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The Importance of Severance and Release When Terminating Employees

Posted by on Oct 12, 2017 in Employment Law | 0 comments

Employers often find it difficult to justify, practically or emotionally, paying severance to an employee being terminated for cause. After all, employers ask, why compensate and reward a worker who broke the rules? It may be easier when the separation is a layoff, yet even under these circumstances, the company’s financial condition may constrain its ability to offer money to a separating employee, getting nothing but goodwill in return.

This Employment Law Bulletin briefly discusses severance and its primary justification: obtaining a release of any future employment law-based claims. We explain why best practices dictate employers set emotions aside in order to secure the protection provided by a release in exchange for a severance payment. We also discuss important issues related to the drafting and implementation of an enforceable severance agreement.

Why Offer Severance

There are sundry reasons an employer may want to offer severance to a separating employee: to reward a worker for years of loyalty; to cushion the blow of an unexpected layoff; to maintain goodwill in the community; or to preserve standing as a competitive, quality employer in the industry.

These are all sound reasons. They explain why employers might consider offering severance in many instances. But the single best reason why employers should offer severance to every terminated employee (i.e., one who is not leaving by her own volition) is the protection that a severance payment, combined with a well-drafted severance agreement, provides against a future claim or lawsuit.

Let’s begin by defining “severance.” In order to support a binding agreement in which the employee waives any claims, the severance must be compensation to which the employee wasn’t already entitled by virtue of her employment. Many employers we work with are surprised to learn that severance does not need to equal several months’ or even several weeks’ pay. This can be a particularly helpful point when considering offering severance to an employee terminated for lying or theft. The investment can be minimal. The peace purchased for merely a few hundred dollars (or less!) is always well worth the investment.

What Severance Buys You

Provided the agreement is properly drafted, signed and otherwise enforceable, the severance payment purchases a promise by the separating employee that she will not bring any claim or lawsuit, in a court or with a government agency, arising out of the employment relationship. Our typical California severance agreement expressly protects against seventeen (17) separate common law causes of action, as well as claims that could potentially be brought under eighteen (18) separate state and federal statutory schemes and regulations.

In fact, the only employment-related claim that cannot be expressly released by way of a severance agreement is one for unpaid wages, which can include reimbursement of expenses, overtime and waiting time penalties. Perhaps most importantly, most reasonably competent lawyers will abandon a claim, regardless of its apparent merits, where a potential client has signed an enforceable severance agreement with the former employer. In this way, for an investment of as little as a few hundred dollars, an employer can avoid incurring attorney’s fees and costs fighting a spurious claim.

The Elements of an Enforceable Severance Agreement

We cannot overstate the importance of having a knowledgeable employment law attorney draft your severance agreement. A severance agreement is a contract. In addition to pitfalls common to every type of contract, there are crucial drafting considerations unique to a severance agreement. This is particularly true if the separating employee is over 40-years-old. An agreement waiving any claims under the Older Workers’ Benefit Protection Act (“OWBPA”) must meet eight (8) statutory requirements, including providing the separating worker a 21-45 day period within which to consider the Agreement before signing it. Even then, the employee has seven (7) days to revoke the agreement. If the employer pays the severance before the expiration of the 7-day period, and the employee revokes the agreement, she may keep the payment and the employer is without recourse to recoup the funds!

In addition to an explicit waiver of any claims that could be brought under federal, state, common law, county, city or local ordinances, a severance agreement can and should provide other protections. Among these, we recommend clauses requiring confidentiality of the severance and prohibiting future disparagement of the employer and its management. It is generally a good idea also to include a clause in which the employee agrees not to apply for employment at any future time; this protects against future claims of discrimination in hiring.

The employee should never be pressured to sign the severance agreement, or to sign it “right away,” as this can provide a duress defense which may undermine the effectiveness of the agreement. It is also a good idea to include a severability clause so that, if an issue arises, a court can later “sever” out any portions of the agreement that are unlawful, rather than rendering the entire agreement unenforceable. A merger clause is also advisable, to prevent a terminated employee from claiming additional terms that are not included on the agreement itself.

