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Second Article Printed in Progressive Dairyman Magazine – Marijuana Laws and You

We were again privileged to be asked to submit an article covering the new Marijuana Laws for Progressive Dairyman magazine.  You can read the article here: https://www.progressivedairy.com/topics/management/cutting-through-the-smoke-marijuana-and-the-workplace or  you can read the article in the October 18 issue.

Please feel free to leave a comment or ask questions regarding this or any HR issue.   You can always call our office at 559-625-2322 if you are a customer or would like more information.

 

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.

Back to top

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.

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!!!

GOVERNOR BROWN SIGNS BILL SETTING UP RETIREMENT FUND FOR LOW WAGE WORKERS

 

Before anyone panics, let me say up front that employers do not have to fund any of this with their own money, you just have to set this up in your payroll so that a percentage of an employees check goes to a State run retirement programSo now let me tell you what we know:

Gov. Jerry Brown is scheduled to sign legislation Thursday to automatically enroll nearly 7 million people in a retirement savings account, an attempt to address growing fears that many workers will be financially unprepared to retire.

The legislation creates a state-run retirement program for workers who don’t have an employer-sponsored plan, many of them working in lower-wage positions. It requires employers to automatically enroll their workers and deduct money from each paycheck, though workers can opt out or set their own savings rate. The account could also be carried from job to job.  It is suggested that originally 5% would be deducted and it would go up by 1% per year until it settles at 10%.  I do not know many workers, especially low income people that can afford 10% of their income being taken away for this program.

Supporters of the concept hope that requiring workers to affirmatively opt out will make them less likely to do so, but it is up to employers to make sure all employees will be aware of this program and that they can opt-out.  Experience from the health insurance program is that most employees will opt-out if it involves their own money.

This bill is known as SB1234 by Senate President Pro Tem Kevin de Leon, D-Los Angeles.  It will be called SECURE CHOICE.  You may thank him directly if you are so disposed or let him know what you think of his idea at   https://sd24.senate.ca.gov/contact/email

Below are some key points.  This program will not open until the 9 member panel charged with oversight of the program is installed, so this may not start for a year or two.

KEY FEATURES OF THE CALIFORNIA SECURE CHOICE RETIREMENT SAVINGS PROGRAM:

Governing and Oversight Board

The California Secure Choice Retirement Savings Investment Board (https://www.treasurer.ca.gov/scib/) is modeled after ScholarShare, California’s 529 College Savings Plan. The Board is comprised of nine members: the State Treasurer (Chair), State Controller, Director of the Department of Finance, a retirement savings and investment expert appointed by the Senate Rules Committee, an employee representative appointed by the Speaker of the Assembly, a small business representative appointed by the Governor, and three additional public members appointed by the Governor. Page 3 of 4

The Board is charged with the administration of the Secure Choice Program, and to date has overseen the completion of the legal analysis and the mandated market analysis and feasibility study. In moving forward with the full implementation of the program, the Board will be the ongoing administrator for the hiring of private firms to manage the investment portfolio and the individual retirement savings accounts.

Disclosures for Employees and Employer Liability Protections

Employees offered the opportunity to participate in the Secure Choice Program will receive a program information packet with a disclosure form that includes the benefits and risks of making retirement contributions, the mechanics of how to participate in or opt out of the program, the process for the withdrawal of retirement savings, and how to obtain additional information about the program.

The disclosure form will clearly inform employees that employers are not liable for their decisions whether to participate in or opt out of the program, or for employee investment decisions, and state that their employer is not a fiduciary of the California Secure Choice Retirement Savings Trust or program, the employer does not bear responsibility for how the program is administered, and the employer is not liable with regard to investment returns and benefits paid to program participants.

In addition, the disclosure form will notify employees that the program is not an employer-sponsored retirement plan, their employers are not in a position to provide financial advice, and that they should contact financial advisors if they want to seek financial advice.

