Prepare for 2020

We hope you have had a prosperous year and are looking forward to the final holidays this year. Now is also the time to plan for the employment law changes in 2020:

  • CA Minimum Wage — Calfornia has, as usual, an increase of $1/hour to the minimum wage on 1/1/2020. This means companies with 26+ employees increase to $13/hour and those with less than 25 employees increase to $12/hour. This is only the state wage so, if you are in an area with a local law, you need to check what that new rate may be.
  • San Diego Minimum Wage — The City of San Diego is one of those areas with a local law. If you have employees working within San Diego city limits, you’ll need to pay $13/hour regardless of the size of your company…while those employees are working within San Diego.
  • Minimum Salary — Whenever the state minimum wage increases, so does the minimum salary. So on 1/1/2020, your exempt (salaried) employees may need a raise. Companies with 26+ employees must pay at least $54,080/year and those with less than 25 employees increase to at least $49,920/year. Keep in mind this is the absolute minimum you can pay an exempt salaried employee…regardless of how few hours they may work. Even a part-time salaried employee must make this same amount at a minimum.
  • Computer Software Professionals Salary — Only California has a special exempt salaried rate for computer software professionals. This amount will be increased to $96,968.33/year. The exemption is very specific so don’t use this exemption unless you are sure your employee meets the qualifications. All other computer professionals must be paid hourly.
  • Sexual Harassment Prevention Training Deadline — Although we received a reprieve on the deadline for sexual harassment prevention training, we are now moving toward the new deadline. If your company has 5+ employees anywhere (counting owners), then ALL California employees must be trained before 12/31/2020. Supervisory employees have a mandatory 2-hour training and non-supervisory employees have a 1-hour training. After the initial training, they must be retrained every 2 years. See our online training at www.Outpost.HRjungle.com!
  • Independent Contractors — The new laws regarding independent contractors are already in effect but now is the time to reclassify those workers, if you haven’t already. The very simplest explanation is that anyone who has contact with your customers MUST be an employee. There are many more aspects to this so please check with us or your employment law attorney to ensure you are compliant going into 2020.
  • New W4 Form — There is a new Federal W4 form you must start using on 1/1/2020. While this must be used for all new hires, you are not required to have current employees complete it. The new method of employee taxation will be based on total family earnings rather than just the number of exemptions they claim. The new W4 is intended to make it easier for employees to have the appropriate amount of taxes deducted. Let us know if you need the new form.

There were more laws enacted but those listed above are the ones most likely to affect you the most on January 1st. We want to help you be compliant so please ask us questions about how any new laws affect your company.

Why You Do What You Do

“I now have about 30 employees and have heard about employee engagement but I don’t really know what that means or why it’s important.”

Your HR Survival Tip

Employee engagement, in simplistic terms, means employees are involved in your company rather than just having a job. If the employee is just coming to a job, they can easily replace that job with a different one. However, if they are engaged with your company, they feel needed and important and that emotional connection often results in much better retention and happier employees.

Involving employees in the business isn’t that hard to do. People love to give their opinions and many just need to be asked. Management often gets so wrapped up in the big picture, they don’t really know how the front line is doing. If you think about it, that front line may not have a management title but they are often the ones with great ideas that could save you money or increase production.

If we walked into your company and started talking with employees, how would they answer these questions?

  • Why is what you are doing important to this company?
  • Do you have ideas of how your work could be done more easily or better?
  • Has anyone ever asked for your opinion about the work?
  • Do you know why your job is done exactly as you do it?
  • Can you tell me what the company values?
  • How do you describe to others what this company does?

The employees’ answers will give you a pretty good idea of how engaged employees’ are and how they feel about their jobs. One of the most important things you can do is to make sure every employee understands why their job is valuable to your company. Even low-level work is important and they need to know that. Based on the answers you get to these questions, you’ll know where you need to put some effort in creating engagement with your employees.

Questionable Posts

“Sarah, my employee, has been posting on social media a lot of pictures of herself partying and drinking. She has been moving up in the company but I think these posts could eventually hurt her career. What can I do?”

