California Employee Rights Advocate : California Labor Attorney & Lawyer : Southern CA Employment Law : Los Angeles, Orange County : United Employees Law Group

People call in everyday with various employment issues or concerns but what is interesting to me is that the majority of the time they have one of these 5 issues and they didn’t even know it. I have had clients tell me that they just assumed that they were being paid and treated properly because the company that they work for is so big and well known:”they must know what they are doing, right?!” The truth is that labor violations occur in any size business and that it’s the employee who needs to arm themselves with knowledge of their rights or at least contact a California labor law attorney with any questions or concerns.

1. Misclassified as an Exempt Employee (salary)
….when in fact they should be Non-Exempt (hourly). Companies are not allowed to arbitrarily classify their employees as exempt from overtime. California labor laws have set strict guidelines regarding who will be considered exempt. The most important thing to remember is that your exemption status is based on your actual job duties, not on your job title or on the job descriptions given to you by the company.

2. Working Off the Clock
Non-Exempt employees are often pressured to work while they are not clocked in. This could mean coming in early to work to prepare for the day or clocking out and remaining to finish work at the end of the day. Often times employers will not come right out and tell their employees that they must work off the clock, but the employer might pressure the employees by threatening with write-ups or termination if all of the work is not completed before the end of the day and in the same breath make it known that overtime is not allowed. Other times it’s more systematic, for example: an employee must spend 10 minutes in the morning booting up the computer system and logon to their computer before they are granted access to use the time keeping system. Or route drivers often have to load their trucks but their time clock doesn’t start until their first stop.

3. Misclassifying Employees as Independent Contractors
Often time employers will classify employees as independent contractors in order to avoid paying overtime, additional taxes and insurance. Again California Labor law has set guidelines regarding who can be classified as an Independent contractor. In order to be an independent contractor you should be responsible for the following:
• Make your own schedule
• Use your own equipment, vehicle, tools etc
• Not have to wear a uniform for the other company
• Not have a supervisor or manager directing you on a regular basis

4. Not Providing Suitable Seating for Employees
Private Attorneys General Act ("PAGA") states "nature of the work reasonably permits the use of seats." Recently large companies like Home Depot, Whole Foods, Costco and Nordstrom have all been in the courts for this violation. Typically for not providing seating to cashiers or other positions where the employee is somewhat stationary.

5. Failing to pay Reporting Pay
Reporting pay is owed when an employer has an employee come to work but the decides that person is not needed for the day and sends them home or works less than half of the shift they were scheduled to work. At this point an employer is required by California labor law to pay this employee for half of the usual or scheduled day's work. This amount should be no less than two hours or more than four hours at the employee's regular rate. The exception is that employee was unable to work due to acts of God, threats to employee or property, etc.

Labor law is complex if you have any questions regarding your employment it is recommended that you contact a California labor law attorney who can help you understand your rights and in many cases will review your situation without charge.

If you have any questions about this article or our blog, feel free to call us at:

Long Beach – (562) 256-1047
Los Angeles – (213) 261-0229
San Francisco – (415) 200-0012 or (415) 230-2755
San Diego – (619) 342-1242 or (619) 272-2193

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Both houses of the California Legislature recently passed S.B. 459 and sent it on to Governor Brown for signature. S.B. 459 prohibits and punishes the "willful misclassification" of employees as independent contractors; S.B. 459 would impose stiff civil penalties for each violation and even higher penalties if a "pattern" of violations is found.

At the same time the IRS has unveiled an employer forgiveness program, called the Voluntary Classification Settlement Program. Wherein if an employer voluntarily comes forward and reports that they have been misclassifying their employees as independent contractors the IRS would require that they only pay approximately 10 percent of the back taxes. The IRS also promises no audits and no penalties on unpaid taxes.

However the IRS has no control in courts as far as labor laws are concerned so the companies that do come forward will be opening themselves up for lawsuits for overtime back pay. With the new legislation S.B. 459 and its stiff civil penalties for each violation and even higher penalties if a "pattern" of violations is found, this could be very costly to employers.

S.B. 459 creates two new unlawful practices

1. "Willful misclassification" of an individual as an independent contractor.
2. Charging a willfully misclassified worker a fee, or making any deductions from compensation for any purpose that would have violated the law governing deductions from pay — Labor Code §§221 and 224 — had the worker properly been classified as an employee.

