Running a business is difficult enough without inadvertently running afoul of what’s allowed.
Being number one is the California way.
When it comes to business, no state outranks us in production, whether it be wine, machinery, aerospace, computers, agricultural products or motion pictures. We’re tops in tourism, too. And we’re also first in number of employees and total payroll.
So it should come as no surprise that California also ranks first in another category: employment practices litigation (EPL). According to a study by specialist insurer Hiscox, California has the most frequent incidences of EPL charges in the country, with a 42 percent higher chance over the national average (which is 12.5 percent) of being sued by an employee. It also found the likelihood of catastrophic verdicts are significantly higher.
That’s why, when it comes to the spate of new employment laws effective in 2014, it behooves an employer to remember Benjamin Franklin’s famous words: “An ounce of prevention is worth a pound of cure.”
“In my opinion,” says Maier, “I think two [of the new laws] are big and the others fall into the not-so-important category. They may seem like they do big things, but I don’t think they change the state of affairs much.”
Anderies, Maier and Cynthia P. Smith, an employment lawyer with Coombs & Dunlap LLP in St. Helena—the legal experts we interviewed for this story—all cite the increase in minimum wage as the most important change that employers need to be aware of.
“The bottom line is that wage and hour issues will continue to dominate the employment law landscape, particularly in California, and all employers need to make sure they understand how to comply with both new and existing laws,” says Anderies.
Show them the money!
Effective July 1, California’s minimum wage increased to $9 per hour (previously $8 per hour). San Francisco’s new minimum is $10.74 per hour and San Jose’s is $10.15 per hour. North Bay businesses with employees working in those cities must pay those minimums. But, keep in mind, the new minimum wage law not only affects hourly workers—it also impacts salaried (exempt) employees, because the amount they must receive to remain exempt also increases.
“It’s rare to see minimum salaries being paid to exempt employees because usually they make more,” she continues. “But if you have a salaried employee who’s on the edge [of the salary scale], you must make the adjustment.” Employers should also review commission agreements for commission sales employees to make sure the minimum wage requirement is met. Most important, make sure the changes have been made by your payroll department and/or the vendor responsible for your payroll. An incorrect paystub can be the hangman’s noose in a wage and hour lawsuit.
“Plaintiff lawyers tend to prefer wage and hour lawsuits, because they’re often more black-and-white than other types of employment claims, like sexual harassment or discrimination, which tend to be more gray and often boil down to he-said/she-said scenarios,” Anderies says. “Both include attorneys’ fees, but wage and hour claims also include penalties that may dwarf an employee’s actual wage loss. So, a disgruntled employee may meet with a lawyer to complain about unlawful harassment or discrimination in the workplace, but before that meeting is concluded, the lawyer is sure to ask to see a copy of the employee’s wage statement to see if there might be wage and hour issues as well.”
Labor Code section 226 requires several items regarding an employee’s compensation, such as pay rate and number of hours worked, including overtime, to be itemized on the pay statement. And that’s often where employers make inadvertent but costly mistakes. “Many small businesses do their own payroll and may not know about all the pitfalls that have to do with wage and hour law,” Anderies explains. “The mistake might be unintentional, but intent doesn’t matter. It also doesn’t matter that other employers may be making the same mistakes. It’s like speeding: It doesn’t matter that everyone else is speeding, too; if you get caught, you’re the one paying the ticket.”
Bottom line? “Make sure all wage and hour pieces are buttoned up and rock solid,” Maier says. “That’s the first place they’ll get through. My practical advice is for employers to be very conservative. Have a policy that’s there’s no working off the clock and no overtime unless permission is given. Also keep good time records to show you’ve paid the employees correctly. It’s always been important, but now it’s even more important.”
Classified information
Anderies, Maier and Smith all note that employers also have to make sure they’re classifying employees correctly. “Another claim we see a lot are employees who are classified as exempt or salaried make the claim that they’re non-exempt in court or before the labor commissioner. The consequences are significant if an employee is misclassified,” Smith explains. “They can recover overtime, meal breaks, rest breaks, waiting time penalties, interest and attorney fees.”
