News, Articles & Updates

NEW STANDARDS FOR DETERMINING JOINT EMPLOYMENT

On January 20, 2016, the Department of Labor’s Wage and Hour Division (“WHD”) issued an Administrator’s Interpretation (AI) establishing new standards for defining “joint employment” under the Fair Labor Standards Act (“FLSA”) and the Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”). The purpose of the new standards is to extend joint and several liability for FLSA and MSPA compliance to employers found to be “joint employers.” The WHD’s guidance is a direct response to the recent shift in business models from traditional employment (one employer employing one employee) to joint employment (two or more business entities share supervision and control over one employee).

Joint employment arises in two types of employment situations which the WHD terms “horizontal” and “vertical” models.  The analysis for determining “joint employment” focuses on the “structure and nature of the relationship(s) at issue.”

1) Horizontal Joint Employment Test:

A horizontal joint employment situation may exist where two (or more) employers employ the same employee and share sufficient ties with respect to their relationship with the employee. The employee performs separate work or works different hours for the employers. The AI provides the example of a restaurant worker who is employed by two different restaurants operated by the same company. In such a situation, the WHD will examine factors such as:

  • Ownership structure (i.e., does one employer own all or part of the other, common owners);
  • Overlapping officers, directors, executives, or managers;
  • Shared control over operations (e.g., hiring, firing, payroll, advertising, overhead);
  • Intermixed operations;
  • Whether one employer supervises the work of the other;
  • Shared supervisory authority for the employee;
  • Whether there is a “pool” of employees available to both employers;
  • Share clients or customers; and
  • Any agreements between the potential joint employers.

If horizontal joint employment is found, the work will be considered “one employment,” and both employers will be legally responsible for complying with FLSA and MSPA regulations.  This categorization can be problematic where, for example, an employee works 25 hours for two employers, thus more than 40 hours a week, and is entitled to overtime premiums.

2) Vertical Joint Employment Test: 

A vertical joint employment emerges where the employee is hired by one employer (the “intermediate employer”) but who works for the benefit of another employer and whose compensation is tied to the other employer. The intermediate employer is typically a staffing agency or has some other contract arrangement with the potential joint employer.  If an intermediate employee is found to be an employee of the potential joint employer, then all of the employees of the intermediate employer would be employees of both employers.  If the intermediate employer is not an employee of the potential joint employer, the vertical joint employment analysis must be applied to individual employees.

The vertical joint employment analysis is an “economic realities” test to determine if the employee is economically dependent on the potential joint employer. The greater the presence of the following factors, the more likely the WHD will find economic dependence and a joint employer relationship. For this analysis, the WHD may draw from the following factors listed in the MSPA:

  • Employer’s control (the extent that the work performed by the employee is controlled/supervised/managed by the potential joint employer);
  • Skills (the extent that the employee’s work is routine, unskilled, and/or involves little training)
  • Performing administrative tasks (extent that employer performs administrative functions normally reserved for an employer, such as handling payroll, providing materials necessary for the job)
  • Integral to business (the degree to which the employee’s work is integral to the employer’s business)
  • Permanence (a permanent, full-time, or long-term relationship by the employee with the potential joint employer)
  • Control of employment terms: (the extent that the employer has the power to hire, fire, modify employment conditions, or determine the employee’s rate of pay)
  • Location where work is performed (property owned, leased, or controlled by the potential joint employer)

 The Effect on Your Business

Businesses and individual employers will not be able to shift obligations to comply with the FLSA and MSPA to associated employers by structuring separate entities (horizontal joint employment) or hiring contractors and staffing companies (vertical joint employment). Instead, joint employers will be held jointly and individually responsible for compliance.

The WHS identified the construction, agricultural, janitorial, logistics and staffing agency as the industries most likely impacted by the clarification, but noted that joint employment occurs in all industries. While it remains to be seen how the tests will be applied in the courts, it is important to be aware of how far your liability and to know that associated entities (as well as the combined structure) also fulfill their obligations under the law.

