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The one constant feature of California employment law is change. There is perhaps no better recent example than this state’s “piece work” compensation rules. Starting January, 2016, employers must fundamentally re-structure such pay systems or face increasing risk of legal claims, including potential business-busting class action lawsuits.
The one constant feature of California employment law is change. There is perhaps no better recent example than this state’s “piece work” compensation rules. Starting January, 2016, employers must fundamentally re-structure such pay systems or face increasing risk of legal claims, including potential business-busting class action lawsuits.
The Core Change in the Law:
Trucking, agriculture, and many other California industries have utilized “by the piece” pay for many years. Haulers have paid drivers by the mile traveled, growers have paid field workers by the bushel or basket, and vehicle repair shops have paid mechanics by the repair job completed. At its best, a wage “by the piece” acts as a win-win for labor and management, when pay rates are fairly set proportional to the enterprise’s overall income generated and workers, now encouraged to produce more to earn more, can be fairly rewarded for their efforts well above “by the hour” norms.
However, starting with two court decisions in 2013, it has not been that simple in this state. Effective January 1, 2016, the California Legislature added more complexity. See, Piece Work Compensation is a Wreck Waiting to Happen, The Perils of New Labor Code Section 226.2 (December, 2015).
California now takes the unique view that an employer must compensate a piece work employee at least at the applicable minimum wage level for “every hour worked,” meaning, unlike the federal system, a company can no longer average all piece pay over the hours worked in a payroll period to confirm an average of minimum wage per hour. Instead, California businesses must pay its piece workers separately for state-directed rest periods and for payable “non-production” time.
A Solution for Compliance with New Standards:
This unique reading of piece work requirements is a potential formula for confusion and conflict. How does one define payable “non-production time” exactly? It is only labeled in Labor Code 226.2 as “time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis.” What “not directly related” means here is anyone’s guess at this point. Is a trucker’s time spent fueling not directly related to his or her driving? Is a mechanic’s time in a coordination meeting not directly related to the repair jobs thus assigned to him or her that day?
However, section 226.2(a)(4) and 226.2(a)(7) provide a possible simple solution. As long as the employer pays an hourly rate of at least the applicable minimum wage for every hour worked in addition to any piece work compensation, the worker will be considered fully paid for his or her payable “non-productive” time.
This solution would thus require the employer to re-define its pay system and modify accompanying practices as needed. Instead of a “pure” or “exclusive” piece work wage (for example, only paying drivers by the mile), a company could change to a hybrid plan that includes: (1) an applicable minimum wage payment for each hour worked in a day; plus (2) a “net” piece work pay calculated by subtracting whatever hourly minimum wage the employee has earned in (1) from the total piece pay he or she previously earned on the “pure” piece work system.
This would not be the only change required to comply with new Labor Code 226.2. If a company has not been doing so for its piece workers, it will now have to require each such employee to accurately record and report his or her daily and weekly hours worked. As we will explain in future articles, that employer must also separately calculate and pay “rest and recovery periods” compensation and may also be obligated to calculate and pay premiums for daily or weekly overtime depending on the industry the business is in. That employer must also accurately document the new system with a revised and expanded paystub in compliance with all California standards.
Yet, this “hourly-plus-net-piece-pay” arrangement has the advantage of complying with the new section 226.2 while retaining the production incentives created by a piece work arrangement. In essence, a piece worker will not earn any less than he or she was earning before the change. With the additional “rest and recovery periods” compensation as above, that employee will actually be earning a little more each week than previously.
The Way Forward:
The new requirements began on January 1, 2016. If a piece work-paying company has yet to implement such a system, it is not too late. However, sooner is better by far. Each week that passes without these improvements is another week where that employer is potentially in violation of California standards and thus at risk of ever-increasing liability.
Our lawyers Tim Bowles, Cindy Bamforth, and Helena Kobrin are assisting many businesses with such urgently needed transitions. Our help also includes addressing any back pay issues arising for periods between January, 2016 and the new system’s implementation. Please contact our office should you need further information.
See also:
Tim Bowles
August 12, 2016
Effective July 11, 2016, San Diego became the next California city to set a minimum wage level above the state’s standard.
Effective July 11, 2016, San Diego became the next California city to set a minimum wage level above the state’s standard.
Under San Diego’s Ordinance No. 20390, all employers, regardless of size or location, must pay at least $10.50 per hour to any employee who works two or more hours in one work week within the geographic boundaries of the city. The state of California’s minimum wage is currently $10.00 per hour. Click here to find out if a particular address is located within those city limits.
