Employers, please remember that section 5 of most, if not all, of the Industrial Welfare Commission Wage Orders (available for download here) provides that an employee shall be paid, as Reporting Time Pay, half of their usual or scheduled day’s work (not less than two (2) hours, nor more than four (4) hours) at the employee’s regular rate of pay whenever the employee is required to report for work and is not put to work, or is given less than half of the employee’s usual or regularly scheduled day’s work.

Also, where the employee is required to report for work a second time in any one workday and is furnished less than two (2) hours of work on the second reporting, the employee should be compensated for two (2) hours at the employee’s regular rate of pay.

The Reporting Time Pay is not applicable when:

(1) Operations cannot commence or continue due to threats to employees or property; or when recommended by civil authorities; or
(2) Public utilities fail to supply electricity, water, or gas, or there is a failure in the public utilities, or sewer system; or
(3) The interruption of work is caused by an Act of God or other cause not within the employer’s control.

Reporting Time Pay is also not applicable for employee on paid standby status who are called to perform assigned work at a time other than the employee’s scheduled reporting time.

For some compliance tips on meal and rest periods – check out this post too.

Employers should be aware that as of November 1, 2009, they will be required to use a new state income tax withholding table, which increases  by 10% the amount of income taxes withheld based on existing claimed exemptions by the the employee.

For example, if state income tax withholding is currently $400 a pay period on an employee’s regular wages, come November 1st , the withholding will increase to $440.

Payroll departments should be prepared to receive employee inquires and amended w-4 forms after the effective date.

This new change was part of legislation (ABX4-17) signed by the Governor to assist in accelerating tax collection due to the budget crisis at the State level (I know,  not just at the State level).

Littler has a more exhaustive posting on the topic here if you would like more information on this tax issue.

Change in CA Tax Withholding Tables Effective November 1, 2009

Recently, in Johnson v. Arvin Edison Water Storage Dist. (2009) 174 Cal.App.4th 729, the 5th District Court of Appeal in California held that a water district, which is a municipal corporation organized as a sort of quasi-governmental entity for the purpose of storing and delivering water to its community, is in fact exempt from the more stringent State overtime and meal period regulations contained in the California labor code.

The plaintiff argued that the water district was  not only subject to the Fair Labor Standards Act (FLSA – 29 U.S.C. Section 201, et seq.), but also to the more stringent wage and hour regulations contained in the California Labor Code, unless expressly exempted in the code itself.  According to the Plaintiff, under statutory construction rules, the Legislature intended that water storage districts provide their employees with overtime and meal periods in conformance with Labor Code Sections 510 (OT provision) and 512 (meal period provision), and the relevant IWC Wage Order. Plaintiff argued that these Labor Code requirements do not infringe on the execution of the District’s sovereign powers.

The plaintiff also stated that the District was not exempt as a “municipal corporation” under Section 220 of the Labor Code, which would have required the district to immediately pay wages due upon an employee’s termination or resignation under sections 201 and 202 and for penalties for failure to do so under section 203.

In affirming the judgment that dismissed the plaintiff’s complaint, the Court held that unless the Labor Code provisions are specifically made applicable to public employers, they only apply to employers in the private sector. Pointing out that because sections 510 and 512 of the Labor Code do not expressly apply to public entities, they are not applicable to water districts.

Additionally, the Court noted that applying sections 510 and 512 of the Labor Code to the District would infringe on its sovereign power to regulate its workforce and would violate the established rule recognized by the Legislature, that public entities are not subject to a general statute unless expressly included.  Finally, the court clarified that a Water District is a “municipal corporation” as that term is used in the Labor Code and, therefore, exempt from Sections 201, 202 and 203.

Although not as stringent as California wage and hour requirements, the water district employees are not without some protection, such districts should still comply with wage and hour laws set forth in the FLSA.

To keep things interesting in between my legal updates, Justin Nassiri has contributed again with this guest post.  This time, Justin discusses ways to gain expertise during time you might usually waste.  Enjoy!

