LEGAL SERVICES FOR ENTREPRENEURS 415/543-9444, Ext. 217 www.lccr.com EMPLOYMENT LAW BASICS
DISCLAIMER The information contained in this presentation has been prepared by Lawyers Committee for Civil Rights ( LCCR ). It is not intended to constitute legal advice. LCCR has made reasonable efforts to collect, prepare and provide this information, but do not guarantee the accuracy, completeness, adequacy, or currency of the information contained in this presentation. The publication and distribution of this presentation is not intended to create, and receipt does not constitute, an attorney-client relationship.
OVERVIEW California Wage and Hour Law Including: Oakland Measure FF Break Becoming an Employer Hiring Procedures Employees v. Independent Contractors Employees v. Unpaid Interns Firing and Layoffs Avoiding Discrimination 3
CALIFORNIA WAGE AND HOUR LAW I N CLUDING OAKLAND MEASURE FF
CALIFORNIA WAGE AND HOUR LAW California Law Minimum Wage and Overtime Exemptions to Minimum Wage and Overtime Paycheck requirements Rest Breaks Meal Breaks Workers Compensation and other benefits Paid Sick Leave Service Charges Oakland Law Applies to employees who work 2+ hours/week in Oakland Only applies to work performed in Oakland Does not matter where your business is located
MINIMUM WAGE & OVERTIME Minimum Wage For Hourly Employees: Hourly CA Min Wage SF Min Wage Oakland Min Wage $10.50/hour ($10.00/hr if 25 or fewer employees) $14/hour as of 7/1/17 EMPLOYEES CANNOT WAIVE OR SIGN AWAY RIGHTS TO A MINIMUM WAGE Overtime Rates For Hourly Employees: $12.86/hour as of 1/1/17 (increase annually) Situation Over 8 hours a day Over 40 hours a week Pay Rate 1.5x hourly rate per overtime hour 1.5x hourly rate per overtime hour 7 th consecutive day worked 1.5x hourly rate per hour on 7 th day Over 12 hours in 1 day Over 8 hours on 7 th consecutive day 2x hourly rate per overtime hour 2x hourly rate per overtime hour that day
BE CAREFUL This is general guidance Be very careful when determining if employees are exempt from either minimum wage or overtime Incorrectly treating a nonexempt employees as exempt potentially opens you up liability
EXEMPTIONS FROM MINIMUM WAGE LAWS Independent Contractors Commissioned Sales Employees (51+% of income from commissions) Earnings average 1.5x minimum wage Farm Workers Seasonal and Recreational Workers Student or Young Workers Occasional Babysitters
EXEMPTIONS FROM OVERTIME LAWS Salaried Employees (SEE NEXT SLIDES) Salesperson Inside, Commissioned Sales Employees (51+% of income from commissions) Earnings average 1.5x minimum wage Outside Sales Employee Others: https://www.dir.ca.gov/dlse/faq_overtimeexempti ons.htm
Salaried Employee Exemption: Requirements Minimum Salary Duties Test
Salaried Employee Exemption: Minimum Salary California Earn at least $840 per week or $43,680 annually Minimum that CA employers must follow Current Federal Law Earn at least $455 per week or $23,660 annually Pending Federal Law Earn at least $913 per week or $47,476 annually Safest to follow this
Salaried Employee Exemption: Duties Test Executive Administrative Learned or Creative Professional Learned Creative Computer Professional
Salaried Employee Exemption: Requirements Minimum Salary Duties Test
PAYCHECK REQUIREMENTS Paycheck Frequency Most employees wages due twice / month. Paystub Information Required Employee's name and Social Security number Employer's business name and address Gross & net wages earned All deductions Pay period dates Total hours worked Hourly rates in effect Number of hours worked at each rate
REST AND MEAL BREAKS Does not apply to exempt employees
REST BREAKS Rest breaks must be paid Cannot be on call during break Employee can choose to waive their break Cannot pressure Keep records of policy, shifts, & break authorization Less Than 3.5 Hours: not entitled to a break. 3.5-6 Hours: one, ten-minute rest break. 6-10 Hours: two, ten-minute rest breaks More than 10 Hours: three, ten-minute rest breaks
MEAL BREAKS Hours Worked Meal Break Required 0-4.59 hrs Employee not entitled to a meal break 5 5:59 hrs Must provide at least 30 min. unpaid meal break. Waiveable by mutual written agreement. 6-9.59 hrs Must provide 30 min. unpaid meal break, not waiveable. 10-14:59 hrs Employer must provide second 30 min. unpaid meal break. Waiveable only if employee took first break.
