Salaries Legally Too Low

“I’m always a bit confused about how much I must pay my salaried employees but my lowest paid is currently earning $56,000.”

Your HR Survival Tip

As an employer, we understand certain things are not completely at our discretion due to the employment laws. Laws dictate who is paid a salary and how much that salary must be before you have any choices.

Who is eligible to be paid a salary is never the employee’s choice. The company takes full responsibility for ensuring the position meets one of the legal exemptions that allow the position to be exempt. Exempt is the legal term for a position that is exempt from overtime and it is often called a salaried position. If the company misclassifies the position as exempt and the state disagrees, the company is the only one held responsible for paying the fines, penalties, and unpaid any premiums (missed meal and rest breaks, overtime).

The minimum amount of any salary paid is also determined by the state. It changes every time the state minimum wage changes. The calculation is 2 times the state minimum wage times 2080. The 2080 is considered full-time hours over a year. So it’s double the state minimum wage and multiplied by full-time hours. For example, if the state minimum wage was $18/hour, the calculation would be $18/hour x 2 = $36/hour x 2080 (full-time equivalent) = $74,880/year as the minimum salary allowed.

The salary paid cannot be less than the full-time equivalent, regardless of how few hours the salaried employee might work. If the calculation results in a $74,880 minimum salary, you must pay $74,880/year even if they only work 5 hours per week. If you pay less, the position automatically loses the exemption for a salary and becomes an hourly position.

What happens if you have been paying less than the minimum salary? That position must legally be reclassified as hourly from the day you neglected to pay the correct salary. You lost the exemption to qualify as salaried that day and it cannot be applied retroactively. Regardless of title, it has been an hourly position from that day.

You need to look back at the period of time worked and prepare a check to the employee. Since that whole period is now considered hourly, you have unpaid wages for all overtime worked, plus premiums due for missed meal and/or rest breaks (max of 2 hours per day). If you have no records, you must take the employee’s word for any overtime hours and missed or late meal breaks and pay them accordingly. Yes, you actually need to ask them to provide you with a list of the overtime hours and missed breaks for that period.

Once you have paid the employee and are now confident you are up-to-date, take a new look at the position to determine if this position is eligible to be exempt (salaried). Confirm the duties test is met for the exemption you have chosen for this position and you will pay more than the minimum salary required by that exemption. In that case, you can consider moving this position to a salary going forward… but you can’t back-date the effective date.

Ignore the Title

“I’m interviewing applicants for a position and one has told me they’d prefer to call the position something else. I’m not really comfortable with the new title suggested. What do I tell them?”

Your HR Survival Tip

When a company realizes they have a position available, it will typically (or should) write up a job description. The description outlines the most important aspects of the job duties and what skills and/or training are needed. The title for that position should reflect both the duties and the skill level.

The smaller the company, the more likely it seems they “over-title” positions. Often the higher level title is to help compensate for lower pay. However, over-titling a position doesn’t work out well for the company or employee. The company may grow and need someone above that employee… but the title is already being used so they have to create an even higher title. The employee isn’t really doing the work because they don’t have the skills. Then their resume looks bad because they can’t get another job at that title’s level.

One way to determine if a title fits the position is to look at job ads. When you look up the title you’ve chosen, is it represented in the ads as a similar position to yours? Smaller companies may not be able to pay quite as well as a large company but the duties and skills required should come close to matching.

The strange and unique titles that pop up may seem cute or fun at the time but they aren’t helpful. Can you run an ad for your “Happiness Manager” opening and receive any useful resumes? Can others in your company understand and explain that role?

The desire for better titles is why the secretary position has evolved over time. There was a time when a secretary, administrative assistant, and executive assistant were distinctly different roles but now those titles are mixed up and the roles are not as clearly defined.

While it may seem a bit boring, sticking to known titles that best fit the duties and skill level will be to your advantage over time as you grow and need more levels of titles. It also works out best for the employee because their resume will more easily reflect their growth in skills as the titles match that growth.

Labor Commissioner’s Office Stays Busy

California’s Labor Commissioner focuses on money due employees. It is considered wage theft when an employer doesn’t ensure employees receive every penny to which they are legally entitled. This often comes up when certain costs are deducted from wages and end up below the minimum wage, when a company doesn’t pay all the extra premiums or overtime due, etc. A few settlements this year include:

  • Saravanaa Bhavan franchise restaurants in the Bay Area will be paying a settlement of $2.2 million to 317 employees. The franchise wasn’t paying proper minimum wage, overtime, meal premiums, split shift premiums, and they provided inaccurate wage statements and kept tips belonging to employees. The employers are also required to make a personal apology to the employees… a new twist from California.

