picking the cheapest service may well fall short of the required “due diligence.” The lowest level of so-called skip tracing, while inexpensive, utilizes a person’s name and address only and significantly less effective than the higher level, somewhat more expensive, service. The latter allows the customer employer to supply the person’s social security number (SSN) and other private information. Where, as the usual practice, an employer maintains former workers’ SSNs, “due diligence” suggests that business should opt for the higher service. While this firm does not recommend any particular “people locator” vendor, we have found, for example, www.locateplus.com helpful in describing its services. To utilize this higher SSN-based locator service and due to the privacy issues involved, a prospective subscriber-employer will have to pass a background check with the vendor.
At this point, a business that is opting to comply with the “safe harbor” requirements should be well-along with the process. For an employer that has not yet begun, the time is now. Please contact any of our lawyers Tim Bowles, Cindy Bamforth, and Helena Kobrin should you need further information.
See also:
Tim Bowles
November 8, 2016
Agricultural employers in California must prepare to overhaul their compensation schemes under thePhase-In Overtime for Agricultural Workers Act of 2016(Act), a new law signed by the Governor on September 12, 2016. The Act affects all persons “employed in an agricultural occupation” (essentially field workers), lowering special employer-favorable thresholds for overtime and thus bringing the industry in line with most other businesses in California. However, the Legislature is phasing-in one of
Agricultural employers in California must prepare to overhaul their compensation schemes under the Phase-In Overtime for Agricultural Workers Act of 2016 (Act), a new law signed by the Governor on September 12, 2016. The Act affects all persons “employed in an agricultural occupation” (essentially field workers), lowering special employer-favorable thresholds for overtime and thus bringing the industry in line with most other businesses in California. However, the Legislature is phasing-in one of these changes over five years for businesses employing 26 or more agricultural employees and over eight years for employers of 25 or fewer agricultural workers.
The first phase — applicable to all agricultural employers regardless of size — begins January 1, 2017. Agricultural employers will generally no longer be exempt from the requirement that workers may not work more than six days in seven. (Labor Code 552; Labor Code 861.) However, Labor Code 554 permits an employer to have employees accumulate “days of rest when the nature of the employment reasonably requires that the employee work seven or more consecutive days, if in each calendar month the employee receives days of rest equivalent to one day’s rest in seven.” This permits an agricultural employer to run seven-day workweeks during harvest time.
Starting January 1, 2019, agricultural employers with 26 or more employees will be required to pay daily overtime (generally, 1.5 times the employee’s regular rate) as follows:
Employers with 25 or fewer employees must implement the same overtime requirements on the following schedule:
For further information, please contact one of our attorneys Tim Bowles, Cindy Bamforth or Helena Kobrin.
Helena Kobrin
November 4, 2016
TheCalifornia Department of Fair Employment & Housing(DFEH) has published itsannual statistical reporton unlawful workplace discrimination, harassment and retaliation charges filed in 2015.
The California Department of Fair Employment & Housing (DFEH) has published its annual statistical report on unlawful workplace discrimination, harassment and retaliation charges filed in 2015.
Individuals filed 17,915 complaints with DFEH last year, up a few hundred from the 2014 total. Many contained multiple accusations. Retaliation, disability and sex-based grievances top the 2015 list, comprising 54.5% of the total:
The Department reports it settled a total of 1,011 cases for which it obtained $12,143,133 in monetary recovery. The Department also filed 46 lawsuits last year for which disability rights violation was the most common allegation.
These statistics underscore the importance for all employers and employees to know and apply clearly written workplace policies prohibiting all types of unlawful discrimination, harassment and retaliation. Policies should also require reporting and specify prompt and fair internal investigation procedures to resolve any such matters. See, Is Your Harassment Policy California Compliant? New Regulation May Require Policy Overhaul (April, 2016).
For more information, please contact one of our attorneys Tim Bowles, Cindy Bamforth or Helena Kobrin.
Cindy Bamforth
November 2, 2016
For thousands of California employers who have compensated workers on a piece rate basis over the years, December 15, 2016 is a critical deadline for delivering the required back payments and accompanying accurate statements under the “safe harbor” provisions of newLabor Code 226.2. The state has made it very clear there areno extensions available under that law. See also,No Chance of Rescue from Safe Harbor; California’s Piece Work Employers Urgently Face Multiple Actions to Comply Fully with N
For thousands of California employers who have compensated workers on a piece rate basis over the years, December 15, 2016 is a critical deadline for delivering the required back payments and accompanying accurate statements under the “safe harbor” provisions of new Labor Code 226.2. The state has made it very clear there are no extensions available under that law. See also, No Chance of Rescue from Safe Harbor; California’s Piece Work Employers Urgently Face Multiple Actions to Comply Fully with New Law.