EXAMPLE OF MEAL BREAK WAIVER I understand that under California Labor Law, after a work period of 5 hours, I am entitled to receive an unpaid meal break of not less than 30 minutes during which I am relieved of all duties. I give my consent that I may waive my 30-minute unpaid meal break only when my work and/or scheduled shift will be completed in 6 hours or less in one workday. I understand that if my shift exceeds 6 hours, I am required to take an unpaid meal break of at least 30 minutes
WORKERS COMPENSATION California requires all businesses to carry workers compensation insurance for their employees Does not generally apply to: Independent contractors Volunteers Business partners Household employees who work less than 52 hours or earned less than $100 in the 90 calendar days before the injury Benefits: Reduces litigation For workers: makes payment faster and more likely For employers: reduces liability
OTHER BENEFITS Clear policy Uniformly enforced
VACATION No legal requirement for paid or unpaid leave But if you chose to provide, certain restrictions apply Once given, belong to employees
JURY DUTY Employees have the right to serve on Juries Payment: Exempt vs Nonexempt If given reasonable notice, cannot fire or penalize Employee may use vacation or other paid leave
VOTING Employer must post notice at least 10 days before election Employee must give 3 days notice of intention to vote Must pay up to 2 hours for employees to vote
OTHER BENEFITS Military Duty: Federal: cannot discriminate, must reinstate (up to 5 years) additional protections for CA National Guard Bereavement: Not required by law
CALIFORNIA PAID SICK LEAVE Permitted uses: (1) Medical need of employee or family member; OR (2) purposes related to domestic violence, sexual assault or stalking suffered by the employee. Employee must provide notice If foreseeable: reasonable If unforeseeable: as soon as practicable
CALIFORNIA PAID SICK LEAVE (CONTINUED) Begins accruing on first day of work May be used after day 90 of employment. 4 accrual methods
CALIFORNIA PAID SICK LEAVE (CONTINUED) Accrual Cap ( Bank ) v Annual Use Cap ( Use ) Minimum 48 hour accrual cap permitted Minimum 24 hours annual use cap permitted Accrued, unused PSL carries over into the next year but is limited by the employer s accrual cap.
CALIFORNIA PAID SICK LEAVE (CONTINUED..) Calculating Salaried employee hourly pay Hourly pay does not include tips Pay at next payroll Must provide written notice of amount PSL on: wage statement, OR in a separate notice on pay day
CALIFORNIA PAID SICK LEAVE (CONTINUED ) Not required to pay out unused PSL at separation But, If an employee leaves and is rehired within one year, previously accrued and unused paid sick days must be reinstated. Paid Time Off policies can satisfy (but be careful)
CALIFORNIA PAID SICK LEAVE RECORD KEEPING Keep records of Employee s name Time worked Hours accrued, and Hours used Pay rate Keep records up to 3 years Must provide an employee a copy of the records upon a reasonable request.
OAKLAND PAID SICK LEAVE Accrual: Every 30 hours worked -> 1 hour of PSL Permitted use: care for designated person Employers may require at 2 hours notice except for accidents, emergencies, or sudden illnesses for which advance notice would be unreasonable.
OAKLAND PAID SICK LEAVE (CONTINUED) Business with 10+ employees: minimum 72 hour accrual cap NOT allowed to cap annual use Salaried employee hourly pay calculated differently
IF EMPLOYERS SUSPECT PAID SICK LEAVE ABUSE DO NOT retaliate against employees for their use of paid sick leave Reason suspicion + Reasonable verification In Oakland, reasonable suspicion includes: taking paid sick leave on days when the employee s request for vacation leave was denied; a pattern of taking paid sick leave on days when the employee is scheduled to work a shift that may be perceived as undesirable, and a pattern of taking paid sick leave on Mondays or Fridays or immediately following a holiday.
SERVICE CHARGES Tips v Service Charges California No legal obligation to pay to employees Oakland Mandatory service charge must go to employees Applies to hotels, restaurants & banquet facilities Cannot count toward minimum wage Must pay to employees no later than next payroll, OR collection of the charge from the customer, whichever is later.