Conclusion

California employers should always consider offering a severance when terminating an employee, provided the employee signs a well-drafted severance agreement waiving any claims arising out of the employment relationship. The severance payment need not be sizeable. However, it is crucial that the agreement be drafted properly. Employers with lingering questions should not hesitate to contact their experienced employment law counsel.

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Employers Required to Use New Form I-9 by September 18, 2017

Posted by on Aug 23, 2017 in Employment Law, Uncategorized | 0 comments

Employers must begin using a new version of the Form I-9 issued by the U.S. Citizens and Immigration Services (USCIS) no later than September 18, 2017 or face potentially large fines. The Form I-9 is the document employers must use to verify the identity of new hires to ensure they are authorized to work in the United States.

What’s Different?

The changes to the Form are subtle. There are changes to the instructions and the list of documents approved to verify eligibility. A Consular Report of Birth Abroad (Form FS-240) was added as a List C document, and all the certifications of report of birth issued by the State Department (Form FS-545, Form DS-1350, and Form FS-240) have been combined.

The List C documents have been renumbered, except for the Social Security Card. All changes are described in detail in the newly revised Handbook for Employers: Guidance for Completing Form I-9 (M-274).

Storage and Retention Rules

Employers must be able to present the Forms to government officials for inspection within 3 business days of a request. Employers who choose to keep paper copies of the documents their employees present may store them with the employee’s Form I-9 or with the employees’ records. However, the USCIS recommends that employers keep Form I-9 separate from personnel records to facilitate an inspection request.

Employers are required to retain an employee’s Form I-9 until the later of (1) the date the employee began work for pay + 3 years, or (2) the date employment was terminated + 1 year.

Potential Penalties for Failure to Follow Form I-9 Rules

In 2016, Immigration and Customs Enforcement (ICE) announced increases for Form I-9 violations. For example, the minimum and maximum fines for simple Form I-9 violations increased to $216 and $2,156, respectively. Additionally, minimum and maximum fines for first offenses of Unlawful Employment of Unauthorized Workers has increased to $539 and $4,313 per worker, respectively.

Employers with lingering questions about the new Form I-9 should contact their employment counsel.

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The State of California Law with Regard to Considering an Applicant’s Criminal History

Posted by on May 25, 2017 in Employment Law | 0 comments

 

Employers may be already aware of the significant movement afoot to eliminate the consideration of an applicant’s criminal history, both from job applications and the interview, until a conditional offer of employment has been made. Variously termed “Ban the Box” or “fair chance” laws, the goal is to “ensure a fairer decision-making process” because, it is believed, anything that makes it harder for ex-offenders to find a job makes it more likely they will re-offend.

In California, the state of the law in this area is very much in flux. The purpose of this Bulletin is to discuss the current state of the law, including a new set of regulations issued in January, and provide a preview of pending legislation that is reasonably likely to be signed into law.

The Current Law

Under the current California laws and regulations, it is unlawful for an employer to consider the following from an applicant’s background record when hiring:

  • An arrest or detention that did not result in a conviction
  • A referral or participation in a pre/post-trial diversion program
  • A conviction that has been sealed, judicially dismissed, expunged or statutorily eradicated
  • An arrest, detention, etc. while the applicant was subject to the jurisdiction of a juvenile court (i.e., under 18 years of age)
  • Any non-felony conviction for possession of marijuana that is more than 2 years old
  • Any criminal history if it will result in an adverse impact on individuals within a protected class (commonly termed disparate impact discrimination)

Before an employer can refuse to hire based on an applicant’s criminal history, it must provide the applicant notice of the disqualifying conviction and an opportunity to show that it is factually inaccurate. If shown to be inaccurate, the conviction cannot be relied upon.

There are exceptions to these prohibitions for certain classes of employers, including health care facilities, that are required by law to screen prospective employees or prohibit hiring of individuals with criminal records.

