How To Avoid 5 Key Wage And House Mistakes Made By California Employers

In this article, you can discover…

• The perils as a California employer of misclassifying your employees.
• How to ensure compliance with California meal and rest break rules.
• Steps to take to ensure payroll is audited correctly.

How Do I Steer Clear Of Misclassifying Employees In California?

Two types of misclassification issues are common in California, and it is important to understand both. The first issue involves misclassifying employees as independent contractors, as Labor Code dictates that there are certain criteria to meet in order to properly classify as an independent contractor. Independent contractor status can be rather complicated and fact-intensive, so it is best to seek the advice of an experienced employment and labor law counsel.

The second misclassification issue that is common in California pertains to misclassifying employees as exempt when they should actually be non-exempt. Most employers believe that paying employees a salary automatically makes them exempt from overtime, rest period, and meal period laws. This is not the case, as there are two primary tests for exemption: the salary basis test and the duties test.

The salary basis test must meet a minimum salary requirement that is equivalent to twice the minimum wage in California. Minimum wage is currently $16.50 per hour in California, meaning that the salary basis test will be based off of a salary equivalent of $33 per hour, $68,640 annually. This means that salaries must be greater than or equal to $68,640/year for your employees to be exempt from overtime and meal period laws. And when the California minimum wage goes up, you must increase the salary. Your exempt employees get built in raises!

For the duties test, there are three primary exemptions: the professional exemption, the executive exemption, and the administrative exemption. All three of these exemptions come with certain requirements that have to be met and involve a complex, fact-intensive analysis. The professional exemption applies to specified licensed professions, including doctors, lawyers, architects and accountants performing the work for which they are licensed to perform. The executive exemptions applies if the worker supervises at least 2 employees and performs management duties. The administrative exemption applies when the employee performs office or non-manual work directly related to management policies or general business operations of his/her employer or his/her employer’s customers and regularly and directly assists a proprietor, or an employee employed in a bona fide executive or administrative capacity. The duties test requires the employee perform duties consistent with the nature of the exemption at least 50% of the time.

If you are seeking more information about how to qualify for one of these exemptions, you would be well advised to enlist the help of legal counsel.

How Can I Ensure Compliance With California Meal And Rest Break Laws?

Primarily, we need to have solid, legally compliant rest period and meal period policies clearly written in an employee handbook. Every California employer should have this, even if you only have one employee. Once the policies have been laid out in your handbook and employees acknowledge that they understand and accept the policies, it will be easy to comply with both laws.

Additionally, it is important to ensure that your non-exempt employees are clocking out on the time clock for a minimum of 30 minutes no later than five hours after starting their shift.

Attorney Scott Shibayama is a seasoned lawyer based in Roseville, CA who has helped countless clients just like you navigate the intricacies of California employment law. With 30 years of experience serving California employers, he is prepared to help you ensure you are compliant with state and federal regulations so that you can get back to business as usual.

Still have questions? Ready to get started? Contact Vision Law^® today to schedule a free initial consultation.

How Can I Prevent Off-The-Clock Work Claims From Occurring?

By providing a written policy stating that non-exempt employees must record all hours worked accurately and clock out for meal periods, you can help prevent off-the-clock work claims from occurring. This policy should also prohibit working off the clock, which will bring you much closer to complying with California law and preventing off-the-clock claims.

How Can I Audit The Accuracy Of My Payroll Process?

Time records for your non-exempt employees are a great place to start, and the information on your time records should correlate with the information on your pay stubs. This means that your employees are being paid accurately for the number of hours they have worked, which is a fairly simple process to audit. Be sure to check periodically that your time card data is being accurately reflected in the paystubs you are issuing to your employees.

How Can Proper Training Help Me To Avoid Wage And Hour Mistakes?

Both employees who are responsible for managing payroll processing, as well as your managers, should fully understand any content within the chapter of your employee handbook that pertains to rest and meal periods, timekeeping and overtime. Once your management team and the employees who process your payroll are aware of and understand the rules, you can proactively work to avoid wage and hour claims.

What Are Common Legal Or Financial Consequences That Can Result From A Small Wage And Hour Mistake?

Failure to follow California’s wage and hour laws commonly leads to either a class action lawsuit or a Private Attorney Generals Act (PAGA) lawsuit. It is very common to see several key mistakes lead to considerable consequences, both legally and financially. Most commonly, there is either no written policy regarding the rules for timekeeping, meals, rest breaks, or overtime, or there are inaccurate daily time records that include missed, late or short punches for meal periods.

It is common to see violations where meal periods fall short of the 30-minute requirement, as even a 29-minute meal can potentially count as a violation. It is also important to be sure that you are compliant with California’s Labor Code Section 226 stub requirements, which require specific information appear on stubs. This information can include your legal name and address as an employer, not just the dba. The hours worked at the correct rate(s) of pay must be shown. The California paid sick leave balance must be shown. These small but simple mistakes can contribute to a Labor Code section 226 violation.

We recently handled a case where an employer failed to include sick leave balances on pay stubs under Labor Code 246, which is required under California law. The failure to include paid sick leave balances caused the California Labor Commissioner to audit this tiny business, ultimately resulting in fines of over $100,000. It is important to understand how very simple compliance issues can lead to significant financial consequences so that you can do your best to avoid any common mistakes.

What Steps Can I Take To Avoid Future Issues?

The first step you can take is to be sure you have an employee handbook and check to ensure that there are solid policies in place about timekeeping, rest periods, meal periods, and overtime. These handbooks will need to be provided to every employee and must be signed to confirm that the included policies are understood and accepted. It would be wise to make multiple copies of any signed acknowledgments so that you can access them if necessary, as it is not uncommon for copies to go missing either due to inadvertence or theft.

Still Have Questions? Ready To Get Started?

For more information on 5 Wage And Hour Mistakes Made By California Employers, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (855) 534-5504 today.