  • Angel Connection Nursing Care and Angel Connection Nursing Services will be paying more than $1.8 million for wage theft violations. Violations included misclassifying some workers as independent contractors instead of as employees, failure to pay overtime wages, paying some employees less than minimum wage, and failure to provide proper wage statements.

  • Classic Castle Car Wash in Long Beach had to pay $282,000 for not paying for the time employees were on the premises and not paying overtime or minimum wages. The Labor Commissioner’s Office has the ability to secure a lien on real property and used it to recover monies due.

  • Another car wash, Torrance Car Wash, was cited $800,000 for 35 workers who weren’t paid sufficient minimum wage, overtime wages, meal and rest period premiums, and contract wages; and didn’t provide proper wage statements.

We already know how picky California is about employee wages and we have more “special” premiums and calculations related to wages than any other state. This is a good time to stop and audit your own practices before an investigation completely stops your business.

Approaching Holidays

“How do I make sure I have enough employees working over the holidays?”

Your HR Survival Tip

Holidays really need a company policy. Although you are not required to provide any paid holidays or to pay employees if you close, you should have a policy stating that. If you do pay at least some employees or need specific advance notice of requests for time off, a policy becomes even more important. Basically, a policy makes it easier for employees to plan and for you to adhere to your policy.

It’s already past the time to start scheduling to ensure you have sufficient coverage over the approaching holidays, so get moving. Calculating how many and which employees will be needed to provide an uninterrupted business workflow can require some careful thought.

When choosing the employees you’ll need for coverage, you may discover a few you really need simply because you don’t have any or enough others who know that job. In the future, consider cross-training so the same employees don’t feel “punished” by working when others take time off… and you aren’t trapped if they can’t work for some reason.

Make sure your decisions are based on non-discriminatory reasons. You could ask for volunteers, accept requests based on seniority, or approve requests in the order of receipt. If you need employees to work the week of a holiday, perhaps they can alternate with those who had time off around another holiday. For example, they have time off either at Thanksgiving or Christmas but not both.

Make sure you aren’t giving holiday time off only to those with families. Most singles make plans with extended families or friends and will feel it’s unfair if they are always chosen to work. Don’t have the same employees get the same holidays off so others don’t have a chance for that specific time off. Don’t forget to have a backup plan in place in case someone is sick and can’t work.

Travel plans are often set at least three months in advance so consider a time off request deadline to match. It can take a bit of experimentation and maneuvering to find what works best for you and your employees. The worst scenario is denying time off to employees who end up spending the time twiddling their thumbs instead of being off with their families. Consider what you need to do for these upcoming holidays… then immediately start working on an even better plan for next year.

Let Me Count The Ways of CFRA

When talking with companies, we frequently find they have an employee who has been absent for a number of weeks or months. They are actually calling to find out how to bring that time off to a close. Too often, we have to inform them the time off has only begun because they didn’t do the paperwork to be able to legally count all that previous time off.

Thanks to the 2021 changes to the California Family Rights Act (CFRA), all California companies with 5 or more employees are subject to CFRA and its requirements. There are two primary documents that may need to be provided to absent employees and the first form must be provided within 5 days of learning the employee may need time off.

Generally, if an employee is absent more than 3 days, you need to investigate. Determine if the employee is merely sick and will be returning to work shortly or is absent for a more serious reason. If the employee won’t be returning to work within another day or two, prepare the CFRA paperwork and send it to the employee. NOW you can start tracking the time off.

The amount of protected time and how is it used may vary based on the reason for the leave. Absences that fall within CFRA include:

  • Paternity – time off to bond with a new baby, new adoption, or new fostering.

  • Maternity – disability time off when delivering a baby and recovering.

  • Baby bonding – time off for the woman who is no longer eligible for disability leave.

  • Medical – disability time off if you have a serious personal health condition.

  • Care – time off to care for a family member with a serious health condition.

You can’t turn back the calendar so the employee will continue to have job protection until they have received the documentation AND the full protected time elapses. Therefore, you want to provide the documents and start counting their time off as soon as possible. We manage leaves for a lot of our clients but you can learn how to do it yourself. Regardless of who is managing your leaves, they must be managed. You don’t want to end up terminating someone illegally and find you have more problems than an employee being absent.

