Don't Sweat California Labor Law

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Need clarity regarding California labor law requirements? Help identifying key facts and strategies for maintaining compliance?
California employment law has deviated from elsewhere in America, making it a difficult landscape for employers to navigate without fear of litigation. In a recently recorded webinar, labor law attorneys from Seyfarth Shaw, LLP–the country’s top wage and hour litigator–shared their best wage and hour advice for employers with workforces operating in California.

What You’ll Learn:
Top employer pitfalls
Best practices for avoiding litigation and penalties
How to ensure compliance across every worksite
Want to learn more ways that EPAY can help your company fight labor laws

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Don't Sweat California Labor Law

  1. 1. California Wage & Hour Law ─ Avoiding Common Pitfalls with a Distributed Workforce Featuring Seyfarth Shaw LLP
  2. 2. Welcome 2 Michelle Lanter Smith Chief Marketing Officer EPAY Systems, Inc. mlsmith@EPAYsystems.com 773-499-7512 Today’s Host
  3. 3. EPAY Systems -- designed to meet the needs of your complex, distributed workforce 3 • Reduce your labor costs by 5% or more • Keep you in control and in compliance
  4. 4. 4 Today’s Discussion For better or worse, California is different. Are you at risk?
  5. 5. 5 Our Speakers Chelsea D. Mesa Associate, Seyfarth Shaw LLP Labor & Employment cmesa@seyfarth.com (213) 270-9725 Colleen M. Regan Partner, Seyfarth Shaw LLP Labor & Employment cregan@seyfarth.com (310) 201-1556
  6. 6. 6 Ask Your Questions To ask a question, simply type your question in the “Question” box on the right side of your screen.
  7. 7. Polling Question • In the last six months, have you banged your head against the wall over a California wage-hour question? 7
  8. 8. 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. 8 ©2014 Seyfarth Shaw LLP
  9. 9. Sources of California Law • California Labor Code • California Industrial Welfare Commission Wage Orders • Judicial Decisions • California Division of Labor Standards Enforcement (DLSE) Interpretations 9 ©2014 Seyfarth Shaw LLP
  10. 10. 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 10 ©2014 Seyfarth Shaw LLP
  11. 11. Pitfall # 1 Failure to Comply with California’s Meal and Rest Period Requirements 11 ©2014 Seyfarth Shaw LLP
  12. 12. 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? 12 ©2014 Seyfarth Shaw LLP
  13. 13. • 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 13 ©2014 Seyfarth Shaw LLP
  14. 14. • 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 14 ©2014 Seyfarth Shaw LLP
  15. 15. 15 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. ©2014 Seyfarth Shaw LLP
  16. 16. A New Twist on an Old Penalty Recovery Periods 16 ©2014 Seyfarth Shaw LLP
  17. 17. 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 17 ©2014 Seyfarth Shaw LLP
  18. 18. Pitfall # 2 Misclassification of Employees under California’s More Narrow Overtime Exemptions 18
  19. 19. Employment Classification Non-Exempt = Entitled to Overtime Exempt = Not Entitled to Overtime 19 ©2014 Seyfarth Shaw LLP
  20. 20. 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? 20 ©2014 Seyfarth Shaw LLP
  21. 21. 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 21 ©2014 Seyfarth Shaw LLP
  22. 22. 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 22 ©2014 Seyfarth Shaw LLP
  23. 23. 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 23 ©2014 Seyfarth Shaw LLP
  24. 24. Pitfall # 3 Failure to Comply with California’s More Stringent Overtime Requirements 24 ©2014 Seyfarth Shaw LLP
  25. 25. • 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 25 ©2014 Seyfarth Shaw LLP Overtime
  26. 26. 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) 26 ©2014 Seyfarth Shaw LLP
  27. 27. 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 27 ©2014 Seyfarth Shaw LLP
  28. 28. Pitfall # 4 Employees Working “Off the Clock” 28 ©2014 Seyfarth Shaw LLP
  29. 29. “Off-the-Clock” Work o Pre or Post Shift Work o Working from Home o After-Hours Calls o After-Hours E-mails o After-Hours Computer Entry o Overachiever – under reporter o Underachiever – under reporter 29 ©2014 Seyfarth Shaw LLP
  30. 30. “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 30 ©2014 Seyfarth Shaw LLP
  31. 31. 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? 31 ©2014 Seyfarth Shaw LLP
  32. 32. Pitfall # 5 Failure to Comply with California’s More Stringent Travel Time Rules 32 ©2014 Seyfarth Shaw LLP
  33. 33. 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. . 33 ©2014 Seyfarth Shaw LLP
  34. 34. Overnight Travel Time Federal o Travel time for work during normal working hours is “hours worked.” California o All travel time for work is “hours worked” – before, during or after normal working hours 34 ©2014 Seyfarth Shaw LLP
