Employing Private Household Caregivers

Practical Considerations for Employing Private Household Caregivers

Last June, Bender’s California Labor & Employment Law Bulletin published an article I co-wrote with a colleague, Carmela Woll, regarding employing private household caregivers. The article contains a lot of useful information for employers and employees to consider when hiring or working as a caregiver, and is similar to other articles I’ve posted. I thought I’d pass along some of the useful information in the article.

Introduction

Families often times come to us after they already hired one or more caregivers, with varying employment arrangements including straightforward arrangements such as payment for services or not so straightforward arrangements such as free room and board in exchange for services. These deals are often made with a handshake and the family members believe they are entering a fair agreement where the caregiver works for limited hours and gets a free place to live and some meals. Everyone sees it as a win-win situation, and may not appreciate the importance of a written agreement or having the caregiver record hours worked.

Well-intentioned, family members can open themselves up to significant personal liability with these handshake arrangements. California’s broad definition of “employer” puts individual family members at risk for a host of wage and hour issues. Failing to maintain accurate records, misunderstanding pay obligations, and unwritten agreements regarding meals and lodging can lead to costly mistakes. Most family members are not prepared to take on the responsibilities of an “employer,” and are not familiar with some of the unique aspects of employing a private household caregiver. Wage and hour claims can be filed up to four years after the wages were due and the liability can be staggering, particularly for a family trying to make ends meet and care for a loved one.

The purpose of this article is to identify some common “red flag” areas that you should know when you or your client wants to hire a private household caregiver.

Credit for Lodging and Meals

In California, Wage Order No. 15-2001 applies to “Household Occupations,” including most workers employed by the household owner. Although an employer may use meal and lodging as a credit against minimum wage, Wage Order No. 15-2001 limits the amount that can be used to offset the employer’s minimum wage obligation, and the amount of the credit depends on the type of lodging provided. Moreover, the credits may only be applied if the employer and employee enter into a voluntary written agreement before the work is performed. A handshake or verbal agreement won’t suffice. The written agreement must specify the amounts that will be deducted, and cannot be more than the amounts set forth in the Wage Order.

Domestic Workers Bill of Rights

Wage Order No. 15-2001 defines “personal attendant” as any person employed by a private householder or by any third-party employer recognized in the health care industry to work in a private household, to supervise, feed, or dress a child, or a person who by reason of advanced age, physical disability, or mental deficiency needs supervision. The status of personal attendant applies when no significant amount of work other than the foregoing is required. For these purposes, “no significant amount of work” means work other than the foregoing did not exceed 20 percent of the total weekly hours worked. Prior to January 2014, “personal attendants” were exempt from many of the typical wage and hour obligations under Wage Order No. 15, including overtime premium pay. However, if a caregiver spent more than 20% of his/her time doing non-personal attendant work, the employee did not qualify as a personal attendant and was entitled to overtime.

This changed in September 2013, when the Governor signed the Domestic Workers Bill of Rights (DWBR), which created California Labor Code sections 1450 to 1454, and extended overtime protection to “personal attendants.” Employers have always been required to pay at least minimum wage for all hours worked, but until adoption of the DWBR, “personal attendants” were not entitled to overtime regardless of the number of hours worked.

Under the DWBR, personal attendants are entitled to overtime compensation at one and one-half times the employees’ regular rate of pay for all hours worked in excess of 9 hours per day or 45 hours per week. The overtime obligation applies regardless of whether the worker is employed by the family or a third-party employment agency. The only exception is if the wages are paid through one of the listed state or county programs (i.e., In-Home Supportive Services, Lanterman Developmental Disabilities Services Act, California Early Intervention Services Act, etc.) or if the person providing the services is the “parent, grandparent, spouse, sibling, child, or legally adopted child of the domestic work employer.”

The DWBR Broadly Defines “Employer”

For purposes of the DWBR, “domestic work employer” is any person, including corporate officers or executives, who directly or indirectly, or through an agent or any other person, including through the services of a third-party employer, temporary service, or staffing agency or similar entity, employs or exercises control over the wages, hours, or working conditions of a domestic work employee. This definition provides a strong argument that a family member could be considered an employer whenever the family member directly or indirectly exercises control over the wages, hours and working conditions. In Guerrero v. Superior Court, the court found the County of Sonoma was the employer because the county was obligated to ensure the work was actually performed and because the County “held the purse” strings. This same logic could be used to sue a family member that hires, pays or otherwise directs the employment of a caregiver.

FLSA Regulations

Since its inception, the Fair Labor Standards Act (FLSA) exempted certain domestic workers (i.e., persons employed about the home) from its provisions. In 1974, Congress amended the FLSA to include some, but not all, domestic workers. Companions, sometimes referred to as “elder sitters,” or “personal attendants,” were never covered by the FLSA. Recent revisions to FLSA regulations eliminated the companion exemption for any worker employed by a third-party employer. This means that if a family uses a third-party agency to provide companion care for a family member, the companion must be paid one and one-half times the employee’s regular rate of pay for any hours worked in excess of 40 hours per week.  Companions employed directly by the family are still exempt from the FLSA’s overtime requirements. Although the overtime obligations do not apply to companions employed directly by the families, families are required to maintain accurate records of the hours worked and wages paid.

Suggestions for Minimizing Risk When Hiring Caregivers

From a liability standpoint, it is almost always safer for families to use a care agency rather than hire a caregiver directly. Reputable care agencies pay their employees according to state and federal law, and have required and recommended insurance coverage in case of problems. Using a care agency also eliminates the problem of finding replacement personnel if the caregiver does not work out or calls in sick. Using a care agency is more expensive than hiring directly, but care agencies are now required to conduct background checks, Tuberculosis tests, and provide minimum training.

Caregivers should only be hired directly when the family members, or the elderly person, are prepared to take on the responsibilities of an employer. That means setting up payroll, keeping track of hours worked, maintaining adequate workers’ compensation insurance and all the other responsibilities and liabilities that come with being an employer. If a care agency is prohibitively expensive, and the family has an aversion to taking on the responsibilities and liabilities of being an employer, a third party employer could be an option. There are a few third party employers catering to the homecare industry, but very few.

It’s best to avoid paying caregivers a daily, weekly or monthly salary. A salary only compensates the employee for the regular hours worked.  If the personal attendant works more than 9 hours in a day or more than 45 hours in a week, the salary does not cover the overtime hours. Caregivers should be paid an hourly rate—and overtime should be paid when it is worked.

When the caregiver is required to remain on the premises, the caregiver must be paid for the time spent on the premises even if the caregiver is sleeping. In Mendiola v. CPS Security Solutions, Inc., the court confirmed that an employee must be paid for all hours worked, including when the employee is subject to the employer’s control—even if the employee is sleeping. Unless the employee is relieved of all duties and free to leave the premises, the employee is still subject to the employer’s control.

Have a written employment agreement. California Labor Code section 2810.5 requires the basic pay information, including the paid sick leave policy, to be in writing, signed by the employee. A written employment agreement should—at a minimum—confirm the at-will nature of the employment, the hourly rates to be paid, and the types of duties the employee is expected to perform.

When seeking to apply credit for lodging or meals towards payment of wages, be sure to have a written agreement with the caregiver before the work begins. Refer to Wage Order No. 15-2001 to determine the maximum amount of credit that may be applied.

Caregivers should not be hired as independent contractors. Different agencies use different tests to determine whether a worker should be classified as an employee or an employer. Regardless of which test applies, it will be difficult for any caregiver to qualify as an independent contractor. Aside from the tax implications, California Labor Code section 226.8 imposes a fine of between $5,000 and $25,000, for “willfully” misclassifying someone as an independent contractor.

