I am both proud and excited to be featured in two new training videos for workplace supervisors and human resources representatives handling California-specific and federal wage and hour issues.

Developed and produced by Kantola Productions, “California Wage and Hour Laws: What You Need to Know” is designed to help companies train their supervisors and human resources representatives to become better, more legally compliant managers.  The video consists of modules that break down the complex requirements regarding a variety of wage and hour matters including:

  • Exempt vs. Non-Exempt Employees
  • Employee vs. Independent Contractor
  • Overtime
  • Meal & Rest Breaks
  • Hours Worked

There is also a federal version of the video.

Both videos are available for purchase in several formats:  DVD, online training for up to 25 viewers, or instant streaming for a single user.  To receive a 20% discount, Fox Rothschild clients and their contacts can enter Fox20 in the “catalog code” box when filling out the online purchase form.

Take a look at a clip from the video below.  Enjoy!

If you are a professional in the hospitality industry, please join me for a presentation on the top Ten Legal Issues Facing HR Hospitality Professionals in 2016.   The event is sponsored by the Los Angeles Hotel HR Association and will be held on Thursday, February 25th at 6:00 pm at the Hollywood Roosevelt Hotel.  You can find out more information about it here

Not only will I review new laws and legal issues, but I will provide practical advice and specific guidance on how to remain compliant.  Topics will include:  the Fair Pay Act, other types of wage claims, minimum wage ordinances (including the LA Hotel Minimum Wage Ordinance), updates on PAGA (the Private Attorney General Act), joint employment, and independent contractor status.  If you work in Human Resources, Risk Management, Operations or Administration in a hotel in Los Angeles you won’t want to miss it.  I hope to see you there!

Copyright: iqoncept / 123RF Stock Photo
Copyright: iqoncept / 123RF Stock Photo

 

 

Nothing in California is easy for employers, and California’s new paid sick leave statute (AB 1522) is no exception.

Here is the first challenge. While employers can make employees give notice of paid sick time when foreseeable, they can’t really punish employees who take time off that is not foreseeable, because the statute prevents retaliation against any employee for using sick leave (or even requesting to use it). Employers are also prohibited from requiring employees to find a replacement worker to cover time off.

So, imagine this. Employee is due in at 9 am. Employee wakes up to a suddenly sick child at 7:15 am (not foreseeable). The employer’s policy requires a 2-hour minimum call out for a missed shift. However, the employee misses that window and calls at 8 am (or maybe even at 9 am when expected at work). The employee has not found a replacement to cover the shift. Now what? Can the employee be disciplined for failing to use the employer’s call out procedure? For not finding a replacement? Unfortunately, the answer is very likely – no. The employer is stuck with an absent employee, no one to cover, and no one to hold accountable.

Here is a second challenge. Sick pay is paid at the employee’s hourly wage. That’s easy, right? Think again. If the employee has different hourly pay rates or is paid commission in the 90 days before the sick leave is taken, then the rate will fluctuate. In fact, the rate for each paid sick day (or hour) must be calculated by dividing the employee’s total wages (not including premium pay), by the employee’s total hours worked in the full pay periods of the prior 90 days.

So, imagine a retail sales clerk who earns commission, or a hotel steward who also covers as a houseman at a different pay rate, or a server who earns a service charge for banquet functions – the appropriate sick pay rate for each of these employees will need to be calculated each time they use sick leave. Oh, and by the way, sick leave can be used in increments as small as two hours.

At this point, California employers (and those advisors trying to guide them) will need more than aspirin!

 

For decades, employers have relied on IRS policy that says when meals are provided for “the convenience of the employer,” the value of the meal is not taxable income. That policy is apparently about to change. The IRS announced on August 26, 2014 in its Priorities Guidance Plan that one of its new “priorities” will be new guidance “regarding employer – provided meals.” The Wall St. Journal reported on September 4, 2014 (subscription required) that IRS auditors are “flagging the issue and demanding back [payroll] taxes from companies amounting to 30% of the meals’ fair market value.” 

This development will affect the company cafeterias at high-profile tech companies in California as well as thousands of hotels and restaurants that provide free meals to employees. It is also a near certainty that where the IRS treads the state taxing authorities will be close behind.

This development may also impact the calculation of the “regular rate” for purposes of overtime compensation. If the value of the free meal is taxable compensation, Plaintiffs’ class action lawyers (who are already circling in the waters on this issue) will argue that the value of the meals must also be blended into the hourly rate on which overtime is calculated. For example, if the stated hourly rate is $10 (overtime = $15/hr) and the meal is worth $4, arguably, the new “regular rate” for an eight-hour shift would be $10.25 (overtime = $15.125/hr). California law on this “regular rate” and overtime point is not crystal clear, and we can expect litigation over the issue in the future. Some employers may want to proactively adjust their payroll practices in order to head off the potential problem.

We all knew there’s no such thing as a free lunch. We’re just learning now that the free lunches may be way more expensive than previously thought.

Free Lunch

My colleague Nancy Yaffe has written several posts (like this one) about the complications in calculating overtime for employees who are paid at different rates or receive certain bonus, commission, or incentive payments. You see, overtime in California (and under federal law) isn’t just based on an employee’s base hourly rate. That would be too easy. To calculate the regular rate of pay, you have to factor in the various forms of compensation the employee receives. Failure to do so results in employees being underpaid and employers being exposed to costly litigation.

Today’s Employment Law 360 (subscription required) reports on a newly filed complaint against Anheuser-Busch that claims (among other things) that employees “received various forms of non-cash compensation, such as discounted and/or free beer” and Anheuser-Busch failed to include these in their calculations of regular rate of pay. You can read the complaint here. Over the years, I’ve heard a great many complaints from employees. But this is the first I’ve heard of employees complaining about free beer.

