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New Federal Salary Threshold for Exempt Classification

As of January 1, 2020, the federal salary threshold for employees to qualify as exempt from overtime will increase from $455 per week ($23,660 per year) to $684 per week ($35,568 per year). For employees to qualify under the Fair Labor Standards Act’s (FLSA) “highly compensated employee” exemption, the minimum salary threshold will increase to $107,432 per year.

As a reminder, for an employee to be classified as exempt, they must meet both the minimum salary requirement and the “duties test.” This new law does not make any changes to the duties test.

It also does not affect employees in California, where the exempt salary threshold is higher.

California employers must comply with the higher thresholds for their employees working in the state. The minimum annual salary for a managerial, administrative, or professional employee in California to be classified as exempt is $49,920 ($45,760 for employers with 25 or fewer employees). Also, California does not recognize the “highly compensated employee” exemption.

Another difference is that the federal law allows for bonuses, commissions and incentives that are paid at least annually to be counted toward the minimum salary requirement. California makes no such provision. And California’s duties test is stricter than the duties test under federal law. Here, an employee must spend more than 50% of their time in each workweek performing exempt duties to qualify as exempt from overtime.

If you have employees outside of California now is the time to review your compensation plans for exempt employees and make any changes needed to comply with the new federal law by January 1.

If you only have employees in California, it’s also a good time to review employee compensation and classification to ensure you are complying with California law.

Please reach out to me at michelle@connecttohr.com if you need help reviewing employee classifications.

New Law Impacts California Independent Consultants

As we head into the fourth quarter of 2019, there are a couple of legal updates you should be aware of.

First, Governor Newsom has signed into law AB 5, which further clarifies the distinction between employees and independent contractors. The law goes into effect on January 1, 2020 and is expected to have a big impact on gig-economy companies like Lyft and Uber, as well as app-based services that depend on contractors such as food delivery and dog-walking services.

Second, the deadline for harassment prevention training (now required for all employees of companies with 5 or more employees including independent contractors) has been extended to January 1, 2021. This will allow more time for large employers who previously only trained supervisors to train their other employees and for smaller companies to train both supervisors and employees. As a reminder, training for supervisors must be at least two hours, and training for non-supervisors must be at least one hour. Training must be repeated at least every two years. Remember to keep records of training for both employees and supervisors.

AB 5 adopts the “ABC” test, which I wrote about earlier this year, to determine whether an individual is an employee or an independent contractor.

Under the ABC Test, in order to classify a worker as an independent contractor the hiring entity must establish that the worker meets EACH of the following three factors:

The worker is free from the control and direction of the hiring entity in the performance of the work, both under the contract for the performance of the work and in fact; AND
The worker performs work that is outside the usual course of the hiring entity’s business; AND
The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

One of the things I tell clients is that it’s essential to consider how you define your core business (2) and how does the worker assist you in that core business.

The new law allows for a few exceptions for positions that are subject to the 9-factor Borello test. Some examples of positions that fit into this category are: insurance brokers, physicians and surgeons, hairstylists, attorneys, and accountants.

Misclassification can be extremely costly for employers in legal fees, back wages and benefits, and penalties. Now is an ideal time to do an overall review of how you’ve classified your workers. Also, it’s important to consult with an employment attorney if you plan to audit your records and reclassify your contractors.

Please feel free to contact me at michelle@connecttohr.com if you need assistance.

50 or More Employees? Here’s What You Need to Know

When your organization reaches 50 or more employees there are some additional federal, state and local laws you need to start following to ensure you are in compliance. Here are two important areas of compliance that affect employers with 50 or more employees.

Harassment Prevention Training

Since 2005 employers with 50 or more full-time, part-time, and temporary employees or independent contractors have been required to provide supervisory employees with two hours of sexual harassment prevention training within six months of hire or promotion, and once every two years thereafter.

Under recently passed legislation, employers with five or more employees are now required to provide anti-harassment training to all employees – both supervisors and non-supervisors – every two years. California SB 1343 requires that all employees be trained by the end of 2019. Training for non-supervisors must be at least one hour. Training for supervisors must be two hours.

