Employees Paid on Commission Are Entitled To Separate Compensation For Rest Periods

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In Vaquero v. Stoneledge Furniture LLC, B269657 (Feb. 28, 2017), a California Court of Appeals has ruled that employers must separately compensate commissioned employees for rest breaks. Here is an overview of the case and considerations for employers in light of this new decision.

Employees Claim Commission Plan Violates Wage Order

Stoneledge Furniture LLC (“Stoneledge”) paid its sales associates on a commission basis. If a sales associate failed to earn guaranteed “minimum pay” of at least $12.01 per hour in commissions in any pay period, Stoneledge paid the associate a “draw” against future advanced commissions to ensure payment of $12.01 per hour in the current pay period. Then, in future pay periods when employees exceeded $12.01 per hour in commissions, the excess was deducted as necessary to reimburse Stoneledge for the advances. Stoneledge permitted employees to take rest breaks but did not provide any separate compensation for the break time.

Former sales associates filed a class action lawsuit alleging that Stoneledge failed to pay for rest periods as required by California law. Stoneledge filed a motion for summary judgment, arguing that the guaranteed minimum pay covered all hours worked, including rest periods. The trial court agreed with Stoneledge and found that the payment system specifically accounted for all hours worked and guaranteed that sales associates would be paid at least $12.01 per hour for those hours. Thus, there was no possibility that rest periods would not be captured in the total amount paid each pay period.

Rest Periods Must Be Separately Compensated From Commissions

The California Court of Appeals disagreed. According to the court, the plain language of Wage Order 7, which applied here, requires employers to count rest periods as “hours worked for which there shall be no deduction from wages.” (Note that the other Wage Orders contain similar language.) The court pointed to two prior California Court of Appeals cases involving separate compensation for rest periods and other nonproductive time when employees cannot earn wages. In one case, the court held that a piece-rate compensation plan was required to separately compensate employees for rest periods where the plan did not already include a minimum hourly wage for such time (this requirement has since been codified at Cal. Labor Code Section 226.2). The other case held that averaging wages for productive time across multiple pay periods to comport with minimum wage laws as to productive and nonproductive time failed to comply with the Wage Orders.

Even though these cases did not expressly apply to commissioned employees, the Stoneledge court concluded that the Wage Order rest period pay requirement applies equally to commissioned employees, employees paid by piece rate, and any other compensation system that does not separately account for rest periods or other nonproductive time. The court noted that the commission agreement used by Stoneledge was “analytically indistinguishable from a piece-rate system in that neither allows employees to earn wages during rest periods.”

Thus, the court held that commissioned employees must be separately paid for rest periods even if their compensation agreement provides “draws” and “advances” designed to comply with minimum wage laws as to selling time. Because the Stoneledge agreement did not include a component to directly compensate sales associates for rest periods, it violated California law requiring paid rest breaks. The court also noted that the advances and draws against future commissions “were not compensation for rest periods because they were not compensation at all. At best they were interest-free loans.”

Considerations For Employers

Employers that use commission-based compensation for employees who are entitled to rest periods should review their policies and practices to ensure that rest periods are accounted for and separately compensated at a set rate that is at least the minimum wage. The same is true for employers that use any other compensation system that does not separately account for rest breaks and other nonproductive time. The safest option is to provide commissioned employees a guaranteed minimum plus commissions, rather than a draw against commissions.

Finally, this case does not mean that employers are without recourse against “lazy sales associates,” as the court called them, who intentionally engage in excessive unproductive time during the work day to drive up their wages. As the court indicated, employers have options, such as disciplinary procedures, to manage employees who do not meet sales or other performance expectations.

 

If you should have any questions, please contact your Stratton Agency Human Resources Specialist at 925-556-4404.

California’s Expanding Fair Pay Act

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The California Fair Pay Act (CFPA) took effect a little over a year ago (January 2016) but already has been expanded to:

  • Ban the use of prior salary to set employee pay; and
  • Prohibit pay differences based on race and ethnicity (in addition to gender) between employees performing substantially similar work.

Effective January 1, 2017, salary history alone cannot be used to justify any disparity in compensation between employees doing substantially similar work. Recall that under the CFPA, neutral pay factors used to explain a pay disparity between men and women (and now employees of different races and ethnicities) must “account for the entire wage differential.”  Thus, for instance, a newly-hired female making $50,000 in her prior job must be paid the same as a male doing “substantially similar work” with the same relevant qualifications.  And, while a difference in pay for the newly-hired female might be explained by differences in other factors, such as experience and education, a lower prior salary alone no longer is sufficient to justify that difference.