Employers shall pay:
San Diego shall publish annual notices announcing the adjusted minimum wage rate for the upcoming year and its effective date. Employers must conspicuously post the city’s current Notice in English, Spanish or in any other languages spoken by at least five percent of the workforce.
Employers must also give each current employee and new hire written notification of San Diego’s special paid sick leave and minimum wage rights using the city’s Earned Sick Leave and Minimum Wage Employee Notification Form.
San Diego’s online frequently asked questions page regarding these rights provides more information.
For further assistance, please contact one of our attorneys: Tim Bowles, Cindy Bamforth or Helena Kobrin.
Cindy Bamforth
August 10, 2016
The U.S. Department of Labor (DOL) has revised the federalFair Labor Standards Act (FLSA) Minimum Wage posterand theEmployee Polygraph Protections Act (EPPA) poster.
The U.S. Department of Labor (DOL) has revised the federal Fair Labor Standards Act (FLSA) Minimum Wage poster and the Employee Polygraph Protections Act (EPPA) poster.
Starting August 1, 2016, U.S. employers must post these revised versions:
1. FLSA Minimum Wage Poster (FMW): In addition to simpler language throughout, this version includes:
2. Employee Polygraph Protection Act Poster: This version deletes the $100,000 civil penalty limit for an EPPA violation and updates the DOL’s contact information.
Employers may purchase these posters and other required state and federal notices from the California Chamber of Commerce or another qualified vendor.
For more information, please contact one of our attorneys, Timothy Bowles, Cindy Bamforth or Helena Kobrin.
Cindy Bamforth
August 5, 2016
The U.S. Department of Labor (DOL) issued itsFinal Rulein May 2016, raising minimum salary amounts for exempt-from-overtime executive, administrative, professional, computer and outside sales employees under theFair Labor Standards Act (FLSA). See “New Stricter Federal Requirements on Exemptions from Overtime, Employers Must Comply No Later than December 1, 2016.”
The U.S. Department of Labor (DOL) issued its Final Rule in May 2016, raising minimum salary amounts for exempt-from-overtime executive, administrative, professional, computer and outside sales employees 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.”
The new regulations, currently set to take effect less than four months from now, pose a sudden, 100%-plus increase in minimum salary for otherwise qualified exempt employees: from $455/week, $1,972/month, or $23,660/year to $913 per week, $3,957 per month or $47,476 annually.
On July 15, 2016, Congressmember Kurt Schrader (D – OR) introduced H.R. 5813, the Overtime Reform and Enhancement Act (OREA), to slow the Final Rule’s implementation. The measure seeks a four-step phase-in of the higher minimum over three years:
The bill would also eliminate the Final Rule’s automatic three year minimum salary increases that are to start in 2019, instead requiring the DOL to comply with the standard evaluation and justification process federal rulemaking law requires.
H.R. 5813 currently does not address the Final Rule’s increase from $100,000 to $134,004 for a “highly compensated” executive to qualify for exemption. The measure is also silent on the Final Rule’s minimum increase for motion picture exempt salaries from $695/week to $1,397/week (or equivalent for a less than six-day week). The bill may of course be amended to address these points.
In an election year particularly, the bill’s prospects of becoming law before the Final Rule’s December 1 effective date is anyone’s guess. Employers who plan to meet the full increase by that date can allow themselves to be pleasantly surprised if indeed H.R. 5813 succeeds in time.
If you need assistance with working any of the issues raised by these new regulations, our attorneys, Tim Bowles, Cindy Bamforth or Helena Kobrin, can help.
Helena Kobrin
August 5, 2016
As we have reported, all businesses with employees working within thegeographic boundaries of the City of Los Angeles(City) are potentially subject to its new minimum wage and paid sick leave rules:Ordinance No. 184320andOrdinance No. 184319(Work Ordinances). See, e.g.,Latest Minimum Wage Increases for California Cities,City of Los Angeles New Paid Sick Leave Requirements Effective July 1, 2016,City of Los Angeles Minimum Wage Increasing Annually from 2016 to 2020.
As we have reported, all businesses with employees working within the geographic boundaries of the City of Los Angeles (City) are potentially subject to its new minimum wage and paid sick leave rules: Ordinance No. 184320 and Ordinance No. 184319 (Work Ordinances). See, e.g., Latest Minimum Wage Increases for California Cities, City of Los Angeles New Paid Sick Leave Requirements Effective July 1, 2016, City of Los Angeles Minimum Wage Increasing Annually from 2016 to 2020.