Additionally, the cities of San Francisco and Los Angeles have enacted their own “Ban the Box”-type ordinances with more stringent requirements/limitations than those described above.

Pending Legislation

Assembly Bill 1008, introduced on February 16, 2017, proposes to add a section to California’s Fair Employment and Housing Act (FEHA), which would create new statewide restrictions on employers’ ability to make pre-hire decisions based on an applicant’s criminal history.

Under the proposed new law, employers:

  • Cannot include on an application any question that seeks disclosure of the applicant’s criminal history
  • Cannot inquire or consider an applicant’s criminal history before the applicant receives a conditional offer of employment
  • Cannot consider an applicant’s conviction of a misdemeanor where no jail time is possible
  • Cannot consider infractions or misdemeanor convictions older than 3 years
  • Cannot consider felony convictions older than 7 years
  • Must undertake an individualized assessment to determine whether a conviction has a “direct and adverse relationship” with the specific duties of the job sought before the applicant can be denied employment based on a conviction

If the employer decides, following this individualized assessment, to deny employment it must provide written notice that:

  • Identifies the specific conviction relied upon to deny employment
  • Provides a copy of the conviction history report
  • Provides examples of mitigation or rehabilitation evidence that the employer would consider
  • Provides notice of the applicant’s right to respond within 10 days

The applicant may then offer information that challenges the accuracy of the conviction or provide mitigation/rehabilitation evidence. In its current form, the bill requires the employer to consider any mitigation/rehabilitation evidence the applicant offers.

If the applicant does not respond to the first written notice, or upon receipt of the applicant’s response the employer still decides against hiring the applicant, it must provide a second written notice that:

  • Notifies the applicant of its final decision
  • Describes any existing internal procedure under which the applicant can challenge the employer’s decision
  • Discusses whether the applicant could be eligible for other positions at the company
  • Identifies the earliest date when the applicant can reapply to the employer for a position
  • Notifies the application of its right to file a complaint with the California Department of Fair Employment and Housing (DFEH)

What Should Employers Do?

California employers should ensure that their hiring practices fully comply with existing California laws, which must include consideration whether they are also governed by the separate ordinances for the cities of San Francisco and Los Angeles. Additionally, employers should monitor the progress and outcome of Assembly Bill 1008, and appropriately adjust their practices if it passes. Employers with lingering questions should not hesitate to contact their experienced employment law counsel.

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California Supreme Court Provides Clarification on Rest Periods

Posted by on Mar 23, 2017 in Employment Law | 0 comments

rest-periodThe California Supreme Court recently issued an important opinion clarifying employers’ obligations to provide employee rest periods. Specifically, in Augustus v. ABM Security Services, Inc., 2 Cal.5th 257, the Court reinstated a trial court order awarding approximately $90 million to a class of employee plaintiffs and held that employers (1) must relieve their employees of all duties during rest periods, and (2) must relinquish any control over how employees spend their break time. This Bulletin discusses the background and additional considerations addressed by the Augustus Court in this critical decision.

Case Background

ABM Security Services employs several thousand security guards throughout California. A large class of the guards sued, claiming ABM failed to provide proper rest periods in compliance with California law. More specifically, the guards claimed ABM required them to keep their pagers and radios on during rest periods and to “remain vigilant” and responsive to calls when needs arose, including escorting tenants to parking lots, notifying building managers of mechanical problems and responding to emergency situations.

The Los Angeles Superior Court granted a motion for summary judgment brought by the employees and awarded them approximately $90 million in damages. The Court of Appeal reversed this order, finding that simply being “on call” did not constitute “performing work” and therefore did not violate California’s rest period laws.

The Applicable Law

California law, set forth in Cal. Labor Code Sections 226.7, 512 and Industrial Welfare Commission (“IWC”) Wage Order No. 4-2001, requires that employers provide a paid 10-minute rest period every four (4) hours of work (or fraction thereof) to any employee who works more than three-and-one-one-half hours per day. The law stipulates that employees should not be required “to work” during this break.

