July 1, 2016 Deadline Approaching for Notice To Take Advantage of Critical Backpay Provisions

As we reported in last December’s Piece Work Compensation is a Wreck Waiting to Happen, The Perils of New Labor Code Section 226.2 (Piece Work), California has implemented detailed requirements for production-based compensation systems beginning January, 2016. This new law affects whole industries that have grown around such piece work (“by-the-piece”) arrangements, benefiting workers and management. For instance, at levels that on average far exceed the applicable minimum hourly wage, it has been the norm for trucking companies to pay drivers for miles driven or deliveries completed, for auto shops to pay mechanics for repairs accomplished, and for service companies to pay technicians for jobs finished and paid for.

As Piece Work and our April, 2016 article California’s Itemized Pay Stub Requirements explain, Labor Code 226.2 now requires businesses operating with such pay systems, among other things: • to compensate affected workers at least the applicable minimum wage for each specific hour worked (no averaging permitted); • to accurately calculate and pay affected workers separately for each daily rest and recovery period; and • to include in each affected worker’s stub for each pay period detailed information showing the calculations and sub-totals for each component of the compensation system. These requirements also apply to companies that only use production as one of several factors in their compensation scheme.

However, section 226.2 provides an important protection to companies that have operated with such piece work systems for any length of time prior to 2016, the so-called “safe harbor” provisions. As explained in Piece Work, two 2013 California Court of Appeal decisions (Gonzales v. Downtown L.A. Motors and Bluford v. Safeway) directed that an employer is in violation of California’s minimum wage law – which requires such compensation for “every hour worked” – unless that business paid its piece workers separately for rest periods and for payable “non-production” time (for example, staff meetings, training time). Section 226.2(b) permits such businesses to avoid any potential past liability for such underpayments of minimum wage and other piece work-related obligations by fairly calculating a 3% – 4% amount from the gross wages of affected workers between July 1, 2012 and December 31, 2015 and by paying all such amounts, with accurate accounting documentation, by December 15, 2016.

However, in order for an affected employer to take advantage of this “safe harbor” protection, it must by July 1, 2016 give written notice to the Department of Industrial Relations (DIR) that it is engaged in such back pay calculations and payments. The DIR has posted a specific notice form for businesses to utilize by that deadline. The DIR will then post the name of the company giving notice on its public website until July 1, 2017.

An affected company that has missed this July 1, 2016 deadline will thus be subject to claims from any employee(s) who may have been underpaid minimum wages under the Gonzales and Bluford rules extending back as far as four years prior to the date such claim is filed with the DIR or with the courts. Particularly in alleged class action claims, the potential liability posed upon an employer who has missed that July 1, 2016 notice deadline may well be far in excess of the 3% – 4% payments deemed sufficient under the safe harbor rules to resolve all such issues.

Thus, any California employer that has utilized a piece pay plan at any time since 2012 should place careful attention on Labor Code 226.2 and how it affects operations. The matter is urgent as the July 1, 2016 safe harbor notice requirement will soon be upon us and then gone. Our lawyers Tim Bowles, Cindy Bamforth, or Helena Kobrin are available for more information.

Tim Bowles, May 20, 2016

California Bans Electronic Cigarettes from the Office

On May 4, 2016 California Governor Brown signed a series of legislative amendments effective June 9, 2016 which extend smoke-free workplace protections, re-define tobacco products to include e-cigarettes and vaping devices, and raise the legal minimum smoking age from 18 to 21.

Although current law prohibits the smoking of tobacco products at a place of employment or in an enclosed space, the new legislation broadens the definition of employer to include an owner-operated business (i.e., one without employees), eradicates the formerly lawful use of designated smoking breakrooms in the workplace, and defines “enclosed space” to include covered parking lots (in addition to lobbies, lounges, waiting areas, elevators, stairwells and restrooms).

Under newly amended Business and Professions Code sections 22950.5(c) and (d) “smoking” now includes the use of an electronic smoking device that creates an aerosol or vapor, in any manner or in any form, and “tobacco product” includes an electronic device that delivers nicotine or other vaporized liquids to the person inhaling from the device, including, but not limited to, an electronic cigarette, cigar, pipe, or hookah.

