FAQ ON PIECE RATE PAY AND PAY CALCULATIONS (AB 1513 and Labor Code 226.2)

Due to the continued interest and volume of calls we have received concerning piece-rate pay and how to properly follow the new laws, we are posting this information from the California Website.  You can read the full FAQ at https://www.dir.ca.gov/pieceratebackpayelection/AB_1513_FAQs.htm

You must list on  your paycheck stubs the piece-rate pay, the time and averaged pay rate for rest\recovery periods, and a third line for non-productive time.  Pay careful attention to the overtime provisions as well.

Here is the important information that you need.  Pay special attention to the area about calculating average pay:

Piece-Rate Compensation – Labor Code §226.2 (AB 1513)

Topics covered in this section

General information
Piece-Rate compensation and wage statement requirements effective January 1, 2016 and later
The affirmative defense provisions of Labor Code Section 226.2 (Relating to time periods prior to January 1, 2016)
Calculating and making back payments to employees and former employees for purposes of the affirmative defense
Employee claims about Piece-Rate compensation

General Information

Q. When does the law go into effect?

A. By operation of law, AB 1513 went into effect on January 1, 2016.

Q. What does AB 1513 do?

A. AB 1513 adds section 226.2 to the California Labor Code, which applies “for employees who are compensated on a piece-rate basis for any work performed during a pay period.”

In general terms, Labor Code section 226.2 does two things:

  1. It establishes compensation and wage statement requirements for rest and recovery periods and “other nonproductive time” for piece-rate employees going forward from the effective date of the statute.
  2. It establishes, for certain employers and under certain circumstances, an “affirmative defense” to any claim or cause of action for damages or statutory penalties based on an employer’s alleged failure to pay compensation due for rest and recovery periods and other nonproductive time for time periods prior to the effective date of the statute.

Q. What is piece-rate compensation?

A. Labor Code section 226.2 does not change the existing definition of what constitutes “piece-rate” compensation.

The existing Division of Labor Standards Enforcement Manual contains the following explanation of piece-rate compensation:

2.5.1 Piece-Rate or “Piece Work”

The American Heritage Dictionary defines the term piece-rate as: “Work paid for according to the number of units turned out.” Consequently, a piece-rate must be based upon an ascertainable figure paid for completing a particular task or making a particular piece of goods.

2.5.2 Examples of piece-rate plans can be as diverse as the following:

  1. Automobile mechanics paid on a “book rate” (i.e., brake job, one hour and fifty minutes, tune-up, one hour, etc.), usually based on the Chilton Manual or similar;
  2. Nurses paid on the basis of the number of procedures performed;
  3. Carpet layers paid by the yard of carpet laid;
  4. Technicians paid by the number of telephones installed;
  5. Factory workers paid by the widget completed;
  6. Carpenters paid by the linear foot on framing jobs.

2.5.3 A piece-rate plan of compensation may include a group of employees who share in the wage earned for completing the task or making the product.

2.5.5.1 Piece-rate and commission plans may be in addition to an hourly rate or a salary rate of pay. Such plans may also be in the alternative to a salary or hourly rate. As an example, compensation plans may include salary plus commission or piece-rate; or a base or guaranteed salary or commission or piece-rate whichever is greater.

(Reference: DLSE , pages 2-2 to 2-3.)

Q. Does the law apply to employees who work on a commission basis?

A. No, the law does not apply to employees who are compensated on a commission basis.

By its terms, Labor Code section 226.2 applies to “employees who are compensated on a piece-rate basis for any work performed during a pay period.” Note, however, that it is the nature of the compensation that is determinative, not the label.

Existing Labor Code section 204.1 defines “commission wages” as: “compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount or value thereof.”

(See also the Ramirez v. Yosemite Water Co. (1999) 20 Cal. 4th 785, 803 [“Although section 204.1 applies specifically to employees of vehicle dealers, both parties contend, and we agree, that the statute’s definition of ‘commission’ is more generally applicable.”].)

As the Supreme Court explained in the Ramirez case, quoting Keyes Motors, Inc. v. Division of Labor Standards Enforcement (1987) 197 Cal.App.3d 557, 563,

“. . . Labor Code section 204.1 sets up two requirements, both of which must be met before a compensation scheme is deemed to constitute “commission wages.” First, the employees must be involved principally in selling a product or service, not making the product or rendering the service. Second, the amount of their compensation must be a percent of the price of the product or service.’” (Ramirez, supra, 20 Cal. 4th at 803-04.)

The Division of Labor Standards Enforcement Manual contains the following language concerning the difference between piece-rate compensation and commission compensation:

2.5.4 Commission

Labor Code § 204.1 defines commissions as: “Compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount or value thereof.” Keyes Motors v. DLSE (1987) 197 Cal.App.3d 557.If the compensation is based on a percentage of a sale, the compensation plan is a commission. On the other hand, a compensation plan which pays employees for the number of pieces of goods finished, the number of appointments made or the number of procedures completed, is based on a piece-rate, not a commission rate; though such compensation plans often refer to the payment as “commission”.

2.5.4.1 Shared commissions

Again, as with a piece-rate plan, a commission plan may include a group of employees who share in the commissions earned. (For a detailed discussion of commissions refer to the DLSE Enforcement Manual, Section 34.)

Q. Does this statute change overtime compensation requirements?

A. Labor Code section 226.2 expressly states in the opening paragraph that it “shall not be construed to limit or alter minimum wage or overtime compensation requirements, or the obligation to compensate employees for all hours worked under any other statute or local ordinance.”

This means that in any workweek in which a piece-rate employee worked overtime hours, overtime compensation must be calculated and paid according to existing law.

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Piece-Rate compensation and wage statement requirements effective January 1, 2016 and later

Q. What are the compensation requirements for rest and recovery periods for piece-rate employees?

A. Labor Code section 226.2, subdivision (a), paragraphs (1) and (3) provide that:

  • Employees must be compensated for rest and recovery periods separate from any piece-rate compensation, and
  • The rate of compensation for rest and recovery periods shall be the higher of:
    • An average hourly rate determined by dividing the total compensation for the workweek, exclusive of compensation for rest and recovery periods and any premium compensation for overtime, by the total hours worked during the workweek, exclusive of rest and recovery periods.
    • The applicable minimum wage.