To avoid more exposure to payment of overtime, do not let personal attendants perform medical procedures or clean the house and other housekeeping chores. A personal attendant is there to provide fellowship and protection, and to assist the care recipient with the activities of daily living. When a caregiver performs work that should be done by a licensed medical professional, or if the caregiver spends more than 20% of her/his time doing laundry and cleaning the house, the caregiver will not qualify as a personal attendant thus resulting in greater exposure to liability for payment of overtime wages.

About the Authors

Carmela Woll is the principal attorney at the Law Office of Carmela J. Woll, in Santa Cruz, California.  She represents and advises both employees and employers in labor and employment law matters, with a focus on providing counsel to small businesses and non-profit corporations.  Ms. Woll also conducts private and public sector workplace investigations. 

Robert Nuddleman is the principal attorney at the Nuddleman Law Firm, P.C., representing individuals and companies in federal and state court and before various administrative agencies, focusing on overtime claims, breach of contract, trade secret protection, claims of sex, race, age, and pregnancy discrimination and/or harassment and accommodating persons with disabilities. Mr. Nuddleman is the current chairperson for the Alameda County Bar Association’s Labor & Employment Law Section and the former chairperson for the Santa Clara County Bar Association’s Labor & Employment Law Section. 

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice about wage and hour or other employment law issues, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

Employee Benefit Plans

I oftentimes get questions about employee benefit plans, such as health insurance plans and retirement plans. ERISA laws–the Employee Retirement Income Securities Act–govern employer provided benefit and welfare plans. Although I can answer some basic questions about ERISA plans, and have even litigated a couple of cases with ERISA issues, I rely on experienced ERISA attorneys for the best advice and representation regarding employee benefit plans.

Attorneys Handling Employee Benefit Plans

One of my favorite ERISA lawyers is Ruth Silver Taube. Ruth is a valuable resource with a wealth of information. I regularly refer clients to her, and have always received positive feedback about her knowledge, advocacy and advice. At her website she gives a brief description of ERISA Plans:

There are two types of  employee benefit plans.  One is an “employee welfare plan,” and the other is “an employee pension benefit plan.”  ERISA Section 3(3), 29 U.S.C. 1002(3).  An “employee welfare benefit plan” is any “plan, fund, or program” which is “established or maintained by an ‘employer’” or an “employee organization” (union etc.) or both for the purpose of providing benefits to employees such as medical, dental, disability, vacation, etc.  ERISA Section 3(1), 29 U.S.C. 1002(1).   Long term disability (“LTD”) plans provided by the employer or employee organization or union are employee welfare benefit plans and are covered by ERISA.

Ruth has been particularly useful in handling Long-Term Disability plans. She knows how to get to the heart of a matter and advocates zealously for her clients. It’s no wonder she has had so many successful resolutions. I can’t recommend Ruth enough. I’m not in the habit of blogging about hiring another attorney, but if you have an employee benefit plan question, you can’t go wrong contacting Ruth.

If you’re in the East Bay, you should also consider contacting Cassie Ayeni Springer. I got to know Cassie at a recent Alameda County Bar Association event and was immediately impressed with her knowledge and attitude regarding representing clients. I had the opportunity to refer an employee benefit plan case to Cassie recently, and received high praise from the client regarding Cassie’s command of the issues.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

 

How Much is Your Attorney Worth?

Attorneys use a variety of fee arrangements depending on their practices and the particular cases. Some work on an hourly rate (meaning you pay for every minute spent on your case). Others work on a contingency-basis (typical in personal injury cases where the client pays no fees unless and until there is a recovery from the other side). Some attorneys work on a flat-fee basis for some projects. Many, like me, offer a variety of fee arrangements to fit the situation. A common question is how much should you pay your attorney. Another way of asking that is: How much is your attorney worth?

Attorney Fees and Attorney Worth

In the ideal situation, the attorneys’ fees match the attorney worth. What do I mean by attorney worth? What is it worth to you in order to receive the services you receive. Oftentimes, the “worth” is not known at the beginning of the relationship. Will you win? Can the attorney successfully prosecute or defend your case? Is the attorney’s advice helpful? Sometimes it is difficult to determine the attorney worth until you know the end result. But you usually agree to the attorneys’ fees–or at least the method of determining the attorneys’ fees–at the beginning of the relationship.

As time progresses, the perceived worth of the services may change. Sometimes the perceived worth changes comes from a change in the case–the case becomes more or less valuable than originally believed. Other times the perceived worth changes because pursuing the case becomes a higher or lower priority in your life. Hopefully the change does not occur because the attorney is doing a poor job. If that’s the case, then you certainly should seek the advice of another attorney to determine whether you are receiving the services you bargained for.

How Do the Court’s Determine Attorney Worth?

In some cases, the losing party may have to pay the winning party’s attorneys’ fees. When that happens, the winning side files a motion for attorneys’ fees and the court determines the amount of attorneys’ fees to award. Usually, the court will award attorneys’ fees based on the Lodestar method. The Lodestar method looks at the attorneys’ reasonable rates and multiplies that by the number of reasonable hours the attorney spent on the case. I say “reasonable,” because the courts have discretion to determine whether an attorneys’ rates or hours are too high.

In a recent case, Hiken v. Department of Defense, that spanned several years, the winning side asked for over $380,000 in attorneys’ fees. The attorneys’ argued their rates ranged from $350 per hour to almost $700 per hour. The court thought the requested hourly rates were too high, and only awarded about $150,000,  based on a $200 per hour rate. In reversing the lower court’s award, the 9th Circuit said:

From time to time, fee applicants request awards higher than that which the evidence may, upon close review by a neutral judge, fairly permit. But a fee applicant’s decision to request a higher rate does not permit a court to disregard different rates if the evidence in the record supports them.

In other words, the court could not just reject the attorneys’ reasonable rate and create the court’s own rate just because it wants to. The case is now back at the lower level so the court can reconsider an appropriate rate.

A useful tool in determining appropriate hourly rates is the Laffey Matrix. This matrix lists hourly rates for attorneys of varying experience levels and paralegals/law clerks. The matrix is prepared and updated every year by the Civil Division of the United States Attorney’s Office for the District of Columbia (USAO). It is supposed to be used to evaluate requests for attorney’s fees in civil cases in District of Columbia courts.  Courts in other jurisdictions will oftentimes refer to the matrix when making fee awards.

Laffey Matrix and Attorney Worth

So, what does the Laffey Matrix say about attorney rates? The following is a list of rates based on years of experience from the 2015-2016 Laffey Matrix:

Experience 2015-16

  • 31+ years $568
  • 21-30 years $530
  • 16-20 years $504
  • 11-15 years $455
  • 8-10 years $386
  • 6-7 years $332
  • 4-5 years $325
  • 2-3 years $315
  • Less than 2 years $284
  • Paralegals & Law Clerks 154

The Laffey Matrix is not the final word on reasonable hourly rates. The actual rates will vary depending on location, experience, firm resources, etc. I tell all my clients that attorneys’ fees are negotiable. That doesn’t mean your attorney will work for free, but you should have a frank discussion with any prospective attorney regarding their rates and experience. Be a well-informed consumer and find the right attorney that works for you.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

 

Happy Labor Day!

As an employment attorney, I thought it would be nice to share some interesting information regarding Labor Day.