3 Ways to Develop a Relative Expertise Using Only Dead Time

I went to school with some of the brightest people I’ve ever met, with exceptionally deep and diverse backgrounds. However, I’m continuously surprised at how quickly, even amidst such impressive company, one can develop a relative expertise that can be useful to others.

For any of you that have worked with a startup, you know how many various tasks you’ll do in a given day. You also know how helpful a network of knowledgeable fellow entrepreneurs can be to save you both time and money on everything from SEO to low cost distribution.

I’ve found that it takes only a slight emphasis on any one area to start developing a relative expertise – far from an expansive knowledge, but still of great benefit to those with no knowledge about a subject. I’ve relied on many friends, classmates, and former coworkers who had relative expertise in all sorts of areas – best ways to reach out to bloggers, how to draft a press release, how to get free wifi from Starbucks – and their pockets of knowledge have been invaluable to me.

I’ve found three practices to be extremely helpful in building up an array of practical knowledge that can help out others who have yet to grapple with a certain problem. So, here are three quick tips that can help you start to build and record an area of relative expertise with virtually no time except dead time.

(1)    Setup a Podcast download: services like PodBean will collect and download your favorite Podcasts for you. I prefer The WallStreet Journal This Morning, NPR: Shuffle Podcast, The Economist, and GSB’s Entrepreneurial Thought Leaders. Download these to your mp3 player in the morning – you’d be surprised how much content you can get through during traditional dead time – waiting in line, walking through parking lots, etc.

(2)    Keep track of your research – whenever you’re doing cost comparison (which goes along with just about everything with startups), take the extra second to keep track of the points of differentiation for the options you consider. I find spreadsheets are the best for this, and have been asked for my recommendations on server space, business card manufacturers, and other cost saving analysis spreadsheets more times than I can remember. (Not to mention the hundreds of similar spreadsheets friends have shared with me in the last two years).

(3)    Setup a RSS Reader: I use Google, but there are plenty of great programs out there. Take 10 minutes to find 3-5 blogs on topics that interest you, and subscribe to their RSS. It’s like having all of your industry reports delivered to your front door every morning, and you can skim through when there’s downtime during the day.

I know I wouldn’t be where I’m out without the help and advice of others, so it feels good to be able to give back to others that have not yet delved deeply into a particular area of an industry or entrepreneurship.

Thanks to a new opinion letter by the California Department of Labor Standards Enforcement (DLSE), California employers have a new tool for cutting employment costs during the down economy.  The opinion letters, taken together with Wage Orders and the California Labor Code constitute the bulk of rules governing wage and hour compliance in California.

The August 19, 2009 opinion letter now authorizes employers to reduce exempt employees’ workweek from 5 days to 4 days, along with a 20% pay reduction, without violating the exemption classification, so long as the employee still meets the minimum requirements for exempt status, such as the minimum salary (currently 2 times minimum wage based on full time employment, or $2,773.33 per month) and the overall work duty requirements.

The opinion letter was in response to an inquiry by an employer experiencing economic difficulties who sought to reduce hours and salary until economic conditions improved.

As many of you may know, businesses are getting more creative in finding ways to save money on health care costs as those costs continue to rise.  One of the methods that employers have turned to more recently is workplace wellness programs [article discussing Safeway's plan]. The idea is that these wellness plans help the employer get ahead of the cost curve by enticing employees (usually though voluntary incentives) to participate in health risk assessments and preventive medical treatment before unattended health issues turn into large hospital claims, which usually make up the largest portion of employer’s health care costs.

This article is not an exhaustive review of the legal technicalities implicated by the adoption of a wellness programs; rather, it is designed to put employers on notice of some of the issues that are out there and some pending rule changes that may impact these plans. We will revisit these issues again later this year when the expected rule changes take effect.

HIPAA and Wellness Programs, A Simple Overview:

Existing regulations under HIPAA (Health Insurance Portability and Accountability Act) place certain restrictions on wellness plans.  Many wellness programs feature financial incentives for employees to use them, such as reduced premiums or deductibles. Other programs charge higher premiums if people do not enroll in the wellness program. HIPAA’s goal is to be sure that these incentives do not unduly impact any particular class of employees, resulting in unfair discrimination.

