California Supreme Court – New Overtime Calculation

This month the California Supreme Court decided the case of Alvarado v. Dart Container Corporation of Cal., S232607 (March 5, 2018).  At issue in the Alvarado case was whether the employer correctly calculated the overtime rate for employees who had received a flat sum bonus.  The flat sum bonus was given to Dart Container employees who worked the weekend shift to encourage employees to take the less desirable shift.

Basic Overtime Rule

The Court recognized the established principal of calculating the necessary overtime rate by using the employee’s weighted average.  California law requires overtime to be based on the employee’s “regular rate of pay.”  Specifically, an employer must pay an employee at the rate of 1.5 times the employee’s “regular rate of pay” for all hours worked in excess of 8 hours a day.  The regular rate of pay adjusts the employee’s normal hourly rate to include additional compensation the employee has earned – such as non-discretionary bonuses.

Pre-Alvarado Determination

California employers have traditionally followed the Division of Labor Standards Enforcement’s standards in calculating the “regular rate of pay” for flat sum bonuses. Generally, this would permit an employer to calculate an employee’s “regular rate of pay” by dividing the employee’s total compensation for the week (not including any overtime premiums, which is what the “regular rate of pay” would impact) by that employee’s total hours worked for that same week.

New Calculation for Flat Sum Bonuses

California now requires an employer to calculate a non-exempt employee’s additional overtime by dividing the amount of the flat sum bonus by the actual number of non-overtime hours worked by the employee, then multiplying that result by 1.5 (to determine a per hour value) and then multiply that result by the number of overtime hours worked (to determine total overtime wages owed). This additional overtime is then added to the overtime compensation attributable to the employee’s hourly wages (calculated by multiplying the employee’s normal hourly rate by 1.5 and then by the number of overtime hours). 

If an employee earns $12/hour, works 24 regular hours, 1 overtime hour, and earns a $200 flat sum bonus in one workweek, then you would calculate as follows:

($200 bonus) / 24 actual non-overtime hours worked = $8.33
Overtime from Bonus = $8.33 x 1.5 x 1 overtime hour worked = $12.50
Overtime from Hourly Wages = $12 (hourly rate) x 1.5 x 1 overtime hour worked = $18
Total Overtime = $30.50
Total Compensation
$288 regular wages (24 hours x $12)
$30.50 overtime wages
$200 bonus
$518.50 total pay

New rule only applies to flat sum bonuses

The definition of “flat sum bonus” is key to understanding the Court’s decision and whether or not it impacts your business.

What is a flat sum bonus?

The Court’s ruling is limited to flat sum bonuses.  A flat sum bonus is additional compensation that does not change depending on the number of hours worked by an employee, the profit/loss of the company, employee performance, or any other variable factors.  Remember, the flat sum bonus at issue in Alvarado was a flat sum provided to any employee who was willing to work the weekend shift.

In so ruling, the Court reasoned that because the form of compensation involved a fixed-value amount that had no direct relevance to the actual number of hours worked, the amount could not be seen as compensation for any overtime hours worked. The Court then held that, as a result, the per-hour overtime value of the bonus could only be calculated by dividing the bonus by the actual number of non-overtime hours worked by the employee, as opposed to the total number of total hours worked.

What Does This Mean for Your Business?
1. If you give flat sum bonuses you will need to modify the way that you calculate the employee’s regular rate of pay when the employee works overtime.

2. If you DO NOT give flat sum bonuses, then the ruling does not impact how you calculate regular rate of pay.

3. If you have questions about whether  your bonus structure consists of any flat sum bonuses, call us at 559-825-6629 or email us at info@corehrteam.com.

 

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California Jury Awards Employee $4.5 Million in Disability Discrimination Claim

Do you know:

  • California employers are required to speak with a disabled employee to determine whether or not that employee can work with or without a reasonable accommodation (known as the “interactive process”)?
  • It is unlawful to terminate an employee because they have exhausted their 12 weeks of medical leave?
  • That making a mistake in how you handle a disabled employee can cost you $4.5 million?

The Facts of the Case (e.g., what not to do)

A California jury recently awarded an employee $4.5 million for failing to accommodate her disability, failing to “engage in the interactive process”, and for retaliating against her for taking her protected medical leave.

The employee began working for the Asian American Drug Abuse Program, Inc. (AADAP) in 2011. During the New Year holiday of 2015, the employee broke her humerus and subsequently began medical leave.  Not long after, the employee was diagnosed with major depression and needed more than the 12 weeks leave protected by the California Family Rights Act (CFRA).  The need for the additional leave was certified by her doctor.  Nonetheless, when her 12 weeks of leave were up, AADAP terminated her for “failing to return from her medical leave.”

