“You mentioned that employees’ pay stubs needed to include specific information. What information?”
Your HR Survival Tip
California is very specific about what an employee’s wage statement (aka pay stub) must include. First and foremost, they want it complete and easy to read. Even if you include all the information and it’s hard to understand, you could still be in trouble.
A complete wage statement must be available for every paycheck (and final check) you provide and at the same time you provide the check. If you find an error or omission, new rules state you have 33 days to replace EVERY wrong wage statement. Yes, even if you had 100 employees paid weekly and found an error that’s been on those wage statements for the whole past year, that’s 100 employees x 52 weeks = 5200 wage statements you’d need to replace.
If you want to see a larger image of the sample on the right, click here. Below is the list of what must be on the wage statement:
- The full legal name of the company (ABC Cosmetic Company, Inc.).
- The complete address of the company (123 Main Street, Suite 5, San Diego, CA 92101).
- The full legal name of the employee, but it’s okay to leave off middle initials.
- The last 4 digits of the employee’s social security number (XXX-XX-1234) or an ID number.
- The dates of the pay period this check covers (1/16/2017 to 1/31/2017).
- Each of the employee’s pay rates, such as $12.00 regular and (if OT is paid) $18.00 overtime.
- Total hours worked at each pay rate, including the gross amount earned at each pay rate.
- Every deduction pulled from the gross earnings; both the name of the deduction and amount.
- Totals of (1) gross earnings, (2) total deductions, and (3) net earnings that match the check amount.
Your company is responsible for ensuring the employee receives the wage statement. You can’t just process a direct deposit, then wait for that remote employee to finally show up to pick up their pay stub. If the employee doesn’t work onsite, you either need to mail their pay stub to them or make sure they have online access to it (plus computer access).
Once you know your wage statements are compliant, audit them at least twice per year. We all know computer glitches happen and you don’t want to find out 3 years later that your company name is now missing a word or space… that’s the stuff of lawsuits these days.
“How can I know I’m legally compliant when they keep changing things?”
Your HR Survival Tip
It’s not easy but, of course, reading this newsletter each week will help you be aware of most changes. Every year, and throughout the year, both the Federal government and CA either enact a new law or change one of the required forms or brochures. They don’t send out emails or post big notices letting you know so it can be frustrating trying to stay on top of it.
There are some basic things you want in place to show that you are at least trying to be compliant. Audit yourself and see how well you’re doing:
- CA Non-Exempt Wage Theft Prevention Notice — This form has been around for several years but was revised in 2015 and, again, in 2016. The revisions are based on the paid sick leave laws. This form is provided to non-exempt (hourly) employees when they are hired AND each time their wage changes. By now, you should have at least 2-3 of these in each non-exempt employee’s personnel file if they’ve worked for you more than 2 years.
- Form I-9 — This form just changed last month and you can get more information from my 1/25/2017 newsletter and the new I-9 Form is available here.
- Wage Statements — CA has become very specific with exactly what should be on your wage statements (pay stubs). Lawsuits are being filed due to simple things like missing spaces and incomplete information. The next article will address this in more detail.
- Employment Law Poster — It’s a new year and you better have a 2017 version of the employment federal AND state law wall poster(s). There were several changes the new poster now includes. This means you can take down the miscellaneous notices you put up last year… just make sure your new poster includes that information first. Also, don’t forget that your field employees need access to this information.
- IWC Posting — When you started the company, you were given the appropriate Industrial Welfare Commission (IWC) Order for your industry. This must be printed out and stuck on the wall next to your current employment law poster. There are 17 different versions, based on industry, so make sure you are posting the correct one.
- Harassment Prevention Policy — Last year, CA enacted a new law stating you must distribute a harassment prevention policy that was separate from anything in your Employee Handbook. This policy is required to included additional information specific to this law and was required to be translated.
- Paid Sick Leave Policy — If you don’t have a written sick leave policy, you are not legally able to stop employees from using all the sick leave they accrue. This means if they accrue 48 hours over the year, they could use it all. You can only limit their use to CA’s 24 hours if it’s in writing. In addition, if you don’t track usage, you can’t limit the use based on your memory. Track it in your payroll system!
- San Diego’s Paid Sick Leave — If you are located in the city of San Diego or have employees working within the city limits, you must follow San Diego’s paid sick leave law. This accrues at the same rate as CA (1 hour of paid sick leave for every 30 hours worked) but has a higher accrual and use. Employees can accrue up to 80 hours but you can limit use to 40 hours per plan year. Again, put it in writing!