Up or Down

“I have an employee who isn’t doing well in his job. I want to cut back on his wages to better match his value to us. Is this legal?”

Your HR Survival Tip

What goes up can go down. You always want to be careful when making changes to an employee’s wages or salary. There are legal considerations, plus you want to be aware of the ramifications of the message you are sending.

You may change an employee’s wage or salary by providing an increase or decrease in the amount. The most common reasons are an adjustment based on an analysis of the employee’s skills, changes to the job market, or temporarily as a disciplinary action. Considerations when lowering a wage or salary include:

  • Providing advance notice of at least a few days but we prefer two weeks, if possible. You may find it easier to time it for the start of a new pay period but it’s not necessary.

  • Ensuring the wage or salary still meets the legally-required minimums.

  • Informing the employee of any other changes that will happen as a result, such as the employee’s title or job description or the timekeeping and meal/rest break rules if moving from a salary to an hourly wage.

  • Recognizing how this change may affect pay equity within your company.

  • Putting it in writing so there is no confusion about the amount, exempt status, or effective date.

The messaging about this change is critical if you want to keep the employee and to ensure the employee fully understands why this change is happening. If this is part of a disciplinary action and only temporary, provide in writing what caused this action, changes you expect to see (if any), and talk through it with the employee. If you are reducing the wage or salary because performance and his demonstrated skill set is lower than you expected, let the employee know why this new wage makes more sense in comparison to his coworkers and what he needs to learn to be eligible for a future raise or promotion.

Don’t expect the employee to be happy about this change, no matter what your explanation might be. However, the more detailed explanation and justification you provide, the more likely you are to retain the employee. If you believe this employee could become the employee you really need, work with them to help them grow and learn those skills. If you really don’t have a need for someone with less skills than you thought they had, use that as your explanation for termination rather than a demotion. Dropping someone’s wage or salary is serious so you want a really good, legal reason.

Return of Property

“I provide my employees with things like tools and a laptop. Can I deduct the cost of that property from their final paycheck if they don’t return it?”

Your HR Survival Tip

Absolutely not! There are ways to get the company property returned but that’s not one of them. California is very protective of final paychecks and will come after you for not paying the employee on time… because the check would be short. Even if the employee agrees to pay for the property, have them write you a separate check rather than make that deduction from their final paycheck.

Think ahead so you’re not stuck once the employee is leaving your company. Use a Property Return Agreement at the time you are issuing any company property. List each item, the value of that item, and the dates issued/returned. Make sure the employee initials each line item. At the bottom of the form, make it very clear this is your property and is only on loan, with the expectation the employee will return all property in good condition upon request or when leaving the company. Employees tend to take things in writing more seriously than verbal reminders or agreements.

It’s very helpful to have a copy of this completed form ready during the separation meeting. If this is an involuntary separation, provide a copy of the form and ask for the return of your property. If the employee can’t produce the property immediately, make arrangements for the return within 24-48 hours. Schedule a time for the employee to drop it off or provide them with a way to ship it back to you. You have a much better chance of getting the property back if you make it as easy for the employee as possible.

If the employee is trying to keep the property and you haven’t agreed to that, put your “official” request in writing and send it to them by certified letter. Repeat this a couple of weeks later, if needed, but now add “if the property is not returned by within 14 days, we will report it to the police as stolen.” However, unless the property is worth several thousand dollars, it’s unlikely the police will actually do anything. You can report it but stay realistic.

Do what you can to avoid a messy situation by putting a policy and process in place so it’s easy to get your property back. If the employee refuses to return your property and it’s not worth taking them to court, you are stuck writing it off. This is why taking steps early on can save you time and money.

Tools and Equipment

“I prefer having employees use their own tools for work because they tend to take better care of them and I have the added benefit of saving money.”

Your HR Survival Tip

When you require your employees to use their personal tools or other equipment, such as cell phones, computers, cars, etc., you may not be saving much money if you’re doing things properly. How do you reconcile what you’re doing against the state and Federal rules that it should cost employees nothing to work for you?

The basic thing to remember is the company is responsible for providing the employee with any and all tools or equipment needed to do the job. If you aren’t providing these items, you must reimburse the employee in some way for using their personal tools or equipment.

  • Tools — If you have a business where employees are using hand and/or power tools, California requires you to pay the employee at least twice the minimum wage if they must provide their own tools. Otherwise, you must provide and maintain the tools.