Massachusetts, Philadelphia and now Puerto Rico already have banned employers from asking candidates about salary history, and several other states and cities are considering similar bans.

The CFPA also now prohibits employers from paying “any of its employees at wage rates less than the rates paid to employees of another race or ethnicity for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.”

Remember that under the CFPA, employers can no longer rely on the notion of equal pay for equal work. Instead, the state adopted a “substantially similar work” test for determining which jobs can be compared, which is decidedly more expansive.  This allows employees and courts to compare wages of employees who perform similar work, even across job titles.  Furthermore, comparisons are no longer limited to the “same establishment.”

California already had strong laws regarding equal pay. With the passage of these amendments, employers need to be proactive in examining their pay practices to ensure compliance and find and fix any issues.

If you should  have any questions, please contact your Stratton Agency HR Specialist at 925-556-4404.

Sexual Harassment Still Ranks High on EEOC’s Radar

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Sexual harassment claims remain all too common on the evening news and in courts across the nation. From recent allegations against on-demand driving giant Uber to jewelry stores Kay and Jared, the stories are hard to miss.

Despite the fact that Title VII of the Civil Rights Act long ago declared harassment illegal, it nevertheless persists in too many workplaces of today. In fact, the Equal Employment Opportunity Commission (EEOC) reports that harassment claims have increased and now make up almost one-third of all EEOC charges. Thus, the EEOC views harassment as a Strategic Enforcement Priority.

What’s more, the EEOC is seeking to add teeth to its harassment guidance. Based on the proposed guidance, here are some tips and strategies for preventing and addressing harassment.

Recognize the Broad Scope of Harassment

The EEOC uses a broad definition of harassment that goes beyond Title VII, as it may be based not only on sex (and sex stereotyping) but various other protected class statuses, including race, color, national origin, religion, age, disability, sexual orientation, gender identity, genetic information and pregnancy.

Harassment may also occur between members of the same protected class. And, the EEOC notes, an employer may also be liable for harassment based on:

• Perceived membership in a protected class (even if ultimately incorrect);
• Association with individuals who have a protected characteristic;
• Alleged harassment that was not directed at the complainant,
• Harassment on social media networks;
• The intersection of two or more protected characteristics (female and Asian); or
• Where the identity of the harasser is unknown and/or anonymous.

Have Management Lead by Example

Commitment from upper management and senior leaders to eradicating harassment in the organization is essential to creating and maintaining a culture of respect with zero tolerance for harassment.

Management needs to ensure that there are sufficient resources to undertake effective harassment prevention strategies such as policy implementation and training. Leaders also need to assess any factors that increase the risk for harassment and work to minimize or eliminate such risk.

Develop and Enforce a Harassment Policy

It is critical to develop, communicate and enforce a written antiharassment policy and provide examples of lawful and unlawful conduct. The policy should Include a multichannel complaint procedure permitting individuals to bring complaints to various member of management and encouraging reporting of questionable conduct. Further, the policy should state that the employer will promptly and thoroughly investigate the allegations and take immediate and proportionate action if it determines that harassment has occurred. The policy should also provide that all information obtained during the investigation will be kept confidential and the complainant will not be retaliated against.

Implement a Multichannel Harassment Complaint Procedure

It is critical to implement an effective multichannel complaint procedure encouraging supervisors and employees to report harassing conduct and allowing complaints to be brought to various members of management. The complaint procedure should:

• Promise claims will be investigated and that appropriate discipline will be imposed for misconduct;
• Ensure that the complainant’s privacy will be protected and they will not be retaliated against; and
• Be translated into all languages commonly spoken in the employer’s workplace.

Investigators should be trained, objective and neutral and each step of the investigation process should be documented from the intake of the complaint, to the scope of the investigation, to the resolution. A written report should also detail the investigation, findings, recommendations and any disciplinary, corrective or preventative actions taken.

Provide Harassment Training

It is critical to provide antiharassment training that is comprehensive, regular and interactive. The training should be:

• Supported by senior leaders;
• Provided at all levels and locations of the organization;
• Regularly reinforced;
• Tailored to each specific workplace; and
• Evaluated and amended on a routine basis.