- Final Paychecks — All final paychecks must include any unused vacation or PTO as of that date; unused sick leave is not paid out. You must also provide the equivalent of a pay stub with all the details. If you are late delivering that check, CA could make you pay the employee for more days until they have the money in hand. There are three timelines here and none of them include direct deposit because that guarantees you’ll be late with the money. (1) If you are terminating (firing) the employee, you need the final check and pay stub in your hand at that meeting. (2) If the employee resigned with notice, you need to provide the final check and pay stub on their last day of work. (3) If the employee walked out without notice, you have 72 hours to get that final check and pay stub to them. That’s not business hours, that’s literally 72 hours from the time they walked out.
My audit checklist is really much longer but we’ll save some for another newsletter! If your audit shows you need to make some changes, do it immediately. It’s not that hard and it will take some worry off your shoulders. Let us know if you’d like help!
“I’ve heard I can use the approximate time an employee clocks in or out. How does that work?”
Your HR Survival Tip
What you’re talking about is called rounding. In fact, there was a court decision in December that clarified what is legally allowed.
The way rounding works is that when the employee clocks in, the actual time is rounded up or down to the nearest tenth of an hour. This court case determined rounding to the nearest tenth of an hour (6 minutes) is the legal standard. For example:
- Clock in at 7:57 and your time is rounded down to 7:54.
- Clock in at 7:58 and your time is rounded up to 8:00.
- Clock out at 5:15 and your time is rounded down to 5:12.
- Clock out at 5:04 and your time is rounded up to 5:06.
Rounding works if both your policy and the application of your policy is “neutral.” This means it must be fair to the employee. The assumption is that, over time, the employee does not lose any money when compared to not rounding their time.
This recent court decision specifies that rounding should be to the closest 6 minute mark (one-tenth of an hour) … not 10 minutes, not 15 minutes. If you’ve been rounding to anything but one-tenth of an hour, change your policy and payroll system now.
“I’ve heard a new I-9 form is available. Do I need everyone to complete it?”
Your HR Survival Tip
This is the government form that seems to be most publicized (at least in the HR world) when a new version comes out. The USCIS Form I-9 is from the Federal Department of Homeland Security and is used to confirm each worker is able to legally work in the U.S. You must be using the new version NOW. The expiration date of 8/31/2019 in the top right corner will tell you if you have the newest version.
This is the longest version they’ve come up with yet and is available digitally in two files: one file contains the form and list of identification that can be used; the other file contains 15 pages of instructions. Here are a few tips to help you:
- When a new version is issued, you immediately start using it only for employees hired from that date forward. Do NOT have current employees complete the new form. Whenever an employee is hired, the I-9 form that is current at that time is the one that should be completed and in your files.
- You must provide both the form and instructions (18 pages total) to the new employee. I know that’s a lot of paper but it’s their rule; however, you can provide these to the employee electronically.
- You cannot suggest or recommend which forms of identification the employee presents as proof. You can only show them the page that lists the acceptable documents and remind them they either need one form from List A -or- one from both Lists B and C.
- A new employee must complete Section A of the form and sign it right after after accepting the job offer but it must be completed before the end of their FIRST day of employment. They must also check the shaded area stating whether or not a translator was used. Only employees of Puerto Rican companies can submit the Spanish version of the form. However, your employees can use that version to help them translate and complete the English version. They may also use a translator but the translator must provide their information at the bottom of page 1.
- The employee must present to you their unexpired documentation within 3 business days of starting work for pay. For example, if the employee started work on Monday, you must see their documentation on or before Thursday that week. If they don’t or can’t present you ALL the documents needed to complete the form by that time, the employee must stop working until they can provide you the correct documentation.
- A replacement receipt for a identification document that was lost, stolen, or damaged may be used initially and you would use “Receipt” and the title of the receipt in lieu of the document’s name. The replaced document must then be presented to you by the employee within 90 days of employment. Reverification is needed within 90 days of a work authorization document expiring. Section 3 is completed when the new document is presented.
- If the employee doesn’t remain employed for more than a day or two, you must have the form completed by the time their employment ends.
- You must review the employee’s documentation in their presence. You may keep copies of the documentation but it’s not necessary or required unless you participate in E-Verify.