This means that piece-rate employees must be paid compensation for rest and recovery periods that is separatefrom their piece-rate compensation. An employer may not treat the piece-rate compensation as including compensation for rest and recovery periods, no matter how the piece-rate was determined.

The hourly rate of compensation for rest and recovery periods must be the same as the hourly rate (averaged over the workweek) that an employee earned during the workweek for time during which he or she was performing work. If, for some reason, this average hourly rate comes out to less than minimum wage, then the employee must be paid at minimum wage.

Q. How does an employer determine the average hourly rate to be paid for rest and recovery periods?

A. The formula for determining the average hourly rate to be paid for rest and recovery periods is set forth in the statute, as follows:

Divide the total compensation for the workweek, exclusive of compensation for rest and recovery periods and any premium compensation for overtime, by the total hours worked during the workweek, exclusive of rest and recovery periods.”

(Labor Code §226.2(a)(3)(i).)

The following are some examples of application of this formula.

Examples:

1. For a workweek of piece-rate compensation only:

  • A piece-rate employee works a 5-day, 40-hour workweek.
  • The employee has two 10-minute rest periods authorized and permitted per day, for a total of 100 minutes (1.67 hours) of rest periods for the workweek.
  • The employee earns $500 in piece-rate compensation for the workweek.
The average hourly rate to be paid for the rest periods for this employee is calculated as follows:
$500 total compensation not including compensation for the rest periods
÷ 38.33 total hours less rest periods
= $13.04/hr
x 1.67 hrs
rest periods for the workweek
= $21.78 compensation for rest periods for the workweek
Total compensation for the workweek:
$500 piece-rate compensation
+ $21.78 compensation for rest periods
= $521.78

2. For a workweek of piece-rate compensation and a base rate of minimum wage for all hours worked:

  • An employee works a 5-day, 40-hour workweek.
  • The employee has two 10-minute rest periods authorized and permitted per day, for a total of 100 minutes (1.67 hours) of rest periods for the workweek.
  • The employee is paid minimum wage ($10/hour) for all hours worked, including the two 10-minute rest periods, for a total of $400.
  • The employee also earns a total of $300 in piece-rate compensation for the workweek.
The average hourly rate to be paid for the rest periods for this employee is calculated as follows:
$683.30 Total compensation for the workweek, not including compensation for rest and recovery periods, which is the $300 in piece-rate compensation, plus the minimum wage paid for all hours worked except the 1.67 hours of rest period time
÷ 38.33 Total hours less rest periods
= $17.83/hour Note: $10/hour of this time is already calculated into and paid in the employee’s minimum wage of $10/hour for all hours worked, including the rest period time.

Therefore, the additional amount owed for rest periods under this example is $7.83/hour.

Total compensation for the workweek:
$400 Minimum wages for all hours worked, including the rest period time
+ Piece = rate compensation
+ $7.83 x 1.67 hours = Additional amount over minimum wage required to pay correct average hourly rate for rest periods

3. For a workweek with both piece-rate work and hourly work:

  • An employee works a 5-day, 40-hour workweek.
  • On two 8-hour days of this workweek (for a total of 16 hours), the employee works at an hourly rate of $10/hour, and does no piece-rate work.
  • On the other three days of the week (for a total of 24 hours), the employee does piece-rate work only and earns a total of $300 in piece-rate compensation.
  • On each day of the workweek, the employee has two 10-minute rest periods authorized and permitted, for a total of 100 minutes (1.67 hours) of rest periods for the workweek.
  • On the two hourly-work days, these rest periods are compensated at the $10 hourly wage.
The average hourly rate to be paid for the rest periods for this employee is calculated as follows:
$453.30 Total compensation for the workweek, not including compensation for rest and recovery periods, which is the $300 in piece-rate compensation, plus the $160 for hourly work, less $6.70, which is the compensation for the 40 minutes of rest and recovery periods on the two hourly-rate days.
÷ 38.33 Total hours, which is 40 hours less the 1.67 hours of rest period time
= $11.83/hour Note: For the days on which the employee worked at an hourly rate, $10/hour of this time is already been paid as part of the hourly rate. For those two days, the employee is owed only an additional $1.83/hour for the rest periods. For the days on which the employee did piece-rate work, the rate to be paid for the rest periods is $11.83.
Total compensation for the workweek:
$160 For the hourly rate worked on two days
+ $300 Piece-rate compensation
+ $1.83 x .67 hours = $1.23 The additional amount owed for the rest periods on the hourly rate days to bring them to the average hourly rate for the workweek.
= $473.06

4. For a workweek of piece-rate compensation and overtime hours:

  • An employee works a 6-day, 47-hour workweek, for which 7 hours constitute overtime.
  • The employee has two 10-minute rest periods authorized and permitted per day, for a total of 120 minutes (2.0 hours) of rest periods for the workweek.
  • The employee earns a total of $800 in piece-rate compensation for the workweek.
The average hourly rate to be paid for the rest periods for this employee is calculated as follows:
$800 Total compensation for the workweek, not including compensation for the rest and recovery periods or premium pay for overtime.
÷ 45 hours Total hours, not including the rest and recovery periods.
= $17.78/hour

x 2.0 hours

= $35.56

Compensation for rest and recovery periods for this workweek.
The overtime premium compensation for this employee is:
$800 Piece-rate compensation
+ $35.56 Compensation for rest and recovery periods
= $835.56
÷ 47 hours
= 17.78/hour Regular rate of pay
x .5
= $8.89 Premium pay due for overtime hours
x 7 hours Overtime hours
= $62.23
Total compensation for the workweek:
$800 Piece-rate compensation
+ $35.56 Compensation for rest and recovery periods
+ $62.23 Premium pay for overtime hours
= $897.79

Q. If an employer pays a base hourly rate for all hours worked (for example, minimum wage), but also pays additional piece-rate compensation, is it sufficient for the employer to just pay minimum wage for the employee’s rest breaks?

A. No. Going forward, the statute requires compensation at an average hourly rate determined by dividing total compensation by the total hours worked in the workweek, as explained above. This encourages employees to take their authorized rest breaks, without feeling that doing so will decrease their compensation.