Supervisors and managers should receive additional training on how to identify, stop, report and correct harassment and avoid retaliation and must understand that failing to do so may result in liability.

California’s Upcoming Indoor Heat Regulation

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In October 2016, Governor Brown signed and approved Senate Bill 1167 which went into effect on January 1, 2017. The law directs Cal/OSHA to draft and propose heat illness and injury prevention standards for indoor workplaces by January 1, 2019.

Although this law proposes new regulatory activity in this area, it is not new news for California employers. California has an active outdoor workplace heat illness standard since 2006. Moreover, in the past several years Cal/OSHA and other agencies have initiated either training or enforcement to protect workers against indoor heat illness.

In 2012, the Division issued two serious citations and the Appeals Board confirmed the citations to two joint employers for violation of the Injury and Illness Prevention Standard because an employee sustained injuries due to heat illness while working indoors. In its Decision the Appeals Board evaluated several factors including ventilation of the facility, access to water, types of machines and whether they generate heat, whether there is an air condition system, whether the work performed by employees is fast pace, the breaks or recovery periods provided to employees, and whether there is a period of acclimatization provided to employees. National Distribution Center, Cal/OSHA App. 12-R6D2-0391, 12-R6D2-0378, Decision After Reconsideration (Oct. 5, 2015).  The Appeals Board held that it was appropriate for the Division to issue citations to employers for indoor heat illness under the Injury Illness Prevention regulation.

On February 28, 2016, the Division submitted a proposed draft of the language of a new regulation during an advisory meeting. Key take-aways from the Division’s initial thinking include:

  • The regulation would apply to (1) indoor places of employment where the dry bulb temperature exceeds 90 degrees or (2) where employees perform moderate, heavy, or very heavy work and the dry bulb temperature exceeds 80 degrees.
  • The Division would evaluate what type of clothing employees are wearing
  • The Division would evaluate the type of work performed by employees. The Division would critically analyze if employees perform moderate, heavy, or very heavy work to determine whether there is a violation of heat illness.
  • The Division would be more critical of high radiant heat work areas like foundries, brick-firing and ceramic plants, glass factories, vehicle manufacturing plants, rubber manufacturing plants, electrical utility rooms, electric power cogeneration facilities, boiler rooms, industrial scale bakeries, commercial kitchens, industrial scale laundries, food canneries, chemical plants, mining sites, smelters, and steam tunnels.
  • The Division would expect all employers to have a Heat Illness Prevention Plan that specifically identifies Indoor Heat Illness Prevention including procedures to involve employees in developing and implementing the plan, procedures to identify heat hazards, rest and hydration procedures, first-aid and emergency procedures, engineering and administrative control measures used to control indoor heat, and training programs.

Even though the official regulation has not been drafted or implemented, employers are advised to start examining their indoor environments for potential heat stress issues and how their operations may be impacted by an indoor heat stress rule.

Should you have any questions, please contact your HR Specialist at 925-556-4404.

California Court Rules Commission-Paid Employees Are Entitled To Separate Rest Period Pay

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A California appellate court ruled yesterday that workers paid on a commission basis must be separately compensated for legally required rest periods (Vaquero v. Stoneledge Furniture LLC). When combined with a state Supreme Court ruling late last year requiring employers to provide workers with duty-free rest breaks, this one-two punch of court decisions will force many California employers to alter their pay practices or face potentially devastating financial consequences.

Background: Open Question Regarding Rest Periods

Under the Wage Orders promulgated by the Industrial Welfare Commission, California employers have long been required to provide non-exempt employees working at least 3.5 hours in a workday with a paid 10-minute duty-free rest period for each four hours of work or major fraction thereof. Rest period time must be counted as hours worked “for which there shall be no deduction from wages.”

For employees paid by piece rate, California courts have interpreted this to mean that piece-rate employees must be paid separately for non-productive time, including rest periods. In 2013’s Bluford v. Safeway Stores, Inc., the California Court of Appeals case concluded that a piece-rate compensation formula that does not compensate separately for rest periods does not comply with California minimum wage law.

When the California legislature passed AB1513 and created Labor Code section 226.2, effective January 1, 2016, it established a special rate of pay to be provided to piece-rate employees on rest and recovery periods: the applicable minimum wage or the average productive rate, whichever is greater. These amounts were in addition to compensation for “other non-productive time” at only the applicable minimum wage.