In an attempt to consolidate the Work Ordinances’ passages in a single, easy-to-read document, the City published on July 25, 2016 an anticipated set of frequently-asked questions (Ordinances FAQs).
Ordinances FAQs restate Work Ordinances’ general definitions; the City’s minimum wage rate increase schedule; eligibility for paid sick leave; how qualifying “Employees” accrue and take paid sick leave; for what purposes an “Employee” can take paid sick leave; how to pay and track earned and taken sick leave; and other information Employers must provide to their Employees.
For additional assistance understanding and implementing the City’s Work Ordinances, please contact one of our attorneys Tim Bowles, Cindy Bamforth or Helena Kobrin.
Cindy Bamforth
July 28, 2016
A court order on the eve of a July 1 deadline threw into doubt whether California would be able to immediately enforce its new piece work compensation law,Labor Code 226.2. See,Storm Brewing Over Piece Work Safe Harbor(July, 2016). However, that judge has now further ordered the state may proceed to administer that law in full and without delay.Nisei Farmers League v. California Labor and Workforce Development Agency,July 25, 2016 order.
A court order on the eve of a July 1 deadline threw into doubt whether California would be able to immediately enforce its new piece work compensation law, Labor Code 226.2. See, Storm Brewing Over Piece Work Safe Harbor (July, 2016). However, that judge has now further ordered the state may proceed to administer that law in full and without delay. Nisei Farmers League v. California Labor and Workforce Development Agency, July 25, 2016 order.
Section 226.2 directed that a California piece work employer give a formal “safe harbor” notice to the state by July 1, 2016 if that business was going to opt to avoid potentially greater liability. A business then could do so by paying all affected workers by December 15, 2016 additional back pay to mid-2012 under one of two calculation methods. See, Safe Harbor in Sight, Piece Work Compensation in California (May, 2016) (Safe Harbor).
The state’s Department of Industrial Relations (DIR) currently lists at least 2,500 companies that have submitted formal safe harbor notices. The only change the above July 25 Order effected was to confirm extension on that July 1 notice filing deadline through July 28, 2016. The DIR will not accept any notices received after that date. Piece work employers may submit this notice online.
Timely filing of its safe harbor notice is only the beginning of a piece work employer’s required actions, all to be taken as soon as feasible. For such a business to meet its safe harbor requirements by paying up to 4% of gross earnings to each piece work employee between July 1, 2012 and December 31, 2015 (Safe Harbor Period) (see, Safe Harbor), these actions include:
A. Safe Harbor Period Back Pay and Documentation:
The new law allows employers to correct any good faith error on such calculations within 30 days of discovering the mistake.
There is much more at stake. Full “safe harbor” compliance will only protect a piece work employer from potential pre-2016 liability. Section 226.2 also requires such employer’s compliance with specific piece work pay standards from January 1, 2016 onward. For piece work companies that do not yet have such standards in place, further actions include:
B. Promptly Implement a Revised Piece Work Pay System:
As discussed in our Safe Harbor blog, section 226.2 now requires California employers to pay at least the applicable minimum wage to each piece work employee for every hour worked as well as a specially calculated premium for every rest or recovery period to which such employee is entitled for each day of labor. Thus, such a business can and should swiftly:
C. Further Back Pay Compliance, from January, 2016 to Date of New System Implementation:
With section 226.2’s standards effective January 1, 2016, an affected company should also swiftly take actions that will catch-up on such compliance for any 2016 pay periods preceding the above implementation, including:
Our lawyers Tim Bowles, Cindy Bamforth, and Helena Kobrin are assisting many such employers with these essential compliance steps, including help with the proper calculations and template and custom forms for the required documentation. Please contact our office should you need further information.
Tim Bowles
July 27, 2016
Continuing the trend of escalating minimum wage laws, numerous cities and one county in California increased their minimum wage effective July 1, 2016. See, for example, our blogs onSan Francisco,Santa Monica,Pasadena,Los Angeles City, andLos Angeles County. The laws vary in their application to smaller and larger employers, as described below.
Continuing the trend of escalating minimum wage laws, numerous cities and one county in California increased their minimum wage effective July 1, 2016. See, for example, our blogs on San Francisco, Santa Monica, Pasadena, Los Angeles City, and Los Angeles County. The laws vary in their application to smaller and larger employers, as described below.
The UC Berkeley Center for Labor Research and Education has published an on-line list of the local California jurisdictions with ordinances raising the minimum wage above the $10.00/hour statewide standard. All but one went into effect July 1, 2016. San Diego’s was effective July 11, 2016.