The California Supreme Court Opinion

The Supreme Court disagreed with the reasoning of the Court of Appeal and reversed, reinstating the $90 million damages award. It did so by adhering to the plain language of the Wage Order, which simply requires employees be relieved of all work-related duties and employer control during 10-minute break periods. The Court also found support for its position in what it termed the “practical realities” of rest periods. While a policy requiring employees to remain on an employer’s premises during rest periods does not establish employer control, requiring employees to carry devices or otherwise remain reachable during a break suggests impermissible employer control.

The Court recognized that employers do have options if an exigency arises and the employee is needed during his or her break. First, it said, “Nothing in our holding circumscribes an employer’s ability to reschedule a rest period when the need arises.” Additionally, the employer may provide employees with another rest period to replace one that was interrupted or pay the employee the premium pay required under the applicable IWC Wage Order and Labor Code Section 226.7. This premium equates to one additional hour of pay at the employee’s regular rate of pay for each day that a rest period is not provided.

What Should Employers Do in Light of the Augustus Opinion?

California employers have collectively paid hundreds of millions of dollars in verdicts, settlements and administrative claims as a result of failing to strictly adhere to the rest period requirements. The Augustus opinion should serve as a wake-up call to any employer who does not already comply with this law. At a minimum, employers should not only review their policies to ensure that employees receive 10-minute rest periods free from duties and employer control, but also take steps to ensure that managers are properly trained to implement this policy.

Conclusion

Employers with lingering questions concerning their rest period policies should not hesitate to contact their experienced employment law counsel.

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What Legalizing Recreational Marijuana Means for California Employers

Posted by on Dec 13, 2016 in Employment Law | 0 comments

marijuana-payment-processing-californiaAmong the major issues decided by California voters this past November was Proposition 64, the Adult Use of Marijuana Act, which legalized recreational use of marijuana by adults. While our state has permitted limited marijuana possession and use for medical reasons for roughly 20 years, expanding legalization to recreational use could further compound what may already seem a murky area for California employers. This post aims to help employers understand the new law and offers guidance as to how to deal with challenges employers may face.

Understanding Proposition 64

Proposition 64 legalizes possession and recreational use of up to 28.5 grams of marijuana and up to 8 grams of concentrated marijuana for adults 21 years old and over. Adults are also permitted to grow up to six marijuana plants at home in a locked area that is not visible from a public place. The law also imposes a 15% excise tax on marijuana sales and establishes a regulatory framework for the sale of marijuana.

However, marijuana remains an illegal Schedule I substance under the federal Controlled Substances Act. Even under California law, smoking or ingesting marijuana in public will remain unlawful, as will smoking or ingesting marijuana in places where smoking tobacco also is prohibited. Similarly, driving under the influence of marijuana remains illegal.

Does Proposition 64 Limit an Employer’s Power to Prohibit Marijuana?

No. The new law expressly says that nothing in the statute should be construed to affect the “rights and obligations of public and private employers to maintain a drug and alcohol free workplace or require an employer to permit or accommodate the use, consumption, possession, transfer, display, transportation, sale, or growth of marijuana in the workplace, or affect the ability of employers to have policies prohibiting the use of marijuana by employees and prospective employees…”

Therefore, even with the passage of Proposition 64, employers may continue to prohibit use, possession and impairment at work. In fact, certain employers are required to maintain a “drug-free” workplace, and the new law does nothing to change this. These include employers contracting with the government or who engage in commercial transportation.

California employers may continue to conduct pre-employment drug testing of all applicants before hire and deny employment if the drug test comes back positive, even if the applicant was legally using marijuana under the state’s Compassionate Use Act.

What Should Employers Do in Light of Proposition 64?

