Don't Sweat California Labor Law

California Wage & Hour Law ─ Avoiding Common Pitfalls with a Distributed

Workforce

Featuring Seyfarth Shaw LLP

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Welcome

Michelle Lanter Smith

Chief Marketing OfficerEPAY Systems, [email protected]

Today’s Host

EPAY Systems -- designed to meet the needs of your complex,

distributed workforce

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• Reduce your labor costs by 5% or more

• Keep you in control and in compliance

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Today’s Discussion

For better or worse, California is different.

Are you at risk?

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Our Speakers

Chelsea D. MesaAssociate, Seyfarth Shaw LLPLabor & [email protected](213) 270-9725

Colleen M. ReganPartner, Seyfarth Shaw LLPLabor & [email protected](310) 201-1556

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Ask Your Questions

To ask a question, simply type your question in the “Question”

box on the right side of your screen.

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Polling Question

• In the last six months, have you banged your head against the wall over a California wage-hour question?

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Why California?

• Federal wage-hour law stems from the Fair Labor Standards Act (FLSA).

• California has its own more extensive regulation of wages and working conditions.

• The FLSA does not preempt California law.

©2014 Seyfarth Shaw LLP

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Sources of California Law

• California Labor Code

• California Industrial Welfare Commission Wage Orders

• Judicial Decisions

• California Division of Labor Standards Enforcement (DLSE) Interpretations


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Compliance With California Wage & Hour Law Is Not Easy

• Meal and Rest Periods

• Employment Classification

• California Overtime

• “Off-the-Clock” Work

• Travel Time

• Expense Reimbursement

• Suitable Seating

• Reporting Time Pay

• Vacation

• Pay at Termination

• Itemized Wage Statements

• Wage Theft Notice

• Time Rounding

• Recovery Periods

• Independent Contractors


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Pitfall # 1

Failure to Comply with California’s

Meal and Rest Period Requirements


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California Meal Periods:Legal Requirements

Exceptions

• 5 hrs or less – no meal period

• A first meal period is waivable if the employee works 5 hrs but not more than 6 hrs

• The second meal period is waivable if the employee works less than 12 hours.

Rules

• Over 6 hrs and up to 10 hrs – one 30-min unpaid/off duty/ uninterrupted meal period must be provided before the 6th hour

• More than 10 hrs – two 30-min unpaid/off duty/uninterrupted meal periods must be provided.

• What does “provide” mean?


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• Less than 3.5 hours - not legally entitled to rest period.

• More than 3.5 hours to 6 hours - one ten-minute rest period.

• More than 6 hours to 10 hours - two ten-minute rest periods.

• Over 10 hours – three ten-minute rest periods.

Rest Periods


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• Compliant written meal and rest period policies

• Written policy requiring accurate recording of meal periods

• Written policy requiring reporting issues with meal and rest periods

• Training for managers and employees on policies

• Employee acknowledgments

• Electronic or paper attestations

Safeguards


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Penalties

• Employees who fail to provide meal breaks or fail to authorize or permit rest breaks must pay a penalty to the employees to the tune of one hour of pay for the missed break

• This does not “forgive” the violation, however. That is, it is not an option just to pay instead of giving breaks.

• The penalties are capped—one for meal breaks and one for rest breaks each day, no matter how many of each kind of violation occurred.


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A New Twist on an Old Penalty

Recovery Periods


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It’s Getting Hot in Here

o California OSHA requires that employees who work outside must get a recovery period of no less than five minutes to prevent heat illness if outside temperature is over 85 degrees

o What is a “recovery period?” - “a cool down period afforded an employee to prevent heat illness”

o Only applies to employers with employees who work outside, such as construction industry employers, agricultural employers, and the like

o In October 2013, the meal and rest break penalty provisions were expanded to provide a new penalty for failure to provide recovery periods

o Equivalent to one hour of employee’s pay


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Pitfall # 2

Misclassification of Employees under California’s

More Narrow Overtime Exemptions

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Employment Classification

Non-Exempt = Entitled to Overtime

Exempt = Not Entitled to Overtime


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Employment Classification ─ Three Tests for Exempt Status

• Salary Level Test – Do you earn enough?

