It’s a Trap!  Students Receiving Credit Need Not Be Paid? 

As colleges and universities begin new terms, not all students are returning to the classroom.  Some students are headed into the “real world,” to work alongside corporate titans, small-business owners, or moms and pops in their shops, while receiving academic credit—and not wages—for their efforts.  These students are applying the lessons learned in their prior studies to real-world scenarios to gain valuable experience, build their skills, and make connections to help them succeed upon graduating.  Or at least they should be.  If they are instead used merely as a source of labor, they must be paid.  But many employers mistakenly assume that because these students are getting school credit, they need not be paid.  That is a trap into which employers reading this blog will not fall.

The Fair Labor Standards Act (“FLSA”) and state laws require employers to pay all employees for work performed.  If students who participate in unpaid internships with private employers do not qualify as “employees,” they need not be paid.  Whether those students qualify as “employees” depends on several factors, but the general rule is that these programs are lawful as long as the student, not the employer, is the primary beneficiary of the internship program.

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EEOC Promotes Gender Equality by Imposing Another Burden on Employers

Employers with 100 or more employees take note: a major new reporting requirement may be coming your way next year.

On January 29, 2016, President Obama announced that beginning in September 2017, employers  with 100 or more employees must report the earnings and hours worked for all of their employees.  That’s right.  Employers must disclose compensation information for all employees, including executives – which many employers consider to be highly confidential – to the EEOC.

Employers will be required to disclose this compensation data as a new category on the EEO-1 report, which employers already provide to the federal government and which contains workforce data sorted by race, ethnicity, gender, and job category.  Specifically, the “revised EEO-1 will collect aggregate W-2 data in 12 pay bands for the 10 EEO-1 job categories” already used.  The EEOC noted that it does not intend to require employers to track hours worked by salaried employees, but that it is seeking input on the issue.

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New California Employment Laws for 2016

Now that the calendar has turned to 2016, this is a good time for employers in California to ensure that they are up to speed on the new laws that took effect on January 1.  Here are some of the highlights.

SB 358 (Gender Wage Differential)

Existing law already prohibits employers from paying women less than men in the same establishment for work that requires equal skill, effort, and responsibility and is performed under similar working conditions.  SB 358 has amended the existing law to make it easier for an employee to prove a violation.  The new law permits an employee to bring an unequal pay claim based on employee wage rates in any of the employer’s facilities (not just in the same establishment) and in other job categories as long as the work is substantially similar (not equal).

Furthermore, the employer now has the burden of proof to show that there are bona fide factors responsible for any wage difference, such as a seniority system, a merit system, or a system that measures earnings by quantity or quality of production.  The employer must also demonstrate that each factor relied upon is applied reasonably, and that the one or more factors relied upon account for the entire differential in pay.

Employers are not permitted to prohibit employees from disclosing their wages, discussing their wages or the wages of others, or inquiring about another employee’s wages.  Such prohibitions are already considered an unfair labor practice under the National Labor Relations Act, but SB 358 provides employees with a new remedy and cause of action.

In addition, SB 358 requires employers to maintain records of employees’ wages and rates of pay, job classifications, and other terms and conditions of employment for a three-year period.

AB 304 (Paid Sick Leave:  Clarification)

This law clarifies some of the more ambiguous provisions of California’s new paid sick leave law, the Healthy Workplaces, Healthy Families Act of 2014.  The Act provides, among other things, that an employee who “works in California” for 30 or more days within a year from the commencement of employment is entitled to paid sick leave.  AB 304 clarifies that the employee must perform that work for the same employer in order to qualify for paid sick leave.  AB 304 also allows employers to use accrual methods that are not based on the number of hours worked, explains how to calculate the rate of pay for paid sick time for nonexempt and exempt employees, and provides guidance for employers that have existing sick leave and paid time off policies (including policies that provide unlimited sick leave or paid time off).

AB 622 (E-Verify)

This law has expanded the definition of an “unlawful employment practice” to prohibit an employer from using the E-Verify system, at a time or in a manner not required by federal law or not authorized by a federal agency memorandum of understanding, to check the employment authorization status of an existing employee or an applicant who has not received an offer of employment.  There is a civil penalty of up to $10,000 for each violation of this new law.

