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

Federal Increase Due December 1, 2016 To Qualify Exempt-from-Overtime Employees

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

Week

$455

$800

$913

Monthly

$1,972

$3,467

$3,957

Annually

$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.

Minimum Hourly Rate Increases Are Near

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

California’s Home Care Organization Consumer Protection Act (the Act) required all home care agencies to be licensed before July 1, 2016. See Home Health Care Organizations Last Chance to Continue Operations After June 30, 2016 (June, 2016). If as a home care organization (HCO) you did not obtain a license by June 30, 2016 — or at least a conditional license — and are continuing to operate without one, you are in jeopardy of being investigated by the Home Care Services Bureau (HCSB).

The HCSB is receiving a large volume of inquiries about unlicensed HCOs. Such an inquiry puts the HCSB on notice to start an investigation, which it does within 10 days of the inquiry, first checking if the company in question is exempt from the requirements of the Act. Some examples of exempt businesses are hospices, home health agencies, and domestic referral agencies. Health and Safety Code 1796.17(b).

If no exemption applies, then the unlicensed HCO will be required to shut down or apply for a license immediately. An unlicensed HCO is subject to a potential fine of $900 for every day it continues in operation without at least a conditional license. Written Directives Version III (WD) 90.006 (p. 10); WD 90.026 (pp. 22-23); and Health and Safety Code 1796.55.

Since the HCSB began implementing the Act, its approach has been one of help and not punishment. With the HCSB still in its early stage of operations, its staff realize that some companies remain unaware of the Act and the requirement to register. In dealing with unlicensed HCOs, HCSB staff will consider the situation of each one that comes to its attention in determining if fines are required.

If the HCSB issues a conditional license, it is good for four months or until a license is issued, whichever is sooner, and can be extended up to three additional months. When an HCO applies for a conditional license, it is no longer considered unlicensed and no longer subject to the $900/day penalty.

On the other hand, if an unlicensed HCO refuses to apply for licensure, it is subject to the $900/day fine for as long as it continues to operate, and may also be referred for criminal prosecution if the HCSB determines that would be a more effective remedy. Health and Safety Code 1796.55. The Act also makes the operation of an unlicensed HCO a misdemeanor, subject to a $1,000 fine and imprisonment for up to 180 days. Health and Safety Code 1796.58.

If you are operating an unlicensed HCO, you are in jeopardy. It is predictable that HCOs that have complied with the Act or even consumers who do not find you listed on the HCSB website will report you to the HCSB. We urge you to confront the situation now before you run into problems.

For more information, please contact one of our attorneys Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin
October 14, 2016

What to Do When There’s a Death in the Family

On Monday morning, one of your two salespeople requests three days off to attend his grandmother’s funeral in Minnesota. On Thursday, the other salesperson requests five days off to attend the funeral of a loved one in Hawaii. Are you legally obligated to grant either or both requests? If so, must you pay for the time off? Can you require employees to use accrued vacation or paid time off (PTO) time?

Currently there are no California or federal laws granting private-sector employees the right to bereavement leave. Since 2007, California governors have vetoed all such leave bills.
In his 2010 veto, Governor Schwarzenegger stated, “While well-intended, the choice of whether or not to offer unpaid bereavement leave should be left to the employer. Further, this bill would impose new and somewhat ambiguous burdens on businesses as well as subjecting them to new threats of litigation over California-specific employment laws. During this challenging economic period, I am unwilling to add new burdens on them and subject them to new grounds for lawsuits.” In Governor Brown’s 2011 veto of a similar bill, he declared: “Granting bereavement leave when a close family member dies is the moral and decent thing to do and I believe that the vast majority of employers voluntarily make such an accommodation for the loss of a loved one.”

Although a California employer is under no obligation to do so, it is good practice to implement policy confirming whether and under what circumstances the company will grant bereavement leave. It should be clear, consistent, and yet flexible enough to tactfully address each unique situation. A bereavement policy should address:

• The amount of bereavement time the employee may take off, if any;
• Whether part-time or temporary employees are eligible;
• The definition of a “family member” for whom the bereavement leave may be taken;
• If the employee’s time off will be paid or unpaid;
• Whether the employee is required to use accrued vacation or PTO time;
• Company discretion to consider all relevant factors and to impose conditions in granting such leaves, including reconciling simultaneous requests; and
• The required elements for a leave request, including whether the employee should submit documentation such as an obituary or funeral notice.

For further information, please contact one of our attorneys: Tim Bowles, Cindy Bamforth or Helena Kobrin.

