Minimum Wage Hike Has Ripple Effect on Exempt Worker Status
October 11-17, 2013

Source: Pacific Coast Business Times.

As fall settles and you break out the Halloween decorations, it’s time to think about the biggest fright of the season: Next year’s new employment laws.

As usual, it’s all tricks and no treats for employers. On the whole, most of the changes are modest and incremental, with the exception of a huge structural change in the minimum wage.

The minimum wage will go up from $8 to $9 per hour starting July 1, 2014 and then to $10 on January 1, 2016. And even though you’ll be buying hot dogs for a fireworks barbecue instead of Halloween candy by the time the change comes, it’s not too early to start planning.

That’s because even if you pay more than the minimum wage to employees, you have to decide which employees are classified as exempt and therefore not subject to a raft of wage-and-hour rules, from meal and rest breaks to overtime. In general, exempt employees need to make at least two times the minimum wage, said Kathy Eppright of San Luis Obispo-based Andre, Morris & Buttery. That means that for employees to be classified as exempt, they’ll need to make at least $37,440 next year or $41,600 starting in 2016.

“I think the big sleeper issue is that people just aren’t going to think to reexamine their exemptions to make sure they’re paying the threshold amounts,” Eppright said.

That could lead to claims of misclassification – and huge liabilities. “They’ll be vulnerable to a claim of unpaid overtime and unpaid mean and rest time periods,” Eppright said. “If a person says, I worked 60 hours a week and never got a break, you’re looking at a significant wage and hour claim.”

Trevor Large, an attorney with Buynak Fauver Archbald & Spray in Santa Barbara, said the minimum wage increases are a particular problem for restauranteurs because California does not allow so-called tip crediting, the practice of paying less than minimum wage and allowing the rest to be made up in tips. “There’s no way for them to offset this like they can in other states,” Large said.

Another big change comes in the arena of sexual harassment, Large said. “Sexual harassment no longer has to be motivated by sexual desire. Let’s say you’re in the bathroom and making fun of the guy in the stall next to you. That could be sexual harassment now, whereas before there was a sexual desire component necessary,” Large said. “There’s still a standard of harassment that it has to be severe or pervasive. One offhand comment is probably not going to rise to the level of sexual harassment, but a pattern could, and you’re going to have to monitor that.”

But Jon Light of LightGabler in Camarillo pointed out that the courts have been interpreting sexual harassment cases this way for some time. The change in the law is essentially the statute catching up to the case law. He said employers who engage in the best workplace practices won’t need to make many changes. “Basically, it’s continuing to be vigilant. It really doesn’t change what employers should be doing anyway,” he said.

Light said one glimmer of hope for employers comes in a change in how attorneys’ fees are handled in wage-and-hour cases. “Before, employers could not recover their attorneys’ fees if they won a wage-and-hour case,” Light said. The law changed. “If the employer can prove that the employee brought the action in bad faith, they can recover their attorney’s fees. That’s a pretty high standard, but at least it gives the employer a shot.”

There are also several smaller changes. Paid family leave – which is paid out by the state – will now be available for workers caring for a wider array of family members, including grandparents and grandchildren. Agriculture and landscaping workers will be given additional “cool down” period on top of the usual rest periods to help prevent heat illness. And crime victims will be granted more time off to testify.

Large said one item for employers to look out for is the fact that undocumented immigrants will be eligible for driver’s license in California next year. While the person’s work status should be clearly marked on the new licenses, employers should remember that the cards won’t be sufficient evidence for work rights on their own. “They don’t come with any enhanced employment rights. Assuming the government shutdown ever ends, you still want to use E-Verify and get I-9s. They still need to be legally here to work,” Large said.

A final law to look out for affects piece workers, such as mechanics or massage therapists, who get paid per job at a set rate. The law now says that if an appointment falls through or there are no cars to work on, the worker must be paid minimum wage – even if other jobs from the day would even the employee’s hourly rate out to minimum wage.

“If there isn’t a job for you to do, you may be standing around and cleaning tools or sweeping floors and have no way to earn that piece rate,” Light said. “If the piece rate worker has a period time during day where they’re not able to earn the piece rate, you have to pay them at least minimum wage.”