While there are many points to be aware of in designing a wellness program, a couple points stand out. The first of which is the limits on incentives that can be used to entice participation in the program. Generally, a program cannot exceed 20% of the cost of the health coverage in setting the amount of the incentive or reward.  Whether this 20% limit is a percentage of the total health coverage cost or just the employee’s share of the cost of coverage depends on how the plan is structured as it relates to dependents, spouses, etc..  Just know there are limits on the incentives.  Rewards or incentives for the employee to participate in the wellness program may take the form of rebates, or contributions toward the employee share of the premium, waivers of co-pays or deductibles, or other variations.

HIPAA also requires that there be waivers from the wellness program for certain individuals. For example, an employer might offer a 20% premium discount for employees who have an annual cholesterol test and achieve results below a certain cholesterol count. The employer would also have to offer reasonable alternatives or waivers to those who are medically unable to achieve those cholesterol levels.

In addition to the requirements under HIPAA, it is important to keep in mind that the Americans with Disabilities Act (ADA) and California Fair Employment and Housing Act (FEHA) also impose requirements on wellness programs. Complying with HIPAA’s nondiscrimination rules and wellness program requirements does not ensure compliance with the ADA or FEHA regulations.

Wellness Programs to be Effected by New Regulations?

New regulations and rule making on the horizon may impact workplace wellness programs. The employment provisions contained in Title II of the Genetic Information Nondiscrimination Act (“GINA”), prohibit employers from discharging, refusing to hire or otherwise discriminating on the basis of genetic information.  Although, this new law becomes effective November 21, 2009, final GINA regulations have yet to be passed.  The Equal Employment Opportunity Commission (EEOC) has recently approved a proposed final rule to implement Title II.  The proposed regulations are being reviewed and are expected to be published by the EEOC just prior to the law’s effective date.

In essence, GINA prohibits employers from discharging, refusing to hire, or otherwise discriminating on the basis of genetic information, and from intentionally acquiring genetic information about applicants and employees. There are also requirements on how the employer should handle the confidential information. GINA defines “Genetic information” broadly, but does permit employers to acquire genetic information when it is requested as part of an employer’s “health or genetic services, including such services offered as part of a voluntary wellness program.” It is expected that the EEOC will clarify the nature and scope of this exception in the final regulations before November 21, 2009.

In requesting comments on its proposed regulations, the EEOC acknowledged that under the Americans with Disabilities Act, the Commission has said that a wellness program is voluntary if it neither requires employees to participate nor penalizes employees for non-participation.  The issue then becomes at what point do incentives, rebates, or other employer tools turn the wellness program into something less than voluntary.

Out of about 40 comments received by the EEOC during its information gathering process, approximately 16 of those addressed the issue of whether and when a wellness program should be considered “voluntary” under GINA.  Of these 16 comments, 4 requested that the EEOC’s final regulations clarify that a wellness program would not be “voluntary” if the program provided individuals any financial inducement to provide “genetic information.”  The remaining comments requested the EEOC issue a final rule clarifying that a wellness program would be “voluntary” if the inducement provided to employees fell within the HIPAA 20% cap governing financial rewards (discussed above) for participating in wellness programs covered by HIPAA.

As many employers inquire about family medical history in the course of administering wellness programs, usually through “health risk appraisals” aimed at identifying health risks, and many wellness programs also are made available to family members who participate in group health programs, the final GINA regulations will affect the design and implementation of wellness programs. Because the EEOC also enforces the ADA, whatever position it takes on the GINA regulations, will likely become its enforcement position for determining whether wellness programs violate the ADA.

While the ADA normally requires that employee medical inquiries and examinations be “job-related and consistent with business necessity,” it permits employers to conduct “voluntary” medical examinations, including “voluntary” medical histories, which are part of an employee wellness program.  As with GINA, the unanswered question is whether a program remains “voluntary” under the ADA if it provides a financial incentive to answer medical inquiries or participate in medical examinations.

In previous comments by the EEOC, the agency has stated that providing a monetary incentive may render the program involuntary, depending on factors like the size of the incentive, and whether the incentive results in significantly higher premiums for employees not participating in the wellness program. The EEOC, as recent as March 2009, stated in an informal opinion that requiring a health risk assessment as a prerequisite for obtaining health insurance coverage would violate the ADA.