It’s important to also note the change in the definition of "Willful misclassification". Previously the definition of "willful" in earlier versions of the legislation was "voluntary and intentional" the new bill redefined “willful” as "avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.” Knowingly being the operative word. "Knowing" is interpreted by the courts as including constructive knowledge, which in turn incorporates what the employer allegedly should have known — an inexact and subjective standard applied post hoc by a finder of fact. In other words, even if the employer believed they were classifying the independent contractors according to law the employer is still expected to know otherwise.

If you are currently classified as an independent contractor you should have control over the following:

- Make your own schedule
- Use your own equipment, tools, vehicle
- Not required to wear a uniform or clothing with company logo
- Use/ purchase your own materials to complete work
- No constant supervision of tasks and performance

If any of these conditions are not met you should contact an experience California labor law attorney to review your situation. You may be entitled to overtime back pay as well as penalties for missed meal and rest breaks.

If you have any questions about this article or our blog, feel free to call us at:

Long Beach – (562) 256-1047
Los Angeles – (213) 261-0229
San Francisco – (415) 200-0012 or (415) 230-2755
San Diego – (619) 342-1242 or (619) 272-2193

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Answer: Department of Labor, the Internal Revenue Service, and Congress

Our budget deficit has all three of these entities working towards a common goal: tax revenue. They are putting pressure on employers, big and small, to make sure they are properly classifying their workers. As an independent contractor you would be responsible for paying your own taxes and you wouldn’t be covered under the company’s worker compensation insurance or unemployment insurance; making it near impossible to get worker compensation if you are hurt or unemployment benefits if you are fired. Essentially all of the financial responsibility is on the independent contractor. The employer is relieved of a substantial amount of taxes and insurance costs by hiring independent contractors. The issue is that companies can’t just decide that you will be an independent contractor. There are specific laws dictating who can and cannot be classified as such. An independent contractor should be independent enough from the company to have control over the following:

• Scheduling; the freedom to create and maintain their own schedule so long as major deadlines are met.
• Equipment; should be able to chose what type of their own equipment they will use to complete the work including vehicles.
• Uniforms; should not be forced to wear the hiring company’s logo/ uniforms as if they are an employee.
• How the task is completed; should not be told in detail how to perform the work. End goals are really all the hiring company should be imposing.

"We Can Help" - The Department of Labor:

Independent contractors are not protected under the Fair Labor Standards Act protections for issues like minimum wage and overtime or other benefits, so often wrongly classified independent contractors do not receive legal protections they are entitled to. The "We Can Help" campaign encourages employees to seek aid from the DOL if they believe they are not being paid correctly or are misclassified. The DOL intends to further focus on fixing worker-classification issues in 2011 by adding 90 new enforcement personnel and an additional $12 million to the Wage and Hour Division's budget.

Even More "Help"- The Internal Revenue Service:

Employee-classification is a front runner with the IRS because employers are not required to pay social security, Medicaid, unemployment, or other payroll taxes on independent contractors. In an attempt to rectify these improper misclassifications the IRS will be adding 100 new enforcement agents and allocating $25 million to investigating misclassification of employees as independent contractors. IRS audits may also impose penalties and require payment of back pay and taxes for workers previously misclassified. The Treasury Department estimates an increase of by $7 billion over the next ten years.

Congress: Proposed Legislation Affects Even Small Employers

Congress offered up new legislation regarding worker classification; The Fair Playing Field Act of 2010. This bill is intended to amend Section 530 of the Revenue Act of 1978, which currently provides a safe harbor for Companies to treat employees as independent contractors for tax purposes if the company has a logical basis for treating them as independent contractors and has consistently reported their income on Form 1099s. If passed this bill would eliminate that safe harbor and employers would be open to larger penalties for worker misclassification, even good faith mistakes.

Employee Misclassification Prevention Act, is another bill that has recently been proposed. It focuses on classification for purposes of compliance with the Fair Labor Standards Act. That Act was introduced in April 2010 and would create a new FLSA violation: misclassification of an employee as an independent contractor. The Act would also:

• Impose notice and record-keeping requirements on businesses with independent contractors,
• Impose fines on businesses for each employee misclassification,
• Expand FLSA's anti-retaliation provisions to cover independent contractors, and
• Award triple damages for violations of minimum wage or overtime laws for employees wrongfully    classified.

The Fair Playing Field Act and the Employee Misclassification Prevention Act are both intended to correct perceived abuse of the independent contractor label, the acts contain different tests for determining who is an independent contractor and who is an employee, which may lead to even more confusion surrounding the issue.