  35. 35. Pitfall # 6 Failure to Comply with California’s Expense Reimbursement Requirements 35 ©2014 Seyfarth Shaw LLP
  36. 36. 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 Charges o Client Entertainment o Travel 36 ©2014 Seyfarth Shaw LLP
  37. 37. Pitfall # 7 Failure to Comply with California’s Reporting Time Pay Requirements 37 ©2014 Seyfarth Shaw LLP
  38. 38. 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 time in any workday 38 ©2014 Seyfarth Shaw LLP
  39. 39. • 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 39 ©2014 Seyfarth Shaw LLP
  40. 40. 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? 40 ©2014 Seyfarth Shaw LLP
  41. 41. Pitfall # 8 Failure to Comply with California’s “No Use It Or Lose It” Vacation Rules 41 ©2014 Seyfarth Shaw LLP
  42. 42. 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 42 ©2014 Seyfarth Shaw LLP
  43. 43. 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) 43 ©2014 Seyfarth Shaw LLP
  44. 44. Pitfall # 9 Failure to Comply with California’s Final Paycheck Requirements 44 ©2014 Seyfarth Shaw LLP
  45. 45. Pay at Termination: The Rules o Voluntary Resignation o Involuntary Termination o Lay Off 45 ©2014 Seyfarth Shaw LLP
  46. 46. 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! 46 ©2014 Seyfarth Shaw LLP
  47. 47. Pitfall # 10 Failure to Comply with California’s Itemized Wage Statement Requirements 47 ©2014 Seyfarth Shaw LLP
  48. 48. 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 48©2014 Seyfarth Shaw LLP
  49. 49. 49 Polling Question • Does your company round time entries for hourly employees (e.g., to the nearest 5 minutes, 10 minutes, or 15 minutes)? ©2014 Seyfarth Shaw LLP
  50. 50. Pitfall # 11 Rounding Time Entries 50 | ©2014 Seyfarth Shaw LLP
  51. 51. 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? 51 ©2014 Seyfarth Shaw LLP
  52. 52. Pitfall # 12 Failure to Abide by Suitable Seating Requirements 52 ©2014 Seyfarth Shaw LLP
  53. 53. 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. 53 ©2014 Seyfarth Shaw LLP
  54. 54. Pitfall # 13 Misclassifying Independent Contractors 54 ©2014 Seyfarth Shaw LLP
  55. 55. To Contract or Not to Contract… • When determining whether to classify as independent contractor or employee, consider the level of control you intend to exert o 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 55 ©2014 Seyfarth Shaw LLP
  56. 56. 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 56 ©2014 Seyfarth Shaw LLP
  57. 57. 57 Presenter John Gaudiuso Sales Engineer EPAY Systems, Inc. Contact John at: jgaudiuso@EPAYsystems.com 312-291-2032
  58. 58. 58 EPAY—In Time with You Uniquely flexible Mobile workforce, union contracts, multiple job assignments? Complex pay rules? No problem!
  59. 59. 59 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!
  60. 60. 60 • Audit Trails • Overtime • Meal Breaks • Pay Differentials • Privacy and Security • Reduce Workers Comp Claims • Did you have an accident free day? Minimize Compliance Risk
  61. 61. Meal & Rest Period Requirements • Meal Breaks can be setup to be in monitor mode o 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 Long o Initiate an ALERT to management or produce reports for analysis o Views & reports can be produced to highlight meal break exceptions so appropriate action can be taken (i.e., adjust time, make comments)
  62. 62. Misclassification of Employees Exempt 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
  63. 63. Stringent Overtime Requirements • Different OT rules can be setup in Blueforce o Daily OT o Daily DOT o Weekly or Bi-Weekly o Consecutive Days Worked
  64. 64. Off the Clock Work • Mix or match collection devices o 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 feature o For example, automatically add 30 minutes to the daily timecard for every 8 hours worked
  65. 65. Travel Time • Track travel time as employees move from location to location throughout the work day o Punch in and out at each location o 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
  66. 66. Reporting Time Pay • Ensure employees are always paid for showing up to work with Blueforce’s minimum hours worked rule
  67. 67. 67 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
  68. 68. 68 Thank You! Chelsea D. Mesa Associate, Seyfarth Shaw LLP Labor & Employment cmesa@seyfarth.com (213) 270-9725 Colleen M. Regan Partner, Seyfarth Shaw LLP Labor & Employment cregan@seyfarth.com (310) 201-1556
  69. 69. 69 Seyfarth Shaw’s 2014 Cal-Peculiarities: How California Employment Law Is Different Connect with EPAY on: o LinkedIn – follow our company page at EPAY Systems o Twitter -- @EPAYsystems o 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!
  70. 70. Thank You! 70

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