The ordinances specifically define the terms “Employer” and “Employee” for application of their standards. For example, the Los Angeles ordinance specifies an “Employee” to be a person who performs work for an employer for at least two hours in a week within city limits. That ordinance defines “Employer” as anyone who “employs or exercises control over the wages, hours or working conditions of any Employee,” whether directly or indirectly. Other municipalities have similar definitions with some variations.
Each ordinance requires that affected employers post an updated official notice where employees can read it easily. We supply links to access those notices below. Some of the ordinances require employers to post the notice in Spanish and/or other specific languages in addition to English. Others require that employers post the notice in other languages spoken by at least a certain percentage of their employees. See, for example, City of Los Angeles and El Cerrito.
Businesses must also provide a complete and accurate Wage Notice to each new employee.
If you have: (a) individual workers who perform work in more than one applicable municipality; or (b) facilities in different applicable municipalities where you have employees, you need to confirm any required implementation of the local minimum wage ordinance in each case. As compliance can be complex, we encourage you to obtain assistance from your attorneys, accountants, and payroll services. Each of the laws has its own nuances, including such things as future increases, provisions on counting tips in minimum wage or not, and exemptions. It is therefore important that you become familiar with the express provisions of any minimum wage laws that may apply to your company.
For further information, contact one of our attorneys Tim Bowles, Cindy Bamforth, or Helena Kobrin.
Helena Kobrin, July 21, 2016
No California employer is obligated to provide paid vacation time to its workers. However, such benefit is a common practice, promoting morale and productivity. Once a company grants paid vacation (say, one week annually), it is considered an accruing benefit, i.e., an employee earns it gradually throughout the working year. See,Vacation Pay in California, andRequiring Use of Paid Vacation for Unpaid Leaves.
No California employer is obligated to provide paid vacation time to its workers. However, such benefit is a common practice, promoting morale and productivity. Once a company grants paid vacation (say, one week annually), it is considered an accruing benefit, i.e., an employee earns it gradually throughout the working year. See, Vacation Pay in California, and Requiring Use of Paid Vacation for Unpaid Leaves.
While California employees are entitled to their vacations under such policies, business does not necessarily go on vacation during the prime months for such time off. In order to ensure continued production and service to their publics, employers have the right to manage their vacation pay responsibilities, including control over scheduling and the number of vacation days a given worker may take at any particular time.
Manager thought and care are required. For example, an employer may not deny vacation time to a worker simply because that person recently returned from a medical disability leave. Such grounds – unrelated to business production demands — could constitute unlawful retaliation. In the event management must deny a proposed vacation period or suggest alternative dates, written confirmation of the actual work-related reasons is a very good idea.
Thus companies need to specify the scheduling ground rules into any policy providing such benefits, including written requests well in advance of planned vacations and a clear statement that it is ultimately management’s prerogative when and how the company will schedule vacation time.
For further information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin for more information.
Cindy Bamforth, July 20, 2016
The City of Los Angeles (City) recentlyincreased minimum wageand doubled California’s paid sick leave requirements (Ordinance No. 184320) for “Employees,” i.e., workers performing labor within the City for a given employer for at least two hours in a particular week. (See below for City limits maps.)
The City of Los Angeles (City) recently increased minimum wage and doubled California’s paid sick leave requirements (Ordinance No. 184320) for “Employees,” i.e., workers performing labor within the City for a given employer for at least two hours in a particular week. (See below for City limits maps.)
As we previously noted, Ordinance No. 184320 did not clearly state whether small businesses with 25 or fewer “Employees” were allowed to wait until 2017 to comply with these City paid sick leave standards.
The City’s newly-issued official notice answers this question. Starting July 1, 2016, all Employers with 26 or more Employees must receive the City’s paid sick leave. Employers with 25 or fewer Employees do not have to provide these sick leave benefits until July 1, 2017.
The official notice also summarizes the City’s minimum wage increases and describes when and how sick pay is earned and used. The notice reiterates that Employees are protected from any discrimination or retaliation for exercising their rights to receive the City’s paid sick leave.
As stated in the City’s companion ordinance (Ordinance No. 184319), every Employer (presumably regardless of size) must post in a conspicuous place at any workplace or job site the City’s official notices in English, Spanish, Chinese (Cantonese and Mandarin), Hindi, Vietnamese, Tagalog, Korean, Japanese, Thai, Armenian, Russian and Farsi, and any other language spoken by at least five percent of the Employees at the workplace or job site. Employers may download the official notices at http://wagesla.lacity.org/.
Click here or here to find out if a particular address is located within City limits.
If you would like further, more detailed information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.