Avoid Hefty Fines and Lawsuits

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Multiple Rates

“My skilled employees are paid a high rate because they work with clients and I can bill my clients for their time. However, now I’m starting company meetings and I really don’t want to pay that high rate for them to attend my meetings since I can’t bill for that time. What are my options?”

Your HR Survival Tip

While California can be very picky about wages, we do have some options regarding pay. California has recognized the different values of different types of work for years. The state already allows us to pay employees minimum wage for time spent driving when that isn’t their normal job. This is because you didn’t hire that person to be a driver. You hired them to be a therapist, electrician, plumber, etc…a job that typically earns a higher wage. It makes sense to pay a skilled employee more but you aren’t going to be excited to pay them that amount if they aren’t doing that level of work.

Just a few examples of employees who might earn two different rates include:

  • Your employee is a licensed therapist. They could earn a higher wage when working with clients versus time spent at your company meetings.

  • Your employee is a certified consultant. When working with clients they could earn a higher wage versus time spent in your weekly online meetings.

  • Your employee is a trainer. They could earn a higher wage performing their primary training duties versus doing the cleaning for your company.

As you might have noticed in the above examples, there is a big difference in the type of work between one role versus the other. You want to be able to fully justify each rate. You already have a justification for their normal, higher rate. You just need an equally reasonable justification for paying them the lower rate. Just be sure the lower rate doesn’t include any of their skills paid at the higher rate. You want a clean division of skills or talents needed for each type of paid time.

Once you have a solid justification, you need to implement the rates properly. You want a printed document that includes details about both rates and the employee’s signature on the document. The document must name each rate (such as skilled and base rates), the amount paid for each (plus the overtime and double-time rates), and the effective date. Provide the affected employees at least a couple of weeks’ notice before you implement these rates.

Be aware not everyone will be thrilled with a lower rate for any reason because this really only benefits you. You could choose a lower rate that saves you money but doesn’t appear too low to them or you could implement the lower rate by reducing it a bit periodically over time. The messaging you use to explain this policy will make a big difference in how well it’s received.

Offer Letter Do’s and Don’ts

“I am creating an offer letter only because the candidate asked for one but I don’t know what I should put in it.”

Your HR Survival Tip

While an offer letter has not always been legally required, it has always been a good idea. Newer laws require a written offer to candidates, depending upon your hiring process. The biggest problem we see is companies trying to put too much into that letter or not using the correct language…both of which can be problematic. We prefer to keep the actual offer letter quite simple because it can be considered a legal document.

  • DO include the full details of the proposed position, such as “We are pleased to offer you the non-exempt, full-time position of Program Coordinator, reporting to __.”

  • DO include the date you want the person to start in this position. Hopefully, you already discussed the date they will be available but, if not, use something like “on or before December 1st, 2020.” While you may be anxious for them to begin, you also want to appreciate the fact that they want to give their current employer notice rather than leaving abruptly. How they leave that employer is a clue to how they would leave you.

  • DO include the rate of pay and frequency but it should be listed as either the hourly rate or salary paid each pay period, such as “You will be paid $2,500.00 per semi-monthly pay period (annualized at $60,000).” Many companies just say the pay is $60,000 without realizing an enterprising attorney could try to hold you to paying that full amount even if the employee didn’t stay a full year.

  • DO include a contingency statement if you are going to have that candidate do a drug screening or background check, such as “This offer is contingent upon the company receiving an acceptable background report and drug test.” In fact, if you are doing background checks, a written offer must be provided before requesting the report.

  • DO mention your benefits but only in a very generic way, such as “You will be eligible for any benefits normally offered to someone in your position.” If you are giving this position special perks, such as a car or gas card, do list those because they aren’t normally provided to every employee.

  • DO include your at-will statement.

  • DO include a deadline for the candidate to respond, such as 3 business days, so you aren’t left wondering whether you can move on because you haven’t heard anything.