Family and Medical Leave Act (FMLA)

The Family and Medical Leave Act (FMLA) is a federal law that requires covered employers to grant an eligible employee up to a total of 12 work weeks of unpaid leave during any 12-month period for one or more of the following reasons:

For the birth and care of the newborn child of the employee;
For placement with the employee of a son or daughter for adoption or foster care;
To care for an immediate family member (spouse, child, or parent) with a serious health condition; or
To take medical leave when the employee is unable to work because of a serious health condition.

Companies fall under FMLA when they have 50 or more employees in any (not just consecutive) 20 calendar weeks of the current or preceding year.

Eligibility

Employees who satisfy certain criteria are eligible for Family or Medical Leave of up to 12 weeks during each rolling 12-month period in accordance with applicable law. Employees eligible for Family and Medical Leave are those who:

Have completed 12 months of employment with their employer;
Have worked at least 1,250 hours for their employer during the previous 12 months; and
Work in a facility with at least 50 employees or in a facility where there are at least 50 employees within 75 surface miles. Employees with no fixed work site will be considered to work from the site to which they report, or the site from which their work is assigned, or the site designated as their home base.

NOTE: Companies must continue the same health plans in which the employee was enrolled before the first day of the leave at the same level and under the same conditions of coverage as if they had remained an active employee for the lesser of the duration of such leave or 12 work weeks.

California Family Rights Act (CFRA)

The California Family Rights Act (CFRA) is very similar to FMLA and applies to employers in California. CFRA allows eligible employees to take up to 12 weeks of unpaid job-protected leave during a 12-month period.

CFRA covers private employers with 50 or more workers within 75 miles of the worksite, and public employers with any number of workers. CFRA runs concurrently with FMLA.

CFRA was enacted to provide employees with work leave rights for reasons such as:

Birth of a child.
Placement of the employee’s child through adoption or in a foster care home.
A serious health condition incurred by the worker’s spouse, child, or parent.
The employee is unable to work because of a serious health condition.

Eligibility

Employee eligibility for CFRA is similar to FMLA. For both CFRA and FMLA, time off for sick leave, vacation/annual leave, administrative time off (ATO), compensating time off (CTO), holidays, informal time off (ITO) or personal leave (PL) are not to be counted toward the 1,250 hours of work.

Training Leave for Emergency Rescue Personnel

Employers with 50 or more people must allow temporary leaves of absence — up to a total of 14 days per calendar year—for employees who are volunteer firefighters, reserve peace officers and emergency personnel to engage in fire, law enforcement or emergency rescue training.

You cannot terminate, threaten with termination, demote, suspend or otherwise discriminate against an employee who takes time off to engage in fire or law enforcement training. An employee who suffers any of these consequences is entitled to reinstatement and reimbursement for lost wages and work benefits. The employee can file a claim with the Division of Labor Standards Enforcement (DLSE).

San Francisco Paid Parental Leave

This San Francisco ordinance requires employers with 50 or more employees to supplement California’s Paid Family Leave (PFL) for employees working in the city. The purpose is to allow employees to receive 100% of their gross weekly wages while on a parental leave of absence. PFL currently provides eligible employees with up to 55% of their regular wages. Employees may receive these benefits for up to six weeks in a 12-month period. San Francisco’s law requires covered employers to provide additional wage replacement benefits of up to 45% of the employee’s wages, subject to the weekly maximum.

Please contact me at michelle@connecttohr.com for more information about what you need to consider as a business with 50 or more employees.

The ABC Test – Defining Independent Contractor vs. Employee

I have been getting a lot of calls recently from clients asking for clarification about the distinction between an independent contractor and an employee.

Misclassification can be extremely costly for employers in legal fees, back wages and benefits, and penalties. In addition, you run the risk of having the IRS or Department of Labor audit your business. This can be extremely time consuming and costly.

Of course, you should always consult your employment attorney for questions about specific situations, but here are some guidelines.