The employee filed a lawsuit against her employer alleging that AADAP’s actions violated the CFRA and the Fair Employment and Housing Act (FEHA)  (California’s anti-discrimination law). The employee argued, and the jury concurred, that she was fired because of her physical and/or mental disabilities, and in retaliation for her taking protected leave for medical treatment.

Below is a breakdown of the employee’s claims and the unlawful actions of the employer:

  1. Failure to Accommodate: The FEHA requires employers to reasonably accommodate qualified disabled employees.  An extended leave is recognized as a reasonable accommodation.  AADAP, however, failed to make any effort to determine whether or not there was an accommodation for the employee that would have allowed her to continue her employment.  The jury determined that she would have been able to perform the essential duties of her job (or a similar vacant position) with reasonable accommodations.
  2. Failure to Engage in the Interactive Process:  The FEHA also requires that an employer “engage in the interactive process” with an employee in order to determine whether or not there is a reasonable accommodation available.  The jury also found that AADAP, despite its knowledge of the employee’s circumstances, did not take reasonable steps to communicate with her about her disability, her leave, or potential accommodations to facilitate her return.
  3. Retaliation for Taking Medical Leave: AADAP provided the employee with a letter stating that she was terminated for “failure to return from her medical leave”.  At the conclusion of her 12 weeks of leave the employee provided AADAP with a doctor’s note indicating that the employee required additional time off to treat her depression.  Despite the note, and despite the employer’s obligation to engage in the interactive process, AADAP automatically terminated the employee.

What Should Employers Do?

Learn from its mistake, and take these steps:

Create a paper trail. As soon as an employee requests a leave or an accommodation, document  the request and discuss the request with a human resources expert or an employment attorney. Next, send correspondence to the employee acknowledging receipt of the request and outline the next steps.

Follow-up. It’s not enough to say that you received the request. Investigate. Ask questions. Request additional information about the impairment—within reason—to find out what the employee’s doctor says he/she can (or cannot) do.  Ensure that the doctor has an updated job description outlining the employee’s job duties and physical requirements.

Talk it out.  Speak with the employee, and get his/her feedback and suggestions on how you can accommodate the employee’s needs while also ensuring that that the employee is able to perform the essential functions of the job. Involve the employee’s doctor and do not hesitate to ask questions and get clarification on the employee’s limitations, if any. Keep an open mind about what accommodations may work (and don’t forget that California courts recognize leave as a reasonable accommodation).

Create (another) paper trail. After you confer with the employee, send another correspondence outlining what you discussed, whether you reached a viable solution, and what action steps you both have to take going forward.  Make sure that you have made every effort to reach a viable resolution before determining that there is no accommodation. Consult with a human resources expert or employment attorney prior to making the final determination.

In summary, the duty of accommodation is continuing; it doesn’t stop after the first request or the first meeting. Each employee and her circumstances will present unique sets of problems that require constant vigilance, attention, and awareness on the employer’s behalf.

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Do Not Ask About Salary History! – It’s Illegal Beginning January 1, 2018

Beginning January 1, 2018 it is unlawful for an employer to ask applicants about the applicant’s salary history.

The New Law   
Effective January 2018:
“(a) An employer shall not rely on the salary history information of an applicant for employment as a factor in determining whether to offer employment to an applicant or what salary to offer an applicant.
(b) An employer shall not, orally or in writing, personally or through an agent, seek salary history information, including compensation and benefits, about an applicant for employment.
(c) An employer, upon reasonable request, shall provide the pay scale for a position to an applicant applying for employment.”
There is an exception to the above if your business is required to ask an applicant about their salary history per a federal or state contract.

What Does The Change Mean for My Business?

You should:

  1. Review your employment application to ensure that it does not contain a request for information regarding salary history (e.g.,”prior salary” or “last rate of pay”).
  2. Make sure that managers and other staff involved in the hiring process know of the new law.

Can I Ask Anything About Salary?

Yes!  You can ask applicants about salary expectations or their desired rate of pay.

Questions? Email us at info@corehrteam.com.

 

 

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NEW LAW! Employees of small employers entitled to maternity/paternity leave

Employers with 20+ Employees Must Provide Maternity/Paternity Leave

Beginning January 1, 2018, employers with 20 or more employees will need to provide up to 12 weeks of maternity/paternity leave to eligible employees.  Eligible employees must have worked for the same employer for at least 12 months and worked 1250 hours during the past 12 months.  The employee must perform work at a site where there is at least 20 employees within a 75 mile radius.

Employer Requirements

  1. The employee must be returned to their previous position upon returning from their leave.
  2. Employers must maintain the employee’s health insurance during the leave.
  3. The leave is unpaid.

Failure to provide the leave will be considered an unlawful employment practice and could result in costly litigation.