• Salary Basis Test – Are you truly salaried?

• Duties Test – What do you do?


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Employment Classification ─Salary Level Test

• For most employees, as of July 1, 2014, the minimum salary level required is $720 per week

• The $720 per week may be paid in equivalent amounts for periods longer than one week:

o Biweekly $1,440

o Semimonthly $1,560

o Monthly $3,120

o Annually $37,440

• The minimum salary level under the federal FLSA is $455 per week, $1,971.66 per month, or $23,660 per year


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Employment Classification ─Salary Basis Test

• Regularly receives a predetermined amount of compensation each pay period (on a weekly or less frequent basis)

• The compensation cannot be reduced because of variations in the quality or quantity of the work performed

• Must be paid the full salary for any week in which the employee performs any work (subject to certain limited exceptions)

• Need not be paid for any workweek when no work is performed


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Employment Classification ─ Duties Test

• Primarily engaged in exempt work that requires the exercise of discretion and independent judgment

• “Primarily” means more than 50% of work time

• California law is more stringent than federal law


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Pitfall # 3

Failure to Comply with California’s More Stringent

Overtime Requirements


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• Federal / FLSA

• all hours worked over 40 in a workweek

• California

• all hours worked over 40 in a workweek

• all hours worked over 8 in a workday

• all hours worked on the 7th consecutive day of work in a single workweek


Overtime

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Payment of Overtime:What Is the Rate of Pay?

Federal

1.5 times the regular rate(Includes hourly pay, non-discretionary

bonuses, and shift differentials)


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1.5 times the regular rate for:

• over 8 hrs. in a workday (up to 12 hrs.)

• over 40 hrs. in a workweek

• first 8 hours on 7th consecutive workday in a workweek

2 times the regular rate for:

• over 12 hrs. in a workday

• any hours over 8 on the 7th consecutive day worked in a workweek

California


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Pitfall # 4

Employees Working

“Off the Clock”


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“Off-the-Clock” Work

o Pre or Post Shift Worko Working from Homeo After-Hours Callso After-Hours E-mailso After-Hours Computer Entryo Overachiever – under

reportero Underachiever – under

reporter


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“Off-the-Clock” Work

• The California Supreme Court endorsed Brinker’s off-the-clock policy:o It is your responsibility to clock in and clock out for every shift you work.

... [Y]ou may not begin working until you have clocked in. Working 'off the clock' for any reason is considered a violation of Company policy. If you forget to clock in or out, or if you believe your time records are not recorded accurately, you must notify a Manager immediately, so the time can be accurately recorded for payroll purposes.

• Review timekeeping policies to ensure they are legally compliant


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Challenges: Mobile Timekeepers

• Some of your non-exempt employees don’t stay in one place all day. What issues can occur?

o Are they recording all time actually worked? o Are they taking their meal, rest and/or recovery breaks? o Are they keeping accurate track of work mileage driven? o Privacy issues if they are required to carry GPS devices?


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Pitfall # 5

Failure to Comply with California’s More Stringent

Travel Time Rules


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Travel Time

o Commute time to and from work generally is unpaid.

o Travel time is compensable if the employee is subject to the control of the employer, even if the employee is not working.

.


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Overnight Travel Time

Federalo Travel time for work during normal

working hours is “hours worked.”

Californiao All travel time for work is “hours

worked” – before, during or after normal working hours


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Pitfall # 6

Failure to Comply with California’s Expense

Reimbursement Requirements


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Expense Reimbursement

• Under California Labor Code section 2802, California employers must reimburse employees for necessary employee business expenses.o Auto Expenses (Other than For Commuting)o Cell Phone Chargeso Client Entertainmento Travel


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Pitfall # 7

Failure to Comply with California’s Reporting Time

Pay Requirements


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Reporting Time Pay

• The Company must pay an employee for half of the employee’s usual scheduled day’s work (no less than 2 hrs and no more than 4 hrs) when the employee:o is required to report to work, and

o reports to work, and

o is not put to work OR is furnished less than half of the usual scheduled day’s work.