Last year, based on a decision in Dynamex Operations West, Inc. v. Superior Court, the California Supreme Court adopted the “ABC Test” as a standard for determining whether workers in California should be classified as employees or independent contractors. In their decision, the Court held that workers are presumed to be employees and that it is up to the employer to prove that they should be classified as an independent contractor based on the ABC Test.

Under the ABC Test, in order to classify a worker as an independent contractor the hiring entity must establish that the worker meets EACH of the following three factors:

The worker is free from the control and direction of the hiring entity in the performance of the work, both under the contract for the performance of the work and in fact; AND
The worker performs work that is outside the usual course of the hiring entity’s business; AND
The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

One of the things I tell clients is that it’s essential to consider how you define your core business (B) and how does the worker assist you in that core business.

In light of this change in the way employees and independent contractors are determined, it’s a good (and timely!) idea to do an overall review of how you’ve classified your workers. Again, as a reminder, it’s important to consult with an employment attorney if you plan to audit your records and reclassify your contractors.

Please feel free to contact me at michelle@connecttohr.com if you need assistance.

New Laws on Harassment, Wage and Hour Violations

In my work with organizations I have two focus areas – Executive Coaching and HR Consulting. Keeping clients abreast of new and changing legislation in the dynamic world of California labor law falls into the HR Consulting bucket, but is also important for the executives I coach.

Here’s an update on some key legislation affecting employers in 2019.

New Restrictions on Sexual Harassment Settlement Agreements

Two recently enacted laws will make it more difficult for employers to resolve workplace sexual harassment and discrimination disputes.

The Code of Civil Procedure Section 1001 prohibits settlement agreements that bar the disclosure of facts related to claims filed for:

Sexual assault
Sexual harassment
Workplace harassment or discrimination based on sex
Failure to prevent harassment or discrimination based on sex
Retaliation against a person for reporting harassment or discrimination based on sex

The law allows the identity of the claimant, and any facts that could lead to the discovery of that identity, to remain confidential if requested by the claimant. Employers are still allowed to enter into settlement agreements that prohibit the disclosure of the settlement amount.

Another new law, SB 1300, amends California’s Fair Employment and Housing Act (FEHA) by placing additional limits on settlement agreements. Employers are now prohibited from requiring an employee, as a condition of employment or in exchange for a bonus or raise, to sign a non-disparagement agreement that prevents the employee from disclosing information about unlawful acts in the workplace. The law also adopts a lower standard for liability, as such:

A plaintiff does not need to prove that tangible productivity has declined as a result of the harassment.
A single incident of harassing behavior may be enough to create a hostile work environment. Proof of a pattern of harassing behavior in the past is no longer required.
Harassing behavior is not acceptable based on historical norms, or industry or company custom.

As an employer you should review your harassment policies to ensure that they align with the recent changes in law. Also, take complaints seriously! Remember to always investigate claims using qualified, impartial investigators, and take corrective action. Create a culture that makes it very clear to leaders and employees that harassment of any kind will not be tolerated.

California has expanded mandatory anti-harassment training to smaller employers

Employers with at least five employees must conduct mandatory sexual harassment training by the end of this year to comply with SB 1343, passed in 2018. SB 1343 requires that training of both supervisors and non-supervisors be completed by January 1, 2020. Training for supervisors must be at least two hours, and training for non-supervisors must be at least one hour. Training must be repeated at least every two years. Remember to keep records of training received by employees and supervisors.

Managers may be personally liable for wage and hour violations

According to a recent decision by a California appellate court (Atempa v. Pedrazzani), an owner, officer or managing agent of a corporate employer can be held personally liable for civil penalties for unpaid wages or overtime.

The plaintiff in this case worked at a restaurant owned by Pama, Inc. He sued the company for unpaid overtime, meal period and rest break violations. When Pama, Inc. filed for bankruptcy, the plaintiff successfully pursued recovery from the restaurant owner, Paolo Pedrazzani.

What this means for you as an employer is that you need to be sure that you and your managers consistently follow wage and hour rules. Even unintentionally failing to comply with the law can create personal liability.