What do I need to do to prepare?

Employers impacted by this law will need to make sure that they are aware of how to handle a request for baby bonding leave.   This will undoubtedly mean training your staff, providing required forms, and understanding how to manage and track leaves of absence.

 

 

 

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Effective July 1st – 2 New CA Employment Laws

On July 1, 2017, employers will face new limitations on the use of criminal background checks and new requirements as to the treatment of transgender employees in the workplace.  What specifically do the new regulations change and how will your business be affected?

Limitations on Use of Criminal Background Checks

The July 1st regulations require employers to demonstrate that any criminal history information sought is job-related and consistent with a business necessity.  California’s new regulations follow the EEOC’s 2012 guidance on criminal background checks.

According to the regulations, an employer must justify this policy or practice by demonstrating that its policy or practice bears “a demonstrable relationship to successful performance on the job and in the workplace and measure[s] the person’s fitness for the specific position(s), not merely to evaluate the person in the abstract,” and that the policy or practice is “appropriately tailored” to the job. The regulations provide two ways for an employer to meet these requirements: (1) conduct an individualized assessment of the applicant or employee; or (2) demonstrate that any “bright-line” disqualification policy properly distinguishes those who do and do not pose an unacceptable level of risk. Either method requires the employer to provide the impacted applicant/employee with notice and a reasonable opportunity to present evidence that the information is factually inaccurate prior to moving forward with the employment decision.

Employers should be aware of the following two changes:

1. Notice of Disqualifying Conviction

Before an employer can take an adverse action against an applicant based on conviction history (e.g., not hiring the applicant), an employer must give the applicant notice of the disqualifying conviction and provide a reasonable opportunity to present evidence that the conviction information is factually inaccurate. Unfortunately, the new regulation does not define “reasonable opportunity”.  Make sure that the applicant has enough time to respond and collect any information needed.

This notice is only required when the criminal information is obtained by a source other than the applicant (e.g. through a credit report or internally generated search).

2. Adverse Impact

An employer cannot consider criminal history in employment decisions if doing so will result in an adverse impact on individuals within a protected class (based upon race, national origin, religion, etc.).  An adverse impact occurs when a seemingly neutral policy or procedure disproportionately affects a certain group of individuals. The applicant bears the initial burden of proving that an employer’s criminal background screening policy has an adverse impact on a protected class.

What does this mean for my business?

If you do criminal background checks simply because you’ve always done it – think again and be prepared to show that there is a job-related reason for the background check. Employers that use criminal background checks in the hiring process should consult with an HR or legal expert before using the information to disqualify an applicant.

Transgender Discrimination

The Fair Employment and Housing Act (FEHA) has long prohibited discrimination in employment on the basis of gender identity.  The new regulations simply describe additional policies that employers must implement in order to prevent such discrimination.

These new policies include the following:

Restroom Facilities

Employers must provide equal access to facilities regardless of the sex of the employee. Employees must be permitted to use facilities that correspond to the employee’s gender identity or gender expression. Employers must use gender-neutral signage for single-occupancy facilities under their control. They cannot require any proof of sex or gender for an employee to use a particular facility.

Transitioning

The definition of  “transitioning” has been added to the FEHA and the new regulations specifically state that it is an unlawful employment practice to discriminate against an individual who is transitioning, has transitioned, or is perceived to be gender transitioning. Transitioning is defined as a process in which an individual begins living as the gender with which they identify and can include changes in name usage, participation in employer-sponsored activities, undergoing hormone therapy, etc.

Dress Standard

An employer cannot impose a dress standard that is inconsistent with an employee’s gender identity or expression in the absence of a business necessity.

Preferred Name and Identity

The new regulations require employers to abide by an employee’s request to be identified by a certain name or a certain gender identity. Employers can only insist on using an employee’s legal name or gender if it is otherwise required to meet a legally-mandated obligation.

Documentation

An employer cannot inquire or require documentation on sex, gender, gender identity, or gender expression as a condition of employment.

What does this mean for my business?

Make sure that your managers are aware of the new regulations and continue to ensure that your workplace is free of harassment and discrimination.  Encourage employees to talk to HR or their supervisor if they feel that they have been harassed or discriminated against based on their sexual identity or expression.  Lastly, review your handbook to determine whether you need to modify or revise any current language, policies, or practices based on the new regulations.

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What’s On Your Pay-Stub?

In California, the information on an employee’s pay-stub is no joke and failing to include the correct information puts your company at risk.

What do I have to put on the pay-stub?