To be safe you should contact a California labor Law attorney to examine your job duties and work conditions to determine your worker classification status. If you have been improperly classified as an independent contractor a California employment attorney could help you recover back pay for minimum wage, overtime, and benefits.

If you have any questions about this article or our blog, feel free to call us at:
          Long Beach – (562) 256-1047
          Los Angeles – (213) 261-0229
          San Francisco – (415) 200-0012 or (415) 230-2755
          San Diego – (619) 342-1242 or (619) 272-2193 

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California labor laws are rather specific in regards to how employers should pay employees on a “piece rate” basis; employers are obligated to pay overtime when the employees work over 40 hours in a workweek. A recently filed class action overtime suit illustrates the dangers of making the assumption that overtime is not owed to piece rate workers. The suit, Case No. 6:10-cv-00346, N.D. New York, alleges that Wave Comm, an Arizona-based cable company, failed to pay overtime to its cable installation technicians.

Piece rate or piecework is defined as work paid for according to a set rate per unit. Webster’s Collegiate Dictionary. A piece rate must be based upon an ascertainable figure paid for completing a particular task or making a particular piece of goods. The piece rate earned must equal or exceed the State’s minimum wage rate for all hours worked. (See appropriate IWC Order and Minimum Wage Order and DEPARTMENT OF INDUSTRIAL RELATIONS DIVISION OF LABOR STANDARDS ENFORCEMENT document DLSE-2005-W-1 Revised 6/2005)

The technicians were paid a fixed amount of money for different types of installation-related tasks, but did not receive overtime compensation for the numerous weeks in which they worked overtime hours.This is not the first suit such filed by these types of technicians against the cable industry.

Even though paying employees on a piece rate basis is permissible under both the FLSA and state law, employees should be aware not only of their entitlement to be paid overtime, but the specific formula for used to calculate the amount of overtime pay. In general, when an employee is paid solely on a piece rate basis and works overtime hours, the employer determines the employee’s regular rate by dividing the employee’s total weekly earnings by the amount of hours worked in that workweek. The employee is then entitled to one-half of the regular rate for each hour worked above 40, in addition to their regular piece rate compensation.

For instance, if an employee paid on a piece rate basis works 45 hours and earns $360.00 in that workweek, the employee’s regular rate for that workweek would be $8.00 per hour. The employee would then be entitled to an additional $20.00 in overtime (half the regular rate, or $4.00, multiplied by five overtime hours). In that workweek, the employee would receive $380.00 in total compensation.

It is also acceptable to pay piece rate employees one and a half times the piece rate for each “piece” produced during the overtime hours, provided that this is agreed to in advance and that the piece rate exceeds minimum wage and is paid for all hours worked up to 40 in the workweek.

If you believe that you may have received your all amounts you earned as a piece rate employee it is recommended that contact a California Employment Attorney to make sure your rights are protected.
 

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In California Quality Assurance (QA) Engineers, often work long hours and are often misclassified as exempt from overtime. Nevertheless, they might be entitled to California QA Engineer Overtime, because the employer has improperly classified employees as exempt when in fact they employee should be classified as non-exempt (hourly), and thus has failed to pay overtime. And In some instances, QA engineers have been classified as independent contractors, meaning the company is not even paying benefits.

More and more, overtime lawsuits are being filed against companies and some have been settled. For instance, Siebel Systems has settled to pay $27.5 million to about 800 software engineers, and IBM is settling $65 million to technical and customer support workers.

A quick Google of quality assurance engineer jobs posted on the Internet found the following tagged onto the job descriptions:

• You will work long hours (possibly some over time up to 10:00 PM);
• Must be willing to work overtime (Aerotek);
• Ability to work overtime as necessary on evenings and weekends (a mobile game company);
• Must be able to work overtime (Net Temps);
• Must be able to work overtime often (Interplace); and
• Willing to work overtime when requested.

Most of these positions are salaried. And chances are, these positions should be non-exempt according to California labor Laws, which means you are entitled to overtime. (Conversely, exempt means you are not entitled to overtime.)

According to the California Labor Code §515.5 (below), the following--a typical QA engineer job description posted by Yahoo--should be non-exempt and it will only be exempt if it meets the salary requirement of $37.94 hourly rate or salary ( based on a 40-80 hour work week) of the minimum monthly and annual exemptions at $6,587.50 and $79,050.00, respectively:

"You will contribute to the design and implementation of test plans, test cases and validation, by creating and using test tools of complex, multi-tier software. You will also interface with other QA engineers, developers, and product managers and operations teams to complete projects. You should possess skills in testing and implementing tests on components written in C++/Perl as well as testing API-based web applications. The ideal candidate should have a proven history and dedication to SQA processes, particularly Agile / Scrum testing and implementation."