There are two main takeaways here. First, some employees will complain no matter what you do. Second, there’s no time like the present to make sure that you’re doing your regular rate of pay calculations correctly.

Budweiser

Back in January 2012 I blogged about regular rate issues as an anticipated hot issue for 2012 and beyond.

In that post I explained that the “regular rate” is not the rate an employer regularly pays. Rather it is the required overtime rate of pay that considers all compensation paid to the employee. I also explained that the reality is, for non-union employers who pay commissions, non-discretionary bonuses, service charges, and even provide perks (like free meals), the calculation of the regular rate of pay is a challenge.

But let’s assume you overcame that hurdle, and understand that you actually have to pay overtime at the “regular rate” that includes additional compensation. You should be good, right? No litigation, right? Well, not necessarily, especially if you haven’t correctly listed the correct “regular rate” on your paystubs.

Here’s the problem. California Labor Code Section 226 was amended in 2012 to provide that an employee is deemed to suffer an injury if the paystub is wrong. One of the items the employer is required to list on the paystub is “all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate.” The goal is to make the paystubs transparent for the employees so they can understand how they have been paid.

Okay, that sounds simple, but when you actually follow the complicated math to compute the regular rate, it gives you the rate for the overtime premium, not the overtime rate. Yes, that’s right. You actually pay half of the regular rate.

For example, let’s say you have an employee who works at two rates in one work week: 20 hours @ $8 per hour and 25 hours @ $12 per hour. In addition, she earned a commission of $100 in that same workweek. If you do the math, the regular rate for overtime purposes is $12.44 per hour (that blends both rates and takes into account the commission paid). So what rates do you put on the paystub in a way that explains to this employee what she earned? If you put $12.44 and multiply it by the 5 hours of overtime, you’ve overpaid her for that week, because you only pay half of what she earned in the overtime rate. So, the paycheck needs to look something like this:

Chart

But will the employee understand why she is not earning $12.44 times 5 hours? Will she understand how the $12.44 rate is computed and that it is a calculation that blends her two rates and the commission earned? Is it better to list the overtime premium rate of $6.22 times 5 hours? Which way is more transparent? Hard questions with no easy answers, which is why I still think that regular rate issues will continue to be fodder for litigation for many years to come.

Many thanks to Jesse Koppin for his assistance with this post.

 

Actually, it’s not a new police procedural coming this Fall. As I’ve written before, the Division of Labor Standards Enforcement now has a Criminal Investigation Unit – with powers to issue search warrants, make arrest, and even carry guns.

Like many, my initial reaction to labor commissioners with guns can best be described as abject horror. But I had the opportunity today to serve on the panel for a presentation to the California Minority Counsel Program (a non-profit organization dedicated to improving diversity in the legal profession). The presentation addressed the Wage Theft Protection Act and the Criminal Investigation Unit.

Joining me on the panel were Shannon Walpole (Director of Employment Law at Ross Stores, Inc.) and Elliot Beckelman (an attorney with the DLSE who works with the Criminal Investigation Unit). My colleagues, Cristina Olivella Armstrong and Tyreen Torner, organized the event and Cristina served as moderator.

Elliot was with the San Francisco District Attorney’s office for 15 years. He explained that my concern about armed SWAT teams storming the headquarters of employers who miscalculated the regular rate of pay was far-fetched. The unit has six peace officers and their focus will necessarily be on those who flagrantly mistreat workers.

Also, before a violator can be charged, the Criminal Investigation Unit will need to persuade the responsible district attorney that this is a matter worth pursuing. So, in theory, even if the DLSE gets overly worked up about a minor violation, it won’t go anywhere unless they convince the DA’s office to commit the resources to charge and prosecute a violation.

Am I comfortable with the idea of gun-toting DLSE agents? Not even close. But if they maintain a focus on sleazy characters who blatantly mistreat workers, we’re all better off.

If you’d like to see the PowerPoint from the presentation, it’s available here on CMCP’s website. Click on the link for Panel PowerPoint.

Thank you to Marci Rubin and CMCP, PG&E (for co-sponsoring the event), my fellow panelists, and everyone who attended.

 

What to expect for 2012? One prediction is more claims and lawsuits based on improper calculations of the regular rate of pay. We are seeing regular rate issues pop up everywhere, including in the DLSE’s revised FAQs about the new Pay Notice requirement.

What is the regular rate of pay anyway? It certainly isn’t the rate an employer regularly pays. Rather it is the required overtime rate of pay that considers all compensation paid to the employee. And the reality is, for non-union employers who pay commissions, non-discretionary bonuses, service charges, and even provide perks (like free meals), the calculation of the regular rate of pay is a challenge.

For example, you decide to give a bonus to employees every quarter if certain defined metrics are met, such as zero injuries, or meeting a production goal, or the absence of guest complaints. For any non-exempt employee who worked overtime in that quarter, in addition to the overtime already earned you would also be required to pay an overtime premium on that bonus. Or you have a business where retail sales are only part of the business, and you pay a 10% commission on retail sales; the overtime rate must include those commission payments.

What if you are short-staffed and you have employees working in more than one classification at different hourly rates? While logic might dictate that you pay overtime at the rate the employee worked that shift, logic has nothing to do with it. The law requires you to pay overtime at the blended rate of all rates worked during that workweek. And what if your workweek for payroll purposes is not the same as your workweek for overtime purposes? Good luck getting that one right.

Quite frankly, the calculations are confusing and hard. That’s why so many employers get it wrong, even when they try to get it right. And that’s also why the issue has so much potential, especially in a climate where meal and rest break claims may be losing steam (fingers crossed on that issue). Just remember, paying daily and weekly overtime isn’t enough; you’ve got to pay it at the right rate too.