Department of Labor Facts re Labor Day

  • Labor Day, the first Monday in September, is a creation of the labor movement and is dedicated to the social and economic achievements of American workers.
  • The first governmental recognition came through municipal ordinances passed during 1885 and 1886.
  • February 21, 1887 Oregon passed Labor Day bill. New York actually introduced the legislation first, but Oregon passed the law first.
  • On June 28, 1895, Congress passed an act making the first Monday in September of each year a legal holiday in the District of Columbia and the territories.

Who First Proposed Labor Day?

It was a McGuire, but was it Peter or Matthew? Peter McGuire was the general secretary of the Brotherhood of Carpenters and Joiners. He also cofounded the American Federation of Labor. Some records he first suggested a day to honor those “who from rude nature have delved and carved all the grandeur we behold.”

Others say that Matthew Maguire, secretary of the Central Labor Union in New York, proposed the holiday in 1882.

At the height of the U.S. Industrial Revolution Americans worked long days, oftentimes 7-days a week just to eke out a basic living. Children worked alongside adults in deplorable conditions, and immigrants often faced extremely unsafe working conditions. Workers began joining together in collectives and unions to fight the inhumane working conditions.  According to History.com, “on September 5, 1882, 10,000 workers took unpaid time off to march from City Hall to Union Square in New York City, holding the first Labor Day parade in U.S. history.”

Labor Day: A Fight for Change

For those that started the movement, Labor Day was more than just a day off from work. It was a statement that all workers deserve to be treated fairly. Many of us take modern working conditions for granted.

Ben Railton, an Associate Professor of English and American Studies at Fitchburg State University and a member of the Scholars Strategy Network says:

Like the American labor movement itself, these histories are messy, conflicted, include both triumphs and tragedies, aren’t easily boiled down into a straightforward narrative. But one clear takeaway is this: As with every victory achieved by the labor movement (including eight-hour workdays, the weekend, health protections, child labor laws, and numerous other successes), Labor Day would not exist without the movement’s more radical and activist elements and efforts. Remembering the holiday’s origins can thus help us not only celebrate all that the labor movement has achieved, but also recognize the continued need for radical activism.

Celebrate the last days of Summer. Enjoy time with your friends and family, but don’t forget the struggles of our forefathers that made this day possible.

Happy Labor Day!

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

A Day in the Life of Employment Lawyers

On August 9th, at 6:00 p.m., I and some of my colleagues will be doing a presentation for the Alameda County Bar Association.  The presentation is part of the ACBA’s Intro to Practice Area Series.  Our presentation is: A Day in the Life of Employment Lawyers, and it will be held at the ACBA office in Oakland. The goal is to offer insights for new attorneys or attorneys thinking about practicing employment law regarding what employment lawyers do and what an average day looks like.

Employment Lawyers

My co-presenters hail from a wide range of practices, from small plaintiffs firms to large defense firms and even an in-house counsel. It should be a great opportunity to learn more about employment law. The following is a list of the presenters:

Jamie Rudman of Sanchez & Amador, LLP

Jamie Rudman is a Partner at Sanchez & Amador, LLP, a minority-owned business law firm in Oakland and Los Angeles. Jamie co-chairs the Employment Litigation Team. She has over twenty years of experience representing employers in employment litigation throughout California, primarily in the financial services, tech and retail sectors, and she counsels Fortune 500 companies on sensitive employment matters. Jamie is the 2016 Vice-Chair of the ACBA Labor and Employment Executive Committee.

Sonya L. Smallets of Minnis & Smallets

Sonya Smallets is a partner at Minnis & Smallets, has been representing employees who have been discriminated, harassed, wrongfully terminated, or denied reasonable accommodations by their employers for more than ten years. Sonya is the Secretary of the ACBA Labor and Employment Executive Committee. Sonya graduated with honors from Berkeley Law. She then clerked for Judge Sidney Thomas of the Ninth Circuit Court of Appeals and Judge Claudia Wilken of the Northern District of California before working for Lawless & Lawless as an associate attorney.

Krista Stevenson Johnson of Sheppard Mullin Richter & Hampton LLP

Krista Stevenson Johnson is a Special Counsel at Sheppard Mullin Richter & Hampton LLP in its San Francisco office. Krista advises and represents management clients in employment and labor litigation, focusing on employment class actions and harassment and wrongful termination lawsuits. In addition, Krista uses her extensive knowledge of and experience in employment and labor laws to provide practical and effective advice to management regarding employment law compliance, wage and hour laws, and workplace investigations.

Karla Franklin of Gap Inc.

Karla Franklin is Senior Counsel in the Global Employment Law Group at Gap Inc., an American worldwide clothing and accessories retailer that operates five distinct retail brands (Gap, Old Navy, Banana Republic, Athleta and Intermix). Ms. Franklin has been with Gap Inc. for over ten years and during that time has lead the company’s defense against a variety of wage and hour class actions. She currently leads the Company’s Wage and Hour compliance efforts. Prior to joining Gap Inc., Ms. Franklin spent approximately ten years as a defense side employment lawyer (working in both large and small firms). Ms. Franklin earned her J.D. from the University of California, Hastings College of the Law.

Robert Nuddleman of Nuddleman Law Firm, PC

Robert Nuddleman began representing employers and employees as a certified law student, and completed his first wage and hour trial before he graduated law school. A significant focus of Robert’s practice relates to wage and hour claims, including unpaid overtime, minimum wages, commissions and bonuses. Robert also represents individuals and companies in claims of sex, race, age, and pregnancy discrimination and/or harassment, and he assists employers and employees regarding how to accommodate persons with disabilities. A particular focus of Robert’s practice includes advising trustees, conservators, families, care agencies, residential care facilities, care homes and others regarding wage and hour and employment laws in the elder care industry. The 2016 Chair of the ACBA Labor and Employment Executive Committee, Robert frequently presents seminars and workshops.

If you haven’t registered yet, you can do so here. Even if you are not an ACBA member, come join us. Hope to see you there.

 

FAQs New Federal Overtime Rules

Last week I wrote about the new federal overtime rules that will go into effect December 1, 2015.  I attended a webinar hosted by the Department of Labor regarding the changes.  There were a couple of points about bonuses that I thought worth mentioning.  I also wanted to circulate the questions and answers the DOL provided regarding the new federal overtime rules.

Non-Discretionary Bonuses

The new regulations allow employers to use non-discretionary bonuses and commissions to satisfy part of the new salary requirement.  Employers can satisfy up to 10% of the salary requirement with quarterly bonuses.  Employers cannot use discretionary bonuses (e.g., holiday bonus, or “attaboy” bonus) to satisfy any portion of the salary requirement.

Non-Discretionary Bonus

So, an employer could pay a salary of $822.00 per week ($42,744 per year), and make up the difference ($91.00 per week) through a quarterly non-discretionary bonus or commission.   If the employee does not earn enough in bonuses to make up the difference, the employer can make a one-time payment each quarter sufficient to make up the difference.

Catch-up payment

The following are the questions and answers the Department of Labor provided after the webinar.

May 26, 2016 Webinar FAQs New Federal Overtime Rules

Q. We are a seasonal property open 8 months – is the $47,476 based on that or 12 months?

A. The new salary is $913 per week. During the eight-month period that employees work at your property, you will need to guarantee that at least $913 per week is paid for an exempt employee. Please see FOH 22g10 concerning rules for annual salary earned in a shorter period, which can be found at the following link: https://www.dol.gov/whd/FOH/FOH_Ch22.pdf.

 

Q. I want to get clarification on HCE. With the new range being $134,000.00. Does that mean that anyone we have earning between $100,000 but less than $134,000 that they have to be brought up to $134,000? Or does that mean that anyone earning over $100,000 but under $134,000 is no longer considered a HCE. I am just not clear on if they need to be bumped up or can be left alone.

