Know Your Wage Order (and hang it on the wall with your new all-in-one labor poster!)

As the new year approaches, many employers purchase a new "all-in-one" employment poster with state and federal labor notices printed on a single sheet of paper. But most employers forget an important item essential to every California workplace: their wage order.

Unlike most states, California does not closely follow federal wage laws (though federal rules also apply to most employers). Instead, the state has adopted “wage orders” regulating different types of employment within the state. These orders cover overtime, work hours, child labor, reporting-time pay, recordkeeping, uniforms, meal and rest periods, and many other aspects of the employment relationship. They frequently require employers to pay more, or to provide more benefits, than federal law.

The orders also differ by industry and type of employer.

Employees working at a manufacturing facility, for example, are covered under an “industrial” wage order typically covering everyone who works in the establishment.

Employees at a workplace not covered by an “industrial” wage order are covered by “occupational” wage orders tied to particular types of jobs. For example, employees working in most office environments are considered “professional, technical or clerical employees” – and are covered by one wage order – even though non-clerical employees working for the same employer may be covered by a completely different order.

It is essential for employers to determine which wage order applies to each of their employees. The applicable wage order(s) must be posted in the workplace and – because they vary – usually are not included with publishers’ all-in-one employment posters.

More important, because the wage orders were drafted to reflect practices in specific industries and occupations, the requirements of each wage order differs from at least some of the others and may even provide flexibility. Certain agricultural employees may (for the next few years, at least) work more than eight hours a day without incurring overtime liability. Retail sales employers may not need to pay overtime where half an employee’s income comes from commissions and the employee makes at least one-and-a-half times the state minimum wage. Sheepherders must be provided “regular mail service” at least once every seven days. These rules, and many more, are drawn from individual wage orders.

And failure to follow wage order requirements have an even bigger bite under the state's Labor Code Private Attorneys General Act, which can result in a $100 - $200 per pay period penalty for every employee subject to a breach of wage order requirements. (One of our presentations discussing this can be viewed here.)

The state Division of Labor Standards Enforcement publishes a booklet – “Which Wage Order” – identifying wage orders applicable to particular types of businesses. The booklet and many other publications, such as the Division’s own enforcement manual, are online at the Labor Commissioner's website. The actual wage orders, published by the now-defunct Industrial Welfare Commission, can be viewed at this site. It is well worth most employers’ time to review the resources on these free public websites.

The state has not collected all its employment laws in one easy-to-find location. Identifying and carefully reading the wage order(s) applicable to your business is a quick and effective way to review at least some of the most important rules affecting your business, large or small.

California Adopts Strict Limits on Independent Contractors

California has implemented a new law extending the state Supreme Court’s Dynamex standard, placing strict limits on the use of independent contractors, to most workplaces throughout the state. With a few exceptions, workers within an employer’s business or industry (or without their own truly independent operation) will be deemed employees rather than contractors for most employment issues such as pay, payroll taxes, and workers compensation.

Last year, the California Supreme Court’s Dynamex decision adopted a new three-part test for establishing whether a worker is an employee or independent contractor under the state wage orders. This new standard applied an “ABC” test requiring businesses to show that an independent contractor was free from its “control and direction,” provided work outside the usual course of the business, and maintained an independently established trade, occupation or business of the same type as the work performed. The second part of the test created the most difficulty for businesses because, in many cases, contractors have been used for work that could be considered within rather than outside a company’s business (most famous example: rideshare drivers).

Last month, Governor Newsom approved A.B. 5, creating a new Labor Code section 2750.3 extending the “ABC” test beyond wage orders to almost all areas of employment. This includes not only wages, overtime and rest/meal periods but also whether workers compensation coverage applies, unemployment and payroll taxes must be paid, and mandated benefits (such as sick leave) must be provided. Under Section 2750.3, a business must meet all three Dynamex or “ABC” tests to show that a worker was a non-employee independent contractor.

The law has important exceptions and, where the exceptions apply, contractor status will be determined by the state’s more traditional Borello test. That test focuses on the amount of control a business has over the “manner and means” of an individual’s work with far less focus on the specific nature of the worker’s duties.

As a practical matter, the new law may not change much for most employers whose workers would have been forced into an employment relationship under Dyamex. The law is a wake-up call to all businesses, though, who should now carefully examine whether casual and longer-term workers ought to be treated as employees rather than independent contractors. The law includes important exceptions for certain types of independent businesses such as marketing, human resources, graphic design, and beauty services. It also excludes various licensed professions (such as attorneys) and bona-fide business-to-business relationships.

The new law applies effective January 1, 2020, and can be viewed here.

California Delays Mandatory Harassment Training

California’s Fair Employment and Housing Act (“FEHA”) has long required employers to take any reasonable steps necessary to prevent and correct sexual harassment. The FEHA is unusual because, unlike most other federal and state laws, it applies to all businesses with five employees and prohibits unlawful harassment for all employers, regardless of size. It has also required employers with fifty (50) or more employees to provide two hours of harassment prevention training to supervisors when hired and regularly throughout their employment.

The state legislature recently extended this requirement to employers with five (5) or more workers, with the additional requirement that one hour of training be provided to regular non-supervisory employees as well. Initially scheduled to take effect after the end of 2019, the extended requirements have been delayed for one year. Employers should plan to complete the training in 2020, as the extended deadline for completion is January 1, 2021.

But beware: The deadline for temporary and seasonal employees has not been extended. Starting January 1, 2020, seasonal and temporary employees (hired to work for less than six months) must receive one hour of training within thirty days or 100 hours of service, whichever comes first. And it’s not a bad idea to start now for all employees: recurrent training is one of the best ways for employers to show they took “reasonable steps” to prevent harassment from occurring in the first place!