- You, not the employee, are responsible for ensuring the form is complete and timely. Only you will be subject to fines and penalties for dates that are late, blank spaces, or other errors on the form.
- Regardless of how the form is filled out (handwritten or on a computer), you must print a hard copy to sign and date.
- Keep all I-9 forms together, not in the personnel files. If you’re ever audited, you can pull just this one file instead of all their personnel files. The forms are never sent to the government.
- You must keep the I-9 form, and any copies of their identification you might have made, for at least the length of their employment plus 1 year or 3 years from date of hire, whichever is later.
This is a form that’s been required for many years and continues to be updated periodically. If you’ve never read the instructions, I recommend you do so. It’s easy to get lax but the penalties for dates that are later than they should be, skipping a space that should have an entry, or just bad information can be severe. This is just one more reason it’s important to have your hiring process and timing in place to avoid issues.
In a ruling last month, the owner of San Diego’s Antique Thai Cuisine was ordered to repay $20,000 in “stolen wages and tips” to 6 workers, plus was sentenced to 2 years in jail for grand theft and labor violations. This criminal conviction in a jury trial for felony grand wage theft by false pretenses is a first in California:
How did this happen? The owner hired mostly immigrants and promised hourly wages but usually only paid them tips instead of their wages plus tips. Even then, some of those tips were kept by the owner because she charged the workers $5 each shift for “glass breakage” to offset her operating costs. Kitchen staff often had to work through their rest and meal periods and received as low as $4 per hour. The result:
- 2 Felony counts of grand theft of labor for failing to pay workers as promised;
- 1 Felony count of grand theft of tips;
- 2 Misdemeanor charges for refusing to pay wages when she had the ability to do so;
- 4 Misdemeanor charges for failing to provide itemized wage statements;
- 2 Years in jail; and
- $73,234 in Labor Commissioner citations and other assessments and civil penalties.
How can you avoid this? Make sure all employees receive at least minimum wage. Understand tips are additional income to employees and it belongs solely to the employee. Remember employees have a legal right to rest and meal breaks that are completely free of any work-related duties and, if your employees don’t get those work-free breaks, they should receive penalty pay. Recognize that California throws a lot of things into “the cost of doing business,” including breakage and loss of Company property. Ensure your wage statements (pay stubs) meet the exacting specifications of the law.
Having a business means you’ll have expenses. “Theft” of money due your employees isn’t the path toward a successful business. Let us know if you need help ensuring you are compliant.
It’s a new year and, as always, there are certain things that must be done immediately to be legally compliant:
- New I-9 form — If you haven’t already switched to it, start using the new I-9 Form for new hires. The deadline is 1/22/2017 and, if you’re using the old form at that time, you would be subject to penalties. Current employees do not complete the new form. Each time a new I-9 form is issued, you begin using the new form for new employees hired after the effective date. Exceptions might be if a current employee needs to have their ID re-certified. Read the instructions to determine how to handle that or other particular situations.
- New employment law poster — You definitely need the employment law poster. We saw a lot of updates last year that will now be incorporated into the new poster. Review the other items you have posted and take down any that are duplicates of laws on the 2017 poster.
- Higher minimum wages — Minimum wage increased to $10.50/hour in California and increased to $11.50/hour within the San Diego city limits. There are at least 22 localities within California with minimum wages higher than the state minimum so you need to see if you are within one of those areas and what the specific rules are for you. For example, the California law has an exception for companies with less than 25 employees but the San Diego law affects all employers, regardless of size.
- Higher minimum salary — The new California minimum salary for exempt employees is $43,680/year ($3,640/month or $840/week). This is a calculation of “2 X state minimum wage X 2080 hours (full-time).” This minimum does not change regardless of how few hours the employee might work. Higher local minimum wages do not affect the minimum salary. The higher Federal salary was indefinitely postponed so, for now, the California minimum is the number you must meet.
- Updated Wage Theft Prevention notice — If you increase or change any California hourly employee’s wages, you must provide them with an updated NonExempt Wage Theft Prevention notice.
- Coming in March — All gender bathrooms: If you have any single user restrooms, the signage must be changed to show both genders can now use it. Although this law doesn’t go into effect until March, now is the time to review the situation and order new signage so you’ll be ready.
Act now to take care of everything this week so you aren’t starting the new year with risks that are easy to eliminate. Also, completing your HR to-do’s now lets you focus on your business goals going forward. Let us know if you need help.
“I did well this year because my employees worked really hard. How do I provide bonuses?”