“Salaried employees have to be performing certain exempt duties more than 50 percent of the time on a daily basis,” says Anderies. “The three most common exemptions are the professional exemption for licensed professionals such as doctors, lawyers and CPAs; the executive exemption for managers who supervise at least two or more employees; and the administrative exemption for employees involved in running the business who may not supervise two or more employees but nevertheless have a direct role in implementing and enforcing company policy [such as human resources employees or controllers]."
This is particularly important if you own a restaurant or are a fast food franchisee, Anderies explains. Oftentimes, managers and assistant managers are working the floor more than half the time. In recent years, restaurants and franchisees have become prime targets for misclassification lawsuits.
The administrative exemption is the trickiest, he continues, because employers often think anyone with an important-sounding title or some supervisory duties (for example, assistant managers) are covered by the exemption. “But often, those employees aren’t meeting the more rigorous California standard that they be performing exempt duties more than 50 percent of the time on a daily basis,” he says. “Instead, many assistant managers—who do, in fact, perform exempt duties throughout the day—simply don’t perform them enough and actually spend the majority of their time engaging in more ‘production-type’ work.
“This is particularly true of both managers and assistant managers in the restaurant and retail industries. These businesses, because of their typically high turnover of relatively low wage earners and seasonal employees, are prime targets for wage and hour class action lawsuits.”
Recovery periods
One new law of particular interest to North Bay employers is an amendment to Labor Code section 226.7, which mandates employers pay an additional one hour of pay to employees who are required to work through a legally mandated meal period, recovery or rest break. This requirement is now extended to employers of outdoor workers (vineyard and construction workers, for example) for situations in which employers fail to provide recovery periods for heat illness prevention.
“An employee gets whatever time he or she needs to recover, or must be paid for an extra hour of work,” Smith says. “The problem is how long should a cool-down period take? This is where you see nuances in the law. It says a cool-down is a rest in the shade for no less than five minutes, but it really is as long as needed. Employers want to comply, but many don’t really understand what it means.”
Employers need to make sure they publicize that their outdoor workers have the right to take recovery periods. “They should also provide shaded places with water and other things that are specified by Cal/OSHA. It’s an important law. If you remember, a few years ago, there was a young, pregnant woman working in vineyards who died from heat illness,” Smith says.
Sexual harassment
British rock star Rod Stewart might beg the question, “Da Ya Think I’m Sexy?” but under one of California’s new Equal Employment Opportunity (EEO) laws, it doesn’t matter at all. Senate Bill 292 effectively confirms prior judicial precedent by expanding and clarifying the statutory definition of what qualifies as sexual harassment under the Fair Employment and Housing Act. Now, it’s state law that sexual harassment conduct doesn’t necessarily need to be motivated by sexual desire.
“The alleged harasser doesn’t need to be romantically or physically interested in the employee [for an employee to file a sexual harassment suit]. He or she just needs to be treating someone different because of that person’s gender,” says Anderies.
“When I first heard about this, I thought it was weird, because I’ve been conducting sexual harassment training for years and I always knew desire wasn’t an element,” says Maier. “That’s been long established in case law. This is actually California catching up in regard to the statute. It’s now legislated so the court can’t find a way around it.”
And it doesn’t have to be harassment by gender opposites. A gay man, for example, who’s teased by another man for having effeminate mannerisms—when a woman wouldn’t be teased for exhibiting the same mannerisms—has basis for a sexual harassment claim, and vice versa.
“Employers should make sure their harassment policy covers this,” Maier says. And sexual harassment training for supervisors, which is mandated for companies with 50 or more employees, is a good idea no matter how big or small a business might be.
Immigrant status
Because much of the North Bay is ag-centric, employers frequently deal with migratory and seasonal workers whose immigration status—confirmed or not confirmed—has often left them with the short end of the stick when it comes to employment protections. New laws on the books help mitigate that issue.
