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Fair Pay Act Investigations

California recently enacted new standards to combat discriminatory pay practices. California’s Fair Pay Act prohibits paying any employee less than the amount paid to employees of the opposite sex, race or ethnicity for doing “substantially similar work.” Employers have the burden of demonstrating that pay differential are based entirely and reasonably upon:

  • Seniority system, merit system, or system that measures earning by quantity or quality of production; or
  • Bona fide factor that is not based on or derived from sex-based differential compensation and that is job-related and consistent with business necessity.

Fair Pay Act Presentation

I recently attended a great presentation sponsored by the Alameda County Bar Association where Hillary Benham-Baker, Jamie Rudman and Carolyn Rashby did an excellent job describing the interplay between the various state and federal statutes, regulations and orders regarding equal pay. Jamie described a speaking engagement where Julie Su, California’s Labor Commissioner, discussed enforcing California’s Fair Pay Act. The Labor Commissioner discussed what questions Deputy Labor Commissioners would typically ask during Fair Pay Act investigations to determine what constitutes “substantially similar work.” I asked Jamie’s permission to share the information, as they represent excellent questions employers should ask themselves when evaluating whether they are complying with the law.

Fair Pay Act Questions To Determine What Constitutes “Substantially Similar Work”

·         What are the actual tasks performed for each job?  What percentage of time is spent on each?

·         What experience, training and education are required for each job?

·         What knowledge is required to perform each job?

·         What kinds and amounts of physical and/or mental effort are required for each job?  Is one job more physical difficult or stressful?

·          What programs, equipment, tools or products are required for each job? What training is needed to use the programs, equipment, tools or products?

·         What is the working environment?  Does one job involve an exposure to hazards or damages?

·         Does one job require supervision of other employees?

·         What is the difference in terms of the job obligations, levels of authority and/or degrees of accountability?

·         What are the programs, equipment, tools or products used for each job?

·         What kinds and amounts of physical and/or mental effort required for each job?

Employers need to understand what constitutes substantially similar work so they can properly evaluate whether or why employees should be paid the same. Pay disparities must be justified by legitimate business reasons.

If you have questions about equal pay, fair pay or any other employment-related issues, contact me at your convenience.

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.

Salary Requirement for Federal and California Overtime

UPDATE ON THE UPDATE: The Department of Labor filed an appeal on the injunction. The notice of appeal aims to lift a temporary injunction against overtime changes that were scheduled to take effect December 1. The appeal was filed in the U.S. Court of Appeals for the Fifth Circuit in New Orleans. Forbes wrote a decent article about the appeal.

UPDATE 11/22/16: A Federal Judge in Texas issued an injunction blocking the new salary requirement from going into effect. This means the new salary requirement will not go into effect on December 1st. We’ll have to wait and see if the Department of Labor intends on fighting the injunction. With the new administration taking over in January, it is unclear how the DoL will proceed.

I’m leaving the rest of the article intact because it still provides useful information about the difference between the federal and the state salary requirement and duties test for exempt employees, and the outcome of the litigation is still anyone’s guess.

Several clients ask the following question (or very similar questions) about the new federal overtime salary requirement:

I have a quick question. It looks like there is a change coming on December 1, 2016 regarding the minimum salary requirement for exempt employees. We currently have our office manager set up with a $46,000.00 annual salary. I think this may fall under the new federal minimum salary requirement. Can you confirm this and also tell me if there is a different amount for California?

Because this issue confuses a lot of employers and employees, I thought I’d share my typical response.

Federal Overtime Salary Requirement

Federal laws requires overtime compensation when a non-exempt employee works more than 40 hours in a week.  Effective December 1, 2016, in order to qualify as an exempt employee under the federal overtime laws,  the employee must receive a guaranteed salary of $913.00 per week or $47,476 per year. The employee’s primary duty must be to perform exempt duties as defined by the FLSA.

The exempt employee must regularly and customarily exercise discretion and independent judgment regarding matters of consequence. Many office managers qualify under the administrative exemption. Additionally, if the office manager supervises 2 or more people and can hire and fire employees, the office manager may also qualify under the executive exemption.  I’m going to assume for the moment that the office manager is primarily engaged in performing exempt duties. Many people misapply the exemption, thinking that because the “office manager” can decide which vendors to use that means the exemption applies. In order to ensure she remains exempt, you will need to give her a raise effective December 1st.

California Overtime Salary Requirement

California has a slightly lower minimum salary requirement. To qualify as an exempt employee under California laws, the employee must receive a guaranteed salary equal to two times the state minimum wage (currently $10.00 per hour). That comes out to $41,600 per year (2 x minimum wage x 40 hours per week x 52 weeks per year). The minimum wage will increase over the next couple of years according to the following schedule:

Rate (Jan. 1) 26 Employees or More 25 Employees or Less
2017 $10.50 $10.00
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 $15.00
2024 Indexed* Indexed*

* Rate adjusted to changes in Consumer Price Index (if any) to a cap of 3.5 percent each year. (Source)

As the minimum wage increases, so does California’s minimum salary requirement. By 2019, barring any changes in the law, employers with 25 or more employees must employees more than the federal minimum wage. Employers with less than 25 employees can get away with paying the federal minimum wage until 2020. As I mentioned, this assumes no further changes to California or Federal law. With the recent election, it’s anyone’s guess as to what the future holds.

Required Duties

Other major differences exist between state and federal law overtime exemptions. To qualify as exempt under California law, the employee must be “primarily engaged in” exempt duties. That sounds similar to the federal “primary duty,” but differs significantly. “Primarily engaged in” exempt duties under California law means the employee spends more than 50% of her time performing exempt duties. An employee’s “primary duty” under federal law means the employee can perform other, non-exempt duties, so long as the primary purpose of the position is to perform exempt duties.

Take the classic fast food manager example. Her primary duty is to oversee and run the restaurant. Because the restaurant is understaffed, the manager spends most of her time running the cash register and flipping burgers. The manager might meet the federal overtime exemption because her primary duty is to oversee the restaurant’s operations. The manager is not exempt under state law because she is not primarily engaged in performing exempt duties.

I hope this helps.  Feel free to give me a call if you have any questions.

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.