Q. What types of compensation must be included in determining the average hourly rate to be paid for rest and recovery periods?

A. The statute says that the average hourly rate shall be “determined by dividing the total compensation for the workweek, exclusive of compensation for rest and recovery periods and any premium compensation for overtime, by the total hours worked during the workweek, exclusive of rest and recovery periods.”

As indicated above, the statute refers to “total compensation” for the workweek. This type of formula is similar to the manner in which employers are currently required to calculate a regular rate of pay for overtime compensation purposes. The Division of Labor Standards Enforcement Manual contains information on the types of compensation within a workweek that generally must be included for this purpose and those that are not. (See DLSE Manual, §49.1 to 49.1.2.3 (items to be included) and §49.1.2.4 (types of compensation not included.)

Q. What are “rest and recovery periods”, as referred to in the statute?

A. Labor Code section 226.2 does not change the definition for rest and recovery periods. Those terms have the same meaning as they do under existing law.

“Rest” periods are defined and required under a number of existing wage orders. For example, existing Wage Order 1 (Manufacturing Industry) contains the following provision regarding rest periods:

12. Rest Periods

A. Every employer shall authorize and permit all employees to take rest periods, which insofar as practicable shall be in the middle of each work period. The authorized rest period time shall be based on the total hours worked daily at the rate of ten (10) minutes net rest time per four (4) hours or major fraction thereof. However, a rest period need not be authorized for employees whose total daily work time is less than three and one-half (3 1/2) hours. Authorized rest period time shall be counted as hours worked for which there shall be no deduction from wages.

B. If an employer fails to provide an employee a rest period in accordance with the applicable provisions of this order, the employer shall pay the employee one (1) hour of pay at the employee’s regular rate of compensation for each work day that the rest period is not provided.

(Wage Order 1, ¶12, 8 CCR section 11010.)

Most of the existing wage orders contain similar, or identical, provisions on rest periods.

Existing Labor Code section 226.7 defines a “recovery period” as “a cooldown period afforded an employee to prevent heat illness.”

Labor Code section 226.7 also provides that:

(b)   An employer shall not require an employee to work during a meal or rest or recovery period mandated pursuant to an applicable statute, or applicable regulation, standard, or order of the Industrial Welfare Commission, the Occupational Safety and Health Standards Board, or the Division of Occupational Safety and Health.

In Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1029, the California Supreme Court said the following concerning rest periods (applying Wage Order 5):

Employees are entitled to 10 minutes rest for shifts from three and one-half to six hours in length, 20 minutes for shifts of more than six hours up to 10 hours, 30 minutes for shifts of more than 10 hours up to 14 hours, and so on.

(Id. at 1029.) See also Brinker, supra, 53 Cal.4th at 1033 (“An employer is required to authorize and permit the amount of rest break time called for under the wage order for its industry.”)

Q. Does Labor Code section 226.2 mean that employers will need to track the number of minutes that employees actually take for their rest and recovery periods?

A. No. Section 226.2, subdivision (a)(2) requires that an employee’s itemized wage statement state “[t]he total hours of compensable rest and recovery periods, the rate of compensation, and the gross wages paid for those periods during the pay period.” (Emphasis added.)

If an employer has authorized and permitted two 10-minute rest periods during an employee’s work shift (see quote from Brinker above), the “compensable” rest and recovery periods are those that have been authorized and permitted according to existing law. That is the amount of time for which an employee must be compensated (i.e., the “compensable” period), and which must be itemized on the wage statement, regardless of whether the employee actually took only 8 minutes on one rest period (less than the amount of time that was “compensable”), or took 13 minutes on another rest period (more than the amount of time that was “compensable”).

Similarly, for recovery periods (“a cooldown period afforded an employee to prevent heat illness,” see Labor Code section 226.7), the employer will need to determine the amount of time that was “afforded” (i.e., authorized and permitted), which may depend on the circumstances. The amount of time that was afforded is the amount of time for which employees must be compensated (i.e., the “compensable” period) and which must be itemized on the wage statement.

Q. Why are there different rules for employers who pay on a semi-monthly basis?

A. Actually, the compensation requirements for rest and recovery periods are the same for all employers, including those that pay on a semi-monthly basis. For employers who pay on a semi-monthly basis, however, there is a provision that allows the employer to pay for rest and recovery periods at a rate of at least the minimum wage for the pay period in which the rest and recovery periods occurred, and then to “true up” the compensation owed (to pay “the additional compensation required”) applying the average hourly rate formula that is required and explained above, in the following pay period. This is because when a semi-monthly pay period ends in the middle of a workweek, it may not be possible to determine the “average hourly rate” for that workweek at the time the paycheck is issued for that payroll period.

This is consistent with existing rules in Labor Code section 204 that apply to employers who pay wages on a semi-monthly basis. That section provides, for example, that “all wages earned for labor in excess of the normal work period [e.g., overtime] shall be paid no later than the payday for the next regular payroll period.” (Labor Code §204(b)(1) (language in italics added).)

Q. What is “other nonproductive time”?

A. Labor Code section 226.2 defines “other nonproductive time” as “time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis.”

What constitutes “other nonproductive time” under this definition will obviously vary depending upon the nature of the work and the “activity being compensated on a piece-rate basis.”

Q. What are the compensation requirements for other nonproductive time?

A. Labor Code section 226.2, subdivision (a)(1) and (a)(4) provide that:

  • Employees must be compensated for other nonproductive time separate from any piece-rate compensation, and
  • Employees must be compensated for other nonproductive time “at an hourly rate that is no less than the applicable minimum wage.

This means that piece-rate employees must be paid compensation for “other nonproductive time” that is separate from their piece-rate compensation. An employer may not treat the piece-rate compensation as including compensation for other nonproductive time, no matter how the piece-rate was determined.

The compensation requirement for other nonproductive time is simply that it be paid at an hourly rate of no less than the applicable minimum wage.

The statute also contains a kind of “safe harbor” provision in subdivision (a)(7), which states:

An employer, who in addition to paying any piece-rate compensation pays an hourly rate of at least the applicable minimum wage for all hours worked, shall be deemed in compliance with paragraph (4).