  • DO include a place for the candidate to sign their acceptance of your offer.

  • DO NOT mention the details of your normal benefit plans because they may change and you don’t want to be stuck with extra benefits you might have mentioned in the letter.

  • DO NOT list the details of the job duties. Instead, you could mention a job description is attached. Again, if you want to change or add duties down the road, you don’t want this offer letter limiting that ability.

The offer letter should be simple but include the relevant facts of what you are offering. You can make the verbal offer first to make sure the candidate doesn’t want to negotiate but then you immediately follow up that conversation with the letter. When you only do a verbal offer, there may be misunderstandings but a written offer is harder to dispute…from either side.

Parting Ways

“My business is slower to return than expected and I have too many employees. How do I reduce my headcount?”

Your HR Survival Tip

Your employee costs are often one of your highest line items, depending on the type of business you have. It’s important to know exactly how much you spend per employee overall so you can make good decisions about when you should increase or reduce the number of employees.

There are several types of terminations but they each have a specific use. Many companies like to use “layoff” because it feels softer to them. However, your choice could potentially result in legal obligations for you so you really do want to choose the type of termination that fits your scenario.

  • Layoff – When you use layoff as your reason, the expectation is you will rehire the employee once business picks back up or you again have need of the position. You provide a final paycheck that includes any earned, unused vacation or PTO time. The employee is eligible for unemployment.

  • Furlough – We rarely saw this used prior to the pandemic. It is almost exactly the same as a layoff except they remain an employee on your records. You still provide a final paycheck that includes any earned, unused vacation or PTO time, and the employee is eligible for unemployment. However, they are still technically an employee. There have been local laws in parts of California requiring companies to hire back furloughed employees before hiring others. In addition, the Families First Coronavirus Response Act (FFCRA) payment to employees with COVID issues is available to furloughed employees even if they aren’t actively working for you. If you truly can’t bring back a furloughed employee, you’ll still need to actually terminate them at some point.

  • Resignation – When the separation with the company is initiated by the employee, it is a resignation. It doesn’t matter whether the employee provided notice or just walked off the job. You provide a final paycheck that includes any earned, unused vacation or PTO time. The employee will not be eligible for unemployment unless there were extenuating circumstances.

  • Job Abandonment – When an employee is a no call, no show for a certain period of time, their termination is processed as a resignation. The length of time will vary from company to company based on the type of industry but the standard is 3 days. You provide a final paycheck that includes any earned, unused vacation or PTO time. The employee will not be eligible for unemployment unless there were extenuating circumstances.

  • Position Elimination – This type is something we find companies wanting to use when they shouldn’t. If you are truly eliminating that person’s role, you need to have a strong justification…particularly if you have more than one employee in that role. If you have 5 technicians but only need 4, you are eliminating one position but then you need to justify why that person is the one losing their job. Beware of the appearance of discrimination when choosing. When you use position elimination as a reason, you want to be sure you won’t need that role again for at least 6 months. That’s not a legal timeline but it’s a safe one. You provide a final paycheck that includes any earned, unused vacation or PTO time. The employee is eligible for unemployment.

  • Discharge – When the company initiates the separation, it’s a discharge (aka firing). This is usually due to poor performance, a bad hire for the job, or other reasons. But you do have a reason you can articulate for choosing to separate. You provide a final paycheck that includes any earned, unused vacation or PTO time. The employee is eligible for unemployment.

We occasionally hear about employees disliking the termination choice and want to use another one. For example, instead of discharge, they want to be laid off, etc. The easiest justification for keeping your choice is that no one except the unemployment department (EDD) will know what the reason was unless the employee tells someone. Companies no longer share reasons with other companies or even within their own company. When you have to share that an employee is gone, it’s best to just say “Sam is no longer working with us and we will be moving his duties/clients to George.” If an outside company contacts you to ask about the employee, the only safe response is to provide their title and dates of employment. Nothing more. At all.