A. If your employee earns at least $913 per week and passes the standard duties test, they will not be affected by the increase in the HCE total annual compensation threshold.  If they only pass the relaxed HCE duties test, you would need to raise their compensation to the new threshold ($134,004 per year) to retain their exempt status.  Alternatively, you could reclassify the employee as non-exempt, which means that they would be entitled to receive overtime pay for all work hours beyond 40 in a workweek.

 

Q. With regard to the non-discretionary bonus and catch up payment provisions, does “quarterly” mean calendar quarter? Fiscal quarter? Or is it up to the employer’s discretion?

A. No, it does not mean the calendar quarter.  It is the employer’s discretion when the quarter will begin.

 

Q. How does this ruling affect agricultural workers?

A. The Department’s rulemaking addressed the regulations governing the “white collar” exemptions under Section 13(a)(1) of the FLSA – exemptions for executive, administrative, and professional employees, as well as outside sales employees and employees with certain computer-related job duties.  Thus, unless an agricultural worker currently qualifies for one of these “white collar” exemptions, they will not be directly affected by the Department’s Final Rule. The FLSA’s exemptions governing agricultural workers have not been changed by this Final Rule.

 

Q. Is the Computer Professional minimum salary/minimum hourly wage requirement  increasing as part of the Final Rule?

A. The hourly salary for the Computer Professional Exemption is still $27.63. However, the weekly standard salary amount has increased to at least $913 per week.

 

Q. Can an employer say that an Xmas bonus is part of your salary in effort to meet the new standard?

A. When the Final Rule takes effect on December 1, 2016, employers will newly be allowed to satisfy up to 10 percent of the standard salary level with nondiscretionary bonuses and incentive payments (including commissions).  Nondiscretionary bonuses and incentive payments are forms of compensation promised to employees, for example, to induce them to work more efficiently or to remain with the company. By contrast, discretionary bonuses are those for which the decision to award the bonus and the payment amount is at the employer’s sole discretion and not in accordance with any preannounced standards.

An unannounced holiday bonus would qualify as a discretionary bonus, because the bonus is entirely at the discretion of the employer, and therefore could not satisfy any portion of the $913 standard salary level.

 

Q. Multiple Incumbent Positions: If I have a job, which meets an exemption test, am I able to reclassify only those who are below the new minimum to non-exempt and allow those that are over to remain exempt? Or, does the entire classification need to be exempt or non-exempt?

A: The “white collar” exemptions require an employee to be paid on a salary basis, paid above a certain salary level, and meet the respective duties test.  If an employee meets the duties test of an executive, administrative, or professional employee, and meets the salary basis requirement,  and meets or exceeds the salary level requirement,  they would meet the requirements for the exemption.  If they fail to meet any part of the criteria, they would not meet the exemption and would therefore be non-exempt. The exemption is applied on an employee by employee basis, not to a particular classification.

Keep in mind the salary level and salary basis requirements  do not apply to outside sales employees, licensed or certified doctors, lawyers and teachers. Employees in these occupations who meet the duties test are exempt regardless of their salary.

 

Q. What is the salary requirement  for part time salary workers?

A. Whether a worker is full-time or part-time, the standard salary level to qualify for exemption will be $913 per week.

 

Q. Has there been any change to the exemption for commissioned employees working at a retail establishment? Our understanding is that these employees are exempt so long as at least 50% of their gross earnings are from commissions. Has that changed?

A. No, Section 7(i) of the FLSA remains unchanged by the issuance of the new Overtime Final Rule related to commissioned employees.   See Fact Sheet #20: Employees Paid Commissions By Retail Establishments Who Are Exempt Under 7(i) from Overtime Under the FLSA.

 

Q. OT rules for non-profit organizations: A client has asked “Can overtime compensation can be paid with time off (comp-time) calculated at time and a half?”

A. No. Only employers that are public agencies under the FLSA (e.g. a state government) can provide comp time in lieu of overtime premium payments.

 

Q. We currently pay employees every 2 weeks. Will our pay periods need to switch to every week?

A. No. Employers may still pay their employees on a biweekly basis. An employer’s overtime pay obligation is determined on a week-by-week basis, but they may pay their employees on a biweekly basis.

 

Q. Straight Commission Employees: How do we handle outside sales staff who are paid straight commissions?

A. Consistent with the current regulations, neither the old or new salary requirements  will apply to the outside sales employee exemption.  For additional information, please See Fact Sheet #17F: Exemption for Outside Sales Employees Under the Fair Labor Standards Act (FLSA).

 

Q. How will this new rule affect California? California has always been consistent or more favorable to the employee than FLSA. This new rules suggests FLSA is now more favorable to the employee. Or am I missing  something? Thanks

A. The Fair Labor Standards (FLSA) provides minimum wage and hour standards, and does not prevent a State from establishing more protective standards.  If a State establishes a more protective standard than the provisions of the FLSA, the higher standard applies in that State.  To the extent the new minimum salary amount of $913 per week under the Overtime final rule is higher than the State requirement,  the employer in that State must comply with the higher standard and pay not less than $913 per week for an exempt white collar employee.

 

Q. Are employers in compliance if they follow the annualized amounts? (Or do they have to make sure they are always in compliance each week?)

A. An employee’s exempt status – and, if nonexempt, the employee’s right to overtime pay – is determined on a weekly basis. Generally, to retain exempt status, an employee must satisfy the duties test and earn at least $913 per week.

 

Q. Quarterly bonus: if an employee is paid between $822 and $913 per week, can the bonus be paid less frequently than quarterly?

A. No. To count toward the standard salary level, nondiscretionary bonuses must be paid quarterly or more frequently.

 

Q. We employ individuals who teach ESL classes, we identify them as teachers, we are not an educational institution or school. Their primary duty is teaching. Do they qualify as exempt?

A. No. To qualify for the professional exemption as a teacher, the employee must be employed in an “educational establishment,” as that term is defined at 29 CFR 541.204(b).

 

Q. Comp Time: Are comp time programs still allowed? Meaning that any hours over 40 hours can be banked to use later to either take time off or maybe get paid at end of year at straight time?

A. Only employers that are public agencies under the FLSA (e.g. a state government) can provide comp time in lieu of overtime premium payments.

 

Q. Did I understand  you correctly to say that teachers do not have to earn the minimum exempt salary? In other words: there is no problem if the salary for teachers in a given geographic area is below the $913/week even if they’re considered exempt employees.

A. Yes.  Certain professional employees – including doctors, lawyers, and teachers – are not subject to the salary basis and salary level requirements  that generally apply to other white- collar employees.  To qualify for the professional exemption as a teacher, the employee must be employed in an “educational establishment” and have a primary duty of teaching.

 

Q. Non-Enforcement for Medicaid-funded services for individuals with intellectual and developmental disabilities in residential homes and facilities with 15 or fewer beds: Does the limited non-enforcement for Medicaid-funded services for individuals with intellectual and developmental disabilities in residential homes and facilities with 15 or fewer beds apply to companies that have multiple facilities all of which have fewer than 15 beds? Thank you.

A. The limited Non-Enforcement Policy for Medicaid-funded services for individuals with intellectual and developmental disabilities in residential homes and facilities with 15 or fewer beds – applies per establishment – not enterprise wide.

 

Q. In a public accounting firm, will the accountants who earn less than $47,476 be eligible for overtime? For example, a new college graduate passes the CPA exam and is a professional but the earnings are less than $47,476.