AB 970 (Labor Commissioner:  Expanded Enforcement Authority)

An increasing number of cities and counties in California have adopted ordinances requiring the payment of a minimum wage that is higher than the state minimum wage.  Under current law, the Labor Commissioner is authorized to investigate and enforce payment of wages under state law.  AB 970 authorizes the Labor Commissioner to investigate and enforce local laws regarding overtime hours or minimum wage provisions and to issue citations and penalties for violations.  AB 970 also authorizes the Labor Commissioner to issue a citation and impose penalties on employers who fail to reimburse employees for expenses necessarily incurred in the discharge of their duties.

AB 1506 (Labor Code: Private Attorneys General Act)

The Private Attorneys General Act has been amended to provide employers with a limited opportunity to cure certain violations of the California wage statement requirements.  The scope of the law is very narrow – it only allows an opportunity to cure violations relating to the inclusive dates of the pay period and the name and address of the legal entity that is the employer.

AB 1509 (Retaliation Against Employee for Complaint by Family Member)

Current law prohibits an employer from discharging, discriminating against, or retaliating against an employee or applicant because the employee or applicant has engaged in protected conduct.  AB 1509 extends the protections of these provisions to an employee who is a family member of a person who engaged in, or was perceived to engage in, protected conduct or who made a complaint protected by these provisions.

SB 579 (Leave for School Activities)

Under current law, employers of 25 or more employees working at the same location must allow a parent, grandparent, or guardian to take up to 40 hours per year of unpaid time off to participate in activities at a child’s elementary, middle, or high school or licensed child daycare facility.  SB 579 expands this requirement to grant an employee time off from work to find, enroll, or re-enroll a child in a school or with a licensed child daycare provider, and to address a child care provider or school emergency.

AB 1513 (Piece-Rate Workers)

AB 1513 provides that employees who are paid on a piece-rate basis must be separately compensated for rest and recovery breaks.  These breaks must be paid at an hourly rate of the greater of either (1) the applicable minimum wage, or (2) the employee’s average hourly wage for all time worked, exclusive of break time, during the work week.  AB 1513 also requires employers to separately compensate employees for “other non-productive time,” which is defined as “time under the employer’s control, exclusive of rest and recovery periods, that is directly related to the activity being compensated on a piece-rate basis.”  This “other non-productive time” must be compensated at the rate of no less than minimum wage.  The new law also provides that wage statements of piece-rate employees must state (1) the total number of hours of compensable rest and recovery periods, the rate of compensation for those rest and recovery periods, and the gross wages paid for those periods during the pay period, and (2) the total number of hours of other non-productive time, the rate of compensation for that non-productive time, and the gross wages paid for that time during the pay period.  The law provides a safe harbor for certain employers to correct a failure to pay for rest and recovery periods and other non-productive time by December 15, 2016.

AB 219 (Prevailing Wages for Concrete Delivery on Public Projects)

AB 219 expands the definition of “public works” for purposes of California prevailing wage law to include the hauling or delivery of ready-mixed concrete for a public works project.  This greatly expands the scope of public works projects, as ready-mixed concrete was previously considered to be a finished product, and thus employees delivering ready-mixed concrete were treated as suppliers, rather than contractors.  Concrete delivery suppliers who enter into contracts with any state agency or political subdivision of the state must now pay prevailing wage rates.

AB 852 (Prevailing Wages for Certain Hospital Construction)

AB 852 expands the meaning of “public works” to include any construction, alteration, demolition, installation, or repair work done, under a private contract, with a general acute care hospital when the project is paid, in whole or in part, with proceeds of conduit revenue bonds issued on or after January 1, 2016.  Prevailing wage rates must now be paid to workers on such projects.

SB 560 (CSLB Enforcement of Workers’ Compensation Coverage Requirements)

Under SB 560, the Contractors State License Board is now authorized to enforce the requirement that licensed contractors carry valid and current workers’ compensation insurance.  This expands the authority of the CSLB, which did not previously have the authority to enforce this requirement.