To notify employees that the state is not liable for the retirement savings benefit, the disclosure form will also specify that the Secure Choice program fund is not guaranteed by the State of California.

Employees that choose to participate in the program will be required to acknowledge that they have received and read all of the disclosures.

Employee Participation in the Secure Choice Program

When the Secure Choice Board officially opens the program for enrollment, only employers that do not offer their own employer-sponsored retirement plan (such as a 401(k), SEP, or SIMPLE plan) or automatic enrollment payroll deduction IRA will have to perform the ministerial duty of supplying the information packet and disclosure form, and allow their employees to remit contributions through payroll deduction.

Employees will be automatically enrolled, and employee participation will be phased-in over a three year timeframe, starting with the largest employers:

 Employers with 100+ employees: allow employee participation within 12 months of the Board opening the program for enrollment;

 Employers with 50+ employees: within 24 months;

 All other eligible employers: within 36 months.

Participation by employees will be completely voluntarily, and employees will retain the ability to opt out at any time.

The default employee contribution rate will be set at 3%, with Board authority to adjust the amount between 2-5%. Through regulation, the Board could also establish an auto-escalation contribution rate, capped at 8% of salary with a limitation on increasing the rate no more than 1% annually. Employees will be able to specify their level of contribution if they do not want to contribute the default rate, and could also opt out of auto-escalation at any time. Page 4 of 4

Employees that already have access to a workplace retirement plan could also voluntarily participate in the Secure Choice Program. However, their employer will not be obligated to allow them to use their payroll system to make automatic payroll contributions to the program.

Role of Employers

Employers that opt to make the Secure Choice Program available to their employees will not bear any fiduciary responsibility and will not be required to pay administrative fees or comply with federal quarterly-reporting mandates. The administrative function of employers will be limited to providing employees with the program information packet and disclosure form, and allowing their employees access to their payroll system to make payroll deductions to the program.

Due to current federal prohibitions, voluntary employer contributions to employees’ individual retirement accounts will only be permitted if there is a future change in federal law and employer contributions would not cause the Secure Choice Program to be treated as an employee benefit plan under ERISA.

WE WILL WRITE MORE ON THIS TOPIC WHEN THERE IS MORE INFORMATION AND WE ARE NEARER TO IMPLEMENTATION.

Don’t Touch That Cellphone!!

Californians!  Because our state government feels it must protect everything you do, the governor has signed AB 1785 written by (and you are going to love the name…) Assemblyman Bill Quirk.  It is known as the “Distracted Driving” update.  Originally passed a few years back, the old law said you should not text while driving and it attached a fine if you are caught.  This makes sense, because we have all driven behind some numbskull who is not paying attention to the traffic and playing with their phone.

So, now we have an update to that law and you should bring this to the attention of every employee you have that uses a company vehicle or drives on company business.  Basically, the new law says that if you touch your phone or other electrical device FOR ANY REASON while driving, it is a violation and subject to a ticket and fine.  Specifically, you can mount a phone or GPS device on the windshield and you are allowed to do a “one-swipe” gesture which allows for the use of GPS but does not allow texting or other items.

These changes were proposed to meet the 2014 appeals court decision to move the emphasis from the action (calling or texting) to the devices.

We are not posting this to cause a discussion on whether a change like this will eliminate accidents, but we feel a technological change would be better.  They  have software that can disable cellphone use while driving, but refuse to implement it.  So, please inform your employees so that they and you are not subject to fines or tickets.

OSHA FINALIZES RULES FOR DRUG TESTING AND SAFETY INCENTIVES (UPDATED SEPT 1, 2016)

 

 Edit Sept 1, 2016…The information below has been adjusted since our posting and the new rules go into effect as of November 1, 2016 instead of August 10.

Due to the major changes listed below, HR Mobile Services, Inc. will be adjusting all of our Drug and Substance Abuse Policies to better reflect these changes.