A. Once the Overtime final rule becomes effective December 1, 2016, white collar employees, such as CPAs, who are paid less than the minimum salary amount of $913 per week will not meet the professional employee exemption from overtime pay. Thus, such employees must be paid overtime for hours worked over 40 in a workweek.

 

Q. Do you plan to provide written guidance with further details regarding the application of the 10% “credit”?

A. Yes, we plan to issue additional guidance before the Final Rule becomes effective on December 1, 2016.

 

Q. Just wanted to verify that any person employed as an outside sales person does not need to have their salary increased?

A. Correct. Outside sales employees are not subject to the salary basis or salary level requirements,  so they are not affected by this Final Rule.

 

Q. Please clarify what a highly compensated  employee must be paid weekly and annually and how nondiscretionary bonuses and commissions factor in. Thanks!

A. When the Final Rule takes effect on Dec. 1, 2016, employees who only satisfy the HCE duties test may qualify for exemption if they earn at least $134,004 per year and at least $913 per week.  HCE employees must receive 100% of the $913 weekly threshold on a salary or fee basis, but non-discretionary bonuses and incentive payments (including commissions) may be used to satisfy the remainder of the $134,004 total annual compensation requirement.

 

Q. Can we classify someone as Salary Non-Exempt and pay them less than the required amount but pay them overtime?

A. Yes, an employer is permitted to pay a non-exempt employee on salary basis which is less than the required $913 per week (New Overtime Final Rule) as long as the employee is not paid less than the federal minimum wage rate of for all hours worked and is paid overtime for all hour worked in excess 40 per week.  For additional information, please review Fact Sheet 23: Overtime Pay Requirements of the FLSA.

 

Q. What is the definition of a highly compensated  employee?

A. The Overtime final rule (effective Dec. 1, 2016) sets the highly compensated  employee total annual compensation level to the 90th percentile of earnings of full-time salaried workers nationally ($134,000) annually). To be exempt as a highly compensated  employee, an employee must also receive at least the new standard salary amount of $913 per week on a salary or fee basis and pass a minimal duties test (i.e., the employee customarily and regularly performs any one of more of the exempt duties or responsibilities of an executive, administrative or professional employee under the regulations).

 

Q. If there is an employee that is currently making $120,000, does the employer have to increase his salary to the required annual salary for the highly compensated  employee?

A. To continue to claim the exemption under the highly compensated  employee test, the employer would have to increase the compensation to at least the new total annual compensation amount.  To the extent the employee meets the standard duties test under the executive, administrative, or professional exemption (EAP exemption), the employer can claim the standard EAP exemption for the employee if he or she earns not less than the new minimum standard salary amount of $913 per week.

 

Q. If the employee is being paid hourly but all the duties are applicable should he be paid salary instead? If this employee wants to stay being paid hourly should it be documented  and signed by the employee?

A. Employees paid on an hourly basis are generally entitled to overtime pay, even if they satisfy the duties requirements  for exemption.  Employers are not required to pay employees who satisfy the duties test on a salary basis unless the employer intends to assert the exemption and not pay overtime.

 

Q. I know it is not changing but can you provide a simple definition as to what the duties test is? Is the duties test what defines whether an employee is exempt under executive/admin/professional?

A. WHD Fact Sheet #17A provides a concise overview of the applicable duties tests for all of the Section 13(a)(1) exemptions.  That fact sheet is available at: https://www.dol.gov/whd/overtime/fs17a_overview.pdf.

 

Q. Does this affect teacher pay as well? Or do they fall under a separate law?

A. The following guidance addresses your question:

https://www.dol.gov/whd/overtime/final2016/highered-guidance.pdf.

 

Q. School Personnel: We are a school district. We have a cafeteria supervisor who we have in the past considered salary. The position is 204 days per year. Would this position meet the exemption if it is paid more than an entry level teacher?  If not, would the salary amount exemption be for the weeks worked or does it have to be for 52 weeks?

A. A cafeteria supervisor must be paid the standard salary level and meet the duties test delineated in 541.100 in order to be classified as exempt.  The new salary level of $913 per week will be effective 12/1/16 and will apply to most employees.  Please see FOH 22g10 concerning rules for annual salary earned in a shorter period, which can be found at the following link: https://www.dol.gov/whd/FOH/FOH_Ch22.pdf.

There is a limited exception for academic administrative employees who are paid at least either the new salary level or a weekly salary equal to the entrance salary level for teachers in the same educational establishment.  Exempt academic administrative employees must have the primary duty of performing administrative functions directly related to academic instruction or training.  Employees, such as a cafeteria supervisor, who work in education but whose work does not relate to the educational field are not performing academic administrative work, and must be paid the standard salary level of $913 per week and meet the required duties test to be exempt.

 

Q. Does a “secretary” who makes $48,000 fit into an exempt category?

A. Workers who do not pass the standard duties test, including most secretarial staff, do not qualify for exemption and will be entitled to overtime pay. There is a relaxed duties test for “highly compensated  employees” earning over $134,004 per year, but even under that HCE test the employee must still perform exempt duties on a customary and regular basis.

 

Q. Can an employee make for example $60,000 annually and still be a non-exempt employee? Or once an employee reaches the new salary level of $47,476 they are automatically a salaried exempt employee?

A. To qualify for exemption, employees generally must pass tests regarding their earnings and job duties.  So, yes, an employee who does not satisfy the applicable duties requirements  will not qualify for exemption regardless of how much they earn.

 

Q. Any changes in the salary requirements  for non-exempt workers?

A. Under the Fair Labor Standards Act, employees who are not exempt from its wage provisions must be paid not less than the federal minimum and overtime pay at not less than time and one half of the employee’s regular rate of pay for hours worked over 40 in a workweek. For example, non-exempt employees may be paid on an hourly or salary basis.

 

Q. Is there an exception that for inside sales employees that mirrors the outside sales exemption?

A. For information about the outside sales exemption under the FLSA, please see Fact Sheet17f: https://www.dol.gov/whd/overtime/fs17f_outsidesales.pdf.  For information on inside sales employees, please see: https://www.dol.gov/whd/regs/compliance/whdfs20.pdf.

 

Q. How does the Final Rule affect Higher Education employees who are not instructors, but are entry level positions?

A. Many entry level positions may be currently overtime eligible and will not be affected by the Final Rule.  Under the New Rule, currently exempt employees must be paid a salary of at least $913 per week to retain their exemption.  However, the salary level does not apply to bona fide Teachers, and Academic Administrative Employees may be subject to an alternative salary level. For additional information, please review our Higher Education Guidance Document: www.dol.gov/whd/overtime/final2016/highered-guidance.pdf.

 

Q. If our management  team meets the test for the executive duties, does this exempt them from the overtime pay if they make under the newly required $913/per week rate?

A. An exempt executive, administrative, and professional employee must meet the duties test in addition to being paid on a salary basis and at the required salary level. Therefore, if an employee only meets the duties test and not the required salary level, they would not meet the criteria necessary to be considered exempt, and would be entitled to overtime in any week they work more than 40 hours.

 

Q. Is it permissible for newly non-exempt employees to be classified as salary non-exempt? All other non-exempt employees are hourly; salary non-exempt would be a new classification for us. It would be far less insulting for my accountants and those in similar positions be paid this way (even if we have to count hours) than to have to punch a clock.

A. Yes.  Salaried status and exempt status are separate  concepts, so employees entitled to overtime pay may still be paid on a salary basis (as long as they receive overtime pay for their work hours beyond 40 in a workweek). See Fact Sheet 23 for guidance on how to comply with the overtime requirement  for salaried nonexempt employees: https://www.dol.gov/whd/regs/compliance/whdfs23.pdf.