If you have any questions about your obligations as an employer, please contact us at info@mitzelgroup.com or reach out to your Mitzel Group, LLP attorney directly.

CALCULATING BONUS OVERTIME USING FEDERAL FORMULA IS LEGAL IN CALIFORNIA

A Court of Appeal decision on January 14, 2016 (Alvarado v. Dart Container Corp.) addressed the issue of whether a California employer should follow the federal formula or the Division of Labor Standards Enforcement Manual (DLSE) proposal for calculating “flat sum” bonus overtime.  The Court held that employers can use the federal formula because there are no California statutes on the issue and the DLSE Manual carried no legal authority. The Court reasoned that employers should be able to rely on directly applicable federal authority on an issue where California law was silent.

The federal method for calculating overtime pay is found in Code of Federal Regulations (29 C.F.R. § 778.110) and states as follows:

  • Straight Overtime Pay: Multiply the number of weekly overtime hours by the straight hourly rate.
  • Overtime Premium Pay: Multiply the total hours worked by the straight hourly rate and then add the bonus to that figure. Divide this amount by the total number of hours worked to determine the regular rate. To determine the overtime premium owed, multiply the regular rate by the number of weekly overtime hours.

Alvarado’s Impact on Employers:

 Alvarado clarified that employers can rely on and deploy the federal formula for calculating flat sum bonus overtime.  However, the Court’s holding does not mean that DLSE guidance contained in its Manual are not binding on employers.  If there is a DLSE interpretation that is supported by California law, and is more favorable to the employees than the corresponding federal law, employers must likely adhere to the DLSE directive.

If you have any questions about your obligations as an employer, please contact us at info@mitzelgroup.com or reach out to your Mitzel Group, LLP attorney directly.

EMPLOYERS TAKE NOTE- NEW 2016 CA LABOR LAWS

On January 1, 2016 Governor Brown passed several new laws that affected California employers. As a reminder, California’s minimum wage increased to $10 on January 1, 2016 as well. Here are the major key changes to note:

California Equal Pay Act: this law has been amended to make it unlawful for employers to prohibit and prevent employees from disclosing their own wages, communicating about the wages of other employees, or inquiring about wages of other employees for the purpose of determining whether there is a factual basis for an equal pay claim. The amendments are intended to lower the plaintiff’s burden of proof and encourage transparency regarding wage equality.

California Family Rights Act (CFRA) Amendments: the new CFRA amendments apply to employers with 50 or more employees within a 75 -mile radius. The new amendments clarify that eligible employees are those who have been employed for 12 months or more and have been employed for at least 1,250 hours during the 12-month period.

The new regulations state that when a business is considered a joint employer (which is determined by looking at the economic circumstances of the situation), the employee should be counted by both employers for determining CFRA eligibility.

When dealing with medical certifications, the new CRFA laws proclaim that the employer must have a “good faith, objective reason” to doubt the legitimacy of an employee’s medical certification. The CFRA defines a serious health condition to be one that involves either inpatient care or continuous treatment. The new law redefines inpatient care as the “expectation” that the employee will stay overnight, but it is not necessary to stay overnight to still be considered inpatient care.

CFRA stresses that employees who fraudulently use CFRA leave will not be protected, but the burden falls on the employer to prove that the CFRA leave was used fraudulently.

Electronic Signatures: if employers are using electronic signatures for new hire documents, they must make sure they can authenticate the new employee’s signature. In a 2014 case, an arbitration agreement was found to not be enforceable because the employer could not authenticate the employee’s signature. The court noted that while an electronic signature has the same legal effect as a handwritten signature under California law, any writing must still be authenticated. Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal. App. 4th 836.

Employment Discrimination: this law makes it an unlawful for an employer to retaliate or discriminate against an employee for requesting an accommodation for a disability or religious observance, regardless of whether the request was granted.

Judgment Enforcement by Labor Commissioner: the new law enables the Labor Commissioner to use any of the existing remedies to enforce a judgment against the employer when collecting unpaid wages. Any employer who fails to comply with minimum wage requirements or tracking employee hours/ days of work, or who violates other related provisions of law may be held liable as the employer for such violation.