Other legal decisions of note

Caldera v. Department of Corrections and Rehabilitation. The plaintiff in this case sued for harassment on the basis of disability after being taunted by his coworkers about his stuttering over a period of two years. The employer argued that the company had an informal, “joking” culture and that the behavior was not severe. The plaintiff won a $500,000 settlement.

This goes back to what I said earlier about creating a culture that is non-tolerant of harassment in any form. Again, the threshold for harassment has been lowered and a pattern of behavior is no longer necessary to prove harassment. If one of your employees is offended by harassing conduct you face potential liability even if the majority of employees are not bothered by the behavior. Again, take complaints seriously and investigate claims right away.

Hurley v. Department of Parks and Recreation. In this case a manager had disclosed private information about a subordinate to a non-manager, violating the plaintiff’s right to privacy. This decision points up the fact that managers should only disclose information about subordinates on a need-to-know basis and never to non-managers. The manager in this case maintained a “drop file” on the plaintiff, containing work performance as well as private information. Private information about employees should only be stored in files maintained by human resources with proper confidentiality protections.

Important updates on the use of arbitration agreements in CA

Epic Systems v. Lewis. In this case the U.S. Supreme Court ruled that the National Labor Relations Act (NLRA) does not prevent employers from making mandatory arbitration agreements a condition of employment, even with a provision waiving the employee’s right to a class action claim.

Along these same lines, two other opinions favored employers with regard to arbitration agreements.

In Sonic Calabasas Al, Inc. v. Moreno, the court ruled that an employer may require an employee to resolve wage disputes through binding arbitration. In Iskanian v. CLS Transportation Los Angeles, LLC, the court rule that an employer may require an employee to pursue claims as an individual and not as part of a class action suit. If you have not implemented mandatory arbitration agreements, I suggest you seek legal advice about the pros and cons of implementing an agreement for your organization.

If you would like more information about any of these legal updates and how they apply to your organization, please contact me for a consultation. Michelle@connecttohr.com.

Walk the Talk: Creating a Culture of Diversity, Inclusion and Belonging

As competition for attracting and keeping top talent heats up, companies who demonstrate that they have a culture of diversity and inclusion will have a significant advantage. Not only are these companies likely to perform better financially, as we discussed in my last blog, they are also more likely to engage and retain their high performing employees. And…attract new ones!

According to LinkedIn Talent Solutions’ 2018 Global Recruiting Trends report, “diversity is the biggest game-changer” among recruiting trends for 2018. Seventy-eight percent of their survey respondents indicated that diversity is very or extremely important in shaping their recruiting and hiring efforts for 2018. And it’s not just diversity – it’s diversity, inclusion, and belonging, all key elements in attracting, engaging and retaining employees.

Companies are focusing their efforts on a wide definition of diversity, including gender (71%), racial and ethnic (49%), age/generational (48%), educational (43%), disability (32%), religious (19%) and other (6%).

Yet despite this focus, companies still have a challenge in attracting diverse candidates. Here are some things to consider as you work on making your candidate pool more diverse, and your culture one of diversity, inclusion and belonging.

Demonstrate your commitment to diversity through the images on your website and in recruiting collateral. Show that you walk the talk.

Review job posting language through the lens of diversity and inclusion. Words matter. Terms such as “rockstar, “ninja” or “guru” may discourage some perfectly qualified people from applying. Use gender neutral language. Sometimes it’s as simple as changing “manage” to “develop.” A recent KQED article noted that “if you say manage a team, the applicants are primarily male. If you say develop a team, it tends to be female. And when you say lead a team, it tends to be neutral.”

Emphasize the impact of the role. Studies show that men will apply for jobs when they meet only 60% of the requirements, whereas women don’t feel confident to apply unless they meet 100% of the requirements. Consider only including the must-have requirements (versus adding all of the nice-to-haves) and focusing more on the impact the candidate would make in the position.