California employers should review and update workplace policies to ensure they clearly state the company’s drug-free workplace policy. With the new law, this should include a specific prohibition of possession or use of marijuana, in any form, in the workplace. Employees should also be reminded that impairment on the job will not be tolerated, even if the impairment resulted from use of an otherwise legal substance (alcohol, marijuana) off site.

If an employer’s policies include pre-employment drug testing, applicants should be informed that they will also be tested for marijuana use.

We recommend the drug-free workplace policy be followed evenly. Making exceptions for one employee tends to undermine the effectiveness of a zero-tolerance policy and may also provide support for disparate treatment claims.

Conclusion

Employers with lingering questions concerning their policies with Proposition 64 should not hesitate to contact their experienced employment law counsel.

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A Spate of New California Employment Laws

Posted by on Oct 14, 2016 in Employment Law | 0 comments

 

aaGovernor Brown has signed a number of new laws affecting California employers. This post briefly discusses a few of them.

Increased Statewide Minimum Wage

Senate Bill (SB) 3 provides for six stepped annual statewide increases in the minimum wage, currently $10 an hour, for employers with 26 or more employees. The minimum wage will increase, beginning on January 1, 2017, as follows:

  • Starting January 1, 2017, $10.50 per hour
  • Starting January 1, 2018, $11 per hour
  • Starting January 1, 2019, $12 per hour
  • Starting January 1, 2020, $13 per hour
  • Starting January 1, 2021, $14 per hour
  • Starting January 1, 2022, $15 per hour

Employers with 25 or fewer employers have an extra year to comply with each new wage rate. Bear in mind that individual municipalities may set minimum wage rates that exceed this schedule.

 Employers Cannot Choose Venue or Law in Employment Contracts

Some employers have historically included choice of venue or law clauses in employment contracts. Such clauses dictate where an employee can bring a civil lawsuit or what state (or federal) law would apply in deciding disputes. New California Labor Code Section 925 prohibits employers from including contract provisions as a condition of employment that require application of another state’s law or dictate that suits must be filed in another state court. This law will apply to employment contracts signed, modified or extended on or after January 1, 2017.

Notification of Certain Leave Rights

Assembly Bill (AB) 2337, effective January 1, 2017, will require employers to inform each worker of his or her employment leave rights as a possible victim of domestic violence, sexual assault, or stalking, by providing that information in writing to newly hired employees. Existing employees are entitled to such information upon request.

Restriction on Use of Applicant’s Juvenile Records in Employment Decisions

AB 1843, also effective January 1, 2017, will prohibit employers from inquiring about and considering information concerning “an arrest, detention, process, diversion, supervision, adjudication, or court disposition” that occurred while an applicant or employee was under the jurisdiction of the juvenile court.

Legislative Approval of California Secure Choice Retirement Savings Program

Under SB 1234, employers with five or more employees that do not already offer an employer-sponsored retirement plan will be required either to offer an employer-sponsored retirement plan or to automatically enroll their employees in Secure Choice by creating a payroll contribution to the employee’s personal California Secure Choice Retirement Savings account. The legislation was intended to saddle employers with only minimal administrative burdens. They will be required to: (1) enable employees to make an automatic contribution from their paycheck into their Secure Choice Account; (2) transmit the payroll contribution to a third-party administrator to be determined by the Board; and (3) potentially provide state-developed informational materials about the program to employees.

Extension of Equal Pay Protections to Race and Ethnicity

Readers of this Bulletin will recall that, last year, the California Equal Pay Act was amended to require employers to pay the same wage as between a male and female employees who perform substantially similar work. On September 30, 2016, Governor Brown signed the Wage and Equality Act of 2016, SB 1063. Effective January 1, 2017, this will extend the protections provided by the Equal Pay Act to employees of different races or ethnicities. Thus, employees who perform substantially similar work must be paid equally, regardless of differences in gender, race or ethnicity.

As with the Equal Pay Act, pay differential between workers of different races or ethnicities may be allowed if it is based on a reasonably applied factor such as a seniority system, merit system, system that measures earning by quantity or quality of production, or some bona fide factor other than race or ethnicity.