Employers will need to keep an eye on these developments and evaluate whether their wellness programs need any modification due to changing regulations.  Employers should not be scared away from implementing a wellness program.  This kind of creative problem solving is what is necessary today for those businesses looking to minimize costs and remain competitive.

The following is a guest post by Justin Nassiri, Stanford MBA Grad and Internet Start-Up entrepreneur.  He makes some great points. Mr. Nassiri’s internet company will be launching in a few days, you can follow it here, and see Mr. Nassiri’s profile here:

If you’re anything like me, the thought of posting anything on Twitter for the world to see is as unappealing as it comes. However, I’ve come to view Twitter as the best free marketing tool available to any company of any size. So for those of you still on the fence, here’s a quick run down on why you should join Twitter and how you can use it.

Twitter is great for 3 things:
(1) hearing what your customers are saying about you and your competitors,
(2) learning about trending topics in your industry,
(3) providing information in a Facebook newsfeed-esque way in a (potentially more) professional manner than FB

For both (1) and (2) very little is required:

• Download “TweetDeck” – it will allow you to set up searches for up to 12 categories (examples: BlueTree, Design, Outsourced Help, 99Designs)
• Any time anyone (regardless of whether you know them) mentions these words on twitter, they will show up in individual search feeds
• You can respond to them privately (if they are “following you”) or publicly
• You don’t HAVE to be that active on Twitter to assist with (1) or (2), but there is a certain amount of credibility you can develop by growing a following of users (more about this below)

For (3) you will need to gain “followers”, which are similar to Facebook friends but are not necessarily people you know. Here’s a few tips on how to get started:

• When you join Twitter it’ll pull info from your address book that’ll get you started. As you search around you can start following more people you know, who will follow you back (out of common courtesy)
• The best way to gain “followers” is by posting useful information on Twitter (people are more likely to “Retweet” what you say, and thus boost your exposure, if you share an interesting article on a relevant topic rather than if you Tweet what you had for lunch)
• Since Twitter allows a max of 140 characters, people use URL shortening websites to save space. I use www.shorturl.com to create a unique url. (An advantage here is that most sites like this have URL counters so you can track how many people view the unique URL you post – this is a good way to see what type of information your followers ReTweet and find interesting)

There’s a lot of different analysis of the most effective way to gain followers…you’d be surprised at how much research goes into this. In general, I’d recommend:

• Tweet 3 times a day at different times
• Websites like www.twuffer.com are great, as you can queue tweets to go out at certain times. The best advice I’ve gotten here is to spend about an hour on Monday morning queueing up Tweets for the rest of the week, and then don’t worry about it after that.
• Put your best/most important Tweets between 11am-1pm ( The number of RTs at this time are the highest, probably since people are checking at lunch)
• The highest ReTweet topics I see are Top 10 style topics on increasing your efficiency, best online marketing practices, best [insert entrepreneur topic] practices, etc

It may not fit your ideal for personal privacy or socializing, but when it comes to online marketing you’re missing a big opportunity if you don’t use it.

Great points, thanks for the information Justin.

Federal contractors and subcontractors with Federal Acquisition Regulation verification (FAR) clauses in their contracts are reminded that they must use the E-Verification system for I-9 compliance effective September 8, 2009 (the US Citzenship and Immigration posting is here).

E-Verify compares information from the Employment Eligibility Verification Form (I-9) against federal government databases to verify workers’ employment eligibility. The system facilitates compliance with federal immigration laws and helps to deter unauthorized individuals from attempting to work and also helps employers avoid employing unauthorized aliens.

All U.S. employers must complete and retain a Form I-9 for each individual they hire for employment in the United States. This includes citizens and non-citizens. On the form, the employer must examine the employment eligibility and identity document(s) an employee presents to determine whether the document(s) reasonably appear to be genuine and relate to the individual and record the document information on the Form I-9. The list of acceptable documents can be found on the last page of the form.

The Form and Instructions are here, and in Spanish here.