  • Equipment — If your employees were working in your office, you’d provide a desk, computer, office phone, internet, etc. While you aren’t required to provide the office furniture, you are required to reimburse employees for any of their personal equipment you are having them use instead of providing them with that equipment. The courts haven’t cited a specific amount but it must be considered a reasonable and fair exchange.

  • Travel — If your employees must use their own vehicle for anything other than the commute to work, you need to reimburse them for mileage (and in most cases, pay for their time). The standard is the current IRS (Internal Revenue Service) per mile rate because it is calculated to cover all costs associated with using a vehicle, such as gas and vehicle maintenance.

You’re in business… rarely is anything free. The government requires you to pay for anything needed to operate your business, including the cost of employees and what they need for their work. While you still may be able to save money using the employee’s personal tools and equipment, make sure you are doing it legally so this practice doesn’t end up costing you much more than expected.

No Surprises

Employees don’t always like surprises and, in most cases, you really don’t want to surprise your employee unless you’re handing them a bunch of money. Don’t be surprised if nearly every other surprise could become a problem.

We are currently seeing legal attempts to eliminate surprises on medical billing from insurance companies. Too many people have been unpleasantly surprised by receiving unexpected charges from medical providers and hospitals. However, this isn’t the only type of surprise that can be a problem.

Providing a performance review that includes negative feedback shouldn’t be a surprise. If the manager is communicating properly and regularly with the employee, the performance review or performance improvement plan should really be more of a summary of previous conversations. Slapping them with a bad review once a year is rarely going to achieve your desired results. And only giving positive feedback on an annual review isn’t likely to keep them excited about working for you.

The employment relationship ends for a number of reasons. However, unless the company is in a dire situation that requires immediate action, terminating an employee shouldn’t come as a surprise to them. If you are terminating due to poor performance, why didn’t you try to change their performance in a way the employee understood their job was at risk? Ideally in this situation, the employee isn’t wondering if they will be fired, just when. They should already understand they haven’t been working at the level you want or need.

Even a raise shouldn’t necessarily be a big surprise. Raises are usually given to good performers and your positive comments to them should have prepared them for the possibility of a raise. Any surprise from the employee should be based on the amount of the raise, not just on the fact they are getting one. If you aren’t providing positive feedback regularly, don’t be surprised if those good employees start looking elsewhere for acknowledgment of their skills and/or knowledge.

Whenever you see an employee surprised by what just happened to them, take it as a sign you didn’t prepare the employee by giving them sufficient feedback along the way. Changing bad behaviors and encouraging good behaviors works much better with continuous feedback. It’s those small comments to your employees that will help them achieve what you want.

Special Clothing

“I’d like my employees to wear certain clothing for work. What can I require?”

Your HR Survival Tip

Many companies like employees to follow a clothing theme that includes the company logo, matching the company colors, or just a standardized look. It’s possible to dictate everything from a hat down to shoes but what you dictate will depend on what you’re willing to pay for that look. Below are some of the possibilities:

Logo Wear: If you want employees to wear clothing with your logo, you need to provide that clothing, and in a quantity that will last a week. The company is responsible for paying for this clothing but you can ask for a refundable deposit you pay back when they return the clothing. You are also responsible for the cleaning of this clothing but, instead, it can be a small reimbursement paid each pay period.

Shirts and Pants: When you require employees to wear certain colors or styles of shirts and pants, whether you must pay for it will depend on your requirements. If the colors and styles are fairly common and can easily be worn elsewhere, it’s unlikely you’ll need to pay anything. The more specific your requirements are, the more likely you’ll have to provide a clothing allowance. For example, if you want a goldenrod polo shirt and tuxedo pants to be worn, you should plan on paying for them. However, a broad definition of white shirts and black pants that can easily be worn anywhere eliminates the need for you to pay for that clothing.

Shoes: Often specific requirements about shoes are related to job safety. If you are in construction, you can require steel-toed shoes/boots and not have to pay for them because those shoes are required throughout the industry. The same is true of slip-resistant shoes in the restaurant industry. Closed-toe shoes are an easy requirement to have without having to pay for them. However, requiring everyone to wear a very specific shoe or an unusual color will likely be your responsibility.

The other side of specific things to be worn is the list of specific things you don’t want employees to wear. This list often includes t-shirts with sayings or pictures on them, spaghetti straps on tops, tops that are too short or pants that hang too low, flip-flops, etc. Think through your preferred dress code and create a policy that is enforceable… and affordable.