Be sure diversity is reflected in your culture. Consider incorporating things like time off for important holidays for diverse religions, providing parental leave, and implementing LGBTQ-friendly policies. Identify and eliminate workplace practices and attitudes that are anti-diversity-inclusion-belonging.

Confirm your commitment to diversity and inclusion on a regular basis by ensuring that teams, projects, promotions and other opportunities are open to the broader definition of diverse individuals – gender, ethnicity, points of view, sexual orientation, etc.

If you need help in incorporating diversity into your hiring practices and/or culture, please contact me at michelle@connecttohr.com.

New Criminal History “Ban the Box” Law Takes Effect January 1, 2018

A new law recently signed by Gov. Jerry Brown will prohibit employers in California from including criminal history inquiries on employment applications before making a conditional offer of employment. AB 1008 applies to all California employers with 5 or more employees and will go into effect January 1. California has had a “ban the box” law for city, county and state employers since 2014. The new law extends the ban to private sector employers. Fifteen local jurisdictions, including San Francisco and Los Angeles, already have such private sector bans in place.

The goal is to give Californians with a prior arrest or conviction a fair chance at finding a job and moving forward.

AB 1008 makes it unlawful for employers to:

Include questions on employment applications about criminal history
Ask about or consider the conviction history of an applicant before the applicant receives a conditional offer of employment; and
Consider, distribute, or disseminate information about arrests that did not result in a conviction.

The bill also requires that, before rejecting an applicant based on criminal history, the employer must first make an “individual assessment” to determine whether the applicant’s conviction history has a direct and adverse relationship with the specific duties of the job. The employer must consider each of the following:

The nature and gravity of the offense or conduct;
The time that has passed since the offense or conduct and completion of the sentence; and
The nature of the job held or sought.

If the employer makes a preliminary decision not to hire the applicant in part or solely due their criminal history, they must notify the applicant in writing and give them at least 5 business days to respond. If the applicant notifies the employer in a timely manner that they dispute the accuracy of the conviction history, and are taking steps to obtain evidence to prove its inaccuracy, the employer must provide the applicant 5 additional business days to respond. By law, the employer must consider the applicant’s response before making a final decision.

From a business perspective, banning “the box” can expand the pool of potential employees in what is a very competitive market. Individuals with arrest records or convictions for even minor offenses often have difficulty getting that first opportunity to begin turning their life around. A former client of mine who gave someone that opportunity had a very positive experience. Through a program with the EDD, she hired someone who had served time for a minor offense to work in the company call center. The individual was anxious to get some experience, and to be able to support their family. The program had very specific requirements that the employee had to adhere to, e.g., weekly drug testing, and attending meetings with their parole officer. It turned out to be a win-win. The employer got a motivated employee, and the employee got a fresh start.

Remember that in light of the new law, AB 1008, you may need to make changes to your employment application form and hiring procedures. Please contact me if you need help in doing so.

HR Alert: Revised I-9 Form and New Employee Notice Requirement

Here are some recently-implemented requirements you should be aware of.

Revised I-9 Form Now Available

On July 17, the U.S. Citizenship and Immigration Services (USCIS) released a revised version of the Employment Eligibility Verification form, Form I-9. Employers may continue to use the existing form, with a revision date of 11/14/16 through September 17, 2017. As of September 18, employers must use the new form with a revision date of 07/17/17. Existing storage and retention rules still apply.

The revised I-9 form contains some minor changes to wording, as well as changes to Acceptable Documents List C. All changes are documented in the revised Handbook for Employers: Guidance for Completing Form I-9.

New Domestic Violence Employee Notice Required

As of July 1, employers with 25 or more employees are required to inform all employees, in writing, about protections for victims of domestic violence, sexual assault or stalking. The notice is a requirement of California Assembly Bill 2337, which was signed by Governor Jerry Brown last September, and outlines protections under Labor Code Sections 230 and 230.1. The California Labor Commissioner recently published a sample notice. The notice contains information on victims’ rights to accommodation and protections against discrimination and retaliation.

