Employers: Deadline This Friday for Piece Rate Safe Harbor

Employers  with piece rate compensation systems must act now to take advantage of safe harbor; deadline for state registration is July 1, 2016

              Although deciphering and complying with California’s labor laws is challenging for most employers, it has recently become even more so for employers with piece rate compensation systems.  Although for years such employers reasonably assumed that such systems were lawful so long as the piece rate compensation provided at least minimum wage for all hours worked, a number of courts began ruling that such pay systems were in fact unlawful unless they included a distinct payment for rest periods.   Recognizing the unfair dilemma confronted by employers who assumed their employees were paid properly, the Legislature approved AB 1513, which allows employers to minimize the risk of lawsuits over piece rate pay plans by making retroactive payments to employees for rest periods.  

The so-called “safe-harbor plan” is conditioned upon meeting two deadlines – a July 1, 2016 deadline to register with the state for participation in the plan and a December  15, 2016 deadline for making the actual payments.  As expressly stated in the safe harbor statute,  participation in the plan does not preclude lawsuits over rest period pay, but it provides an affirmative defense to such lawsuits, precluding an award of damages or penalties.  To take advantage of the affirmative defense, however, the employer must prove that it complied with the letter and spirt of AB 1513’s safe harbor program.    

Any employer with piece rate compensation systems should carefully consider the pros and cons of the safe harbor program before July 1.  Exposure to wage and hour litigation after the deadline elapses will increase dramatically for employers who have not taken advantage of the safe harbor.  As the list of employers who register for the program is on-line and publicly available, anyone considering a wage and hour class action will instantly know who has registered and who has not.  Given the difficulties inherent in overcoming the affirmative defense,  employers who have registered for the program will be positioned to aggressively block rest period litigation.  Those who fail to register may still argue that their pay systems were adequate, but they will have to overcome the current precedents holding that rest periods must be separately paid.  Registering with the state’s program is user-friendly.  Employers interested in the program should immediately log onto the Department of Industrial Relations website and click on the AB 1513 link: http://www.dir.ca.gov/pieceratebackpayelection/piecerate.html.

Two new employment laws in effect in California

With the new year brings new employment laws.  Recently I attended the Cook Brown LLP law firm's legislative update where they discussed two new updates effective in 2015.  Cook Brown LLP Partner Barbara Cotter gave me a quick summary of these below:

Governor Brown signed two pieces of legislation last year that will have a major impact on nearly all California employers.  One deals with the common use of temporary agency or staffing agency employees.  The other deals with paid sick leave.  The first law, now found at Labor Code Section 2810.3,  provides that an employer who obtains workers from a staffing or temporary agency will be held responsible for all wages and worker’s compensation coverage due those workers, even if they are formally hired, supervised and paid by the agency.   This dramatically changes the risk of hiring temporary workers.  Previously, an employer could only be held responsible for agency employees where the employer actually controlled the work performed by the employees and provided hands-on instruction on how the work was to be accomplished.  This new law totally supersedes those prior rules.  Now, an employer can be held strictly responsible even if the employer has never met the staffing agency employees, never dealt with them directly and does  not dictate how they perform the work.  Two key exceptions apply however:  In order to be subject to this law, the employer must have at least 25 workers (including those supplied by the agency); and must utilize more than five agency workers.  This law is effective January 1, 2015.

The second law, known as the “Healthy Workplaces, Healthy Families Act of 2014,” requires that on July 1, 2015, an employee who works for thirty or more days for an employer is entitled to paid sick days to be accrued at a rate of no less than one hour for every thirty hours worked.  An employee is entitled to use sick pay after on or after the ninetieth day of employment.  The sick pay can be capped at three days per year.  Limited exceptions apply to employees subject to collective bargaining agreements and in certain industries, such as in-home care.  The employer must provide a report on the sick pay accrued and used, along with the employee’s paystub.  Employers are required to post a notice of this new law.  The Department of Industrial Relations has published a sample notice on its website at www.dir.ca.gov.