Conclusion

Employers with questions concerning any of these new or amended California employment laws should not hesitate to contact their experienced employment law counsel.

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The US Dept. of Labor Requires Two Revised Workplace Posters

Posted by on Aug 24, 2016 in Employment Law | 0 comments

 

workplacesafety2The U.S. Department of Labor has issued regulations requiring employers to post two revised workplace posters. The regulations took effect August 1, 2016.

The first new poster, “Employee Rights Under The Fair Labor Standards Act” poster, contains new information about the rights of nursing mothers under the FLSA to take reasonable breaks to express milk for a period of one year following birth of their child. It also instructs them that their employer must provide a workplace location shielded from view and free from intrusion. The location may not be a bathroom.

The new FLSA poster also contains a new section about independent contractor misclassification, as well as information in the “tip credit” section that instructs employers of tipped employees who meet certain conditions that they may claim a partial wage credit based on tips received. The poster, available in 10 different languages, is available at: https://www.dol.gov/whd/regs/compliance/posters/flsa.htm.

The second revised poster is the “Employee Rights—Employee Polygraph Protection Act” poster. The only substantive change to this poster was the removal of a reference to the amount of possible penalties. The new poster also contains new contact information for the DOL. This poster, available in English and Spanish, is available at: https://www.dol.gov/whd/regs/compliance/posters/eppa.htm.

Finally, for employers with 50 or more employees, the Department of Labor previously released an updated Family and Medical Leave Act (FMLA) poster in April, 2016. Unlike the FLSA and Employee Polygraph Protection Act posters, the updated FMLA poster contains substantial revisions. This revised poster, available in English and Spanish, is available at: https://www.dol.gov/whd/regs/compliance/posters/fmla.htm.

Conclusion

Employers with questions concerning workplace posters mandatory under federal and state laws should not hesitate to contact their experienced employment law counsel. We can assist.

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New Law Clarifies Wage Statement Requirements for Exempt Employees

Posted by on Aug 18, 2016 in Employment Law | 0 comments

payday-paystub-e1442307328807California Assembly Bill 2535, signed on July 22, 2016 by Governor Brown, amends California Labor Code Section 226. Prior to this amendment, employers were required to track and record hours worked for exempt outside sales persons and executives who are not paid solely by salary. This meant that such tracking was required, even where an employee was not compensated for hours worked, but received commissions, bonuses or stock options.

AB 2535 amends Labor Code Section 226 to eliminate this anomaly. Employers are no longer required to record hours for employees exempt from payment of minimum wage and overtime. Specifically, the law adds section (j) to Section 226, which, effective January 1, 2017, will provide:

“(j) An itemized wage statement furnished by an employer pursuant to subdivision (a) shall not be required to show total hours worked by the employee if any of the following apply:

(1) The employee’s compensation is solely based on salary and the employee is exempt from payment of overtime under subdivision (a) of Section 515 or any applicable order of the Industrial Welfare Commission.

(2) The employee is exempt from the payment of minimum wage and overtime under any of the following:

(A) The exemption for persons employed in an executive, administrative, or professional capacity provided in any applicable order of the Industrial Welfare Commission.

(B) The exemption for outside salespersons provided in any applicable order of the Industrial Welfare Commission.

(C) The overtime exemption for computer software professionals paid on a salaried basis provided in Section 515.5.

(D) The exemption for individuals who are the parent, spouse, child, or legally adopted child of the employer provided in any applicable order of the Industrial Welfare Commission.

(E) The exemption for participants, director, and staff of a live-in alternative to incarceration rehabilitation program with special focus on substance abusers provided in Section 8002 of the Penal Code.

(F) The exemption for any crew member employed on a commercial passenger fishing boat licensed pursuant to Article 5 (commencing with Section 7920) of Chapter 1 of Part 3 of Division 6 of the Fish and Game Code provided in any applicable order of the Industrial Welfare Commission.