This is from the rewriting of (29 CFR 1904.35(b)(1)(I) and subsequent commentary letter issued by OSHA in May, 2016.

Back in 2006, OSHA issued a paper that took at dim view of Safety incentive programs.  The general idea was that if there were no injuries reported for a month or a quarter, there would be a drawing for prizes such as a TV or gift cards.  While this was done with good intentions that employees would work more carefully so that everyone would have a chance to win valuable prizes, it also had an impact (intended or not) on the reporting of injuries.  The letter went on to point out that an employee could be put under increased peer pressure not to report an injury and that was not acceptable.  The new rule specifically prohibits employers from using incentive programs that discourage injury reporting.  THEY ARE NOT BANNING INCENTIVE PROGRAMS!  Programs could include:

  • –   Providing t-shirts to workers serving on safety and health committees or to celebrate a goal being reached
  • –   offering modest rewards for suggesting ways to strengthen safety and health
  • –   throwing a company or department wide recognition party after the successful completion of safety training

The final ruling goes into effect on Nov. 1, 2016.  The final rule explicitly incorporates “the existing prohibition on retaliating against employees for reporting work- related injuries or illnesses that is already imposed on employers”.  You can bet that lawyers will be quoting this and inquiring into incentive programs when filing a 132-a or EEOC discrimination case.  BE CAREFUL.  If you are not sure of your program, give us a call.

ALSO………..

OSHA has determined that blanket application of a company post-injury drug test policy may not be legal because it may deter an employee from reporting an injury.   Employers are prohibited from using the drug testing as a threat to employees who may want to report and be treated for an injury.

Where this can happen, and you need to address this with your supervisors, is when the supervisor says to the employee, “you can be treated at the clinic, but you know they are going to test you for drugs and alcohol and if they find anything you will be fired”.  That is a threat and is illegal.  You must make sure your people know that comments like this expose your company to major fines.

Further, drug testing after an accident is only allowed when 2 situations are present.  The first is that the injury MUST be associated with an action on the part of the employee that could have been connected to a drug or alcohol impairment.  That is to say, if an employee is stung by a bee, there is no connection to unusual behavior due to being under the influence and so there is no reason to apply a drug and alcohol screening test.  If the employee was swinging a stick at a bee hive and got stung, there may be a good reason to have them tested.  If a tree branch falls on an employee, no test.  If an employee is climbing a tree for fun during lunch, maybe there is a reason for testing.  If an employee has a back strain or a cut due to a missing guard on a piece of machinery, there is not a good reason to drug test.

The second part of this is that the testing should only be done when it can accurately identify impairment caused by drug use.

So, you need to be reasonable in your application of testing employees and you cannot use it as a threat to not report.  You still need to follow DOT rules because they may override some of these situations.  All DOT accidents require post-accident testing and in most cases would meet the standard above in either case.

CALIFORNIA ASSEMBLY BILL TO END AG OVERTIME EXEMPTION (AB2757) PASSES COMMITTEE

AB 2757 (Gonzalez), which seeks to repeal longstanding law allowing California Agriculture to pay overtime after 10 hours of work in a day passed the California Assembly’s Labor and Employment Committee on April 6, 2016.

Presently, Labor Code section 554 exempts agricultural employees from Labor Code provisions regarding wage and hour, meal break requirements and other working conditions.  Known as the Phase-In Overtime for Agricultural Workers Act of 2016, this bill would remove this exemption and would create a schedule that would phase-in overtime requirements for agricultural workers over the course of four years, beginning in 2017.  Under the proposed legislation, beginning July 1, 2017, agricultural workers would receive overtime for all work after nine and one-half hours daily or in excess of 55 hours in one workweek.  The thresholds for daily and weekly overtime would be further reduced each subsequent year until January 2020, at which point agricultural employees would receive overtime for work beyond eight hours daily or 40 hours weekly.