Employee Referrals

“I’d like to implement a plan that rewards employees for recommending people they know to our company. What do I need to consider?”

Your HR Survival Tip

Employee referral plans can be a huge benefit to your company and for your employees. When a current employee recommends someone to apply, they want the reward. As a side benefit to you, they often feel responsible for the success of that person and won’t recommend people they think might make them look bad.

When planning to offer a referral bonus, there are more things to consider than you might think:

  • What is the value of receiving a recommendation from an employee? Recruiting time and money can often cost you far more than paying a referral bonus. We see plans paying $300-$1000, depending upon the position.

  • When does the current employee receive the bonus? Consider how long it takes a new hire to start doing well in the job. Or look at your turnover and determine when most of it happens. If you have a lot of turnover in the first three months, then you want to wait until after that to pay out any bonus.

  • What process needs to be in place? Make sure you have a system that captures who referred each applicant and reminds you when to pay out the bonus. Also, what happens to the bonus if the current employee is no longer working for you when the payout date arrives?

  • What will you do if the new employee isn’t really that great but is still around long enough to force you to pay the referring employee? New hires don’t learn new jobs at the same pace and you have to accept that. Either make sure your payout date allows for this or just remember you’re paying for the recommendation, not for a guarantee this will be the best employee you’ve ever had.

If you decide to implement this type of plan, make sure the details are in writing and/or added to your Employee Handbook. When money is involved, employees tend to have a very good memory of what was promised. You don’t want to undermine the benefit of offering this plan by not paying as promised.

Extra Cost of Employees

“I pay my employees well but a few are mentioning I should be reimbursing them for different things. Besides wages, am I supposed to pay them for anything else?”

Your HR Survival Tip

If you ask the Internal Revenue Service (IRS), California’s Department of Industrial Relations (DIR), the federal Department of Labor (DOL), or the Courts, you will find they all agree you may owe your employee for more than just time worked. The answer comes down to the fact that it should not cost your employee a penny to work for you or to do their job.

Where those pennies are being spent by employees depends on the job they have, equipment/tools needed to do the job, and their workspace. When using an employee’s personal property, you will be legally expected to pay for that convenience…even if it doesn’t actually cost the employee more. Examples include:

  • Personal cell phone — If you haven’t provided the employee with a desk or cell phone, you must reimburse for a percentage of their monthly plan based on company use. Even if they have an unlimited plan, your company benefits so you need to calculate a fair reimbursement. However, you won’t owe anything if they choose to use their personal cell phone over a company-provided cell phone or access to a phone at their desk.
  • Mileage — If an employee is using their personal vehicle to run errands or go to different job sites within the day, you should pay them for mileage. The simplest method is to use the IRS mileage rate because it covers everything. Mileage does not include their commute between their home and the first/last job site of the day. Also, you probably owe for their time whenever you owe them for mileage.
  • Expenses — If employees must buy supplies or equipment to do their job, you need to reimburse them. This includes things your remote employees need, such as internet service, cell phones, laptops, monitors, and office supplies. However, you aren’t obligated to buy office furniture since they should already have an office setup for remote work. You also are not required to reimburse for equipment that isn’t necessary to do the job, such as a printer.
  • Logo wear — If you require employees to wear shirts, hats, or other items of clothing with your logo, you must provide sufficient quantities to last a workweek…and reimbursement for the cleaning of those items. Yes, that’s a little-known requirement. You cannot require the employee to pay for the logo wear but may request a deposit that must be returned when the employee returns the items.

Look carefully at each position in your company to determine whether you owe reimbursements to employees in those positions. The change of the tax laws has made it more difficult for employees to claim those expenses on their income tax forms, which means they will be looking to you to make them whole. Reimbursing employees becomes critical if those expenses result in an employee making less than minimum wage in any pay period.