Your HR Survival Tip
Congrats on doing so well that you can afford to share with your employees! There are several things to remember to ensure the bonuses are viewed as a great benefit.
First, keep in mind that a bonus is a form of wages and, therefore, taxable income. Bonuses can also be subject to overtime. Yes! California seems to have a love affair with weird calculations and this is one of them. You look at any overtime worked by non-exempt employees over the period the bonus covers, then you do a calculation to determine how much overtime must be paid on the bonus. If you choose to ignore this, an employee could choose to collect that money through the Labor Commissioner if they know it should be paid.
Next, bonuses have a special earnings code in payroll. Most of the time it feels like half the bonus amount goes to taxes… which deflates the excitement of a bonus. You can avoid much of this by setting it up in payroll differently:
- Plan to pay the bonus with a separate check. I prefer a “live” (paper) check for the impact and excitement.
- Set the bonus checks on a different pay cycle. Your pay cycle is probably currently set to weekly, biweekly, or semi-monthly. Change it, for the bonus checks only, to the longest pay cycle available (monthly, 9 weeks, etc.). This tricks the system into thinking this employee makes only this amount [i.e., the bonus amount] each month, 9 weeks, etc. so it uses a lower tax bracket.
- Temporarily turn off the non-required deductions, if possible. You need to consider all the deductions active on regular checks… find out which you can or can’t stop for the bonus check.
- Once you’ve processed those checks, make sure the system reverts to your usual pay cycle and deductions for the next payroll check.
You must decide which of the two types of bonus you are giving, discretionary or non-discretionary. This isn’t typically a last minute decision but can be the first time. Going forward, now’s the time to set up your plans for next year’s bonus.
Discretionary bonuses should be considered a surprise bonus. Employees shouldn’t expect it, don’t know why they “earned” it, and isn’t provided regularly or at regular times. If you just like to toss money to employees for the holidays, this is typically the bonus for that. You don’t have revenues, goals, or anything else tied to this bonus or it can legally lose its discretionary status.
Non-discretionary bonuses are my preference because I don’t like providing employees money without their understanding of what they did to “earn” it. Yes, non-discretionary bonuses are legally payable every year (or whatever period you have set) if goals are met but you are the one who sets those goals. Obviously, the first goal is meeting or exceeding the necessary company revenues or growth needed to even have a bonus pool that period. Other goals can be broken down by departments, locations, and individuals. Even your lowest-level employee should have goals based on objective criteria, such as hours worked, productivity or efficiency.
- If you choose a non-discretionary bonus, you really need to create a written bonus plan that employees also sign. A few of the critical factors in the plan should be, for example:
- Employees must be actively employed at the time bonuses are paid out.
- Employees who have been actively working for only part of any plan year will receive a pro-rated (or no) bonus.
- New employees must be actively working at least X months to participate in the bonus plan that year/quarter/etc.
- Determination of whether a goal is met is at the owner/CEO’s sole discretion and their decision is final.
Employees talk and, legally, you can’t prevent them from discussing their bonuses. Make sure your bonus plan, discretionary or non-discretionary, is developed in a way you can explain why each person received the bonus they did. You don’t want this great benefit tarnished by concerns of discrimination in how the bonuses were given or the amounts received. Let us know if you need help with this!
“I know some things are changing soon but can’t remember what… help!”
Your HR Survival Tip
The first of January each year does seem to be the date many new laws or regulations go into effect. In the past couple of years we’ve seen paid sick leave laws with varying effective dates, depending on the city.
There were more laws passed than I’ve listed below but they either aren’t for everyone or they go into effect later in the year. Below are things to prepare for by January 1, 2017:
- California minimum wage increases to $10.50 per hour ONLY for those companies with 25+ employees. (If you are not yet at 25, you get a break but you will need to pay the $10.50 the moment you have 25 employees or by 1/1/2018.)
- California minimum salary for exempt employees increases to $43,680 per year ($3,640 per month or $840 per week). The minimum salary is based on state minimum wages, not city minimum wages. This minimum must be paid to exempt employees regardless of how few hours they may actually work.
- San Diego minimum wage increases to $11.50 per hour. This affects employees working within San Diego city limits, regardless of where your company may be located. While San Diego is the only city in San Diego county with a separate minimum wage, many other cities throughout the rest of California have minimum wage increases so please check your locality.