California Labor Code section 226(a), lists nine specific categories of information that need to be listed on each wage statement: (1) gross wages earned; (2) total hours worked by the employee (with exceptions for certain exempt employees); (3) the number of piece-rate units earned and any applicable rates if the employee is paid on a piece-rate basis; (4) all deductions, provided that deductions made on written orders of the employee may be aggregated and shown as one item; (5) net wages earned; (6) the inclusive dates of the period for which the employee is paid; (7) the name of the employee and only the last four digits of his or her social security number or an employee identification number; (8) the name and address of the legal entity that is the employer; and (9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked by the employee at each hourly rate. Certain additional requirements apply for temporary services employers and farm labor contractors.  In addition, California requires that the pay-stub reflect the hours of paid sick leave available to that employee.

What happens if I don’t include the required information?

Failure to comply could result in statutory penalties of up to $100 per pay period, per employee, up to a maximum of $4,000 per worker, plus additional civil penalties and other damages.  Depending on the number of employees – this could be very expensive!  Include in the cost of litigation and seemingly mundane clerical mistake can cost you thousands of dollars.

What should I do?

Grab a pay-stub and make sure that you have all the correct information listed.  If you use a payroll company, don’t assume that they have included the correct information.  The payroll company may not be based in California or they may not be familiar with the requirements.

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Stopped in its Tracks! New Overtime Rule Unexpectedly Delayed

With just days left until the effective date, a federal judge has stopped the implementation of the new overtime rule.  The new rule setting the minimum salary requirement for exempt employees at $47,476 was to take effect on December 1, 2016.  Not anymore!

On Tuesday November 22nd, a Texas federal judge granted an emergency preliminary injunction stopping the new law in its tracks.  The injunction was a result of two separate lawsuits, one filed by 21 states and the other filed by Chambers of Commerce from throughout the United States.

What happens now?

For now, employers do not have to comply with the new overtime regulations on December 1, 2016. Employers should be aware that this is only a preliminary injunction, and not a permanent injunction. This preliminary injunction only delays the effective date of the new regulations until the Court makes a final determination on the merits

California employers must continue to follow state law which requires that exempt employees receive a guaranteed salary of at least twice the minimum wage or $41,600/year.  For employers with 26 or more employees, California’s minimum wage increases to $10.50 on January 1st , increasing the minimum salary for exempt employees to $43,680/year.

Questions?  Call or email CoreHR Team at info@corehrteam.com or 559-825-6629.

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BREAKING NEWS! U.S. Publishes New I-9 Form

Good News!

There is a new I-9 Form and it is easier to use than the old one!

On November 14, 2016 U.S. Citizenship and Immigration Services (USCIS) published a new Employment Eligibility Verification form, commonly know as the I-9.

The I-9 form is the form employers are required to use to establish that an employee is eligible to work in the United States.

The new form features a number of upgrades intended to help reduce errors and help employers more efficiently complete the form.

What do I need to do?

All employers must begin using the new form by January 22, 2017, but you can begin using it immediately. CoreHR Team’s recommendation? Why wait? The new form is easier to understand and easier to complete.

 

 

 

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California Fair Pay Law Expanded – Effective January 1st

Governor Jerry Brown recently expanded the California Pay Equity Act (“Fair Pay Act”) by signing new laws that will go into effect on January 1, 2017.

Specifically, the current law has been expanded to include prohibitions on pay differentials based on race or ethnicity.

Summary of the Fair Pay Act

The Fair Pay Act, signed into law in October 2015, currently prohibits employers from paying employees of the opposite sex differently where they perform substantially the same work, when viewed as a composite of skill, effort, and responsibility, and perform it under similar working conditions.

New Effective January 1, 2017

The new law, the Wage Equality Act (SB 1063), extends this prohibition to compensation disparity based on race or ethnicity. If there is a wage differential the employer must demonstrate that specific, reasonably applied factors account for the entire wage differential.

These include:

  • A seniority system;
  • A merit system;
  • A system that measures quality or quantity of production; or
  • A bona fide factor other than sex, race or ethnicity, such as education, training or experience

An employer relying on a “bona fide factor” must ensure that such factor(s):

  • Is not based on or derived from a difference in compensation that is based sex, race or ethnicity,
  • Is job related, and
  • Is consistent with a “business necessity”

The new law amends the Fair Pay Act to state that “prior salary cannot, by itself, justify any disparity in compensation.”

Practically Speaking … What does this mean?

Two things to note:

  1. Employers can no longer rely on salary history as justification for a pay deferential. Just because John has always made more than Mary isn’t justification for why John gets paid more.
  2. Employers can ask applicants for their salary history.

Considering the new amendments, California employers should carefully examine their current salary structures to ensure that disparities in the wages of employees who perform similar work are not based on sex, race or ethnicity or solely on prior salary history.

Questions?  Need help evaluating your pay structure? Call our experts at 559-825-6629.