This means that if an employer pays a base hourly rate of at least the applicable minimum wage for all hours an employee works, in addition to any piece-rate compensation, the employer will be deemed in compliance with the compensation requirements for other nonproductive time.

Q. Does an employer need to track the amount of other nonproductive time worked by an employee who is compensated on a piece-rate basis?

A. It depends. If the employer utilizes the “safe harbor” option of subdivision (a)(7) (i.e., “in addition to paying any piece-rate compensation, pays an hourly rate of at least the applicable minimum wage for all hours worked”), then the compensation and wage statement requirements for other nonproductive time are satisfied, and the employer is not required to determine or to record the actual amount of hours worked in other nonproductive time. (See §226.2(a)(2)(B); (a)(4); (a)(7).)

If the employer does not use this “safe harbor” option of paying an hourly rate of at least minimum wage for all hours worked, then the amount of hours worked in other nonproductive time must be determined (§226.2(a)(5)), listed on the wage statement, (§226,2(a)(2)(B)), and compensated separately at an hourly rate of at least minimum wage (§226.2(a)(4)).

Subdivision (a)(5), however, provides that “[t]he amount of other nonproductive time may be determined either through actual records or the employer’s reasonable estimates, whether for a group of employees or for a particular employee, of other nonproductive time worked during the pay period.” (Labor Code §226.2(a)(5).) This allows employers the option of determining the amount of other nonproductive time worked based on a reasonable estimate, rather than actual tracking of time.

Subdivision (a)(6) further provides that:

An employer who is found to have made a good faith error in determining the total or estimated amount of other nonproductive time worked during the pay period shall remain liable for the payment of compensation for all hours worked in other nonproductive time, but shall not be liable for statutory civil penalties, including, but not limited to, penalties under Section 226.3, or liquidated damages based solely on that error, provided that both of the following are true:

A. The employer has provided the wage statement information required by subparagraph (B) of paragraph (2) and paid the compensation due for the amount of other nonproductive time determined by the employer in accordance with the requirements of paragraphs (4) and (5).

B. The total compensation paid for any day in the pay period is no less than what is due under the applicable minimum wage and any required overtime compensation.

In general terms, this means that if an employer makes a good faith error in determining the amount of other nonproductive time for a worker, whether determined through records or based on an estimate, in that the employee actually worked more other nonproductive time than was in the estimate or as otherwise determined by the employer, the employer remains liable to compensate the employee for all of the other nonproductive time the employee actually worked (at an hourly rate of at least minimum wage), but will not be liable for any statutory penalties.

This provision is subject to the two qualifications in subparagraphs (A) and (B), quoted above, including that the employer must have paid the employee at least minimum wage and any required overtime compensation on that minimum wage.

Q. Are there any wage statement requirements under this law?

A. Yes. Labor Code section 226.2, subdivision (a)(2) provides that:

The itemized statement required by subdivision (a) of [Labor Code] Section 226 shall, in addition to the other items specified in that subdivision, separately state the following, to which the provisions of Section 226 shall also be applicable:

  1. The total hours of compensable rest and recovery periods, the rate of compensation, and the gross wages paid for those periods during the pay period.
  2. Except for employers paying compensation for other nonproductive time in accordance with paragraph (7), the total hours of other nonproductive time, as determined under paragraph (5), the rate of compensation, and the gross wages paid for that time during the pay period.

As indicated in the language in italics above, an employer is not required to state the total hours of other nonproductive time, the rate of compensation, or the gross wages paid for that time, if the employer “in addition to paying any piece-rate compensation, pays an hourly rate of at least the applicable minimum wage for all hours worked,” as authorized by the “safe harbor” language in subdivision (a)(7).

The wage statement requirements should be read in tandem with the current requirement under section 226, subdivision (a), that an itemized wage statement show “all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee…” (§226(a)(9)). To the extent there may be overlap between this provision and section 226.2(a)(2) going forward, the requirements will be harmonized. Employers will not be required to state the same information twice on the wage statement.

Cal\OSHA Changes Interpretation of Laws

For 2017, Cal\OSHA is aligning itself more completely with OSHA in the way it views repeat offenders.  You can read the whole report written by Littler Global at this site https://www.littler.com/publication-press/publication/calosha-amendment-significantly-expands-its-definition-%E2%80%9Crepeat%E2%80%9D

In Summary, Cal\OSHA can now go back 5 years and if you have a “substantially similar” citation at any of your locations in California, it will be considered a “repeat” violation and you could be subject to fines of over $70,000.  The five year look-back begins on the date that the citation is finalized, so if you appeal the citation, it could delay the finalizing date and mean the actual time from the original violation could be almost 6 years old and still be within the 5-year window for repeats.  This may affect strategies going forward.

Also, please take note of the fact that this is a repeat at any facility within your organization that is in the State.  So, if you have a citation for your eyewash station in one location, if you have a shower citations (substantially similar) problem in another location, they could be listed as repeat violations and the fines would grow about 4 fold.

Comparing first-quarter figures from the past six years, the number of Cal/OSHA investigations has risen steadily, from 2,608 in 2011 to 3,375 in 2016, nearly a 30% increase. Citations for alleged serious violations have increased even more significantly – by 330% in the same period. Alleged serious violations represented 21% of total cited alleged violations for the first quarter of 2016 versus only 10% in 2011.

So, be prepared.  Walk your property with an open eye.  Invite HR Mobile Services to come out and help you identify problems.  Check your paperwork!

The clear message here is that you should take these citations seriously and implement changes at all locations to address an issue so that it does not cost you again.

Final Thoughts on 2016 and a Caution to Legislators and Employers for 2017

I will begin this by saying that some of this article is focused on California, while much can be applicable to the rest of the United States.  The San Joaquin Valley is a microcosm of what has taken place across this country.  The rural, farming and agriculture areas of this country are tired of being ignored.   And finally, they stood up in November and got the attention of the people that think that life is only lived in big cities.

California politicians are very good at double speak.  They say they are supportive of Agriculture, but none of them every actually come to the Valley to talk to business owners.  On the rare occasion they do come to the Valley it is to talk to the workers or to point at a High Speed Rail train that is not going to do anything for people here.