Upcoming Deadlines

We have a few hard deadlines ahead of us that require action. Start scheduling now to ensure everything is ready and/or done by the deadline.

By 12/31/2020 — Sexual Harassment Prevention Training

If your company has 5+ employees anywhere, including owners, all your California employees must complete their sexual harassment prevention training by 12/31 of this year. This is paid time for the employees so schedule it accordingly. We have had two years to get this training completed so it’s highly unlikely the state will accept any excuses for not meeting the deadline. There are several resources for this training available online, including our training.

On 1/1/2021 — New Minimum Wage

On January 1st, the CA minimum wage increases again for non-exempt (hourly) employees. Companies with 25 or fewer employees must pay $13/hour, while companies with 26 or more employees must pay $14/hour. These numbers will continue to increase by $1 for the next two years. Please check the law in your area because most have a higher minimum wage. For example, the city of San Diego’s minimum wage will be $14/hour on 1/1 for companies of any size.

On 1/1/2021 — New Minimum Salary

Whenever the state’s minimum wage increases, it affects the salary for exempt employees. The calculation is always the same: 2 x state minimum wage x 2080. The new absolute minimum an exempt employee can earn in 2021 is $54,080 (in companies of 25 or fewer employees) or $58,240 (in companies of 26 or more employees). This number does not allow any unpaid days off (because it’s the minimum) and cannot be reduced due to part-time hours. If the position is becoming overpriced for you, let’s talk about changing it to hourly non-exempt.

On 1/1/2021 — California Family Rights Act (CFRA)

Effective 1/1, companies with 5+ employees anywhere, including owners, will now be subject to CFRA…this has been reduced from 50+ employees. Eligible employees will be able to take up to 12 weeks of unpaid, protected time off every 12 months if they have a qualifying event. The most common qualified reasons include their own or a family member’s serious health condition or for baby bonding time. In addition to keeping the job protected, there is paperwork involved that must be provided in a timely manner. Please let us know if you’re interested in our services for this.

These are not flexible deadlines so don’t wait until the last minute to prepare. We have resources available so please inquire if you need help or have questions.

New COVID Rules

“I’ve heard my workers’ compensation insurance is now going to be hit when employees get COVID. Will this make my rates go up?”

Your HR Survival Tip

We aren’t yet sure just how SB1159 will affect workers’ compensation insurance rates, if at all. Regardless, we have no choice but to implement the changes required by this new law. Originally, there was a short-term law in place from 7/6-9/17/2020, that presumed anyone working for you might have caught COVID while working and was eligible under your workers’ comp. The new law made this presumption official and extends the time period for more than 2 years…to January 1st, 2023.

If at any time between 9/18/2020 and 1/1/2023 you can answer yes to all the below questions, you must file certain paperwork:

  • Your company has 5 or more employees (including owners, etc.).
  • An employee tested positive for COVID within 14 days of working at your facility or job site.
  • The employee provided you a positive test result.

If you did (or do in the future) answer yes to the above, provide your employee with a DWC1 workers’ comp claim form. Then ask your employee for more details so you can complete Form 5020. Now you have 3 business days to submit Form 5020 and a written report to your workers’ comp claims administrator that includes the following:

  • Employee number (do not use the employee’s name but, instead, use the last 4 of their social security number or their employee number in payroll).
  • The date the employee submitted a specimen for COVID testing.
  • Address of the location(s) the employee worked during the 14-day period prior to a positive test result.
  • The highest number of employees who also worked at each of those locations during the 45-day period before the employee stopped working at each location.

The presumption that your company might be considered responsible for an “outbreak” only occurs when, within 14 days of a positive test, (1) 4 or more employees test positive at a specific location in companies with fewer than 100 employees; -OR- (2) 4% of the highest number of employees who reported to the same specific location test position in companies with 100 or more employees; -OR- (3) your company is ordered to close by the local or state health department due to a risk of infection from COVID.