BECOMING AN EMPLOYER
BECOMING AN EMPLOYER When do you become an employer? A business becomes an employer when it pays wages in excess of $100 in a calendar quarter to one or more employees What do you need to do as an employer? Register with the California Employment Development Department (EDD) within 15 days of becoming an employer: http://www.edd.ca.gov Pay taxes What taxes do employers need to pay? Federal Social security & Medicare Federal Income Tax Withholding Federal Unemployment Tax California Unemployment Insurance Employment Training Workers' Compensation Insurance State Disability Insurance Personal Income Tax Withholding
DEFINING AN EMPLOYER Three tests under California Law. An Employer is one who: 1) Engage (another) to work 2) Exercises control over wages, hours or working conditions 3) Suffers or permits (another) to work Martinez v. Combs, California Supreme Court, 2010 In all three tests the plaintiff (i.e., the person claiming to be the employee) has the burden of showing that he or she was an employee.
DEFINING AN EMPLOYER, CONT. Test 1: Employer engaged or employed the person in the plain, ordinary sense of the word. Test 2: Employer is one who controls wages (including pay increases or decreases); hours (work schedules or hours worked) or working conditions (where & how work is performed) Test 3: Employer knew: that the plaintiff was working in the business without having been formally hired; or that the person was being paid less than minimum wage (the employer has knowledge of the work and failed to prevent the work)
HIRING: MAKING THE OFFER Get Everything on Paper, Even if it Seems Unnecessary Even if employees are friends or family, things may go wrong Use Offer Letters Include at will language-allows you to fire at any time, for (almost) any reason State whether the employee is salaried or hourly State compensation and benefits Include non-disclosure agreements and/or invention assignment agreements if you have private company information Note: non-compete agreements are generally not valid in CA after termination Distribute Employee Handbooks Include company policies, procedures and other important information Include policies to prevent and address harassment and discrimination, retaliation, sexual harassment, bullying, and social networking policy Read Hiring Your First Employee, by NOLO Press Available at SF Law Library- Legal Databases- Nolo Reference Information
INDEPENDENT CONTRACTOR What is an Independent Contractor? Different agencies have different tests. The Department of Labor Standards Enforcement ( DLSE ) starts with the presumption that a worker is an employee. DLSE then uses the economic realities test which primarily looks at who has the right to control the worker s work both as to the work done and the manner and means in which it is performed.
EMPLOYEES AND INDEPENDENT CONTRACTORS Independent Contractor Not owed benefits, leave, or overtime Should create a written contract assigning copyright for work Differences Owed benefits, leave, & overtime. Employer owns copyright for work created within scope of employment Employee Independent Contractor Less control or supervision by employer; work off-site Worker s services are less central to employer s business Paid by project Factors More control or supervision by employer; work on site Worker s services are more central to employer s business Paid by time worked Employee
IS THAT WORKER REALLY AN INDEPENDENT CONTRACTOR The IRS is going after employers who classify employees as independent contractors don t be one of them Results: fines, back taxes Hiring Independent Contractors (California Labor Code Section 2750.5) Hire an independent contractor to perform a specific job Do not hire an independent contractor on a permanent or at will basis Do not supervise or control an independent contractor method of work Give a time frame for services to be completed Do not say when/where/how a contractor works Do not control who does the job contractors may hire assistants to do the work Pay by the job, not on regular dates in regular amounts Hire for work that is not part of the day-to-day operation of the business Clarify that independent contractor is responsible for his own liability, worker s comp, taxes, and benefits BOTTOM LINE: The IRS has the last word. Be careful.
CONSTRUCTION INDUSTRY BEWARE Contractors State License Law very difficult to use independent contractors for licensed work. California Labor Code 2750.5: the presumption of employee status can be rebutted only as to persons who hold a valid contractor's license; the presumption cannot be rebutted as to persons who do not hold a valid contractor's license
UNPAID INTERN An unpaid intern is not an employee engaged to do something for the benefit of the employer or a third person. BUT, he or she is: A person who receives education-in-lieu-of-pay. The intern or trainee should receive training at the employer s expense.