Obviously, California Agriculture should do everything it can to oppose this ill-thought legislation. Sagaser, Watkins & Wieland PC will continue to monitor AB 2757 and all other pending employment and labor law bills pending in the California Legislature.  Please call us at 559-421-7000 if you have any questions.

This bill will reduce the paychecks of thousands of agriculture workers.  This bill forces employers to cut 20 hours a week out of the agriculture workers check.  It also reduces their mandated sick pay hours to 24 (from 30) and most of these families will not be able to exist on this amount of pay.  This could mean the end of Agriculture in California.  If employees cannot feed their families they will move away.   If they go, there won’t be anyone to tend the animals and crops.  This is a bill that needs to see the light of day and have a vigorous voice from all Ag employers.  Do it today!!

CALIFORNIA MINIMUM WAGE PART 2…..

Please look at this graph that shows the minimum wage increase path for small and large employers.

201603290916

It shows that small employers (25 or fewer employees) and large employers (26 or more employees) will pay at a different rate.  Beginning in 2017, large employers will increase to $10.50 per hour.  Smaller employers will not increase until 2018.

Small employers will continue to be one  year behind the large employers until all employees are covered at $15 per hour by 2023.  The increase starts like this…

Large Employer                    Small Employer

2017 – $10.50                          NO Raise

2018- $11.00                           $10.50

2019 – $12.00                          $11.00

2020 – $13.00                         $12.00

2021 – $14.00                        $13.00

2022 – $15.00                        $14.00

2023……………………………..$15.00 + yearly cost of living increases set each year so you don’t have much time to set new prices to adjust for the unknown increase each year.

This could all be changed before it is signed into law, but this is the proposal as of yesterday.  Also, there is a component that would tie the increases after this to inflation rates and also a “hold” feature if the economy goes down, but considering how the State lies about the real debt and economic problems (they still claim they are a employer friendly state), I don’t hold out much hope for a “hold” being used.  It is, after all, in the State’s interest to increase pay so they can increase the amount of taxes collected from everyone.  There is no incentive to lower the amount to be taxed.

Stay tuned……..

CALIFORNIA TO RAISE MINIMUM WAGE YEARLY TO $15 PER HOUR AND BEYOND……..

Governor Brown, today, will be announcing an agreement reached between the State Legislature and 2 major Unions in California regarding minimum wage.  The unions had registered 2 differing minimum wage initiatives and got them on the California ballot, thus going around the State Government to let the people vote on the idea.

According to news reports, the negotiated deal would boost California’s statewide minimum wage from $10 an hour to $10.50 on Jan. 1, 2017, with a 50-cent increase in 2018 and then $1-per-year increases through 2022. Businesses with fewer than 25 employees would have an extra year to comply, delaying their workers receiving a $15 hourly wage until 2023.

Future statewide minimum wage increases would be linked to inflation, but a governor would have the power to temporarily block some of the initial increases in the event of an economic downturn.

While we have often written here that we oppose minimum wage increases without acknowledging the other “hidden” costs such as large increases in Worker’s Comp costs, this may be the better of the choices available.  The other initiatives on the ballot would have raised the minimum rate more rapidly so the next 2 years we only get a .50 raise each of the first 2 years.

Of course, by 2022, $15 will not raise anyone out of “poverty” since the line will rise as well, so by then the new chant may be $20 per hour.  And so it goes…..

Its backers are hopeful that the final agreement will allow them to formally withdraw that initiative in a few weeks.

“We want to look at the details first,” said Steve Trossman of Service Employees International-United Healthcare Workers West.

Sources say the Legislature could vote on the wage compromise as soon as the end of next week by amending an existing bill on hold since 2015.

It is of note that NO BUSINESS OWNERS OR ORGANIZATIONS WERE INCLUDED IN ANY OF THESE DISCUSSIONS.  So much for open and transparent government!!