The fact is, California, and many State governments across the country, would prefer if Agriculture would just go away.  They would much rather we were all working in a state full of Silicone Valley businesses.  They are cleaner, there would be no fight over water, and we could just ignore it altogether.  In the past election, we did not get visits by Hillary (Trump dropped in quickly) and Kamala Harris (the new Senator) didn’t bother with and knows nothing about this side of California.  The Governor has only been to Fresno a few times in 6 years and that is never to learn about real issues (he knows it all I guess).

For the rest of the country, the story is similar.  President Obama flew over the rest of the US and only visited a few coastal states in 8 years in office.  He came to California almost monthly to San Francisco or Los Angeles to attend a fund raiser, but on the ONE occasion that he came to the valley to discuss the drought, he got off the plane, went to a dirt field for about 1 hour and then flew out because he had a golf date in Southern California (where they had water to make beautiful greens for his putting).  We never saw a thing done about the drought after that and still have not until last week when a bill (0pposed by outgoing Senator Barbara Boxer) was signed by the President to help us build dams.  This was not because of any work done by the President, but by the work of our Representatives from the Valley that finally got enough support from  enough people in both parties to get this to the President despite Barbara Boxer.

One of the most telling examples of how Legislators view business owners is how they write regulations.  Almost all regulations start with the assumption that most employers are bad.  In fact, many times it is actually written into the introduction and states that this bill must be passed to protect the workers, etc.  The reality is that most employers work very hard with their employees to create a family atmosphere.  The regulations get in the way of much of this.  Every time the government mandates a benefit that many people are already doing for their employees, they add cumbersome requirements, and many pages of fines and penalties if you do not do it exactly right.  In a more practical world, doing your best should count for something, but not according to our Legislators.  So, every time they add a benefit, many employers remove another benefit so they can afford the one the government wants.  There is only one pot of money, but Legislators think employers can just invent more money like Congress does and it just isn’t the case.

If there is one takeaway from the recent Presidential elections is that middle-America and rural areas are tired of being ignored or shoved aside by our representatives.  If you don’t visit and really listen to their issues, you run the chance of being replaced.  Not all issues affecting business and employees can be handled by looking out the window in Los Angeles or Sacramento or Washington, D.C.  I hope they pay attention or 2018 could be a very turbulent year as well.

BUT THERE IS A RESPONSIBILITY OF THE OWNER\EMPLOYER AS WELL:

In 1999, in California, Governor Gray Davis signed the labor bills establishing daily as well as weekly overtime rules.  It also established a 30 minute employee meal with stern regulations.  Here we are 17 years later and there are still a number of employers who ignore, or do not know of these laws, or simply choose to go their own way.  This affects all of us.  When an employer does not follow the simple laws and refuses to do things like installing a time clock and paying people for the hours they work, they give every employer a black eye and give every Legislator an easy excuse to add new laws and regulations.  In other words, a few stubborn bad employers are making business hard for everyone else.  Instead of just complaining about the State or the Federal government, if  you know an employer that is not following the law, talk to them and let them know they are a big part of the problem.

The easiest way to pay people with the least amount of work on your part is to pay people exactly what they work based on a time clock.  Anything else you are doing is why we keep getting more “wage theft” headlines.  Let’s all resolve in 2017 to pay people for what they work and hold them accountable for the job.  Spend your hard time enforcing your rules instead of working hard to explain a poor payroll practice.  With minimum wages going up and other regulations coming to many States, 2017 is a good year to get on board the right train.  HR Mobile Services, Inc. is there to help you do it, but you have to follow the program to make it successful.

Have a Happy and Prosperous New Year!!!

WAL-MART TRUCKING LOSES $54 MILLION LAWSUIT OVER UNPAID BREAKS AND WAGE THEFT

Below is a great article from the Fresno Bee regarding a local Law Firm that is making a living off of suing Trucking companies.  They even brag that they have 3 more lawsuits pending.  If you have trucks (one or a hundred) you should be award of these lawsuits and be talking to your attorney before you are put in this spot.

UPDATE TO FEDERAL SALARY RULES

Word reached us this morning that a Federal Judge has ruled against the recent changes to the Federal Overtime Exemption and Salary rules including the new minimum of $47,476 per  year for Federal Salary exempt employees .  This rule would have been higher than the California rule of twice the minimum wage, which, in a 40 hour workweek would come to around $42,000 per year.  Please read the article below, but understand that some states including California have rules over and above the Federal law.  When State law is more favorable to the employee than Federal law, the State law takes precedents and you must follow it.  Here is the article:

 Federal Overtime Rules on Hold
Tuesday afternoon, a federal judge for the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction on the Department of Labor’s new overtime rules, which were slated to go into effect in just over a week on December 1, 2016. The judge ruled that the Department of Labor (DOL) likely overstepped its rulemaking authority by raising the salary threshold as high as it did and by implementing the automatic increase every three years. What this means now:

  1. The effective date of the rules has been delayed indefinitely.
  2. Employers may choose not to implement the changes they had planned for Dec. 1 compliance.
  3. The new rules have not been thrown out or invalidated – at least not yet.

The judge has not made a final ruling in the case, but the fact that he issued the injunction suggests that he is leaning in favor of the groups that want to stop the rule changes. It is also possible that his final decision will allow some parts of the rule to stand but not others. The DOL has indicated that in the meantime they are considering their legal options with respect to the preliminary injunction. Employers are obviously wondering whether they should move forward with the changes they have been planning. Unfortunately, this is a difficult question to answer and ultimately a business decision, which is much harder than a compliance decision. Although employers are not required to make changes, they may want to consider the following:

  • Will it hurt the bottom line to make the changes? If so, how much?
  • Will it be difficult to undo changes that have already been made?
  • How will employees feel about the decision? Did they like the changes? Hate the changes?
  • Is the new pay structure better than what is in place now?
  • If the changes aren’t implemented now, will it be possible to make them on short notice in the future?

At this point, we do not know how long the injunction will be in place or if the rules will be thrown out entirely. We will be keeping an extremely close eye on this case and will issue further e-Alerts when actionable information is made available.