Employers should update their company policy and procedures to expressly prohibit e-cigarettes and vaping in the workplace and take steps to notify all employees of the above restrictions by the June 9 deadline.

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

Cindy Bamforth, May 18, 2016

PAYROLL RECORD-KEEPING 101

Employers should take proper steps to generate and protect complete and accurate payroll records. In addition to being legally obligated to compile such records, employers can also use these documents to refute a worker’s claim for unpaid overtime, off-the-clock hours worked, and/or missed meal breaks. Under federal and California law, employers must maintain and preserve payroll records that include hours worked, wages paid, pay dates, and gross and net pay.

As more specifically described in the California wage orders record-keeping requirements and other state regulations, each employer must keep accurate employee information including:

• Full name, home address, occupation and social security number.
• Ages of all minors.
• Time records showing when the employee begins and ends each work period.
• Meal periods, split shift intervals and total daily hours worked except for (i) any meal periods during which all operations cease and (ii) any authorized paid rest periods.
• Total wages paid each payroll period, including value of board, lodging, or other compensation actually furnished to the employee.
• Total hours worked in the payroll period and applicable pay rates. This information must be readily available to the employee upon reasonable request.
• Total balance of sick pay benefits.
• As covered in our blogs Piece Work Compensation Is a Wreck Waiting to Happen and California’s Itemized Pay Stub Requirements, Ignoring the Needed Details Poses Trap for Unwary Employers, other details regarding piece rate production and compensation for all applicable employees.

The above-listed records must be in English; written in ink or other indelible form; and properly dated, showing day, month, and year. Payroll records should be kept either at the employee’s place of employment or at a central location within California for at least four years to comply with employment-related records retention requirements. Employers should consult with their tax advisors for any additional IRS-mandated retention periods.

Employers should safeguard all such employee records from unauthorized use, disclosure, removal or destruction. Restrict access to such files to trusted human resources and/or accounting personnel only and always keep the records in a secure, locked location. After all, when it comes to wage and hour claims, the best defense is a good set of payroll records.

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

Cindy Bamforth, May 11, 2016

City of Santa Monica Increasing Minimum Wage Annually from 2016 to 2020

Continuing the trend in California and elsewhere in this country, the Santa Monica City Council has adopted an ordinance providing annual minimum wage increases for eligible employees to a maximum $15.00 per hour by 2020.

The measure covers any worker who performs at least two hours of labor within the city limits in a given workweek. While the ordinance thus applies to all companies employing such eligible individuals, those with no more than 25 persons on payroll need not implement the changes until July 1, 2017. The initial increase will be to $10.50 on July 1, 2016. This is $.50 higher than the current state minimum wage. See our previous blog, Amended Minimum Wage Notice Must Be Posted by July 1, 2014.

The Santa Monica minimum wage increases are the same as those recently passed by the City of Los Angeles and the County of Los Angeles. It provides for further annual increases each July 1, to:

$12.00 in 2017;

$13.25 in 2018;

$14.25 in 2019; and finally

$15.00/hour on July 1, 2020.

Employers who have 25 or fewer employees must begin implementing the increase in July 2017, and have until 2021 to reach $15.00/hour. An employer may pay specifically defined “learners” at 85 percent of minimum wage for up to 160 hours. Non-profits with more than 25 employees may apply for a waiver if they meet certain conditions.

After $15.00/hour is reached in 2020, Santa Monica will be following LA city’s and county’s lead, raising minimum wage annually based on consumer price index.

Santa Monica has also enacted a living wage ordinance for hotel workers, directing a $13.25/hour minimum wage starting July 1, 2016, then matching the City of Los Angeles hotel worker rate, starting at $15.37/hour as of July 1, 2017.

As discussed in our recent blog on the new state minimum wage law, if you have employees working in more than one municipality with its own minimum wage standard, this may mean different rates between them.