New Minimum Wage and Hiring Rules in Effect

As of July 1, the minimum wage has increased in a number of California cities. If you have employees in any of the following cities, be sure that you have changed their pay rates accordingly. Note that in some cities, the minimum hourly wage is based on the number of employees. Also, if an employee works in (or telecommutes from) a city with a higher minimum wage than the state, the employer must follow both the state wage requirements and the city’s wage requirements for that employee. The current minimum wage in the state of California is $10.50/hour for employers with 26 or more employees, and $10/hour for employers with 25 or fewer employees.

New minimum wages are as follows:

San Jose: $12/hour
Milpitas: $11/hour
San Francisco: $14/hour
San Leandro: $12/hour
Emeryville:
• $15.20/hour for companies with 56 or more employees
• $14/hour for companies with 55 or fewer employees
Los Angeles, Malibu, Pasadena, Santa Monica, and unincorporated areas in Los Angeles County:
• $12/hour for companies with 26 or more employees
• $10.50 for companies with 25 or fewer employees

Effective January 1, 2018, the state-wide minimum wage will increase to $11/hour for employers with 26 or more employees and $10.50/hour for employers with 25 or fewer employees.

Use of Criminal Histories in Hiring Decisions
Also effective July 1, the Fair Employment and Housing Council implemented new rules regarding the use of criminal history in hiring decisions.

The new rules require that employers consider whether their use of criminal histories will have an adverse impact on any protected class. If an applicant or employee claims that the policy or practice of using criminal histories has an adverse impact on a protected class, the employer will have to show that the policy was job-related and consistent with business necessity.

Employers must also be able to show that there wasn’t a less-discriminatory policy or practice that could have achieved the same result. Employer policies must allow for an individual assessment that considers the nature of the offense, how long ago it took place, and how it relates to the position, if at all.

In addition, applicants or employees must be notified if an adverse action will be taken because of their criminal history, and they must be given an opportunity to address any factual inaccuracies. If a record is shown to be inaccurate, it must not be considered.

Please note that the following criminal records should not be considered in California:

• Arrests that did not result in conviction (unless trial is pending)
• Detentions that did not result in conviction
• Sealed records
• Convictions that have been judicially dismissed, including through expungement
• Misdemeanor marijuana convictions more than two years old
• Participation in pre-trial or post-trial diversions programs
• Proceedings in juvenile court

If you have questions about a specific hiring situation, contact your employment counsel.

Creating a Culture That Promotes Good Behavior

In my past couple of blogs I’ve discussed harassment and bullying, how to recognize and prevent those behaviors, and the negative effects they can have on your business. But bullying and harassment are just two of many bad behaviors that can impact your business. Others include: unethical behavior, disrespect to customers or other employees, poor quality work, chronic lateness or absenteeism, and so on.

Establishing and communicating clear guidelines as to what is, and what is not, acceptable behavior is essential. It’s about creating a culture that promotes ethics, respect and integrity. Although we often think of company culture in terms of branding and perks, a strong company culture includes much more.

According to Harvard Business School Professor James L. Heskett, “effective culture can account for a 20-30% of the differential in corporate performance when compared with ‘culturally unremarkable’ competitors.”

So how do you create a great culture that promotes good behavior? Start with clearly defined vision and mission statements, and a set of core values. Ensure that each and every employee understands and can articulate the vision, mission and values. Be clear and consistent about expected behaviors. Integrate the vision, mission, values and expectations into your new hire orientation, employee handbook, and leadership training. Be sure that leaders at every level are aligned with the culture and are modeling expected behaviors. Recognize employees who consistently demonstrate the values in their interactions with customers, vendors, team members and other employees.

Employees who know what the standards and expectations are feel more empowered and have an easier time making decisions. This is especially important in small companies where everyone knows one another and employees feel more like family. If the standards aren’t clear and consistent and periodically reinforced, the lines can get blurred.

Communicate, and most importantly, demonstrate to employees that your focus is on doing the right thing, and not just on increasing profits. When companies lead with ethical behavior, respect and integrity, employees are more likely to follow.

If you would like more tips on creating a positive culture, please contact me.