 

ALL CALIF. EMPLOYERS BE READY FOR NEW PROP. 65 REQUIREMENTS IN 2018

California has been dealing with Prop. 65 (notice of possible Cancer causing items in use).  Well, recently we were hoping that this bill, which has been a boon to California lawyers, would be pruned and made more practical.  Instead, they have made it much tougher for almost every employer in California beginning in 2018.  There are over 800 chemicals on the present list.  Here is the list:  https://oehha.ca.gov/proposition-65/proposition-65-list .   Beginning in 2018, the old sign stating that “chemicals known to cause cancer” that  you see everywhere from every restaurant and hospital to gas stations to ball parks, will now require a sign that lists all chemicals in use at any facility.  That means barber shops to dairy farms will need to have this list posted in plain view for all people entering the property.

On its face this is absurd.  This is another example of politicians trying to show people how they are protecting us, when the reality is that no one pays attention or reads it.  As proof, how many people really read the required postings by every employer near their time clock or break room?  It is another venue for lawyers to file lawsuits against employers while not protecting anyone.

You can read a very good article regarding this story from  Joseph Perrone in the Fresno Bee.   Here is the link: https://www.fresnobee.com/opinion/opn-columns-blogs/article114970193.html

While we have time, the recent elections do not give us much hope that any sanity will return to the California State Legislature.  However, with people starting to campaign for the Governor position in 2  years, I would suggest that anytime you are confronted by any of these aspiring politicians, you ask them their stance on this issue and why.  It may provide some attention and action to make this proposition more practical.

 

CURRENT I-9 WILL BE REPLACED SOON

Employers: Current Form I-9 valid until Jan. 21, 2017

On Aug. 25, the Office of Management and Budget (OMB) approved a revised Form I-9, Employment Eligibility Verification. USCIS must publish a revised form by Nov. 22, 2016. Employers may continue using the current version of Form I-9 with a revision date of 03/08/2013 N until Jan. 21, 2017. After Jan. 21, 2017, all previous versions of Form I-9 will be invalid.

HR Mobile Services, Inc. has been working on this topic since last year when we knew we were coming close to the expiration date for the I-9 form.  Apparently, even though that date has been on the form for years, the US government is still allowed to be 8 months late to do their job……But you don’t.

Anyway, please be assured that if you are a HR Mobile, Inc. client, we will be replacing the I-9 form as quickly as possible in all of our new-hire packets as soon as it is available.  This will not happen immediately in all cases, but will definitely be completed before the January 21, 2017 deadline.  We will also be including any late changes to the laws based on the election or other late changes that are part of the year-end processes across the country.  For some states that could be a change to minimum wages, sick pay or drug policies among other things.  As always, if you have a question, please call our office.  We may be calling you as well in certain circumstances to ask or clarify how you want to deal with a new law.

Good Luck to everyone as we enter an interesting 2017.

ARIZONA TO VOTE ON RAISE TO MINIMUM WAGE AND SICK PAY

Arizona, following the trend in neighboring States like California, has initiative 206 on the November 8 ballot.  It seems probable at this point that the initiative may pass.  If it does, beginning January 1, the minimum wage will rise to $10 per hour and eventually get to $12 per hour by 2020.  Voters in Flagstaff are voting to raise the limit to $15 per hour.

Included in the proposition is also the addition of Paid Sick Leave.  Similar to the law established in California, it provides that the employee earns one hour of sick pay for every 30 hours worked.  Employers with less than 15 employees will have to provide 24 hours of sick pay and those over 15 employees will provide up to 40 hours per year.  The unused hours can roll over to the next year.  Alternatively, the employer can “front-load” all hours anticipated at the beginning of the regulation, which is July 1, 2017.  There is no payout of unused hours at the time of termination.  However, if an employee comes back to work for  you within 9 months they are started right where they left off and they can use any hours that were left on the books.

There are more rules to this, but let me warn everyone that retaliation or arguing with an employee about using their earned sick hours will not go well for the employer.  Experience in California has shown that trying to bully employees or retaliate for the use of this sick pay does not go well in court for the employer and the fines can be very expensive.

Below is from the review of the Proposition with links to read the rest of the bill.  It is pretty easy to read and there is a lot of information that bookkeepers and employers will have to know about this law.  As always, HR Mobile Services, Inc. has experience in these laws and will help guide the transition including the changes to your employee hire packets.

The Minimum Wage and Paid Time Off Initiative, also known as Proposition 206, is on the November 8, 2016, ballot in Arizona as an initiated state statute.

A “yes” vote supports raising the minimum wage to $10 in 2017, and then incrementally to $12 by 2020, and creating a right to paid sick time off from employment.
A “no” vote opposes this measure, keeping the minimum wage at $8.05, adjusted for cost of living, and retaining employers’ ability to decide whether or not to offer paid sick time off.

In November 2016, voters in Colorado and Maine are also voting on measures to increase their state minimum wages to $12. In Washington, citizens are voting on an initiative to increase the minimum wage to $13.50.

Overview

Minimum wage in Arizona

Arizona’s minimum wage is $8.05 per hour in 2016. The federal minimum wage is $7.25. Due to Proposition 202 of 2006, the state’s minimum wage increases with the cost-of-living. Without Proposition 206, Arizona’s minimum wage is expected to increase to $8.15 in 2017.[1] In November 2016, voters in Flagstaff, Arizona, are voting on whether to increase their city’s minimum wage to $15 an hour.[2]

Initiative design

Proposition 206 would increase the minimum wage to $10 in 2017, $10.50 in 2018, $11.00 in 2019, and $12 in 2020. Starting in 2021, the measure would increase the minimum wage with the cost of living. The measure retains Arizona’s law regarding tipping, which permits employers to pay employees who receive tips up to $3.00 less than the minimum wage.[3][4]

The initiative would also guarantee 40 hours of annual paid sick time to employees of businesses with 15 or more employees and 24 hours to those of businesses with less than 15 employees. Employees would be entitled to accrue one hour of paid sick time for every 30 hours worked. The measure would permit earned paid sick time to be utilized for an employee’s medical care, an employee’s need to care for a family member, a public health emergency, or addressing domestic violence.

State of ballot measure campaigns

Supporters had raised $1.5 million as of October 10, 2016. Living United for Change in Arizona had donated almost $1 million to the campaign. The Arizona Chamber of Commerce launched an opposition campaign, Protect Arizona Jobs, on September 19, 2016, and is expecting to spend over $1 million. Polls indicate that around 56 percent of Arizonans support Proposition 206.