IS THAT WORKER REALLY AN INTERN? The major question to ask yourself when hiring an unpaid intern is: does the internship really benefit the intern? If the answer is no, then you could be violating labor codes. Violating the labor codes could result in back pay to the worker (including overtime pay) and state and federal penalties. 6 factor test: April 7, 2010, DLSE Acting Chief Counsel opinion letter http://www.dir.ca.gov/dlse/opinions/2010-04-07.pdf
Intern v. Employee In California, there are 6 considerations to determine whether an unpaid internship is legal/valid: 1. the training, even though it includes actual operation of the employer's facilities, is similar to that which would be given in a vocational school; 2. the training is for the benefit of the trainees or students; 3. the trainees or students do not displace regular employees, but work under their close supervision; 4. the employer derives no immediate advantage from the activities of the trainees or students, and on occasion the employer's operations may be actually impeded; 5. the trainees or students are not necessarily entitled to a job at the conclusion of the training period; and 6. the employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training. In the past, the DLSE took the position that unpaid trainees and interns not only had to meet these six FLSA criteria, but also needed to meet five additional criteria (e.g., a prohibition on employee benefits, very generalized rather than company-specific training and hiring through a separate screening process). More recently, the DLSE alternatively used an "economic realities" test with six factors which differed in part from the FLSA criteria.
TERMINATING EMPLOYMENT Before Firing/ Layoffs Keep record of employee performance Make sure you have a lawful reason for firing If firing for poor performance, make sure you have documented (1) poor performance and (2) efforts to help employee improve performance Upon Firing (Or Closing of a Business) Pay final wages on time, including accrued vacation or PTO If employee quits without notice must pay final paycheck within 72 hours Waiting time penalties of up to 30 days for not paying final paycheck on time Review employment agreement and pay all amounts due Have employee return company property and information Remind employee to keep employer s trade secrets and proprietary information confidential
AVOID DISCRIMINATION State and federal laws: Title VII, ADA, FEHA, PDL, etc. Examples of protected categories: race, color, national origin, ancestry, physical disability, mental disability, medical condition, pregnancy, genetic information religious creed, marital status, age gender, gender identity, gender expression, or sexual orientation Prohibited actions: Refusing to hire, train, or employ a person Firing Discriminating / Harassing / Retaliating
CA HEALTHY WORKPLACES Do you have 50 or more employees? AB 1825: Sexual harassment: training and education. AB 2053: Employment discrimination or harassment: education and training: abusive conduct. Currently, an employer with 50 or more employees has to provide at least two hours of classroom or other effective interactive training and education, regarding sexual harassment and abusive conduct, to all supervisory employees within six months of starting and every two years thereafter.
AVOID DISCRIMINATION, CONT. Tips for employer: Have anti-discrimination and harassment policies in place TRAINING and more TRAINING A word on background checks: Remember that background checks aren t generally required. If you are going to run a check: - You must get written consent from the employee - The EEOC recommends as a best practice to delay a background check until later in the hiring process when going to offer a job not the first thing - This saves the cost of running checks on a wide applicant pool, too Cal. Labor Code 432.7 prohibits asking about arrests or dismissed convictions
GENERAL TIPS Keep employee files up to date Include filings, performance reports, etc. Use employment contracts, even if you hire friends or family Carefully follow wage & hour laws penalties are high if you don t Consider using a payroll service to ensure that you are properly applying withholdings, etc. For required Notices, when in doubt consult.
UPCOMING LEGAL CLINIC This Thursday, July 13, 2017 5:00 PM to 7:00 PM Legal Services for Entrepreneurs Clinic Oakland Business Assistance Center 270 Frank H. Ogawa Plaza, Oakland, CA 94612 Please fill out an application.
UPCOMING WORKSHOP July 12, 2017 3:30 PM to 5:30 PM Business Law Basics Workshop Small Business Administration 455 Market Street, 6th Floor, San Francisco, CA 94105 August 2, 2017 3:30 PM to 5:30 PM Business Law Basics Workshop Small Business Administration 455 Market Street, 6th Floor, San Francisco, CA 94105
ATTORNEY-MATCHING PROGRAM For businesses that meet eligibility requirements. Fill out an application form or online: https://www.lccr.com/get-help/economic-justicelegal-services-for-entrepreneurs-lse/lse-applicationenglish/.
ADDITIONAL EMPLOYER RESOURCES City of Oakland Measure FF: http://www2.oaklandnet.com/government/o/cityadmin istration/d/minimumwage/index.htm SF Law Library- Nolo Legal Reference Database CA Employment Development Department: http://www.edd.ca.gov/ CA Department of Industrial Relations: http://www.dir.ca.gov/ US Citizenship and Immigration Services: http://www.uscis.gov/ US Equal Employment Opportunity Commission: http://www.eeoc.gov/
THANK YOU FOR COMING! Legal Services for Entrepreneurs (LSE) provides free legal assistance to low-income entrepreneurs and entrepreneurs who invest in low-income neighborhoods. For more information: 415-543-9444 ext. 217 www.lccr.com/lse