Your HR Survival Tip

Legally, there’s nothing you can do about the choices employees make when posting on social media. People of all ages now seem to post everything about their life, without regard to privacy or what others may think. Once something is posted, it truly is “out there” forever. People don’t always think about that when posting.

You can counsel Sarah and explain she might want to give some thought to the message she’s sending with her choice of posts and who is seeing them. Although we all have personal lives, every detail doesn’t need to be made public. In some cases, those posts may actually alter what people think of her and that could ultimately damage her career.

Strangely enough, a lot of people feel a person with a lot of responsibility at work must be responsible at all times. For example, people may not want to see their banker getting sloppy and having fun at a party. They only want to know this person is someone they can trust.

If you have employees connecting with clients, have them stop using their personal accounts. Instead, create a company page where they can connect and you can control what gets posted. Another option you have is to coach your employees to maintain a separate list for business contacts, when possible, so they can better control what is viewed by those contacts.

As politicians have found, it can be very awkward to have an old post suddenly pop up as a news item. Many companies are now scouring social media to gain more insight into applicants. Regardless of whether they should do that or not, employees need to be aware of the potential long-term effects of publishing every aspect of their lives.

Are You Insured?

“I don’t provide insurance for my employees but I recently heard everyone is now required to be insured. What is that about and how does it affect me?”

Your HR Survival Tip

When the Affordable Care Act (ACA or ObamaCare) was enacted years ago, the mandate was for companies of 50 or more full-time employees (or full-time equivalents) to provide health insurance for employees. If you were required to provide insurance and didn’t, you are subject to a tax penalty. California has now enacted its own version of this for individuals through SB78 and individuals must have coverage by 1/1/2020.

This law created an individual mandate requiring all Californians to have health insurance coverage. Everyone is affected…your employee, their spouse or domestic partner, and their dependents. If any individual is not covered, they will be subject to penalties when filing their state income tax return in 2021. Right now it appears the penalty starts at $695 per adult and half of that per child, but it does depend on your total family income. The penalty can be avoided if they have proof of coverage for every month going forward.

There are exceptions if the premium for the individual or family is over a certain percentage of income. The premium would need to be more than 8.4% of the household income. There are other exemptions but check them out carefully if you plan to count on one of them. Options for no-and low-cost coverage are also available through California’s MediCal program.

If you offer health insurance but have employees (or their families) who are not covered, they must obtain coverage. Individuals can use the California Exchange (CoveredCA.com) and may be eligible for financial assistance. The other option is to go through an insurance broker…brokers do not cost you anything and they may be able to find you a better plan for less money. Plus, you have someone to contact with questions.

This new law does not affect companies but may affect your employees. The deadline to obtain coverage is January 1st so please spread the word to your employees and make sure they understand the consequences of doing nothing. Insurance coverage is no longer an option, it is now a law. If you need an introduction to a broker who works with individuals (instead of companies), let us know!

Paying Per Something

“I have a dental practice and just got hit with a claim for not paying an employee correctly. However, she’s per diem and I pay her for each day worked. What did I do wrong?”

Your HR Survival Tip

There are several ways the “per” something payment methods can go wrong for you. While most of these work just fine in other states, never forget you are in California and nothing is the same here.

Below are some examples of what we see go wrong and why:

  • Per Diem — Per diem means a daily rate. This is quite common in the healthcare field. You might not be aware that many dental hygienists are paid per diem because they might only work 1-2 days a week at your dentist’s office and another 2-3 days at other offices. However, in California, you must remember we pay overtime for any time worked over 8 hours and that includes per diem workers. So if your per diem worker doesn’t stop work after 8 hours, you’ll owe the per diem rate plus overtime.
  • Per Week — This isn’t an official method of paying but you might be using it without knowing it’s wrong. Let’s say you have hourly employees who have agreed to work for a certain amount of money each week. You’ve agreed the workweek includes one day with a little overtime and a couple of shorter days. The amount of pay is intended to cover 40 hours of regular time and 2 hours of overtime, even though the employee may not actually work a full 40-hour week due to the short days. Sounds fair and keeps payroll easy, right? The problem is, again, California. You must pay overtime as a separate line item in payroll as proof of payment. The Labor Commissioner would say the weekly amount is only paying for regular time and can’t include overtime…and you still owe for that overtime.
  • Per Pay Period — This happens too often. You have an hourly employee who works no overtime so you both agree to just pay him the same amount each pay period. No fuss, no muss. There are two problems here. First, you must reconcile that pay with hours worked so you haven’t really eliminated any work from your side…and we can only hope you’re still making that employee clock in and out. The other problem is that you cannot legally use this method if you have a semi-monthly pay period (twice per month). Semi-monthly breaks down to 86.67 hours per pay period. An hourly employee will typically work either 10 or 11 days each pay period. Each time there were 11 days in the pay period you could be fined for not paying in full (88 hours). The 10-day pay period where you paid more than needed cannot count toward the 88 hours due the next pay period. Frankly, it’s just easier overall to stick with paying for time worked and submitted on a timecard.

Worse than the “sunshine tax” we all pay, are the employment laws that will make you pay even more if you choose to ignore them or aren’t even aware of them. California is quite fierce in its protection of employees who aren’t paid correctly or on time.

Bonus Considerations

“As we come to the end of the year, I’m considering bonuses for my employees. Has anything changed I need to know?”

Your HR Survival Tip

Employees typically love to receive cash bonuses at any time. However, as a business, you need to consider whether you are taking full advantage of this particular benefit so your business benefits, too.

The laws have become very picky about non-discretionary bonuses. A non-discretionary bonus is one that is expected and, often, the amount the employee might get is also known based on certain criteria. Many companies have had their bonus plan in place for so long it would likely be considered non-discretionary for legal purposes. Non-discretionary bonuses must now calculate an overtime amount based on any overtime worked by hourly employees over the bonus period. Yes, it’s another strange calculation California requires so let us know if you need help with it.

If you want a discretionary bonus plan, employees should haven’t any expectation of a bonus, should wonder if there will even be one, wonder when it might be, and have no clue about how much they might receive. Does your bonus plan fit this? If not, it could be considered non-discretionary. A true discretionary plan is basically a total surprise to the employee.

The biggest problem with a discretionary bonus is the inability to create a plan. Aside from the legal label of your bonus plan, have you given any thought as to why you’re providing a bonus? If you’re just trying to share the wealth and provide employees with a bonus when it’s been a good year, perhaps a profit-sharing plan would be better.

If you do want a more formal bonus plan (non-discretionary), make sure you’ve set it up so employees realize they actually have to earn it. Have quarterly goals set for the company, the department, and the employee. Consider the payout date if you’re doing an annual bonus and whether or not the employee must still be employed by you on the payout date. Also, what happens to those employees who haven’t worked the full year? Overall, you shouldn’t be providing a bonus if the company doesn’t meet certain revenue expectations or certain goals aren’t met. Bonuses are a reward for helping the company succeed. An employee shouldn’t be earning a bonus if they haven’t met their goals or aren’t doing a good job. Remember a bonus will appear as a big gold star on the employee’s file and will work against you if you want to terminate them for poor performance a month or two later.

Use bonuses to make sure your company is moving forward. Rather than throw money at employees, make them work for it. Both the company and the employees will come out ahead if you do.

Reclassify the Exempt Employee

“I have an exempt (salaried) employee I’d like to make hourly instead. How do I do that?”

Your HR Survival Tip

You may reclassify an exempt (salaried) employee to a non-exempt (hourly) employee but you want to think it through to avoid problems. The first thing is to confirm the legality of the employee’s current classification. In other words, was this person correctly classified as exempt?

A proper classification of exempt means the position meets all the requirements listed in one of the Federal exemptions, including both the salary and duties tests. The minimum salary requirement is easy because you are either paying sufficiently or not. The duties test is more challenging because there is some subjectivity involved so be conservative to be safe.