Assembly Bill 263 adds new Labor Code sections that outline “unfair immigration-related practices.”
Employers cannot request more or different documents than what’s required under federal I-9 rules and can’t refuse to honor documents that appear to be genuine.
Employers also can’t “threaten to report the person to police or federal agents in retaliation for that person exercising his or her rights under the Labor Code,” Smith says, which was often the case when certain laborers filed complaints about unpaid wages.
“You can’t treat employees differently based on perceived immigration status,” Smith explains. “You can’t use E-verify for those you suspect [might be illegally in the United States], but not others.” In other words, profiling is illegal. And whatever you do, if you release an employee—whether his or her status is legal or illegal—make sure you pay the wages earned plus any termination payments.
“Whenever you have a migratory or seasonal workforce that comes and goes, one of the problems is failing to pay everything owed at time of termination,” Anderies explains. “If a person either quits or is fired, you need to calculate all accrued pay—including unpaid overtime and unused vacation—and include it in the final termination check.” If you don’t, the penalties are steep.
“In California, waiting time penalties [for termination pay] are significant. An employer will owe a full day’s pay for every day the termination pay is late, up to a maximum of 30 days. The problem is that termination pay issues generally don’t come to light until way after 30 days,” Anderies says. “The penalty payment often exceeds the wages owed. Let’s say the person was owed $500 in unpaid overtime. [By not paying it at termination], 30 days pass and you now owe several thousand dollars. The penalty is basically automatic, and unless the employee did something to prevent the employer from paying everything the employee was owed, there’s virtually no defense.”
On the horizon
Given the state legislature’s proclivity for passing employee-friendly legislation, expect another flurry to reach Governor Jerry Brown’s desk in the coming months. “More will be coming in. We just don’t have them yet,” says Smith.
But there’s more than that on the horizon. “I personally believe, moving forward, that we’re going to see lots of changes, not just in employment law, but in the interpretation of all of our state laws because of Jerry Brown’s appointments to the California Supreme Court,” says Smith.
Goodwin Liu, a professor from UC Berkeley, started his 12-year term in September 2011, and Brown just nominated Mariano-Florentino Cuellar, a professor at Stanford University and a Mexican immigrant (he’s yet to be approved). A third appointment is in the wings for the court’s last vacant seat.
“He’s truly committed to diversity with all the appointments he’s making, not just the Supreme Court appointments,” Smith says. “And that’s not bad for employers, even though some might think so.”
And while some North Bay business owners might be frustrated and convinced that California’s legislature is more than a little squirrely when it comes to employment laws, they can find solace in one instance where California doesn’t rank first: the nation’s craziest legislatures. Berkeley-based AlterNet, a nonprofit media organization (www.alternet.org), gives that honor to Arizona.
Wage and Hour
• California minimum wage is now $9 per hour, effective July 1, 2014, and will again be raised to $10 per hour on January 1, 2016.
• Domestic workers (caretakers and other in-home employees) are now protected by very specific overtime pay requirements, effective January 1, 2014.
• Meal and rest break prohibitions are now expanded to recovery periods to prevent heat illness.
• The penalty available for citations by the Labor Commission for failing to pay minimum wage has been expanded. There’s now a requirement that the employer pay liquidated damages to the employee, in addition to existing penalties.
• Labor Code Section 98.6, which protects employees who assert their rights under the Labor Code (by complaining of wage theft, for example) prohibits any retaliation or adverse action against the employee. It also is expanded to include both written and oral complaints and adds a civil penalty (very important to note) of up to $10,000 per employee per violation.
• Amounts due under a Labor Commission order, once final, can be created as a lien on the employer’s real property.
• Employers who win wage-claim lawsuits now may recover attorney’s fees and costs from the employee only if a trial court finds that the employee filed the lawsuit in bad faith.
• If an employer fails to remit withholdings from an employee’s wages that were made pursuant to state, local or federal law, it’s a criminal penalty.