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

Helena Kobrin, May 10, 2016

New Changes on Employment Eligibility Verification Form I-9

All U.S. employers must complete and retain a Form I-9 for each individual hired for employment in the U.S., including citizens and non-citizens. You may have noticed, however, that the version in use reflects an expiration date of March 31, 2016.

U.S. Citizenship and Immigration Services (USCIS) is in the process of refining Form I-9 by the changes originally published November 24, 2015 in the Federal Register. The new form will be downloadable from the USCIS website for use on a company computer.

Until USCIS completes that final new form, the Office of Management and Budget approves it, and USCIS posts it online, employers should continue to use the existing version of Form I-9, available on USCIS’s online I-9 resource center.

For further information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin for more information.

Helena Kobrin, May 6, 2016

The City of Pasadena Approves Gradual Increases in Minimum Wage Starting July 1, 2016

On February 1, 2016, the Pasadena City Council enacted Ordinance No. 7278 to boost the city’s minimum wage to $15, following similar actions recently taken by Los Angeles and San Francisco. See, City of Los Angeles Minimum Wage Increasing Annually from 2016 to 2020 and San Francisco Minimum Wage. Also see UC Berkeley’s compilation of the growing number of California municipalities adopting minimum wage laws.

Commencing July 1, 2016, many employers (regardless of where located) must pay at least $ 10.50 per hour to all adult and minor employees who work two or more hours in Pasadena in a given workweek more specifically:

A) Employers with 26 or more employees shall pay:

1) From July 1, 2016, a $ 10.50 hourly minimum wage.

2) From July 1, 2017, a $ 12.00 hourly minimum wage.

3) From July 1, 2018, a $ 13.25 hourly minimum wage.

B) Employers with 25 or fewer employees shall pay:

1) From July 1, 2017, a $ 10.50 hourly minimum wage.

2) From July 1, 2018, a $ 12.00 hourly minimum wage.

By April 1 of each year, Pasadena shall publish a bulletin announcing the adjusted minimum wage rate to take effect on July 1 of that year. Employers in turn shall give written notification to each applicable current employee as well as each new employee at time of hire.

Any further increases depend on the City Council’s further review of local economic conditions, including costs of living.

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

Helena Kobrin, May 2, 2016

New Regulations May Require Policy Overhaul

The California Fair Employment and Housing Council (FEHC) enacts regulations that protect employees from unlawful discrimination, harassment and retaliation, stressing the employer’s affirmative duty to prevent such workplace misconduct.

As previously covered in New California Pregnancy Disability Leave Poster Requirements Take Effect On April 1, 2016, the FEHC amended its Fair Employment and Housing Act (FEHA) regulations effective April 1, 2016, requiring for the first time all employers with five or more employees to develop and distribute a harassment, discrimination, and retaliation prevention policy containing these mandatory provisions:

• Protected Categories: List all current protected categories covered under FEHA, including but not limited to a person’s race, color, national origin, religion, and gender.

• Prohibited Conduct: Indicate the law prohibits supervisors, managers, co-workers and third parties from engaging in prohibited conduct.

• Reporting Options: State that in addition to registering a complaint to one’s immediate supervisor, the employee may also report directly to a designated company representative (such as an HR manager or other supervisor), a complaint hotline, an ombudsperson (intermediary), and/or directly to the Department of Fair Employment and Housing (DFEH) or the Equal Employment Opportunity Commission (EEOC).

• Complaint Process: Ensure complaints receive confidential treatment to the extent possible, a timely response, impartial and timely investigations by qualified personnel, documentation and tracking for reasonable progress, appropriate options for remedial actions, and resolutions and timely closures.

• Supervisor Duty to Report: Instruct supervisors to report such complaints to a designated company representative, such as an HR Manager, so the company can attempt to resolve the claim internally.

• Neutral Investigation: The employer shall conduct a fair, timely and thorough investigation that provides all parties appropriate due process and reaches reasonable conclusions based on collected evidence.

• Remedial Measures: If at the end of the investigation misconduct is found, the company shall take appropriate remedial measures.

• Anti-Retaliation: Make clear that employees shall not be exposed to retaliation for lodging a complaint or participating in any workplace investigation.