If this job description sounds familiar, you are likely entitled to overtime. You should contact a California labor law attorney to find out if you have been misclassified as exempt; if so, you may be entitled to considerable overtime depending on your quality assurance engineer pay and how many hours you worked.

California Labor Code §515.5

(a) Except as provided in subdivision (b), an employee in the computer software field shall be exempt from the requirement that an overtime rate of compensation be paid pursuant to Section 510 if all of the following apply:
(1) The employee is primarily engaged in work that is intellectual or creative and that requires the exercise of discretion and independent judgment, and the employee is primarily engaged in duties that consist of one or more of the following:
(A) The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications.
(B) The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to, user or system design specifications.
(C) The documentation, testing, creation, or modification of computer programs related to the design of software or hardware for computer operating systems.
(2) The employee is highly skilled and is proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering. A job title shall not be determinative of the applicability of this exemption.
(3) The employee's hourly rate of pay is not less than forty-one dollars ($41.00) thirty-six dollars ($36.00), or the annualized full-time salary equivalent of that rate, provided that all other requirements of this section are met and that in each workweek the employee receives not less than thirty-six dollars ($36.00) per hour worked. The Division of Labor Statistics and Research shall adjust this pay rate on October 1 of each year to be effective on January 1 of the following year by an amount equal to the percentage increase in the California Consumer Price Index for Urban Wage Earners and Clerical Workers.[The strike out text refers to pre-2008 law]
(b) The exemption provided in subdivision (a) does not apply to an employee if any of the following apply:
(1) The employee is a trainee or employee in an entry-level position who is learning to become proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering.
(2) The employee is in a computer-related occupation but has not attained the level of skill and expertise necessary to work independently and without close supervision.
(3) The employee is engaged in the operation of computers or in the manufacture, repair, or maintenance of computer hardware and related equipment.
(4) The employee is an engineer, drafter, machinist, or other professional whose work is highly dependent upon or facilitated by the use of computers and computer software programs and who is skilled in computer-aided design software, including CAD/CAM, but who is not in a computer systems analysis or programming occupation.
(5) The employee is a writer engaged in writing material, including box labels, product descriptions, documentation, promotional material, setup and installation instructions, and other similar written information, either for print or for onscreen media or who writes or provides content material intended to be read by customers, subscribers, or visitors to computer-related media such as the World Wide Web or CD-Roms.
(6) The employee is engaged in any of the activities set forth in subdivision (a) for the purpose of creating imagery for effects used in the motion picture, television, or theatrical industry.

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It is not unusual for employees to reach into their own pocket to pay expenses that relate to their job. A typical list includes the following:

• Using your car for business
• Cleaning clothing required to be worn at work
• Purchase, maintenance or loss of tools and equipment
• Expenses related to attending training or educational materials
• Travel
• Cell phones
• Lodging and meals
• Entertainment

An easy way to figure out if an expense should be paid back to you is to simply ask yourself the following question:

“Is this an expense that my company expects me pay for their benefit?” If the answer is yes you are probably entitled to be reimbursed.

To state it another way, the law requires employers to pay employees for any business expenses that arise out of an employee’s reasonable performance of job duties.

For example, if an employee must drive a car (other than to commute to and from work), pay for client entertainment, or make cell phone calls then Section 2802 of the labor code requires the employer to reimburse the employee for the expense.

An employee is entitled to recover all or a portion of unreimbursed business expenses that was paid in the last four years even if he agreed to forgo reimbursement, took an amount that is less than his costs or agreed a salary or commission that was supposed to include reimbursement for these expenses.

This law also covers anyone who was misclassified as “independent contractor”. There are many instances where a person believes he is an independent contractor but in fact is an employee. It does not matter if the error was made by an honest misunderstanding or intentionally. It also does not matter if the misclassification was made by the employer or the employee. It is the law that decides who is an employee and all the rights given to employees.

The law specifically requires an employer who provides a fixed expense allowance or an enhanced commission rate, ensure that expense
reimbursement payments fully cover all necessary expenses. The enhanced portion of any compensation that is supposed to cover all expenses paid by an employee must be identified by the employer by setting forth the method or formula used.