If the employee was not correctly classified as exempt, you have some issues and need to make this transition very carefully. The problem is that the employee could file a claim for the unpaid overtime, missed meal breaks, etc. they would have received as an hourly employee. If this is where you are, you will want to talk with us about your risks and options.

If the employee was correctly classified as exempt, the transition to non-exempt is fairly simple. Even then, you’ll want to have an explanation of why you are reclassifying their position because they will ask. An explanation might be that California’s annual increases are causing the minimum salary to go higher than you can pay for the position, or the amount of time off the employee has been taking will work better in an hourly role, or the position is actually changing and will no longer qualify as exempt.

The transition itself is very simple. Create a memo, letter, or form indicating the effective date and hourly rate of pay. If this transition changes any benefits or the title, include that. Make sure the employee knows the new rules regarding tracking time, meal and rest breaks, and other non-exempt details. Although the total pay may not change, it’s still a good idea to give the employee a week or two notice of the change.

Keep in mind that some employees feel the exempt classification is an acknowledgment of their value and level of position so they might feel they were demoted. That’s not the case so make sure they know you still value them.

New Somethings from Newsom

California’s Governor Newsom must have writer’s cramp from signing so many bills into law. All the laws below are scheduled to go into effect on January 1st, 2020, unless someone manages to stop or change them. We have:

  • AB51 Mandatory Arbitration Agreements — The agreements have been seeing some changes but now we won’t be able to require employees to sign one to keep their jobs. Without the ability to force arbitration agreements, companies may see more lawsuits.
  • AB707 Arbitration Fees — Steep ramifications may be seen if the party initiating an arbitration agreement fails to pay the appropriate fees within 30 days.
  • AB5 Independent Contractors — This bill has already been discussed in the last two articles so we won’t waste your time repeating the information.
  • AB749 No-Rehire Provisions — Often settlement agreements include a provision that the company will not rehire that employee. However, this bill prohibits that option so the ex-employee will no longer be automatically prevented from being rehired.
  • AB9 Claims Extended 2 Years — The deadline for filing a complaint with the DFEH (Department of Fair Employment and Housing) has been extended to 3 years from the previous 1-year deadline. The DFEH handles all types of California’s harassment claims.
  • SB142 Lactation Accommodation — We have had a lactation location law on the books for a while but this law now provides more specifics. The location cannot be a bathroom, must be in close proximity to the employee’s work area, and be shielded from view and free from intrusions while the employee is there. The room itself must be safe, clean, and free of hazardous materials; have a surface for the employee’s breast pump and personal items; have a place to sit; and, have access to electricity or extension cords so a breast pump can operate. Finally, there must be access to a sink with running water and, close to the employee’s workplace, a cooling device (like a refrigerator) for storing the milk. There are exceptions in the law for multi-employer worksites where a shared location is used and when the location is temporary or not possible due to financial resources, size or structure of the employer’s business. However, be prepared to prove you need the exception because it will be assumed you are able to provide a lactation location in accordance with the law. In addition to all this, you must create a policy that includes your process for requesting a lactation accommodation, the employer’s obligation, and information about filing a claim for violations with the Labor Commissioner. Whew!
  • SB188 Protects Hairstyles — Discrimination against individuals based on hairstyles that are historically associated with specific races is now prohibited. In general, this includes braids, locks, and twists.

California employment law continues to make it challenging to run a business. All we can do is take it one step at a time and work harder to be compliant. Please let us know if we can be of help!

New Rules for Contractors, Part 2

Our previous article reviewed the testing options that will be used for independent contractors going forward. The default will be the ABC test but AB5 provided the following exemptions. These exemptions will be tested by the more flexible Borello test.

Occupations

When a profession must be licensed to be exempt from the ABC test, you want to be very careful that you are not including people who are practicing but do not yet have a license. That group must be employees until they are licensed and have a business of their own.