San Jose’s “Opportunity to Work Ordinance

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Effective March 13, 2017, employers with 36 or more employees who maintain a facility in San Jose or who are subject to the San Jose business license tax must comply with San Jose’s “Opportunity to Work” ordinance.

Specifics about this ordinance can be found at http://www.sanjoseca.gov/index.aspx?NID=5360 or by contacting your Stratton Agency HR Specialist at 925-556-4404.

There is a requirement for posting. Posters can be found in English, Spanish, Cantonese and Vietnamese These posters contain the official notice from the City of San Jose Office of Equality Assurance.

Hugs May Create Hostile Work Environment, 9th Circuit Rules

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The 9th Circuit Court of Appeals has ruled that unwelcome workplace hugs may give rise to a sexually hostile work environment under Title VII of the Civil Rights Act. A female corrections officer claimed that her male superior hugged her often enough to make her uncomfortable at work. The employer and the co-defendant county sheriff countered that the hugs were completely innocuous and never involved sexual comments or touching.

But the San Francisco-based appellate court holds in Zetwick v. County of Yolo that a reasonable jury could find from the frequency of the hugs that the superior’s conduct was out of proportion to “ordinary workplace socializing” and had, instead, become abusive. The court also says a jury could conclude that the differences in hugging of men and women were not “genuine but innocuous differences” in the ways that men and women routinely interact.

The female corrections officer contended that her superior greeted her with unwelcome hugs on more than 100 occasions, and a kiss at least once, during a 12-year period. She also said she observed the superior hug and kiss several other female employees, but did not see him hug male employees. The employer disputes the claimed number and frequency of the hugs.

In reaching its ruling, the 9th Circuit notes that the Supreme Court has recognized in Faragher v. City of Boca Raton that a supervisor’s acts generally have greater power to alter the work environment than the acts of co-workers. The appellate panel found the supervisor’s position significant as to whether the hugs and the alleged kiss subjected the corrections officer to an abusive work environment. As a result, the court sent the case back to the lower court for a trial on the merits of the sexual harassment claims.

This dispute illustrates the importance for employers of ensuring that their employees understand the proper boundaries between appropriate and inappropriate workplace conduct.

OSHA Identifies 10 Most Cited Safety and Health Violations

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The Occupational and Safety and Health Administration released a preliminary list of the 10 most frequently cited safety and health violations for 2016, compiled from about 32,000 inspections of workplaces by federal OSHA staff.

The top 10 for 2016 are:

  1. Fall protection: OSHA said falls are among the leading causes of worker deaths, particularly in construction. Fall protection measures, as well as ladder and scaffold safety protections, could prevent injuries and deaths. OSHA noted that it has a campaign currently in place to educate employers and workers about these measures. “Employers must take these issues seriously,” the agency said.
  2. Hazard communication.
  3. Scaffolds: Implementing safety protections related to scaffold work could reduce injuries and deaths.
  4. Respiratory protection: OSHA said respiratory protection is essential for preventing long term and sometimes fatal health problems associated with breathing in asbestos, silica or a host of other toxic substances. OSHA noted, “But we can see from our list of violations that not nearly enough employers are providing this needed protection and training.”
  5. Lockout/tagout: According to OSHA, “We also see far too many workers killed or gruesomely injured,” from lockout/tagout and machine guarding violations, when machinery starts up suddenly while being repaired, or hands and fingers are exposed to moving parts. It said proper lockout/tagout procedures make certain that machines are powered off and cannot be turned on while someone is working on them. It said installing guards to keep hands, feet and other appendages away from moving machinery prevents amputations and worse.
  6. Powered industrial trucks: OSHA said that a high number of fatalities related to forklifts, and a high number of violations related to powered industrial truck safety, indicate that many workers are not being properly trained to safely drive these kinds of potentially hazardous equipment.
  7. Ladders.
  8. Machine guarding.
  9. Electrical wiring.
  10. Electrical, general requirements.

Bathroom Signage Requirement 3/1/17 – CA

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This is a reminder that a new laws goes into effect on March 1, 2017 that requires restroom signage changes if you have single use restroom that locks.  The signage must indicate that it is a unisex or all gender bathroom.

This law does not require the modification or addition of a restroom.  It only requires new signage if you have individual use restrooms.