• The Company must also pay an employee for a minimum of two hours if the employee is required to return to work a second timein any workday


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• In Aleman v. AirTouch Cellular (Cal. App. 2011), the California Court of Appeal held that no reporting time pay is due for training meetings that were scheduled in advance, even though the meetings were scheduled for less than half the amount of time an employee typically worked.

• Reporting time pay only would apply if the employee is furnished work for less than half the scheduled meeting time.

Time Pay Requirements


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Polling Question

• Do you offer “personal days” or “floating holidays” that may be used for any purpose (or almost any purpose)? If yes, do you pay out California employees for their unused days?


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Pitfall # 8

Failure to Comply with California’s “No Use It Or Lose It” Vacation Rules


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Vacation

• No use it or lose it

• Employers can place reasonable cap on vacation accrual (1.5 times annual accrual is minimum)

• Employers can “cash out” accrued vacation time each year

• Must pay out accrued, unused at termination

• Floating Holidays


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Personal Time Off (PTO)

• In California, it is the equivalent of vacation, subject to the same rules

• Can be used to satisfy mandatory paid sick leave ordinances (e.g., San Francisco)


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Pitfall # 9

Failure to Comply with California’s Final Paycheck

Requirements


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Pay at Termination: The Rules

oVoluntary Resignationo Involuntary Terminationo Lay Off


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Pay at Termination:Waiting Time Penalties

• Exiting employees not paid all wages owed at termination can get “waiting time penalties.”

• Requires “willful” failure to pay, but that is a broad concept under California law.

• Unless you have reasonable defense to paying the wages, you generally owe the penalties.

• Ignorance of the law is no excuse!


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Pitfall # 10

Failure to Comply with California’s Itemized Wage Statement Requirements


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Itemized Wage Statements ─ Required Information

• Gross wages earned

• Total hours worked (not for salaried exempt employees)

• Number of piece-rate units earned and any applicable piece rate

• All deductions

• Net wages earned

• Dates of the pay period

• Employee name and last four digits of SSN or other employee ID.

• Name and address of the employer

• All applicable hourly rates for the pay period with number of hours worked at each rate


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Polling Question

• Does your company round time entries for hourly employees (e.g., to the nearest 5 minutes, 10 minutes, or 15 minutes)?


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Rockin' Around the Clock

o Trial court judge in class action against See’s Candy Shops said rounding of any kind violates California law

o Good News for Employers: The Cal Court of Appeal adopts the DOL and DLSE position: unbiased rounding is ok as long as it does not works to the disadvantage of the employee over a period of time

o But Beware: Do you know how your rounding policy works over a period of time?


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Pitfall # 12

Failure to Abide by Suitable Seating Requirements


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Take a Load Off

o Almost every wage order includes a requirement that employees be permitted to sit and provided “suitable seating” in order to do so What is suitable?

What is an adequate number?

o Where must these seats be placed?

o Regardless of whether an employee requests a seat o Must be in addition to any employees who require a seat

as a reasonable accommodation.


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Pitfall # 13

Misclassifying Independent Contractors


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To Contract or Not to Contract…

• When determining whether to classify as independent contractor or employee, consider the level of control you intend to exerto Is it on the results of the contract, or the details of how

they get to those results?