(G) The exemption for any individual participating in a national service program provided in any applicable order of the Industrial Welfare Commission.”

Employers with any questions about wage statement requirements are encouraged to contact their experienced employment law counsel. We’re here to help.

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Minimum Wage Hike and Sick Leave Enhancements in Los Angeles & San Diego

Posted by on Jul 6, 2016 in Employment Law | 0 comments

get-a-raiseThe cities of Los Angeles and San Diego approved ordinances that will increase the minimum wage and mandatory Paid Sick Leave starting this month.

Los Angeles

Los Angeles Mayor Eric Garcetti signed an ordinance that increases the minimum wage of employees who work in the City of Los Angeles for at least two hours in a particular week. Employers with 26 or more employees will pay $10.50 per hour effective July 1, 2016. Employers with fewer than 26 employees will continue to pay the state minimum wage of $10.00 until July 1, 2017, when their applicable minimum wage will climb to $10.50.

Los Angeles employers must also provide Paid Sick Leave up to 48 hours per year, which can be provided in a “front load” method, or an accrual method, accruing 1 hour of PSL for every 30 hours worked. This is twice the annual PSL required under California state law. Additionally, Los Angeles employers must allow employees to carry over accrued, but unused, sick leave up to a limit of 72 hours. Unlike the statewide PSL law, the Los Angeles ordinance expressly allows employers to require reasonable documentation of an absence from work for which PSL will be used.

There are stiff fines for noncompliance, including a $500 fine for failing to post the required notice.

San Diego

On June 7th, voters in San Diego voted to increase the city’s minimum wage to $10.50 immediately upon certification of the election results by the San Diego City Clerk, which could occur anytime. The minimum wage will increase to $11.50 per hour effective January 1, 2017. Further increases, keyed to San Diego’s Consumer Price Index, will occur beginning Jan. 1, 2019.

The ordinance also requires employers to provide employees with one hour of Paid Sick Leave for every 30 hours worked within the city limits. While employers may limit an employee’s use of PSL to 40 hours per year, they may not cap sick leave accrual.

As with Los Angeles, there are stiff penalties for noncompliance. Employers who fail to comply may face a civil penalty of up to $1,000. Failure to comply with the notice requirement face a penalty of $100 per employee, up to $2,000.

What you should do: Employers with any employees in the cities of Los Angeles or San Diego should immediately ensure their pay practices, sick leave practices and posted notices comply with the new ordinances. Your employment law counsel can help.

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Updated FLSA Minimum Salary Requirement for White Collar Exemption

Posted by on Jun 28, 2016 in Employment Law | 0 comments

AAEAAQAAAAAAAAXnAAAAJGMzY2Q0NzZhLTk0Y2YtNDQ1ZS1hNDVlLTA2NjU2ZDcyZDQwYQMost employees are entitled to receive overtime premium pay when they work beyond a certain number of hours in a day or week. Under both state and federal law, certain employees, because of their job duties and compensation, can be considered “exempt” from overtime. The most common exemptions are the so-called “White Collar” exemptions, for executive, administrative and professional employees.

On May 18, 2016, the US Department of Labor published its Final Rule updating the Fair Labor Standards Act (FLSA) to increase the minimum compensation required for an employee to be properly classified under one of the White Collar exemptions. The Final Rule increases the minimum salary level from its present $455 per week ($23,660 annualized) to $913 per week ($47,476 annualized). Employers can count nondiscretionary bonuses and commissions toward up to 10% of this annual minimum.

Importantly, all of the other stringent “duties” requirements for an employee to be considered exempt remain unchanged. Finally, the Rule, which becomes effective December 1, 2016, provides for automatic increases in the salary levels every three years (beginning January 1, 2020).

What you should do: This is an excellent time to evaluate whether exempt employees are properly classified. This means, not only determining whether they will meet the increased salary requirements, but equally important is evaluating whether their job duties meet the specifications set forth under the FLSA (and California Wage Orders). We encourage you to involve your employment law counsel in this important analysis.

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