We will continue to monitor this law as it is rewritten and passes through the Legislature to the Governor’s desk.  Then we have to hope the initiatives are pulled from the ballot as well.  Stay tuned……

UFW HANDING OUT FALSE WAGE INFORMATION

 

 

Due to the recent signing of AB1513 there are a lot of people very nervous about Piece Rate pay and the new rules.  Please not the article below and then I will add more information below the article.  Also, as a reminder, Minimum wage goes to $10 per hour beginning January 1, 2016 in California.

UFW Distributes Minimum Wage and Piece-Rate Leaflet

Article Courtesy of: Rob Roy, President and Counsel, Ventura County Agricultural Association

Please find a leaflet that is being left on employee’s vehicles at worksites or along public roads by representatives of the United Farm Workers of America, AFL-CIO (UFW).

The leaflet seeks to inform agricultural employees as to whether they have heard about the “new wage law.”  They also claim that “thanks to the UFW, we have a new law that protects wages for farm workers that work by piece rate.”

The leaflet goes on to say that effective January 1, 2016, it is required that each employee is paid for their non-productive time (e.g., travel time between fields, training, exercises, etc.) based upon the minimum wage.  It also states that it is required that your employer allow you to take paid rest periods even though you work by piece rate based upon the average hourly rate earned.

Before December 15, 2016, the leaflet requests that if your employer has not given you retroactive pay, you should demand it for the last four years the employer failed to pay.  It goes on to state that you could be eligible for $8 more per day, up to $48 per week.

Lastly, the leaflet asks employees to remember not to sign documents that waive their right to this money.  This last reference is to retroactive release agreements between employers and employees to cover retroactive wages not paid such as non-productive time, rest or heat recovery periods or overtime.

There are several misstatements in this leaflet.  For example: (1) The UFW was not a party to the negotiation process; (2) Workers cannot demand unpaid wages beyond three years unless they are part of a class action lawsuit with a cause of action for restitution under the California Business and Professions Code; (3) There is no law that currently requires an employer to pay retroactive non-productive time and rest periods.  However, AB 1513, which becomes effective on January 1, 2016, permits employers to voluntarily make such payments to avoid potential class action lawsuits.

It should be noted that these leaflets may be passed out with Notices of Intent to Take Access by UFW organizers to your workplace.  If the UFW files a valid Notice of Intent to Take Access and files it with the ALRB, they will be permitted to take access to your business operations during three specified periods in the workday.  During such periods, they may be able to distribute such leaflets and speak with your employees concerning its content.

Do not attempt to restrain UFW representatives in passing out leaflets to your employees during lawful access.  Also, do not question your employees about what the UFW representatives discussed during the access periods.

If UFW organizers are accessing private property to put the leaflets on employee vehicles, you may intercede and inform the organizers that they are on private property, they are trespassing, and ask them to remove the leaflets.  To enforce your demand, you should take a photo of the individual placing the leaflet, as well as his/her car and license plate.

If they persist in not leaving your private property, contact the local police or sheriff’s office.

_________________________________________________________________________________________________________

AB 1513 was written to address the issue of unpaid rest periods, which, by law, should be paid.  Here is the problem….when an employee is working by piece rate, they are not paid when they are “resting” so the court said the employer must establish an hourly rate to pay the employee when they are not picking fruit or whatever the job is.  You cannot establish just a minimum wage for this time because it is not an incentive to take a rest break for less than you are making when you work.  So, they created a formula that involves taking the gross amount paid for a week, divided by the hours worked minus the 10 minute breaks and meal periods time.  That gives you the hourly rate when they are working.  This is the hourly rate you use to pay the rest breaks on a separate line on their pay stub.  We strongly suggest that you meet with your attorney and develop a plan for paying any employees who fall into this category.

There is also a ‘safe-harbor” time set up to pay back pay if you owe it, without incurring penalties.  This could save you thousands of dollars and again, it is worth a discussion with a good labor attorney to protect your rights.

You may also contact HR Mobile Services, Inc. for a general discussion of this issue before you speak to your attorney.  Just give us a call or email.