Cindy Bamforth
October 12, 2016

City’s Enforcement Guidelines Attempt to Make Sense of the Confusion

Beginning July 1, 2016, the City of Los Angeles’ (City’s) Minimum Wage Ordinance (MWO) imposes higher paid employee sick time benefits than the statewide level. For definitions of covered “Employers” and “Employees” and other details, see: City of Los Angeles New Paid Sick Leave Requirements Effective July 1, 2016, Ordinance Requires Double the Benefits California Law Currently Specifies (June, 2016) as well as the City’s Minimum Wage and Sick Time Benefits: Frequently Asked Questions (FAQ) (July, 2016). As detailed below, Employers with 25 or fewer Employees may delay providing the MWO’s sick leave benefits until July 1, 2017.

The City will enforce the MWO’s paid sick time benefits through the Office of Wage Standards (OWS) via Rules and Regulations (specifically, Regulation No. 4, pp. 9-11) published July 22, 2016. Regulation No. 4 covers many key points on the City’s paid sick leave mandate, including:

Methods of providing paid sick time benefits. Regulation No. 4 restates that Employers subject to the MWO must provide paid sick time benefits either by: i) providing 48 hours of paid sick leave to the Employee at the beginning of each employment year, calendar year, or 12-month period; or ii) providing one hour of paid sick leave for every 30 hours worked. See Rules and Regulations (p. 9).

Carry-over of paid sick time. The OWS now clarifies that unused paid sick time accrued by an Employee under either of the above two methods shall carry over to the following year of employment and may be capped at a minimum of 72 hours. Employers may also set a higher cap or no cap at all. See Rules and Regulations (p. 10).

Re-hired employees. Under MWO section 187.04 (I) if an Employee is rehired within one year of the date of separation from employment, accrued and unused paid sick time must be reinstated. However, the Rules and Regulations state that if an Employer previously compensated an Employee for all accrued and unused sick time benefits upon separation from employment, the Employer is not required to reinstate the Employee’s paid out sick time benefits upon such a rehiring.

Providing a more generous compensated time off policy. The OWS may determine that an Employer’s established policy is more generous than what the MWO requires and, after considering the “totality of the circumstances,” allow an Employer’s established compensated time off policy to remain in place even if it does not meet the MWO’s accrual rate and eligibility requirements. See Rules and Regulation (p.11).

Small business deferral form. Employers with 25 or fewer Employees may defer providing the MWO’s paid sick time by one year, i.e., until July 1, 2017. However, OWS requires all such Employers interested in the deferral to complete and retain Form MW-2. See City’s FAQs Nos. 39-45 and Rules and Regulations (pp. 16-18) for more information. Also see, Los Angeles Moves to Enforce City Minimum Wage Ordinance Required Forms Now Available (September, 2016).

Exempt-from-overtime employees. The City’s FAQ No. 9 ambiguously states that the MWO does not apply to exempt-from-overtime “white collar” employees because such workers would not qualify for the California minimum wage. This of course is clear regarding the MWO’s higher minimum wage levels. Overtime exempt workers are paid salary, not by the hour. However, read literally, FAQ No. 9 also exempts overtime exempt workers from the MWO’s higher level paid sick leave provisions. This makes no sense. After all, such workers are eligible for the statewide sick pay benefits. Unless and until OWS provides further guidance on this issue, the better practice is to provide paid sick time benefits at the MWO level to overtime exempt Employees as well as hourly non-exempt Employees.

If you would like further, more detailed information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Cindy Bamforth

October 6, 2016

Employers Must Use New I-9 Form

Starting January 21, 2017

Businesses nationwide will soon have an updated I-9 form to verify a new hire’s eligibility for employment. See: New Changes on Employment Eligibility Verification Form I-9.

The new form is in the final review stage. The U.S. Office of Management and Budget approved it in August, 2016. It is now over to the U.S. Citizenship and Immigration Service (USCIS) for any technical updates, with issuance no later than January 21, 2017. Once available, it will be valid until August 31, 2019.

In the meantime, employers are to continue to use the I-9 form with revision date “03/08/2013.” That existing form is available online. Additional information on the forms is available at I-9 Central on the USCIS website.

For more information, please contact one of our attorneys Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin,

October 4, 2016

Employers Must Give Close Attention To the Required Special Pay Calculation

California’s New Piece Rate Requirements: For many industries in California, paying employees on a piece rate system has been a long-time win-win for management and workers. Truckers earning by the miles driven, mechanics paid by a percentage of amounts charged to customers, and field workers compensated by the pounds of apples picked are of course paid more the more they produce. Such piece rate systems thus tend to generate wages well in excess of minimum wage when averaged per hour.