• Garment manufacturers who fail to display their name, address and registration number at the front entrance of the premises now face a civil penalty.
• Bond requirements for car wash employers have been raised from $15,000 to $150,000, except for those who have a collective bargaining agreement in place that meets specified criteria.
• Successor farm labor contractors are now liable for wages or penalties owed by a predecessor farm contractor under certain circumstances.
• Employers that provide services or construction work for the government or public entities must pay the prevailing wage, which is usually significantly higher than minimum wage. Privately financed refinery construction projects also must pay prevailing wages under the new law.
Discrimination and Retaliation
• Members of the military and veterans are now protected from employment discrimination under the Fair Employment and Housing Act.
• Sexual harassment conduct doesn’t need to be motivated by sexual desire.
• Whistleblower protections have been expanded to include reports alleging a violation of a local rule or regulation. It also prohibits retaliation against an employee because the employer “believes the employee disclosed or may disclose information.”
Immigrant Protections
• An employer is prohibited from engaging in “unfair immigration-related practices” when an employee asserts protected rights under the Labor Code. For example, an employer cannot threaten to contact immigration authorities because the employee complained that he or she was paid less than the minimum wage.
• Employers who engage in unfair immigration-related practices can now be assessed penalties, including a private right of action.
• The state can now suspend or revoke an employer’s business license if that employer reports, or threatens to report, the immigration status of any employee because of a complaint about employment issues. Attorneys now can face disbarment for similar conduct against witnesses or parties in a lawsuit. However: Employers aren’t subject to suspension or revocation of a business license if they require a worker to verify eligibility for employment under Form I-9.
• A person (not just an employer) now may be guilty of criminal extortion if the person threatens to report the immigration status or suspected immigration status of an individual, relative or member of his/her family.
Leaves and Benefits
• There are new protections for crime victims to take time off from work to appear in any court proceeding in which a right of the victim is at issue. However, this law applies only to specific crimes, such as solicitation for murder and vehicular manslaughter while intoxicated.
• Existing protections for victims of domestic violence or sexual assault have been extended to victims of stalking, including time off work to appear at legal proceedings and to seek medical/psychological treatment (impacts employers with 25 or more employees only).
• It’s unlawful for employers to discriminate or retaliate against an employee who’s a victim of domestic violence, sexual assault or stalking. Employers also must now make reasonable accommodations for such victims, including implementation of safety measures.
• Employers with 50 or more employees now must provide a temporary leave of absence (up to 14 calendar days per year) for reserve peace officers and emergency rescue personnel to receive training. The previous law only covered volunteer firefighters.
• Paid Family Leave wage-replacement benefits for employees have been expanded to include benefits for time taken to care for a seriously ill grandparent, grandchild, sibling or parent-in-law. It doesn’t create the right to a leave of absence, but does provide workers with some financial compensation/wage replacement during a qualified absence.
• If you’re a North Bay employer with employees who are working in San Francisco, you now must consider requests for “flexible or predictable working arrangements to assist with care-giving responsibilities.” This protects employees from adverse action based on their caregiver status. This will require that a poster informing employees of their rights be posted.
• State and local agencies are now prohibited from asking a job applicant to disclose information regarding a criminal conviction until after it’s determined the applicant meets minimum employment qualifications. Exceptions include positions where a criminal history background check is required by law.
Workers’ Compensation
There are several bills that were signed into law in 2013 that impact workers’ compensation, including death benefits for dependent children, language assistance and interpreters, medical treatment and billing, copies of prescriptions and reporting of controlled substances. Perhaps the best one is AB 1309, which limits the ability of professional athletes who work for out-of-state sports teams to bring workers’ compensation claims in California for cumulative trauma (such as arthritis or brain injuries caused by multiple concussions). To file, these athletes will have to prove they worked a good part of their careers for teams based in California or spent more than 20 percent of their professional time working in California. So much for players from visiting teams getting a piece of the California workers’ comp pie.