Text of measure

Ballot title

The ballot title is as follows:[5]

INCREASES THE MINIMUM WAGE FROM $8.05 PER HOUR IN 2016 TO $12.00 PER HOUR BY 2020 AND ESTABLISHES THE RIGHT TO EARN PAID SICK TIME AWAY FROM EMPLOYMENT.A “yes” vote shall have the effect of increasing the minimum wage from $8.05 per hour in 2016 to $10.00 per hour in 2017, and then incrementally increasing the minimum wage to $12.00 per hour by the year 2020; entitles employees to earn 1 hour of paid sick time for every 30 hours worked with limits based upon the size of the employer; broadly defining the conditions under which paid sick time may be taken, including mental or physical illness, care of a family member, a public health emergency, or absence due to domestic violence, sexual violence, abuse or stalking; prohibiting various forms of retaliation against employees for exercising any rights under the law; and requiring employers to provide various notices to employees about the law.

A “no” vote shall have the effect of retaining the existing minimum wage (along with the existing method for annually increasing the minimum wage for inflation) and retaining employers’ existing ability to determine their own earned paid sick leave policy.[6]

Ballot summary

The ballot summary is as follows:[7]

The Fair Wages and Healthy Families Initiative increases minimum wage to $10 in 2017 then gradually to $12 by 2020; provides 40 hours annual “earned paid sick time” for employees of large employers (24 hours for those of small employers); time accrues at one hour earned for every 30 hours worked; time may be used to address circumstances caused by illness of employee or employee’s family, public health emergencies, or domestic violence; prohibits retaliating against employees using the benefit; allows for more generous paid time-off policies; and exempts employees who expressly waive the benefit under collective bargaining agreements.[6]

Full text

The full text of the measure can be found here.

Fiscal analysis

See also: Fiscal analysis statement

An extended summary of the fiscal analysis statement can be found here.

CALIFORNIA AND ARIZONA EMPLOYERS SHARE RISKS OF NEW MARIJUANA INITIATIVES

The article below is from the Arizona Chamber of Commerce in its entirety followed by an article from the Orange County Register in California.  The exact same arguments can be made for California.  There is almost no doubt that this will pass in California but the supporters refuse to allow questions on their websites and will not address the legalities that will face employers.

Factor into all of this is the new drug testing (or non-testing) standard set by OSHA on a Federal level and employers are in a real bind if they try to keep drugs out of the workplace.  Under Federal OSHA you cannot drug test post-injury unless the use of drugs or alcohol would be considered the proximate cause of the accident AND the test must be able to establish that the employee was under the influence at the time of the accident.  Since there is no legal test for THC levels, you will not be able to test for or fire someone just because THC from marijuana is in their body.  This is a major problem that no one wants to address until attorney’s get ahold of it in a big trial and sue the owner because they were aware the employee had marijuana in their system and did not remove them from operating equipment.  Just wait!

Here is the story.  In California, it is Proposition 64.  Below the Arizona comments is a article from the Orange County Register in California regarding their proposition:

__________________________________________________________________________________________________________

The Arizona Chamber of Commerce and Industry and No on 205 this Thursday, October 27 at 2 PM are hosting a tele-town hall for employers who are concerned about the effect of legalized marijuana in their workplace. Call 1-877-229-8493, PIN 115868.  

The proposed Regulation and Taxation of Marijuana Act, otherwise known as Proposition 205, would massively affect existing Arizona law. Put simply, Proposition 205 would negatively impact Arizona law and policy in a variety of significant ways, including how job creators manage their workforce and workplace.

The Arizona Chamber of Commerce and Industry is proud to spearhead efforts to defeat this job-killing initiative. In Proposition 205’s 20 pages of conflicting and contradictory legalese, there are two key provisions that are particularly problematic for employers: proposed A.R.S. §§ 36-2860(A) and 36-2860(B). These two provisions, and Proposition 205 in general, are poised to wreak havoc on Arizona in a manner not disclosed in the initiative or acknowledged by its out-of-state marijuana industry backers.

The aforementioned provisions would upend Arizona’s employment laws in the following ways:

  • It would rob employers of the ability to take disciplinary action against employees who test positivefor marijuana, despite having a statutorily approved drug-testing policy. Want a drug-free workplace? Proposition 205 makes that more difficult.
  • It would create an environment for an avalanche of wrongful termination lawsuitsfor employers that fire employees for using marijuana on the theory that the termination was in violation of Proposition 205.
  • It would tangle Arizona businesses in a web of regulations that conflict with federal lawregarding safe workplaces, safe roads and transport, and safe foods. Does your business have federal contracts? Under Proposition 205, you’ll be forced to navigate two conflicting sets of laws.

Proposition 205 would be a trial lawyer’s dream. Compounded with the clashes above, these provisions would create conflict within laws related to various Arizona benefit programs, too. For example:

  • Proposition 205 would create a situation where, under Arizona’s welfare laws, marijuana would be considered both legal and illegal, resulting in costly litigation.
  • Proposition 205 would also create a situation where Arizona’s unemployment insurance laws would require a person to be denied benefits, yet it would also prohibit such denial, again resulting in costly litigation.
  • Lastly, it would be virtually impossible for Arizona employers to receive a statutory discount on workers’ compensation premiums for having a zero-tolerance drug-free workplace.

Propostion 205 is a mess. Its passage would harm employers’ ability to keep marijuana out of their workplace, whille exposing them to expensive lawsuits. Arizona job creators who are concerned about our state’s ability to continue to attract and grow jobs should vote no on Proposition 205.

WHAT:           Tele-town hall on Proposition 205’s effect on employers

WHEN:           Thursday, October 27 at 2 PM

HOW:              Call 1-877-229-8493; enter 115868 when prompted for a PIN

Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry

__________________________________________________________________________________________________________________________

 

Why Prop 64 is about more than just smoking marijuana

By BROOKE EDWARDS STAGGS

2016-10-24 14:33:08

Proposition 64, on its surface, poses a simple question: Should people be free to smoke pot in California?

But the 62-page initiative on the Nov. 8 ballot asks voters to determine much more than that.

It asks them to decide how much cannabis Californians should be allowed to carry, whether they should be able to grow it in their homes and what, if any, penalties consumers should face going forward.