It is the employer’s obligation to show that all expenses incurred by its employees have been fully reimbursed because Labor Code Section 2804 forbids an employer to permit an employee to waive the right to reimbursement. Employees must be reimbursed for all necessary expenses of the employer.

Employers are liable for business expenses even when an employee has failed to submit required expense reports. The law focuses not on whether an employee requests reimbursement but rather on whether the employer either knows or has reason to know that the employee has incurred a reimbursable expense. If the employer has that actual or constructive knowledge, then it must exercise due diligence to ensure that the employee is reimbursed.

An employee should not pass up his right to receive reimbursement because no claim was made in the past or there is little or no documentation. This could occur when an employee does not understand his rights was misinformed or was discouraged from making a claim.

Not only does an employee have the right to reimbursement for business expenses but has the right to recover attorney’s fees, interest and penalties.

We as California labor lawyers know that an employee is not like a company that has the money to pay attorneys to protect them. That is why our law firm provides representation paid solely from money that we recover from the employer. In other words we help level the playing field.

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Worker misclassification is becoming a new hot button issue at both the state and national levels. It has been a long standing practice of employers to misclassify employees as independent contractors so as to avoid payment of taxes, unemployment benefits, workers compensation benefits, overtime, etc. This is a problem for California workers, because they are being denied compensation and benefits to which they are rightfully entitled. It is also a problem for the state of California, which continues to struggle with a huge budget deficit.

The test for determining whether an individual is an employee or an independent contractor depends on the state or federal law being applied. Under common law, an individual is considered an employee “if the person contracting for the services has a right to control and direct both the results of the services and the means by which those results are achieved.”  
At the federal level, the IRS and Social Security Administration have developed a 20-factor test for determining the level of control held by the person contracting for the services. The factors focus on three primary components:

• Behavior control – the right of the worker to control how a specific task is accomplished
• Financial control – the right of the worker to control the “business aspects” of accomplishing a specific task
• Relationship of the parties – how the parties perceive their relationship 

At the state level, California has several different tests including those found in the California Labor Code and California Tax Code.  When enforcing wage and hour laws, the California Division of Labor Standards Enforcement (DLSE) uses the “economic realities” test,  which like federal law focuses on the degree of control held by the person performing the services. As Jonathan Siegel explains, there are many questions that can be asked, including whether the worker is performing specialized services and providing the required tools and equipment.
 

To ensure that workers are being properly classified, the IRS has developed a new audit program for employment taxes. Beginning in February 2010 and lasting through 2013, approximately 6,000 companies will be audited. In addition to resolving any worker misclassification issues, the IRS plans to collect data that will be used to improve future employment audits. 

President Obama is also doing his part to crack down on worker misclassification. The proposed budget for the fiscal year of 2011 provides the Department of Labor with an additional $25 million to increase enforcement personnel and issue grants to bolster the states’ ability to address this problem. 

If you believe your employer has wrongfully classified you as an independent contractor, contact a knowledgeable California labor law attorney. An attorney can explain your rights and may be able to collect many benefits to which you are entitled.

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Under California labor law what determines whether a worker is an independent contractor or an employee depends on several different things, all of which must be well thought-out, but none of which is a sole determinant.

Among many factors are these three important considerations:

• Does the employer have direct control or the power to control the manner and means used by the worker to carry out his/ her work?
• Does the employer supply the worker with the tools and place to implement the work?
• Does the worker have a set schedule or is he/ she at liberty to establish his own schedule?

Generally, California labor law dictates that the more control an employer has over a worker's day-to-day responsibilities, the more likely the worker is an employee. The less control an employer has over a worker's day-to-day responsibilities, the more likely the worker is an independent contractor.

What is the impact of a misclassification of workers?

Whether the misclassification of workers by employers is deliberate or not deliberate, the consequence to the employer is the same. California labor law imposes costly penalties on employers who have improperly classified an employee as an independent contractor. Depending on the circumstances, an employer may also be liable for other damages under applicable laws, such as a judgment for wages owed, payroll taxes or medical expenses for a worker who has been injured on the job. California labor laws as well as federal labor laws are strict when it comes to allowing for independent contractor status.

Misclassification of independent contractors prevents workers from enjoying the benefits and protections afforded employees under many of today's California labor laws, including minimum wage and overtime, meal and rest periods, workers' compensation, unemployment and disability insurance benefits and anti-discrimination laws. Talk to a California labor law attorney when deciding on classification- it is an “ounce of prevention.”

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