• Both the California EDD and federal IRS have several factor tests they use to make determinations, focusing mostly on control, oversight and supervision, and the importance of the tasks performed by the worker to the business itself


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You Can’t Control Me!

o New laws significantly increase penalties for misclassification already paying back employment taxes and overtime wages

o Now civil penalties for “willful misclassification” voluntarily and knowingly misclassifying

$5,000 to $15,000 per violation

if a pattern or practice, $10,000 to $25,000

o Anyone who, for money or other valuable consideration (such as an outside accountant), advises an employer to treat an individual as an independent contractor to avoid employee status is jointly and severally liable with the employer if the individual is found not to be an independent contractor. excludes those giving advice to their employers or

attorneys providing legal advice


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Presenter

John Gaudiuso

Sales EngineerEPAY Systems, Inc.

Contact John at:[email protected]

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EPAY—In Time with You

Uniquely flexible

Mobile workforce,

union contracts,

multiple job assignments?

Complex pay rules?

No problem!

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Reduce Your Labor Costs

Eliminate erroneous pay calculations, time rounding, and management inconsistencies

Eliminate buddy punching

Biometric time clocks with camera and finger print reader

Reduce costs associated with paper checks. Save an average of $2.87 per pay period/per employee.

or more!

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• Audit Trails• Overtime• Meal Breaks• Pay Differentials• Privacy and Security• Reduce Workers

Comp Claims• Did you have an

accident free day?

Minimize Compliance Risk

Meal & Rest Period Requirements

• Meal Breaks can be setup to be in monitor modeo Identify if the employee has taken their lunch after X amount

of hours after the start of their shift (when they clock in)

• Meal breaks can be identified as Missing, Late, Short, or Longo Initiate an ALERT to management or produce reports for

analysiso Views & reports can be produced to highlight meal break

exceptions so appropriate action can be taken (i.e., adjust time, make comments)

Misclassification of EmployeesExempt vs. Non-Exempt

• Employee Audit reports in Blueforce can reflect the role (e.g., service work versus supervisor) an employee has performed over a period of time

• Use data to monitor for improper compensation according to employee’s roles and responsibilities

• Watch for employees that are alternating between exempt and non-exempt roles regularly

Stringent Overtime Requirements

• Different OT rules can be setup in Blueforceo Daily OT o Daily DOTo Weekly or Bi-Weekly o Consecutive Days Worked

Off the Clock Work

• Mix or match collection deviceso For example, use punch in on an EPAY time clock,

punch out on a smartphone using Blueforce Mobile Punch if that eliminates “travel” time to the clock

• Use Blueforce auto append featureo For example, automatically add 30 minutes to the

daily timecard for every 8 hours worked

Travel Time

• Track travel time as employees move from location to location throughout the work dayo Punch in and out at each locationo Blueforce can total the travel time throughout the

day

• Or, employees can track travel time by entering the time into EPAY’s mobile, web or telephony collection devices when they punch out

Reporting Time Pay

• Ensure employees are always paid for showing up to work with Blueforce’s minimum hours worked rule

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Upcoming Education

Compliance Webinar Series with Seyfarth Shaw LLP

• Understanding the Affordable Care Act: Should You Pay or Play? Recorded Webinar

• Mobile GPS Webinar: Time Tracking & Mobile Apps. July 3rd:10:00 am cst

• Public Demonstration Webinar: Time Tracking & Mobile Apps. July 10th:10:00 am cst

Register at www.EPAYsystems.com

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Thank You!

Chelsea D. MesaAssociate, Seyfarth Shaw LLPLabor & [email protected](213) 270-9725

Colleen M. ReganPartner, Seyfarth Shaw LLPLabor & [email protected](310) 201-1556

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Seyfarth Shaw’s 2014 Cal-Peculiarities: How California Employment Law Is Different

Connect with EPAY on:o LinkedIn – follow our company page at EPAY Systemso Twitter -- @EPAYsystemso Sign up for our e- newsletter at EPAYsystems.com

Connect with Seyfarth Shaw LLP:o Wage & Hour Litigation Blog

http://www.wagehourlitigation.com/o California Peculiarities Blog

http://www.calpeculiarities.com o Twitter - @SeyfarthShawLLP

Bonus!

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Thank You!

Don't Sweat California Labor Law

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Transcript of Don't Sweat California Labor Law