 

Q. I have an employee that works 50 hours a week on exempt status. He will be moved back to hourly, and will get a pay reduction. This will help us to maintain his current weekly wage. Is this something that we can do and be in compliance with FLSA.

A. Employers have a range of options for responding to the updated standard salary level. For each affected employee newly entitled to overtime pay, employers may:

  • increase the salary of an employee who meets the duties test to at least the new salary level to retain his or her exempt status;
  • pay an overtime premium of one and a half times the employee’s regular rate of pay for any overtime hours worked;
  • reduce or eliminate overtime hours;
  • reduce the amount of pay allocated to base salary (provided that the employee still earns at least the applicable hourly minimum wage) and add pay to account for overtime for hours worked over 40 in the workweek, to hold total weekly pay constant; or
  • use some combination of these responses.

The circumstances of each affected employee will likely impact how employers respond to this Final Rule.

 

Q. Where can I find more information regarding making catch-up payments for non- discretionary bonuses?

A. 29 CFR Part 541.602(a)(3) as well as 81 Federal Register 32427 provides more information regarding the catch-up payments for non-discretionary bonuses.

 

Q. Are blue collar workers (i.e. mechanics) able to be classified as salaried exempt or must they be hourly?

A. Blue collar workers like mechanics will not qualify for exempt status because they do not pass the duties requirements  for exemption, so they are entitled to overtime pay unless another exemption applies.  However, nonexempt employees do not have to be paid on an hourly basis.

 

Q. Can you please confirm that if an employee is paid $134,004 as of 12/1/2016 they should be classified as Exempt regardless of the duties test?

A. That is incorrect.  Employees who earn at least $134,004 per year (and at least $913 per week) must still satisfy the HCE duties test to qualify for exemption.  Although the HCE duties test is less rigorous than the standard duties test, the employee must still perform exempt duties on a customary and regular basis. See Fact Sheet #17H for a description of the HCE duties test: https://www.dol.gov/whd/overtime/fs17h_highly_comp.pdf.

 

Q. I was trying to take notes and didn’t get all the details on the administrative duties exemption.

A. See WHD Fact Sheet # 17C for an overview of the administrative employee exemption: https://www.dol.gov/whd/overtime/fs17c_administrative.pdf

 

Q. You said nothing is changed in terms of paying employees on a Fee Basis. Do employees paid on a Fee Basis have to meet the criteria of one of the exemptions: executive, administrative, or executive? And, when the final rule is in place, will the fee basis pay have to equal $913 per week, rather than the current $455 per week threshold? Thank you.

A. For an employer to claim an exemption under the white collar exemption regulations (effective Dec. 1, 2016), the employee must meet the duties test under the executive, administrative, or professional exemption, and be paid not less than the minimum salary amount of $913 per week.  Employees who meet the duties test under the administrative or professional exemption may also be paid on a fee basis of not less than $913 per week when the final rule becomes effective.

 

Q. If someone is paid a salary to work Monday through Friday and only works 4 days instead of 5, is the new rule stating we have to still pay the full salary for the week?

A. Yes, employees who perform any work in a workweek must satisfy the full standard salary level test to retain their exempt status.  This is not a change from the current regulations.  For information on permissible deductions, see 29 CFR 541.602.

 

Q. We have salaried professionals whom are not scheduled at any time to work more than 40 hours per week. Do we have to track hours each week to verify that or if the schedule doesn’t allow for more hours can we document their schedules and not have them do a time card? We have several of the Officers that are very upset in having to go back to turning in time cards each week.

A. If the salaried professionals are bona fide exempt employees as defined in 29 CFR Part 541.300, there is not a recordkeeping requirement.  However, if the salaried professionals do not meet all the requirements  for the exemption, including the salary level, there are recordkeeping requirements  that can be found in 29 CFR Part 516, which would be applicable to them.

Furthermore, overtime-eligible workers are not required to punch a time clock. Employers have options for accounting for workers’ hours – some of which are very low cost and burden. There is no particular form or order of records required and employers may choose how to record hours worked for overtime-eligible employees. For example, where an employee works a fixed schedule that rarely varies, the employer may simply keep a record of the schedule and then indicate the changes to the schedule that the worker actually worked when the worker’s hours vary from the schedule (“exceptions reporting”). See Fact Sheet 21: Recordkeeping Requirements under the Fair Labor Standards Act (FLSA).

For employees with a flexible schedule, an employer does not need to require an employee to sign in each time she starts and stops work. The employer must keep an accurate record of the number of daily hours worked by the employee, not the specific start and end times. So an employer could allow an employee to just provide the total number of hours she worked each day, including the number of overtime hours, by the end of each pay period. The Department has material available to help employers figure out what method of recording hours works best for their workforce.

 

Q. As a local government, we have identified the employees that are currently classified as exempt, but are compensated  below the new salary threshold of $47,476. Do we have the option of allowing these employees to accrue compensatory time at the rate of time and one- half in lieu of raising their salaries to the new threshold?

If so, we currently have employees within the same job title that are compensated  both above and below the salary threshold. Is it permissible to offer compensatory time (at time and one- half) only to those in the same job title that are compensated  below the salary threshold without offering the same comp time to those compensated  above?

A. State and local government employers may provide comp time in lieu of overtime pay, provided that there is a prior agreement.  See https://www.dol.gov/sites/default/files/overtime-government.pdf.  Since job titles do not determine exempt status, employers may treat exempt and nonexempt staff differently even though they may have the same job title.

 

Q. Final salary number for exempt: How was the decision made to come up with the 47 plus verses the 50 plus number?

A. The Department received a large number of comments expressing concern that the proposal didn’t take into account low-wage regions, low-wage industries, and small businesses.  In response to these concerns, the Department set the level at the 40th percentile of full-time salaried workers in the lowest wage Census region instead of the 40th percentile nationally, as proposed in the Notice of Proposed Rulemaking.  This resulted in the new salary level of $913/week ($47,476 annually).

 

Q. Learned professional exemption follow-up: During the webinar, it was mentioned that a job requiring a degree in any subject area would not fall under the learned professional exemption. Would this be different if required qualifications included a degree in one of several different qualifying areas?

A. For information on the Learned Professional Exemption, please see Fact Sheet 17d which can be found here: https://www.dol.gov/whd/overtime/fs17d_professional.pdf.

 

The above Questions and Answers were provided by the Department of Labor after the May 26th webinar.  Different rules can apply in different states.  Check with an attorney familiar with wage and hour laws if you have questions.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

State Bar’s Guide to Kids and the Law

Every year the California State Bar publishes several  guides regarding different areas of the law.  The State Bar recently published it’s annual “Kids and the Law Guide.”  The guide has several useful topics such as:

  • The Age of Majority
  • Alcohol and Kids
  • Bikes, Skateboards and Scooters
  • Cars, Kids and Traffic Laws
  • Child Abuse and Neglect
  • Civil Laws and Lawsuits
  • Criminal Law and Crimes
  • Curfew Laws
  • Drugs and Kids
  • Emancipation
  • Fighting
  • Hate Crimes and Hate Speech
  • The Internet, Cell Phones and Computers
  • Parents’ Rights and Responsibilities
  • Privacy and Kids
  • Schools and School Rules
  • Work, Work Permits and Taxes

State Bar’s Kids and the Law Guide

I started reviewing the annual guide regarding Kids and the Law when I taught a high school class as part of a law school course I took at Santa Clara University School of Law.  The guide was very helpful in identifying topics for discussion with my students.  Now that I have kids of my own, the guide reminds me how important it is for my children to understand their rights and responsibilities.  I have not represented a significant number of minors in the workforce, and most of my employer clients do not employ minors beyond the occasional son or daughter. Reviewing the section on work permits is always a good refresher.  Since I am scoutmaster for my sons’ boy scout troop, I may use different portions of the guide to help educate the scouts.