SB 588 (Penalties for Non-Payment of Wages)

Under SB 588, the Labor Commissioner can file a lien or levy on an employer’s property in order to assist an employee in collecting unpaid wages when the employee has obtained a judgment against the employer.  SB 588 also requires an employer with an unpaid wage judgment against it to obtain a bond in an amount up to $150,000, based on the amount of the unpaid judgment.  If the employer fails to obtain a wage bond, the employer can be subject to a stop work order.  Additionally, SB 588 provides the potential for individual liability against business owners and certain managers for unpaid wages owed to employees.

Developments in Employee Benefits Law: Same-Sex Marriage and Title VII’s Protection for LGBT Employees

A number of recent legal changes will have a notable impact on employee benefits law both now and in the future.  Some of the most significant of those changes are the U.S. Supreme Court’s same-sex marriage decision in Obergefell v. Hodges, and the expansion of Title VII’s discrimination protections to lesbian, gay, bisexual, and transgender (“LGBT”) individuals by the Equal Employment Opportunity Commission (“EEOC”) and some federal courts.

Same-Sex Marriage:  Windsor and Obergefell v. Hodges

In the 2013 Windsor decision, the U.S. Supreme Court ruled that the federal government must recognize same-sex marriages for purposes of federal law.  After Windsor, the federal government issued guidance that it would look to the law of the state where the same-sex couple was married (state of celebration), rather than to the state law where the couple lived (state of residence), in most instances under federal law to determine if the same-sex couple was validly married.  On June 26, 2015, the U.S. Supreme Court held, in a 5-4 decision in Obergefell v. Hodges, that state laws banning same-sex marriage are unconstitutional, and mandated that states both permit same-sex couples to marry and recognize same-sex marriages lawfully performed in other states.  As a result of Obergefell, the “state of celebration” test for determining whether to recognize a same-sex couple’s marriage is no longer relevant under federal law. Continue Reading

IRS Extends ACA Reporting Deadlines

The IRS issued key extensions to looming 2016 information reporting deadlines for applicable large employers. This relief applies only to the deadlines for reporting the coverage that employers offered in 2015:

  • The deadline for providing employee statements is extended to March 31, 2016 (from February 1, 2016).
  • The deadline for filing 1094-Cs and 1095-Cs with the IRS is extended to May 31, 2016 (June 30, 2016, if filing electronically) (from February 29, 2016 for paper filings and March 31, 2016 for electronic returns).

While the IRS encourages employers to complete reporting as soon as possible, it recognizes that some filers may need more time to do this for the first year of reporting.  Employers will not be able to request an automatic or permissive extension of time beyond these extended deadlines. This means that employers could incur a penalty if unable to provide employee statements by March 31, or to file returns with the IRS by May 31 (June 30, if e-filing). However, employers will still have an opportunity to demonstrate reasonable cause for reduced or waived reporting penalties for incomplete or inaccurate filings.  No penalty relief is available if there is a failure to timely provide an information return or to furnish a statement.

The key to avoiding penalties is to make a good faith effort and provide returns or statements by the applicable deadlines (with extensions), even if incomplete.

These deadline extensions could impact employees who need coverage information to file their income tax returns. For example, an employee enrolled in an individual policy at the Marketplace, with the potential for subsidized coverage, needs the 1095-C to confirm if their employer offered them affordable minimum essential coverage. In light of this, the IRS states that individuals who file their 2015 income tax returns based on information that they received from their employer or coverage provider do not need to file amended returns or take other action upon receipt of their 1095-C (and/or 1095-B).

United States Supreme Court Once Again Rejects California’s Attempt To Void Class Arbitration Waivers

In DIRECTV, Inc. v. Imburgia, a decision released this week, the United States Supreme Court rejected the California Court of Appeal’s interpretation of a binding arbitration provision that would have rendered unenforceable a class arbitration waiver provision.  In doing this, the Supreme Court once again affirmed the primacy of the Federal Arbitration Act (“FAA”) and the invalidity of  attempts by state courts to limit the enforceability of class arbitration waiver provisions.