By their submitting written notice to the Department of Industrial Relations (DIR) by July of this year, some 2,500 California businesses have signaled their intent to fulfill any pre-2016 piece work back pay liability by calculating and paying each affected worker up to 4% of his or her gross earnings for “piece work” pay periods between July 1, 2012 and December 31, 2015 (Safe Harbor Period).
However, waiting until the last minute to issue checks on or near that December 15, 2016 cut-off date will likely not afford the protection the law provides. As full safe harbor compliance includes three critical steps that may take weeks to complete, best practice was to have started as soon as a company gave that safe harbor notice to the DIR. If a business has not yet begun the following actions, best practice is to start immediately.
1. Calculate: The employer must pay each employee an amount equal to 4% of that employee’s gross earnings “in pay periods [within the Safe Harbor Period] in which any work was performed on a piece-rate basis.” An employer may deduct up to 1% of that gross from the calculation for amounts already separately paid for rest and recovery periods and for “other nonproductive time” (as defined in section 226.2);
2. Compensate: Section 226(b)(4) requires the employer to begin payments of that back pay “as soon as reasonably feasible,” with completion no later than December 15, 2016. It is not just the statute’s “ASAP” language that dictates starting payments right away if a business has not already begun. The law requires employers to use “due diligence, including the use of people locator, to locate and pay former employees” in the event those individuals have relocated. For all those the employer cannot find despite such efforts, that employer must submit a lump sum payment to Labor Commissioner by December 15, along with detailed description of the ex-workers included, in both hard copy and electronic form. Section 226.2(b)(4),(d)(1),(d)(2). Obviously, an employer is unlikely to be able to start and complete these tasks in the closing hours before midnight, December 15.
3. Document: The employer must accompany each such payment with an accurate safe harbor statement with four distinct disclosures: (i) a statement that the payment has been made under section 226.2; (ii) statement on the calculation method for the payment, e.g., the 3%-4% method above; (iii) “a statement, spreadsheet, listing or similar document that shows for each pay period” during which the employee had piece work earnings the gross wages earned and any separate amounts paid for rest, recovery and other nonproductive time; and (iv) the calculations made to determine the total payment. Section 226.2(b)(5). Itemizing “each pay period” on this statement as required may not be a few hours’ work, particularly when a large number workers are involved. The check issued should be for the ensuing net amount, following standard withholding and employment tax deductions, as further shown on a compliant paystub.
For those companies affected that have not begun this process, there is no time like the present. Please contact any of our lawyers Tim Bowles, Cindy Bamforth, and Helena Kobrin should you need further information.
See also:
• Piece Work Compensation is a Wreck Waiting to Happen; The Perils of New Labor Code Section 226.2 for Trucking, Auto Repair and Other Industries (December, 2015)
• California’s Itemized Pay Stub Requirements (March, 2016);
• Safe Harbor in Sight, Piece Work Compensation in California (May, 2016); and
• Navigating Piece Work in California (August, 2016)
• California Piece Rate Law: No Time to Relax on Rest-Recovery Premium Pay (September, 2016)
Tim Bowles
October 31, 2016
California Labor Code section 515.5exempts certain computer software professionals from overtime compensation who receive specified minimum compensation. California’sDepartment of Industrial Relations(DIR) hasannounced its rate increasefor this minimum, effective January 1, 2017.
California Labor Code section 515.5 exempts certain computer software professionals from overtime compensation who receive specified minimum compensation. California’s Department of Industrial Relations (DIR) has announced its rate increase for this minimum, effective January 1, 2017.
To comply with the section 515.5 exemptions, California employers must pay otherwise qualified computer software employees a minimum hourly rate of $42.39, up from $41.85. Alternatively, an otherwise qualified employee paid by salary is eligible on minimum annual compensation of $88,318.55, payable at least once monthly at no less than $7,359.88.
An exempt computer professional must also meet each of the high-level skills and duties criteria for that exemption as laid out in Labor Code section 515.5. Among these, the employee must be “primarily engaged” (more than 50% of the time) in intellectual or creative work which requires “the exercise of discretion and independent judgment” applying systems analysis to determine “functional specifications” of hardware, software or systems; designing computer systems or programs; and/or documenting, testing, creating or modifying computer programs related to computer systems software or hardware design.