- Internal Revenue Service (IRS) mileage rates dropped slightly to 53.5 cents per mile for business, 17 cents per mile for medial or moving purposes, and 14 cents per mile in service of charitable organizations.
- AB1978 requires janitorial companies to register annually with the DLSE (Dept. of Labor Standards Enforcement) to protect janitorial employees from wage theft and sexual harassment.
Don’t forget to give hourly employees an updated CA Non-Exempt Wage Theft Prevention Notice reflecting any wage change you might make. This is also a great time to review your exempt employees to ensure you have them properly classified.
“I have 3 exempt managers who work a lot of hours. I’d like to give them time off to compensate for those extra hours. How do I do this?”
Your HR Survival Tip
You don’t… at least not in California. California does not allow “comp” time for non-exempt (hourly) or exempt (salaried) employees.
If an employee is non-exempt, you must absolutely pay that employee for all time worked. We have both daily and weekly overtime, rather than just the 40 hours per week most states follow. You can’t allow a non-exempt employee to swap an hour off today for working an hour longer tomorrow. You definitely must pay overtime for that extra hour the next day.
Exempt employees have different rules. They agreed to certain responsibilities and tasks in exchange for a specific amount of pay. In concept, you should not care whether that employee can complete all their work in 30 hours or 60 hours each week. You look only at the performance and decide whether or not they are performing as expected and handling all their responsibilities.
Generally, exempt employees do not track their time but it’s not illegal to require a timecard. Comp time, however, isn’t the purpose of exempts using timecards. Exempt time tracking is most often seen in companies that have their accounting set up for job costing… they want to know how much of their payroll (and other costs) went toward each project.
If you start tracking an exempt employee’s hours and providing comp time for the extra hours they work, you could easily be viewed as turning that employee into a non-exempt employee. You never want to compensate them with time off for each extra hour worked. It’s a legal disaster waiting to be discovered.
That’s not to say you can never provide an extra day off to an exempt employee; just be careful how and when you do it. You don’t want to be discriminatory nor do you want employees to expect it. Therefore, think of the time off as a special bonus for an effort “over and above” during a particularly busy time or for completing a special project that required unusually long hours. Make them wow you before considering it. Even then, you can’t reward them hour for hour.
Tell them you really appreciate their extra effort and to take Friday off. Don’t use this for someone who is consistently putting in a lot of hours even when there’s nothing special going on… this could just be a slow worker or a sign you need to adjust the amount of work they have if they can never keep up. This is not a replacement for a higher salary or a substitute for overworking your employees.
Rewarding someone who has put in a special effort is always appreciated by employees. However, think through your plan (or discuss it with us) to make sure it won’t come back to bite you.
“I heard a new I-9 form is available. Do I need everyone to complete the new form?”
Your HR Survival Tip
Over the years, we’ve seen several versions of the I-9 form. One of the constants has been the rule that you begin using a new I-9 form when it becomes available. However, you do not replace your employees’ older versions just because a new one has been issued.
The new I-9 Form can be used immediately, but you must be using it by 1/22/2017. I don’t know a good reason to wait so please begin using this new version.
- Which form to use — You must use the current form available at the time of hire. That form will usually remain valid for the length of that employee’s employment.
- When to use the form — You must receive the employee’s identification to be used on the form within the first 3 days of employment. If the employee delays in getting you the proper ID, have them stop working until they provide the ID.
- Employee’s requirements — The employee completes Section 1 and provides you with proper identification.
- What ID can be used — The page after the form itself has a chart showing what identification is allowed. The employee must either provide 1 item from List A… OR 1 item from List B plus 1 item from List C (yes, that’s 2 forms of ID when using Lists B and C). Please pay attention to List A because some items, if expired, are not valid.
- Your requirements — You have 3 days from date of hire to complete your Section 2 of the form, which includes the certification just below the area you enter the employee’s ID. Do NOT leave any blanks and add your full business address.
- Using e-Verify — Do not use the online e-Verify system unless you are a federal contractor and required to do so.
They have expanded this version so now the form itself is 3 pages, but page 3 is just the recertification section. You typically only have to use this section when idenfication from List A has been updated. The 4th page of the form is the list of acceptable ID. Instructions are now a separate document but you must still make sure the employee has access to these instructions.
In summary, stop using your old I-9 form and begin using the new one. You don’t have to replace the old ones. Complete all the questions/blanks… you can be fined for missing information even when it’s something as simple as your zip code. We’re available if you have questions!