RELATED: Prop 64 to legalize marijuana: Who’s backing it, who’s fighting it and why?

It also asks them to weigh the future of a multibillion-dollar industry, including everything from how marijuana businesses should be taxed to what warning labels should appear on edible products.

Depending on who you ask, either the devil or the redemption is in those details.

Supporters call Prop. 64 the “gold standard” of marijuana legalization, touting strict safeguards that build on lessons learned by the four states that already allow recreational pot.

Some opponents say the measure doesn’t go far enough to keep kids and roadways safe, while detractors on the other end of the spectrum say the measure includes too many regulations to be true “legalization.”

With the vote about two weeks away, here’s a closer look at what Prop. 64 means for California.

PERSONAL RIGHTS

Prop. 64 would allow California residents and visitors 21 and older to buy, carry and give away up to an ounce of marijuana. That’s enough to roll perhaps 40 average-sized joints.

They also could possess up to 8 grams of concentrated cannabis, such as waxes or oils that can be vaporized or mixed into foods.

Under the measure, residents could grow as many as six pot plants at home and keep what they harvest. But the plants couldn’t be visible to the public. And local governments could regulate how they’re grown, including requiring that it be done indoors.

No one could consume recreational pot in public. Consumption would be allowed only on private property or in “cannabis cafes” licensed strictly for marijuana use.

The initiative would uphold laws against driving while impaired or having an open container of marijuana in a car. But it wouldn’t establish a threshold, as Colorado and Washington did, for how much THC (the compound in pot that makes users high) drivers could legally have in their blood.

Prop. 64 backers say that’s because blood alcohol content isn’t a good measure for marijuana impairment, since pot stays in the system long after its mind-altering effects have worn off. So the initiative would direct tax revenue to law enforcement and researchers to develop better tests for drugged driving.

The measure would protect employer rather than employee rights, allowing companies to hire and fire based on drug tests.

But the penalties for most marijuana-related crimes, which studies show disproportionately affect minorities, would be lower if the measure passes. Adults convicted of possession with intent to sell would get six months in jail rather than two years in prison, for example, while teens caught with the drug would get counseling and community service instead of criminal records. And those changes would be retroactive, meaning marijuana offenders could be released from jail or have their records expunged if the measure passes.

Prop. 64 also would uphold existing rights for medical marijuana patients, allowing them to still grow more pot than recreational consumers and access medical marijuana at 18 years old. They would face some additional taxes, though they’d also gain privacy and child custody protections.

If the measure is approved, all of these personal rights would take effect the day after the election, on Nov. 9.

BUSINESS PLAN

It would take a bit longer for the taxed and regulated recreational marijuana industry promised by Prop. 64 to take shape.

Shops would start to open on or before Jan. 1, 2018.

That’s the date California officials expect to start issuing licenses to all medical marijuana growers, manufacturers and sellers under industry regulations signed into law in 2015.

Prop. 64 would largely extend the same regulatory framework to recreational marijuana production, with requirements for licensing, testing, child-resistant packaging, limited advertising and tracking pot from seed to sale.

The initiative would establish a 15 percent sales tax, plus a tax by weight for growers. That would be on top of taxes local governments tack on and regular state sales tax, though medical marijuana users would be exempt from the latter.

Small- and medium-sized businesses would get an edge coming out of the gate, since Prop. 64 bans large-scale cultivation for the first five years. But after Jan. 1, 2023, there would be no state cap on the size of marijuana farms.

Cities and counties would still have authority to regulate, tax or ban marijuana-related businesses in their borders. Many have already started passing laws in anticipation of Prop. 64, with 62 local measures related to marijuana on the ballot Nov. 8.

THE OUTLOOK

Nearly every poll on Prop. 64 suggests it will pass – though perhaps narrowly. Recent polls have ranged from 51 percent to 71 percent support, with many averaging around 60 percent.

But advertising to defeat Prop. 64 is being aired. And in California the popularity of measures often shifts in the final days before an election.

If the measure becomes law, industry experts predict that California’s legal weed market will reach $6.5 billion by 2020 and potentially spur legalization throughout the country.

The Legislative Analyst’s Office anticipates that tax revenue from the measure could top $1 billion annually, with the justice system potentially saving tens of millions more on enforcement costs.

The revenue won’t go to state or local general funds. Instead, it will be set aside to fund youth prevention programs, marijuana research, better drugged driving tests, environmental remediation and grants to impacted communities.

The impact legal marijuana has on highway safety, teen use and crime isn’t yet clear. There are conflicting reports coming out of states such as Colorado and Washington, which approved legal pot in 2012. And experts say they need more years of reliable data before they have definitive answers.

More research is also needed on how recreational marijuana use ultimately affects health and achievement, with particular concern over today’s increasingly potent pot. But studies increasingly suggest that, while marijuana consumption may pose some risks for young people and the mentally ill, responsible use appears to have little impact on healthy adults.

With valid concerns on both sides of the issue, Dr. Igor Grant, who heads up the Center for Medical Cannabis Research at UC San Diego, said it’ll be up to voters to weigh the impacts of prohibition against potential impacts of legalization.

“There’s a cost-benefit analysis that voters have to make,” he said.

Contact the writer: 714-796-7963 or bstaggs@ocregister.comTwitter: @JournoBrooke

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PETA IS OUT SPYING AGAIN

We had a report yesterday from a dairy in the Buttonwillow area that there was a person spying on the dairy from the road.  We have previously reported on this issue.  The herdsman saw a van with dark tinted windows parked on the road next to the dairy fence.  There was one man apparently with a camera focused on one of the corrals and as soon as the herdsman approached the van, they jumped in and drove off very fast.

Again, we advise that  you do not become overly confrontational or threatening.  You can have someone hold a blanket on a stick in front of the camera so they get discouraged and leave, but remember, if they are on the road, it is public property and you do not have a right to confiscate equipment.  If you feel they are bothering your employees or animals, you can contact the Sherriff’s office and ask that they not agitate the animals.

We are not sure of the actual affiliation of this group at this time, but we wanted everyone to be aware that the same events that were going on in Northern California, are now hitting the south valley area.  If you see someone, call your neighbors, or call us.