You can download the Kids and the Law Guide in English or Spanish.  You can also order multiple copies of the guide.

Anyone with children, or who works with children or has responsibility for children should take a look and consider reviewing the information with their family and friends.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

 

EDD and Labor Commission Provide Guidance: Employee Versus Independent Contractor

The EDD and the DLSE (Labor Commissioner) are hosting on a free seminar throughout California regarding how to classify a worker as an employee versus independent contractor.  In the San Francisco Bay Area, the next one is in Dublin on February 11th.  For other dates and times, you can check the EDD’s website.

Employee Versus Independent Contractor

There are many benefits to using independent contractors, but is it worth the risk?  Classifying someone as an employee versus independent contractor has the potential to create significant exposure for companies that misclassify independent contractors due to a lack of understanding of what constitutes an employee versus independent contractor.  California Labor Code section 226.8 has significant monetary penalties for employers or persons who willfully misclassify employees as independent contractors.  “‘Willful misclassification’ means avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.”

Since 2012, the Department of Labor, the IRS, and several state agencies have been sharing information about worker misclassification.

 

When: Thursday, February 11, 2016
Time: 9:00 a.m. to 3:30 p.m.
Where: Dublin Civic Center
100 Civic Center Plaza, Council Chambers
Dublin, CA 94568

The Employee versus Independent Contractor Tax Seminar will cover:

  • Common misconceptions about independent contractors.
  • Ways to combat payroll tax fraud.
  • How to distinguish between employees and independent contractors.
  • Statutory and exempt employment.
  • Resources to help classify workers.

EDD & Labor Commissioner

To register for the event, go to: http://www.edd.ca.gov/Payroll_Tax_Seminars/

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

Meal and Lodging Credits in the Workplace

The Federal FLSA allows an employer to, under certain circumstances, count as wages “the reasonable cost … to the employer of furnishing such employee with board, lodging, or other facilities.” 29 U.S.C. § 203(m). The Department of Labor has just issued a new guidance document explaining the requirements for meal and lodging credits in the workplace under section 3(m) of the Fair Labor Standards Act (FLSA), as well as the proper method of accounting for this credit in calculating wages, with many examples involving home care workers.

Meal and Lodging Credits in the Workplace

The Q&A section answers such questions as:

What is a section 3(m) credit?

Under what circumstances may an employer claim the Section 3(m) credit for lodging?

What does it mean for lodging to be “regularly provided by the employer or similar employers”?

How do you determine if the employee “voluntarily accepted” the lodging?

What does is mean for lodging to be provided “in compliance with Federal, State, and Local Laws”?

What does it mean for an employee to receive the “primary benefit of the lodging” in the section 3(m) context?

When is housing “adequate” for purposes of whether an employer can claim a section 3(m) credit?How does an employer comply with the requirement to keep accurate records with regard to section 3(m)?

How does Section 3(m) apply if a live-in home care worker is a member of a union or subject to a collective bargaining agreement (CBA)?

How do you determine the amount of a section 3(m) credit?

What is the “reasonable cost” of the facilities?

And many more.

Employers who want to use meal and lodging credits in the workplace are encouraged to review the Q&A section and the Field Assistance Bulletin.

Employers in California should keep in mind that state and federal law are not the same with regard to meal and lodging credits in the workplace.  State regulations limit the amount of credit employers can use to offset minimum wage obligations, and there must be a written agreement between the employer and the employee.  Employers should also keep in mind that providing meals or lodging as part of the compensation could increase the employee’s regular rate of pay for overtime premium purposes.

If you have questions about the meals and lodging you receive from your employer, or if you provide meals and lodging to your employees as part of their compensation, speak with an employment attorney familiar with wage and hour issues as soon as practical.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, Berkeley, San Ramon, Concord, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

Hiring Employees Without Getting into Hot Water

As the economy improves and hiring increases, many clients have questions regarding how to avoid common pitfalls when hiring employees.  Asking the right questions and avoiding the wrong ones is just one step in Hiring Right!

Finding the Right Candidates

Hiring right begins with finding qualified candidates.  Before you begin your search make sure you know what you are looking for.  Explore your requirements and talk to others that will be working with, for and above the person.  What skills and qualities are needed?  What personalities will mesh with colleagues, subordinates and superiors?  What level of education or past experience is necessary for the job?  Will the person be supervising others?  Do you need someone with extensive experience in the field or will a recent graduate work better?  The answers to these questions and others are a good start in defining the position.

Once you determine the type of qualities and experiences the company needs, draft a job description to define the position.  An effective job description details the essential job functions, including any physical or mental requirements.  Having the essential job functions detailed in a formal job description enables you to determine what, if any, reasonable accommodations are possible for candidates with disabilities. The job description should list any job expectations and the reporting structure.  The job description should accurately reflect the work the employee is expected to perform.  Ambiguous or incomplete descriptions are not helpful and can cause problems in the future.  You may need to update the job description on an annual or more frequent basis depending on the actual work performed.

Determine a compensation range for the position as well as whether the employee will be eligible for incentive payment plans (i.e., commissions, bonuses).

Once the job description is created, determine whether the position should be classified as exempt or non-exempt.  Consult a professional familiar with the overtime laws if necessary.  Failing to correctly classify a non-exempt employee can result in an unpaid wage claim.  Recent years have seen a dramatic increase in overtime claims based on misclassification of non-exempt employees.

Once you have a Job Title for the position you are ready to create a job announcement.  Whether you work with a recruiter or post the job announcement online yourself, the job announcement should provide a good overview of the skills, qualifications and requirements of the position.  Some employers include pay ranges whereas others prefer to keep the pay range “close to the vest.”  Identifying the pay range may prevent people with higher salary requirements from applying, but may also encourage others to overstate their requirements.  Either method works if its right for you.

When considering where to post the announcement don’t forget to post the position internally.  Oftentimes the best candidates come from within your own personnel pool or from employee referrals.  Placement agencies and recruiters are a good choice if you don’t mind paying a referral fee.  Oftentimes they can vet the candidates reserving only qualified candidates for your review.  Consider posting the position with the Employment Development Department’s Job Match System.  If you are considering recent graduates, contact trade schools or other appropriate places of education.  Do not forget to put the job announcement on your own website and other online social media sites (e.g., www.LinkedIn.com, etc.).

Be aware: union contracts may require internal posting before seeking outside candidates.

When advertising the job, do not use language that could be interpreted as preferring one protected class over another (i.e., age, race, sex, national origin, marital status, sexual orientation, etc.) and state your Equal Employment Opportunity policy in the advertisement.  Do not make reference to the length of employment unless the position truly is temporary.  Remember, most employees are employed “at-will” and may be terminated or can quit for any or no reason.  Representations regarding the length of employment (i.e., “Our employees are like family – they never leave!”) can interfere with the at-will nature of the employment or lead to possible fraud claims.

The Interview Process

Hopefully your recruiting efforts resulted in a slew of qualified candidates and you now get to choose one among many to fulfill the vacant position(s).  Whether the candidates are interviewed by one person or several, each person participating in the interview process should review the job description and the candidate’s qualification prior to the interview.  Preferably, the decision makers will have already conferred about the qualities that the ideal candidate will possess.