  • Contractors who are a licensed insurance agent or broker
  • Contractors who have a current CA license as a physician, surgeon, podiatrist, psychologist, dentist, or veterinarian
  • Contractors who have a current CA license and are practicing their profession as a lawyer, architect, engineer, private investigator, or accountant
  • Contractors who are licensed by CA or registered with the SEC or FINRA as a securities broker-dealer, investment adviser, or their agents and representatives
  • Commercial fishermen
  • Direct sales salespeople who meet the exclusions under Unemployment Code §650. (These are the multi-level marketing people, like SendOut Cards, Arbonne, Mary Kay, Tupperware, etc.)

Professional Services Contracts

Examples of service providers include marketing professionals, HR administrators, travel agents, graphic designers, still photographers, freelance writers, estheticians, electrologists, manicurists, barbers, and cosmetologists. Criteria include:

  • Business location (separate from the hiring entity)
  • Business license, in addition to any required professional licenses or permits
  • Negotiates rates for the services performed
  • Sets own hours, within the scope of work and due dates
  • Provides same services to other clients or makes themselves available to potential clients
  • Customarily and regularly exercises discretion and independent judgment in the performance of the services

Business to Business Contracts

Contracts must be in writing. Other requirements include:

  • Have a business location;
  • Advertise their services;
  • Have any equipment needed to perform the work;
  • Negotiate their own rates;
  • Set their own hours; and,
  • Maintain control over the performance of their work.

Construction Contracts

The status is determined using the Borello test AND Labor Code §2750.5. The subcontractor:

  • Must be licensed;
  • Must have the authority to hire and fire;
  • Maintains a business location; and,
  • Assumes financial responsibility for the services provided.

While AB5 makes the business a bit easier, always default to employee status if you are not absolutely certain the appropriate test can be passed. Take note that gig workers are not listed so they will likely end up as employees.

New Rules for Contractors, Part 1

We’ve been waiting for more than a year to hear more information about independent contractors. Last year the California Supreme Court created the ABC test, which made it difficult to justify using independent contractors.

The decision to hire someone as an independent contractor lies with the hiring company. If your company misclassifies that worker, your company will be the only one held legally responsible. The contractor holds no liability so it’s important you do your due diligence. The default is they are an employee and they are subject to the ABC test.

The passing of AB5 clarifies who will be exempt from the ABC test. If they are exempt from ABC, they must instead pass the Borello test. Let’s first look at the parts of each test.

ABC Test

The workers must pass all 3 points. If they fail any of these, they must be an employee.

  • A — You can’t control the services or how the worker performs the work (this means you can only tell them the outcome you want, not how they get there).
  • B — The work performed must be outside the usual course of your business (this means the work they do doesn’t touch your clients, it’s just for the business itself).
  • C — The worker must have a real business (this means they have liability insurance, marketing collateral, other clients, etc.).

Borello Test

The Borello test is more flexible because it looks at all 11 points so the worker doesn’t necessarily need to pass each one. However, some points carry more weight than others.

  1. The person performing services is engaged in an occupation or business distinct from yours;
  2. The work cannot be part of the regular business of the hiring company;
  3. The worker supplies the equipment, tools, and location for doing the work;
  4. The hiring company cannot provide the equipment, materials, or helpers required to complete the project;
  5. The worker provides the hiring company with a special skill;
  6. The work is typically completed without supervision;
  7. The worker’s opportunity for profit or loss depends on their skills;
  8. There is a limit to how much time is spent on services to be performed;
  9. There is an end date for the work to avoid a degree of permanence of the working relationship;
  10. The method of payment is related more directly to the work than the clock; and,
  11. There is an agreement specifying the relationship and scope of work to show this is not an employer-employee relationship. However, this is only one point so it’s very risky to assume a contract will protect your company.

Anyone working as an independent contractor must be tested by either the ABC or Borello test. As mentioned, AB5 makes it clearer regarding who will be tested by the more flexible Borello test. We’ll go into more detail about the ABC test exemptions in the next article.