As we have relayed in several previous articles (see below), in the last three years the California courts and Legislature have implemented standards greatly complicating piece rate pay systems, including through new Labor Code 226.2, effective January 1, 2016. While these changes have motivated some employers to drop piece pay altogether, many other businesses must continue piece systems or risk losing the vast number of employees who want to work for such production-based incentives. Continuation requires managers to understand and comply with the new complexities.

This New Law Requires Special Pay for Rest and Recovery Breaks: Perhaps the most perplexing element of new Labor Code 226.2 is the special calculation now required to pay piece workers a premium each week for their entitled paid rest and recovery periods.

California employers must provide each employee with certain numbers of ten-minute paid rest breaks depending on how many hours that employee works in a given day. See: Employee Meal Periods and Rest Breaks; California’s Basic Requirements for Daily R&R.

California employers must also provide employees paid “recovery periods” to cool down and prevent heat illness posed by working conditions. See: Labor Code 226.7; Required Heat Illness Prevention for Outdoor Worksites; and Heat Illness Prevention Amendments Likely to Take Effect.

The California Division of Labor Standards Enforcement (DLSE) directs that employers calculate such premiums for all rest periods to which an employee is entitled in a given workweek, not just those the employee actually takes during that week. See, DLSE’s Frequently Asked Questions, Piece-Rate Compensation – New Labor Code 226.2.

Special Math Formula for the Rest-Recovery Premium: When a California employer includes a piece rate in its pay system, Labor Code 226.2 requires a special per hour premium rate for rest-recovery time :

(a) all non-rest and non-recovery compensation in a week;
DIVIDED BY
(b) the total non-rest and non-recovery working time for that week.

(c) Then, the resulting gross rest-recovery rate per hour
MINUS
(d) any hourly minimum wage already payable for all working hours that week;

EQUALS
(e) the premium rest-recovery rate.

For example: Joe Driver just put in a 40 hour week for Galactic Trucking (eight hours/day for five days), paid a base of $10.00 for all hours worked ($400 in hourly wages), plus $500 piece rate pay for his miles driven that week. Under California standards, Joe was entitled to ten 10-minute rest periods (two per day for five days), or a total of 100 minutes or 1.66 hours of rest time for that week. See chart contained in Employee Meal Periods and Rest Breaks; California’s Basic Requirements for Daily R&R.

Joe’s rest-recovery time premium rate is thus calculated as:

(a) All non-rest compensation for the week. This is $900 (the $400 hourly wages and $500 piece pay); minus $16.66 [1.66 rest hours x $10.00/hour]) = $883.34

DIVIDED BY
(b) Non-rest time (total time 40 hours minus rest time 1.66 hours): 38.34 hrs.

(c) Then, the resulting gross rest rate [$883.34 ÷ 38.34 hours] $23.03
MINUS
(d) minus the $10.00/hour already paid Joe for all hours worked
EQUALS
(e) the premium rest-recovery rate: $13.03/hour

Galactic Trucking thus must pay Joe an additional $21.63 in rest-recovery premium pay, for a total of $921.63 compensation for that week ($400 hourly, $500 piece, plus $21.63 in rest-recovery premium pay).

Our lawyers Tim Bowles, Cindy Bamforth, and Helena Kobrin are assisting many businesses on the implementation of California’s piece rate standards specified in Labor Code 226.2. Our help also includes addressing the back pay calculations and statements section 226.2 requires for those businesses that have elected the “safe harbor” for pay periods from July 1, 2012 through 2015. Please contact our office should you need further information.

See also:

• California’s Itemized Pay Stub Requirements (March, 2016);
• Safe Harbor in Sight, Piece Work Compensation in California (May, 2016); and
• No Chance of Rescue from Safe Harbor; California’s Piece Work Employers Urgently Face Multiple Actions to Comply Fully with New Law (July, 2016)
• Navigating Piece Work in California (August, 2016)

Tim Bowles
September 30, 2016

California’s Basic Requirements for Daily R&R

Except for salaried, legitimately exempt-from-overtime workers, California employers must provide each employee with certain numbers of unpaid meal periods and paid rest breaks depending on how many hours that employee works in a given day.

Unpaid Meal Periods

First Meal Period: Generally, employers may not employ a worker for a work period of more than five (5) hours a day without providing the person a meal period of not less than 30 minutes. However, if the total work period in a day is no more than six (6) hours, that meal period may be waived by mutual consent of the employer and the worker. See, Industrial Welfare Commission (IWC) Wage Orders and Labor Code Section 512.

For example, if an employee begins work at 8:00 a.m. and works an eight-hour day, he/she must start his/her single meal break on or before 1:00 p.m., the close of the fifth hour of work.