Enforcement of Employee Claims by Labor Commissioner: the Labor Commissioner will have the power to issue a citation to enforce local minimum wage, overtime laws, and employee indemnification policies. However, the Labor Commissioner cannot issue citations when the local entity has already issued a citation for the same violation.

Piece-Rate Compensation: this applies to employees who are compensated on a piece-rate basis for any work performed during a pay period. This new law mandates that employers must compensate employees for rest and recovery periods that are separate from any piece-rate compensation. In addition, this new law creates an affirmative defense for employers who, by December 15, 2016, fully compensate their specified employees for all uncompensated rest periods, recovery periods, or unproductive time between July 1, 2012 and December 31, 2015.

The Family School Partnership Act: this law applies to employers with 25 or more employees. This act was expanded to encompass more circumstances for when an employee can take time off work without fear of being terminated. Employers are prohibited from discriminating against an employee who is a parent, guardian, or grandparent who has custody of a child and subsequently uses unpaid time off for the purpose of participating in school activities. This now includes taking job-protected time off to: 1) find, enroll, or re-enroll his or her child in a school or with a license care provider, and 2) to address a child care provider or a school emergency.

Definition of an “Unlawful Employment Practice”: this definition is now expanded to prohibit an employer from using the E-Verify system at a time or in a method that is not authorized by federal law to check the employment authorization status of a prospective job applicant or current employee.

Next Steps for California Employers

  • Update employee handbooks and company policies/procedures to reflect the changes in the labor laws in California
  • Inform managers of the new laws and their responsibilities for implementing policies that comply with all relevant labor laws in California
  • Display all new labor law notices in the workplace where employees can easily read them

If you have any questions about your obligations or compliance as an employer, please contact us at info@mitzelgroup.com or reach out to your Mitzel Group, LLP attorney directly.

2016 MINIMUM WAGE INCREASES IN CALIFORNIA

On January 1, 2016, the statewide California minimum wage increased to $10. This means that the minimum salary requirement increased to $41,600. For some cities in California, the minimum wage increase will become effective later in the year. The minimum wage increase also impacted other states across the nation.

The federal government has proposed an increase to the federal minimum salary requirement, which is expected to pass later this year. This would increase the minimum salary to $50,440.

Next Steps for Employers

Employers must be alert to these changes in order to limit the risk if a wage or hour claim brought by an employee. Impacted employers need to:

  • Consider local governing minimum wage requirements. Minimum wage must be paid at the highest rate mandated for the employer’s locale.
  • Increase wages for employees making less than the minimum required amount.
  • Consider payroll-processing implications when determining the effective date of the wage change. For example, if wages are increased effective January 1, employees might have different base pays in a single pay period.
  • Review and amend, if applicable, pay scales for exempt staff considering all Federal, State, and local wage requirements. For example, specific California Wage Orders require that an exempt employee’s monthly salary must be at least two times the State minimum wage for full time employment.

The Office of Labor and Standards Enforcement requires employers to post a Notice informing employees of this new increase. The Notice must be displayed where employees can easily read it.

Impacted Cities in California

San Francisco: Minimum wage will increase to $13 effective July 1, 2016. It will increase to $14 effective July 1, 2017 and to $15 effective July 1, 2018.

Berkeley: Minimum wage will increase to $12.53 effective October 1, 2016.

Emeryville: For employers with 55 employees or less: the minimum wage will increase to $12.25 effective July 1, 2016. For employers with 56 or more employees: the minimum wage will increase to $14.44 effective July 1, 2016.

 Richmond: Minimum wage will increase to $11.52 effective January 1, 2016.

Los Angeles (City and County): Minimum wage will increase to $10.50 effective July 1, 2016.

San Diego: Minimum wage will increase to $10.50 effective January 1, 2016.

To see how California compares on minimum wage to other states across the country, visit: http://www.paywizard.org/main/salary/minimum-wage

If you have any questions about your obligations or compliance as an employer, please contact us at info@mitzelgroup.com or reach out to your Mitzel Group, LLP attorney directly.