Language Translation: Translate the policy into any language spoken by at least ten percent of the workforce at any facility.

Distribution of Written Policy: The written policy must be distributed by hard copy or email with an acknowledgment form for the employee to sign and return. Alternately, the employer may disseminate the written policy in any other way that ensures employees receive and understand it.

Covered employers should update their policies to meet the new requirements. Full compliance with these revised FEHA regulations should help prevent or promptly correct discriminatory and harassing conduct and deter frivolous lawsuits.

For more information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Cindy Bamforth April 29, 2016

Employers Must Protect Workers from Outdoor and Indoor Heat Illness

As covered in our blogs New Heat Illness Prevention Measures Now In Place and Heat Illness Prevention Amendments Are Likely to Take Effect May 1, 2015, heat illness prevention regulations obviously apply to industries that require significant outdoor labor, including agriculture, construction, landscaping, oil and gas extraction, and transportation and delivery of agricultural and construction products or other heavy materials.

However, all California employers are responsible for ensuring their indoor workers are also protected from high heat hazards. The California Occupational Safety and Health Appeals Board (Appeals Board) recently ruled against two employers with Injury and Illness Prevention Programs that failed to effectively address such unhealthy inside conditions. The case stemmed from a warehouse operator who suffered heat illness while working inside a metal freight container with a temperature exceeding 100 degrees F.

The Department of Industrial Relations (DIR) “Frequently Asked Questions” (FAQ) section includes helpful discussion of various heat illness prevention issues. The DIR also offers a separate information page on the requirements.

Our attorneys, Tim Bowles, Cindy Bamforth, or Helena Kobrin can also address questions and concerns.

Cindy Bamforth, April 22, 2016

California’s Gradual Increases in Minimum Wage, to Reach $15.00 Per Hour by January 1, 2022

On April 4, 2016, California jumped on the “living wage” bandwagon when Governor Brown signed Senate Bill-3 (SB-3) making California one of the first two states in the country to enact a $15 minimum wage. The other was New York, the measure signed into law by Governor Cuomo on that same day.

The California law follows a trend of minimum wage ordinances now in place for 18 cities and counties in this state. See our blogs, City of Los Angeles Minimum Wage Increasing Annually from 2016 to 2020, Oakland Minimum Wage Escalates to $12.55, San Francisco Minimum Wage Escalates to $12.25 on May 1, 2015 and Be Prepared for Statewide and Local Minimum Wage Increases. Also see UC Berkeley’s compilation of California municipalities with minimum wage laws.

SB-3 will increase the statewide minimum wage 50 cents per hour to $10.50 beginning January 1, 2017 and to $11.00 on January 1, 2018. The rate then increases $1.00/hour each year from 2019 until $15.00 in 2022. The minimum will then adjust annually by the cost of living with a maximum increase of 3.5%.

Businesses with under 25 on payroll do not need to begin complying with the state minimum wage hikes until 2018, but will need to follow any applicable local minimum wage in the interim.

A business operating in more than one city with a minimum wage ordinance is responsible for tracking all these individual laws, potentially obligated to pay employees working in one such city a different wage than in another. Even sending a single employee into an applicable city for one service call could affect his or her minimum wage requirement in the applicable pay period. Such municipal ordinances differ on the minimum numbers of hours worked within city or county boundaries for local law to apply.

These minimum wage hikes may create other new costs for California employers. For instance, minimum salaries for exempt-from-overtime employees will also increase annually, geared at double the minimum wage for a 40 hour week. Each hike will also raise the overtime premium, set at 1.5x or 2.0x a worker’s regular rate of pay. For instance, as of January 1, 2017, employees receiving minimum wage must be paid at least $15.75 for every 1.5 overtime hour and $21 for double time. Those overtime rates will be higher for any worker also receiving commissions, certain bonuses and/or piece work in addition to hourly compensation. See our blog Working Overtime in California.

These rising costs may require businesses to increase the costs of goods and services or to lay off employees or reduce hours to remain viable.

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

Helena Kobrin, April 20, 2016