The law prohibits discriminating against candidates based on various protected characteristics (e.g., age, race, sex, national origin, sexual orientation, disability, religion, marital status, etc.).  The law also may require employers to make reasonable accommodations for candidates with qualifying disabilities to enable such candidates to fully participate in the hiring process.  To avoid asking inappropriate or potentially unlawful questions, prepare the essential questions that you will ask every candidate ahead of time.  The questions should be designed to better enable the company to evaluate how well the candidates will be able to meet the criterion specified in the job description.  Asking the same questions to each candidate makes it less likely any single candidate can claim the interview process was slanted.

Try to ask open-ended questions, giving the candidate the opportunity to explain his/her qualifications or reasons for the answer.    Asking candidates how they handled, or would handle, specific scenarios can often provide insight into the candidates’ problem-solving and task-managing processes.

Do not, DO NOT, ask questions about:

Marital status

  • Are you single?
  • Do you live alone?
  • Are you dating anyone?
  • Have you ever been married?
  • Do you have or plan to have/raise a family?

Religion

  • Is that a Jewish name?
  • Where do you go to church?

Age

  • What year were you born?
  • What year did you graduate from high school?

Disabilities[1] or other medical conditions

  • Do you get sick often?
  • How often were you sick at your last job?
  • Do you need health insurance?
  • Have you ever been injured on the job?

Lawsuits (especially against prior employers)

Second languages unless speaking another language is an essential job function

Where the person was born

Are you a U.S. Citizen[2]?

Political affiliations

  • Who did you vote for?
  • What’s your take on [insert political issue of the day]?

Although not directly prohibited, employers should avoid asking about participation in clubs or other organizations because the answers may be perceived as asking about religion, age, etc.  Instead, ask if the candidate what interests the candidate has outside of work.

Questions should focus on the job requirements and the skills necessary to perform the job.

Some employers refuse to allow interviewers to take notes, fearing that something might be written in the notes and interpreted incorrectly.  I think notes can be helpful in recalling why a particular candidate was or was not chosen.  I do recommend the notes refer to objective information rather than subjective comments.  Note-takers should avoid comments such as “not a good fit” or “didn’t feel right.”  Instead, include the factors that led to those conclusions (e.g., “Wouldn’t make eye contact”  “Clothes were disheveled” “Did not answer questions directly”).

Checking Referrals

Some employers feel that checking referrals is a waste of time because the applicants will only provide referral sources that will provide positive information.  While this may be true, contacting former employers can help you evaluate strengths and weaknesses of potential candidates. Checking an applicant’s employment history can also verify the accuracy of the applicant’s resume and prevent a possible “negligent hiring” claim later on.

When checking references, obtain a release from the candidate authorizing the referral source to speak with you candidly about the applicant’s employment history.  As with the interview process, be consistent.  If you check references for one candidate, check references for all candidates.  The questions you ask should all be related to the job the applicant will perform.  Keep notes regarding the information obtained from prior employers with your notes from the initial interview.

Many companies do not know whether they should conduct background checks.  Background checks (as opposed to reference checks) usually refer to criminal and/or credit reporting checks.  Generally speaking, I recommend conducting a background check for employees that will have significant customer contact at customer sites or homes, or if the employee will be handling money. There are laws that limit the types of background checks employers can perform on certain employees.  If you are going to conduct a background check use a third party company familiar with the rights and responsibilities regarding how to conduct a proper background check.  Always ensure the employee authorizes the background check in writing.  NOTE: the background check authorization has to be separate from the general employment application paperwork.

Offer Letter or Employment Agreement?

Congratulations, you’ve found one or more qualified candidates!  Should you offer the job verbally or in writing?  The essential terms of the employment should always be in writing.  Essential terms include:

  • Job Title and possibly a short job description,
  • Reporting structure,
  • Compensation and benefits,
  • Vacation, Sick Leave, and/or PTO accrual if any,
  • Beginning employment date,
  • Necessity of providing appropriate documentation regarding ability to work in the U.S.
  • At-will nature of employment.

If you are going to make a verbal offer, send a written confirmation of the employment terms for the potential employee to sign.  If the offer is subject to any contingencies (such as successful background check or drug test[3]) make sure the contingencies are listed in the offer letter.  If the offer letter is a pre-cursor to a more formal Employment Agreement, ensure the terms remain the same and that the offer letter informs the employee that the employment is contingent upon execution of a formal Employment Agreement.

Many offer letters say they are not “contracts,” but they are.  At the very least they are written confirmation of the terms of the verbal contract.  Therefore, do NOT include any terms that are not part of the employment arrangement or that you will not be able to perform.

A detailed written offer may negate the need for a formal Employment Agreement.  However, depending on the level of formality and the essential terms of the employment an Employment Agreement may be necessary.  Many companies will require employees to sign Confidential and Proprietary Information Agreements.  These agreements can be part of or separate from the Employment Agreement.

Whether you use an offer letter, an Employment Agreement, a Confidential and Proprietary Information Agreement, or some combination thereof, have the documents reviewed by qualified counsel to ensure the terms are clear, unambiguous, lawful and beneficial to the company.

The Employee’s First Day

Hiring right does not end until the employee receives a copy of all essential handbooks and benefit policies and receives any necessary training or orientation.  Smart employers have all of the new employee paperwork together for the employee on their first day, as well as a check list the HR Manager can use to confirm the employee’s receipt of the necessary paperwork.

The following paperwork is either required or highly recommended:

  • Notice to Employee (Labor Code 2810.5)
  • Report of New Employee (DE-34 from the EDD)
  • Employee’s State Withholding Allowance (DE-4 from the EDD)
  • Employee’s Federal Withholding Allowance (from IRS)
  • State Disability Insurance Pamphlet (DE-2515 from the EDD)
  • Paid Family Leave Pamphlet (From the DFEH)
  • Workers’ Compensation Rights and Benefits Notice (from WCAB)
  • Employment Eligibility Verification (I-9 from UCIS)
  • Sexual Harassment Information Sheet (From DFEH)
  • Personal Physician/Chiropractic Pre-designation Form (from WCAB)
  • COBRA, Cal-COBRA and/or HIPAA Questionnaire if the company offers health benefits

I also recommend confirming receipt of the following employment and benefit policies:

  • Sexual Harassment Prevention Policy
  • At-Will Employment Policy
  • Computer and Technology Use Policy
  • Employee Handbook
  • Summary Plan Descriptions or other paperwork regarding Health, Disability, Retirement or other employer-provided benefits

The employee should sign an acknowledgement that s/he received each of the policies.

Consider what type of training the employee will receive and implement the training as soon as possible.  If there is any safety or hazardous material training required prior to performing the job ensure the proper certifications are obtained before the employee performs any such work.

In Conclusion …

Hiring right is not something that just happens.  It takes careful consideration of the options and tactics that will work best for your company.  Thoughtful contemplation of your company’s needs and frank discussions with knowledgeable counsel regarding the various rights and responsibilities imposed by law can ensure your company hires and retains the right employees – and avoids costly litigation!

 

[1] You may show candidates the job description and ask, “Would you be able to perform the essential functions of this job with or without reasonable accommodations?”  Do not ask “Do you have a disability that would interfere with this job?”
[2] You may ask, “If you are hired, can you provide evidence that you are legally able to work inside the United States?”  However, if you ask the question to one candidate you must ask it of all candidates.
[3] When an employer can drug test a potential or current employee is regulated.  Speak with a knowledgeable professional before implementing a drug testing policy.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

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