California employers who order their labor posters and postings from the various sources out there, should also be aware and remember that the Employer is also required to post a copy of the appropriate Wage Order from the Industrial Welfare Commission of the California Department of Industrial Relations.  Do not forget this component of the California posting requirements.

When hiring someone to complete a project or series of tasks for you, it is sometimes tempting for the person doing the hiring to classify that worker as an independent contractor.  It is cheaper for the person doing the hiring because employment taxes do not have to be paid, certain insurance requirements do not have to be met, and certain benefits do not have be provided. Also the employer may not have to comply with wage and hour laws (i.e., overtime, meal and rest periods, reporting time pay, etc..).

This is why some businesses go ahead and classify that new worker as an independent contractor rather than an employee. But just because the business classifies the worker as an independent contractor, does not mean the various regulatory agencies will do the same, and doing so may get the business in trouble.  Regulatory agencies favor the employee and the employee model of hiring for work.  The IRS and State Franchise Tax Board would also like for you to designate the person as an employee so you have to pay the employment taxes.  They lose countless amounts of money each year to underreported self employment income.

In order to stay out of trouble with the various regulatory agencies you need to weigh several factors (developed by case law) to determine whether the person is truly an independent contractor or an actual employee. You should keep records of the decision and why the decision was made. You want information in the file that will support your decision that the person really is an independent contractor, if you go with that classification.   Generally speaking, the more control you exert over the person, the more likely the person will be classified as an employee. If you direct their work, tell them when they have to report, pay for their tools or supplies, give them any training, set the hours of work, require they only work for you, and things of this nature, you have likely exerted sufficient control over the person for them to be classified as an employee.  If the person doing the work uses their own tools, can subcontract the work to someone else, can report to work on their schedule, does work for various other individuals or businesses, provides their own training, and does not have to report like other employees, tends to suggest the person is a true independent contractor.

There are other factors different agencies look at, and some safe harbor provisions an attorney can advise you about.

The IRS has a publication discussing worker classfications.  Visit the Department of Labor’s site for discussion related to proper classification here.  Finally, the Employment Development Department has an valuable resource here.

You should also have an independent contract agreement in place with anyone you designate as an independent contractor to recite all the facets of the agreement and memorialize the lack of control you have exerted over the person in terms of the business relationship.

Jeewarat v. Warner Bros. Entertainment (CA2/5 B212323 9/3/09):

The 2nd District Court of Appeal for California has reversed the lower courts grant of summary judgment in favor of the employer, and held that when an employee causes a car accident while driving home from a 3 day business conference, even though on his normal commute route, the employer may be held liable for the injuries sustained while on the “special errand” for the employer where the employer cannot show that the employee was acting on his own interest or so deviated from the scope and course of employment that the chain of causation may be considered broken. Ok, that was a mouthful of a sentence, but I think you get the point.

You can find the opinion here.

In Rutti V LoJack, the Ninth Circuit Court of Appeal looked at the issue of which activities performed by an employee should be counted as “hours worked” or are properly disregarded as non-compensable activity.  This case highlights the sensitive issue of working of the clock. The Court applied rules under both the Fair Labor Standards Act (FLSA) and California Labor Code.

Rutti it is an important wage and hour case for many reasons, but this post is concerned with the commuting time issue brought up in Rutti.  In that regard, the decision reemphasized the familiar rule that commuting time (i.e., travel time from home to the first place of employment for the day) need not be paid under the FLSA or California Labor Code.  Both Federal law (29 USC Sec. 254) and the California Labor Code (Labor Code Section 510) provide that time spent commuting to and from the place where the employment activities are carried out is generally not compensable “time worked.”

The emphasis in the Rutti case was that the commuting rule applies even where the employee is required to use a company vehicle and is restricted from making unauthorized stops or engaging in personal business. Rutti did allow that an employee’s travel time could become compensable if she were required to perform any “additional legally cognizable work” during the commute.  The Court gave no specific examples of such work; however, making work related cell phone calls or similar activity could be likely examples of such activities that would convert the non-compensable commuting time into on-the-clock work activity that would be compensable.