Second Meal Period: Generally, employers also may not employ a worker for more than ten (10) hours a day without providing a second meal period of not less than 30 minutes. However, if the total hours worked are no more than 12, employer and employee may waive this second meal by mutual consent as long as the first meal period was not waived.

For example, if an employee begins a 12-hour work day at 8:00 a.m., and takes his or her first 30 minute meal period between 12:30 p.m. and 1:00 p.m., then he/she must start his/her second 30 minute meal break on or before 6:30 p.m., the close of the tenth hour of work. Returning to the job at 7:00, that person could then work the remaining two work hours of that day, through to 9:00 that evening.

Employees must be relieved of all duty, must relinquish control of all work activities, must be given the reasonable opportunity to be uninterrupted during any such provided 30-minute meal period and must not be impeded or discouraged from taking that period. Otherwise, that meal period shall be considered “on duty” and counted as time worked. An “on duty” meal period shall be permitted only where the nature of the work prevents an employee from being relieved of all duty and when by written agreement between the parties an on-the-job paid meal period is agreed to.

The California Division of Labor Standards Enforcement (DLSE) recognizes that employers may require that workers stay on premises for their meals. However, the DLSE holds that in this instance, the worker is denied his/her time for his/her purposes and remains in effect under the employer’s control. With minor exceptions for child care, foster care and residential health care workers under IWC Wage Order 5, that employer must pay such workers for their required-on premises meal periods as above.

Paid Rest Breaks

Except for those workers validly classified as salaried, exempt from overtime, California employers must also provide (“authorize and permit”) each employee paid rest breaks. The amount of rest time shall be based on the total hours worked daily at the rate of ten (10) minutes “net rest time” per four (4) hours or major fraction thereof (i.e., more than two hours). However, an employer need not provide any such paid rest time for an employee whose total daily work time is less than 3.5 hours. See, IWC Wage Orders.

Thus:

Total Hours WorkedNumber of 10 Minute Rest Breaks0 to 3.5 hours 03.5+ to 6 hours 16+ to 10 hours 210+ to 14 hours 314+ to 18 hours 4

The DLSE has interpreted “ten minutes net rest time” as a consecutive ten minutes that begins once a worker has arrived at his/her appropriate rest area away from the workstation, e.g., a break room or perhaps an outside smoking area.

The DLSE recognizes that employers may require employees to stay on premises during their rest breaks. The Wage Orders generally direct that employers are required to provide suitable resting facilities for employees during working hours in an area separate from the toilet rooms. (5th paragraph)

IWC Wage Order 5 permits a limited exception to the “fully off-duty” requirement for rest breaks. An employee responsible for child care, foster care and residential health care may take his or her rest period while retaining general supervision of the applicable resident(s) if that employee is in sole charge of that person or those persons. However, an employer in these contexts must also authorize and permit another rest period for such a worker who had to interrupt a break to respond to the needs of residents. Wage Order 5, section 12(C).

Rest breaks are to be available in the middle of each four-hour work period insofar as practicable. Rest periods should not be combined with meal periods or other rest periods. Employees should not use rest breaks to start work ten minutes late or to end work ten minutes early.

If an employer fails to provide an employee a required meal period, rest break, or recovery period, that employer must pay that worker one additional hour of pay for each such period or break. The employer must include this additional pay in that employee’s next paycheck. See IWC Orders and Labor Code Section 226.7(c).

The Supreme Court of California’s Brinker decision (2012) clarified the meaning of “employer provided” meal periods and rest breaks. In essence, employers are not responsible for policing workplaces to make sure employees take their meals and rest breaks. Rather, employers are responsible for clear policies setting out the above standards and for consistently encouraging and supporting employee prerogatives to take their entitled times away from their labors during the workday.

See also,

• Brinker Decision and Rest Periods. California Employers Get a Break (May, 2012).
• Brinker: California’s Meal Break Breakthrough. Employers are No Longer the Lunch Police (May, 2012).
• Brinker: Employees May Skip Breaks. Yet Greater Flexibility Requires Greater Documentation (May, 2012).
• Brinker: Clocking In on Employee Timekeeping. Dos and Don’ts for California Employers (May,2012).
• Brinker’s New Rules for Meal and Rest Breaks. The Necessity of Management Training (May,2012).
• Brinker Case Settles for $56 Million California Restaurant Workers Settle High Profile Wage and Hour Class Action Lawsuit (August, 2014).

For further information, contact one of our attorneys Tim Bowles, Cindy Bamforth or Helena Kobrin.

Tim Bowles

(updated, revised September 22, 2016)