Although such qualified employees need not be paid overtime premium under California law, employers should further ensure such workers meet the overtime exemption for computer professionals under federal law.
It is also possible for computer professionals to qualify for the administrative, executive or “learned profession” exemptions from overtime. Each category possesses its own distinct qualification rules.
For more information, please contact one of our attorneys Tim Bowles, Cindy Bamforth or Helena Kobrin.
Cindy Bamforth, October 27, 2016
Effective December 1, 2016, the Federal Overtime Exemption Rule, “theFinal Rule,” will raise the minimum salary amounts for certain workers to qualify for overtime exemption under theFair Labor Standards Act (FLSA). SeeNew Stricter Federal Requirements on Exemptions from Overtime, Employers Must Comply No Later than December 1, 2016(May, 2016).
Effective December 1, 2016, the Federal Overtime Exemption Rule, “the Final Rule,” will raise the minimum salary amounts for certain workers to qualify for overtime exemption under the Fair Labor Standards Act (FLSA). See New Stricter Federal Requirements on Exemptions from Overtime, Employers Must Comply No Later than December 1, 2016 (May, 2016).
There are pending attempts to slow down or stop implementation of the Final Rule. In July, 2016, a member of Congress introduced H.R. 5813, the Overtime Reform and Enhancement Act (OREA), in July 2016 to phase in the higher minimum salary required for exemption over the next three years. See Not So Fast – Congressmember Seeks to Slow New Overtime Exemption Rule (August 2016). Congress has not passed the bill and it remains pending in Committee.
On September 20, 2016, 21 states and a business-interest group filed two federal lawsuits in the Eastern District of Texas challenging the Final Rule. They chose that district as it is known as a “rocket docket court,” normally moving cases along at relative lightning speed.
While a lame duck Congress could still pass H.R. 5813 after the November election, or the Texas court could issue an order these weeks preceding the December 1 deadline, companies cannot and should not wait to prepare.
The table below compares the current federal minimum salary requirements for otherwise qualified exempt employees with the new levels under the Final Rule. Depending on the state in which you operate, your current minimums may be higher, as shown in the column for California. If so, the new law would of course have a lesser impact than in other states.
Current Federal
California
Federal as of December 1, 2016
$455
$800
$913
$1,972
$3,467
$3,957
$23,660
$41,600
$47,476
To adopt and implement a workable plan for your company, it is good practice to list out all your exempt employees, comparing current salaries to Final Rule requirements. If the latter amount is drastically higher for any such worker, it would be a good idea to calculate what you would pay that person on an hourly rate plus overtime. Of course, no matter the decision, the company must ensure compliance with all legal requirements for the selected status.
For further information on the issues raised by these new regulations, please contact our attorneys, Tim Bowles, Cindy Bamforth or Helena Kobrin.
Helena Kobrin
October 20, 2016.
CaliforniaLabor Code section 515.6exempts certain licensed physicians and surgeons from overtime compensation as long as they receive set minimum hourly rates of pay. TheCalifornia Department of Industrial Relations (DIR)is increasing this minimum, effective January 1, 2017.
California Labor Code section 515.6 exempts certain licensed physicians and surgeons from overtime compensation as long as they receive set minimum hourly rates of pay. The California Department of Industrial Relations (DIR) is increasing this minimum, effective January 1, 2017.
To avoid California’s requirements to pay overtime premium rates after eight hours worked in a day or 40 in a week, employers will have to pay eligible physicians and surgeons the minimum equivalent of $77.23 per hour, up from the current $76.24 rate.
To document qualification for this exemption, employers will need to pay the physician or surgeon the minimum hourly rate, keeping accurate track of hours worked. Physicians and surgeons paid on a lump sum salary (whether weekly or otherwise) will not qualify for this exemption.
Under Labor Code section 515.6 a doctor is exempt-from-overtime only if he or she is a licensed physician or surgeon “primarily engaged” (more than 50% of the time) in duties that require that licensure. California Business & Professions Code section 2052 specifies such duties, requiring a medical license for anyone who “diagnoses, treats, operates for, or prescribes for any ailment, blemish, deformity, disease, disfigurement, disorder, injury, or other physical or mental condition of any person.”
Employers relying on this exemption will of course need to implement this rate change by the January 1 deadline.
Licensed medical doctors may also qualify for other overtime exemptions, including the administrative, executive, or professional exemptions. Each such category carries its own distinct criteria.
For more information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.
Cindy Bamforth
October 18, 2016