Minimum Wage, New Labor Laws, Pay

2017 LABOR LAW CHANGES

The legislature passed many new employment laws or tinkered with old ones.  Below are a three of the most significant changes.

MINIMUM WAGE INCREASE

 In California, the minimum wage will increase to $10.50 per hour on January 1, 2017 for employers who have more than 25 employees.  The people of San Diego passed a ballot proposition in June that increased the minimum wage to $10.50 per hour and will further increase it to $11.50 per hour on January 1, 2017.  Workers get the highest minimum wage rate among federal, state, or local minimum wage laws.

The Federal Minimum Wage will not change for now, but one aspect of it might.  On December 1, 2016, the minimum salary for exempt employees was scheduled to increase to $47,476.00 per year.  That is more than double the old federal minimum salary requirement and is higher than most state minimum salary requirements.  However, a judge in Texas recently ruled that the law would NOT go into effect on December 1.  It might go into effect later; however, the judge may permanently bar the change.  Either way, the judge’s ruling will probably get appealed.

The minimum salary in California will increase to $43,680.00 for exempt employees on January 1, but only for employees who work for employers who employ more than 25 employees.  Why does the state minimum salary distinguish between employers who employ more or less than 25 employees?

The answer is the way in which the minimum wage works in California.  The minimum salary in California is twice the state minimum wage times the number of hours a full- time worker, at 40 hours per week, works in a year.  In other words, the number of hours the state presumes a full-time worker to work in a year is 2080 hours.  Two Thousand Eighty hours times $21 per hour (twice the $10.50 state minimum wage for employers who employ 26 or more employees) equals $43,680.00.  As of January 1, that will be the minimum salary for exempt employees who work for an employer who employs at least 26 employees.  The state minimum wage for all other employees (those who work for an employer who employs fewer than 26 workers) is $10 per hour.  Thus, for employers who employ 25 or fewer employees, the minimum annual salary for exempt workers is $41,600.00 (2 x $10/hour x 2080 hours) or $800.00 per week.

The California minimum wage rate will increase every year through 2023.  The scheduled increases are below:

For employers who employ at least 26 employees:

  1. On January 1, 2017, the minimum wage will increase to $10.50 per hour.
  2. On January 1, 2018, the minimum wage will increase to $11 per hour.
  3. On January 1, 2019, the minimum wage will increase to $12 per hour.
  4. On January 1, 2020, the minimum wage will increase to $13 per hour.
  5. On January 1, 2021, the minimum wage will increase to $14 per hour.
  6. On January 1, 2022, the minimum wage will increase to $15 per hour.

For employers who employ 25 or fewer employees:

  1. On January 1, 2018, the minimum wage will increase to $10.50 per hour.
  2. On January 1, 2019, the minimum wage will increase to $11 per hour.
  3. On January 1, 2020, the minimum wage will increase to $12 per hour.
  4. On January 1, 2021, the minimum wage will increase to $13 per hour.
  5. On January 1, 2022, the minimum wage will increase to $14 per hour.
  6. On January 1, 2023, the minimum wage will increase to $15 per hour.

The minimum yearly salary for exempt employees will increase by twice the minimum wage times 2080 hours.  The governor has the ability to delay implementation of the above minimum wage schedules.

FAIR PAY ACT

In 2015, California amended Labor Code §1197.5 to prevent employers from retaliating against employees who make Fair Pay Act claims.  That law also made it easier for employees to prove unequal gender pay.  On January 1, 2017, the law will now allow employees to make Fair Pay Act claims based on differences in pay between employees of different races and ethnicities as well as gender.  In addition, past salary levels cannot justify lower pay.

CHOICE OF LAW AND FORUM SELECTION CLAUSES

California Labor Code §925 was passed this year and will go into effect on January 1, 2017.  It prevents employment contracts from forcing California workers to bring their claims outside of California when they live and work in California.  It also prevents employers from forcing employees to be governed by the law of another state.  Out of state employers who hire California workers to perform work in California will not be allowed to use handbook provisions or employment contract provisions to force California workers to bring claims out of state and under another state’s laws.  Often, the employment laws of another state favor the employer.  Of course, trying to litigate in a different state significantly burdens most California workers.  In contrast, Labor Code §925 will allow California employees to file claims in California under California law.

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Independent Contractor

Independent Contractor or Employee?

Am I an independent contractor or an employee?  How should my business classify its workers, as independent contractors or employees?

Both workers and businesses struggle with these questions at times.  Most of the time, the answers are pretty clear.  However, in a significant minority of employment relationships, the answers are not clear.  Unfortunately for those who struggle with questions about their employment relationships, the tests used to answer these questions are often hard to apply.

The first thing to consider when trying to determine whether a worker is an employee or independent contractor is whether the person receiving the service controls the details of the work.  (Empire State Mines Co. v. Cal. Emp. Com., (1946) 28 Cal.2d 33, 43.)  However, control is not the only consideration.  “[T]he ‘control’ test, applied rigidly and in isolation, is often of little use in evaluating the infinite variety of service arrangements.”  (Borello & Sons, Inc. v. Dept. of Industrial Relations, (1989) 48 Cal.3d 341, 350.)  In other words, if control does not clearly show an employment relationship, then the person analyzing the relationship should apply “economic reality test” factors, similar to those listed below, to further evaluate the relationship:

(a) Whether the one performing services is engaged in a distinct occupation or business;

(b) The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;

(c) The skill required in the particular occupation;

(d) Whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;

(e) The length of time for which the services are to be performed;

(f) The method of payment, whether by the time or by the job;

(g) Whether or not the work is a part of the regular business of the principal;

(h) Whether or not the parties believe they are creating the relationship of employer-employee.

(i) The worker’s opportunity for profit or loss depending on managerial skill;

(j) The permanence of the working relationship;

(k) Whether the service rendered is an integral part of the employer’s business.  (Borello, at 351, 354-355.)

Employers have argued that in some situations, only the control test should be applied.  That test arguably will more often find an independent contractor relationship than the economic realities test.  Employers usually want to have independent contractors working for them rather than employees.  However, the trend is to find an employment relationship, at least where employee rights and benefits are concerned or where the state has an enforcement interest.  (Air Couriers Internat. v. Employment Development Dept., (2007)150 Cal.App.4th 923, 935-37.)

The federal cases analyzing employer-employee relationships under the Fair Labor Standards Act also apply economic realities test factors.  (Real v. Driscoll Strawberry Associates, (9th Cir. 1979) 603 F.2d 748, 754.)  Regardless, some state or federal agencies may still apply some form of the control test.

As an employer, to be on the safe side, you should analyze your workers under the arguably more liberal economic realities test.  Similarly, in most cases, workers will not be wrong if they analyze their work relationship by applying the broader economic realities test.  However, depending on what agency is analyzing the issue or the state in which the worker is performing the work, a control test may be the correct test to apply.

S. Ward Heinrichs, Esq.
BACKSTROM & HEINRICHS
Attorneys at Law
A Professional Corporation
4565 Ruffner Street, Suite 207
San Diego, CA 92111
(858) 292-0792
(858) 408-7543 (fax)

http://bestemploymentattorneysandiego.com/

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