If you are committed to your safety protocols and keeping your employees safe, you may not be affected by this law. However, remind employees that their behavior outside of work can affect their safety and they should be practicing social distancing and wearing a mask even when around friends and family who don’t live with them.

Driven

“Our admin will run errands for us on occasion. I just heard she received a DUI last month. Should I have any concerns?”

Your HR Survival Tip

Yes, you should definitely be concerned. Whenever you allow an employee to drive for any reason related to their work or your company, you are taking a risk. If anything happens while an employee is driving, it’s your company that will be sued.

Companies don’t always consider someone running errands as an actual driver for the company, but you should. Even a quick, one-time run for sandwiches for the boss’ lunch is considered work time and puts the company at risk. It doesn’t matter if they are using their own vehicle or yours, it’s the activity that will count against you.

Before allowing any employee to drive on company time for any reason, you really need to do your due diligence:

  • Do you get a copy of their personal auto insurance for your files?
  • Do you get a copy of their driving record from DMV on a regular basis?
  • Do you do post-offer drug/alcohol testing?
  • Do you have a policy about driving for the company that mentions safe driving, the need to report any tickets or accidents, and other important considerations?
  • Does your company’s liability insurance policy provide you coverage for employees who are driving?
  • Do you know who is legally responsible for paying parking or traffic tickets?
  • Do you understand when a commute might be considered work time?
  • Does the employee know they could be fired if driving is a major part of their work and they are no longer considered a safe driver?

Doing your due diligence to ensure you have safe drivers is not a violation of the employee’s personal privacy. If they don’t want to provide the information you need, you don’t allow them to drive or don’t hire them into a position that will require driving. The company will always be viewed as having “deep pockets” in comparison to the employee driving so both are sued when something happens. While you can’t guarantee every employee is driving safely, you can at least show you are taking your due diligence seriously.

Over the years, there have been some interesting lawsuits about employee accidents. One lawsuit was about an employee who was responsible for taking the company mail to the post office every day on her way home…and had an accident. Another lawsuit was about an employee who attended a company happy hour and caused a fatal car accident on his way home. What might be your lawsuit story?

Employees 1, Employers 0

Governor Newsom signed SB1383 and dramatically changed protected time off as we know it. On January 1, 2021, companies of 5 or more employees will be subject to the California Family Rights Act (CFRA). The CA Chamber of Commerce had declared this a job killer bill and it definitely proves politicians don’t understand the challenges smaller employers face.

CFRA is very similar to FMLA (Federal Medical Leave Act) but includes a few more benefits for the employee than the Federal law. Starting 1/1/2021, the following differences will be in effect:

  • Affected companies:
    FMLA = companies with 50+ employees;
    CFRA = CA companies with 5+ employees.
  • Employee’s employment:
    Both = employed at least 12 months and worked at least 1,250 hours during that period.
  • Location size:
    FMLA = 50+ employees within 75 miles;
    CFRA = 5+ total anywhere.
  • Amount of time off:
    Both = up to 12 weeks of unpaid, protected time off.
  • Reasons:
    Both = care for yourself or a family member with a serious health condition, pregnancy, new baby bonding (or foster or adoption), and various military reasons.
  • Family member:
    FMLA = child (minor or a dependent), spouse, and parent;
    CFRA = those listed under FMLA plus siblings, grandparents, grandchildren, domestic partners, adult children, and children of domestic partners.
  • Protection:
    Both = the employee must be guaranteed the same or similar job when the leave ends. No exceptions.

Small employers should remember that anyone actively working in the business, even if unpaid, is counted as an employee when calculating the 5+ number. Independent contractors and non-profit volunteers are not counted.

This will be a big learning curve for those of you with less than 50 employees. There is paperwork involved with each leave and timing is critical. Even for companies of 50+, this will bring changes due to the layering of CA and Federal leaves. We will be discussing this more but please reach out to us if you want to start preparing in advance of this law going into effect.