DIRECTV involved a claim by consumers that DIRECTV’s early termination fees violate California law.  The service agreement at issue in the action provided that any claims would be resolved by binding arbitration.  The agreement contained a class arbitration waiver but provided that if the “laws of your state” made the waiver unenforceable, then the entire arbitration provision “is unenforceable.”  The lawsuit was filed in 2008, prior to the United States Supreme Court’s 2011 decision in AT&T Mobility, LLC v. Concepcion holding that the FAA preempted California case law deeming class arbitration waiver provisions unenforceable.

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Time to Notify Your Employees of Oregon’s Paid Sick Leave Law

Oregon employers should all be aware that Oregon’s new Paid Sick Leave (PSL) law goes into effect on January 1, 2016. We originally reported on the the PSL law’s requirements in July of this year.

Late yesterday, the Oregon Bureau of Labor and Industries (BOLI) published its final rules implementing Oregon’s PSL law: download text of the rules (PDF)

BOLI’s rules require employers to provide all employees with written notice of the Oregon PSL law’s substantive requirements. This notice must be provided to all current employees by no later than the end of the employer’s first pay period in 2016. For employees hired after January 1, 2016, this notice must be provided by the end of the new employee’s first pay period. Employers can create and provide their own written notice, however, we recommend using BOLI’s notice, available here (PDF)

Note that the rules also require written notification at least quarterly of the amount of accrued and unused sick time available for use by the employee. This notification can be provided to employees on their paystub.

SHRM Quotes Adam Belzberg and Wes Miliband on the Effects of Drought on California’s Agricultural Labor Market

Stoel Rives labor and employment attorney Adam Belzberg and water resources attorney Wes Miliband were quoted in a Society for Human Resources Management (SHRM) article titled “California Drought Has Wide-Ranging Effects in Business Community.” The article examines the effects of California’s long-lasting drought on the state’s job market, specifically on the agricultural and food manufacturing sectors.

Belzberg describes how overall farm employment has actually been increasing, as producers have shifted to crops that are more labor intensive, with some growers resorting to the H-2A guest worker program because of the resulting labor shortage.

Miliband, meanwhile, discusses the potential impact of the Sustainable Groundwater Management Act, enacted in 2014, on farm employment. He notes it could affect growers using groundwater from basins that haven’t been adjudicated–but that are deemed to be either high-priority or medium-priority. Employment levels might decline if these growers have less water and, in turn, fewer acres to harvest. Even under those conditions, Miliband added, employment levels could remain stable or grow if more labor-intensive crops are used.

Read “California Drought Has Wide-Ranging Effects in Business Community,” published November 11, 2015.

 

The Federal Budget Deal Will Mean Higher OSHA Penalties for Employers

The Bipartisan Budget Act of 2015, signed by President Obama on November 2nd, contains a buried provision with the potential to substantially impact employers. Section 701 of the Act significantly increases the maximum civil penalties that may be imposed for violations of the Occupational Safety and Health Act. OSHA penalties — which have not changed since 1990 — must now be adjusted annually based on the Consumer Price Index. In addition, the penalties are subject to a “catch up” calculation intended to reflect changes in the CPI since 1996. The maximum allowable penalties for OSHA citations in 2016 are anticipated to increase as follows: penalties for “willful” violations are anticipated to increase from $70,000 to $106,158, and penalties for “serious” and “other than serious” violations are anticipated to increase from $7,000 to $10,616.

These numbers will only grow larger in coming years, as annual adjustments are made in relation to changes in the CPI.

Sacramento Becomes the Latest City in California to Adopt a Local Minimum Wage

Joining over a dozen other California cities that have adopted or are considering adopting a local minimum wage, the Sacramento City Council has voted to approve an ordinance that will raise the City’s minimum wage. Under the ordinance, the minimum wage in Sacramento will increase to $10.50 by 2017, $11.00 by 2018, $11.75 by 2019, and $12.50 by 2020. After 2020, minimum wage increases will be tied to the Consumer Price Index. Companies with fewer than 100 employees will be given an extra year to phase in the increased minimum wage increments. Employers will receive a credit of up to $2.00 an hour if they provide healthcare benefits to their employees.

Sacramento’s decision to adopt a local minimum wage adds to the growing patchwork of local minimum wages in California (and elsewhere). Companies with employees throughout California must take steps to ensure that they comply with the differing minimum wage requirements in localities up and down the state.

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