Alert: Court Denies AB 1513 Injunction – Safe Harbor Deadline Now July 28, 2016

Today, the Fresno County Superior Court denied Nisei Farmers League’s request for a preliminary injunction staying the enforcement of AB 1513’s affirmative defense deadlines.  AB 1513 is recent legislation specifying how nonproductive time should be compensated for employees paid by piece-rate.  The new deadline to file with the DIR is July 28, 2016.

Under AB 1513 (codified as Labor Code 226.2) employers had until July 1, 2016 to file with the Department of Industrial Relations (“DIR”) its intention to opt into the affirmative defense provisions outlined under the law.  The court had previously granted a temporary restraining order staying the provisions until ten days after the July 18, 2016 hearing on the injunction. The court did not rule on the merits of Nisei Farmers League’s complaint that the law is unconstitutional.  That matter will be heard at a later date.  For now, employers are back to where they were on June 29, 2016, with three days remaining to file for the safe harbor.

A link to the online election form can be found here.  A link to the court’s ruling denying the injunction can be found here.

For more information about this or other employment related matters contact Jennifer Douglas Phillips.

ALERT: Legal Challenge To AB 1513 Filed. Deadline to file for Safe Harbor protections extended to July 18, 2016.

Nisei Farmers League filed a lawsuit on June 27, 2016 in Fresno Superior Court challenging the legal validity of certain provisions of AB 1513 governing payment for nonproductive time for employees compensated by piece rate. The extension of time to file for safe harbor protections with the California Labor Commissioner was extended in order to provide time for a hearing. Nisei Farmers League is requesting a restraining order to stay enforcement of the law pending the court’s decision on the merits of the lawsuit. More detail about the lawsuit, including links to the court documents, can be found here.

Please note, that while the deadline has been extended to register for the safe harbor provisions, there has been no decision about the validity of the law, which has been in effect since January 1, 2016.

For more information about this alert and how it might impact your business please contact Jennifer Douglas Phillips, Greg Walsh or Owen Dallmeyer.

Deadline Looming for Employers to Elect “Piece-Rate Back Pay” Safe Harbor under AB 1513

It’s decision-making time under AB 1513 for employers of piece-rate workers in California.  More specifically, if you employ piece-rate workers in California, you must give notice to the state’s Department of Industrial Relations by July 1, 2016 if you want to avail yourself of the safe harbor under the statute and secure the complete affirmative defense to claims for failure to pay for nonproductive time for periods prior to December 31, 2015.

If you are asking yourself if this applies to you, here is some background:

Effective January 1, 2016, AB 1513 added a new section to California’s Labor Code (Section 226.2, available in full here) that established compensation and wage statement requirements for nonproductive work time, i.e., rest and recovery periods and other work time that was not directly compensated by a piece-rate workers “piece-rate.”  Formerly, employers would argue that they had built such nonproductive time into the “piece-rate.”  AB 1513 effectively put an end to that.  The DIR has a set of answers to “Frequently Asked Questions” (available here) that is a helpful resource for specific questions.

In brief, Labor Code Section 226.2 requires that piece-rate workers be compensated separate from their piece-rate earnings, based on an average hourly rate, for mandatory rest periods, heat recovery periods, any other time that is not directly compensated by an employee’s piece-rate, e.g., meetings, waiting time, etc. (or “nonproductive time”).  The employee’s wage statement must also separately state certain information related to this compensation.  The formula for calculating an employee’s “average hourly rate” is also set forth in the statute.  The DIR’s FAQ site has good examples of this calculation under various scenarios—hint:  it’s not a simple average.

While AB 1513’s requirements apply from January 1, 2016 (the statute’s effective date) forward, it also prescribes two “safe harbors” for employers to utilize to defend against claims for unpaid nonproductive time.

First, under the statute, an employer is deemed in compliance with its requirement to pay separately for other nonproductive time, if it pays employees at least minimum wage for all hours worked in addition to piece-rate pay.  This safe harbor applies to all nonproductive time except rest and recovery periods.  Employers are required to pay the average hourly rate for all rest and recovery periods during any period the employee is paid on a piece-rate basis.  There is no exception to this.

Second—and the subject of this posting—Employers have an affirmative defense under the statute to any claim or cause of action for failure to pay for rest periods, recovery periods, or other nonproductive time, for time periods before December 31, 2015.  But, to take advantage of this safe harbor, you must pay each of your employees (past and present) for any unpaid or underpaid nonproductive time from July 1, 2012 to December 31, 2015 inclusive.

You can do this by either:

(1) Calculating and paying the actual sums due, plus interest, or

(2) Paying each employee an amount equal to 4% of his or her gross earnings in pay periods during which the employee worked for a piece-rate from July 1, 2012 to December 31, 2015.

If you choose to pay the 4%, you can set off from the payment any amounts already paid directly for nonproductive time to the employee, but no more than 1% of the employee’s gross earnings for the time period.  Under either method, you must provide a statement summarizing how you calculated the payment; you must use due diligence to locate and pay former employees; and you must make payments to the Labor Commissioner’s Unpaid Wages Fund (with additional admin fees) for former employees who you cannot locate.

But, as mentioned, if you want to avail yourself of this protection, you will need to act fast.  Notice to the DIR of a “Piece-Rate Back Pay” election must be given no later than July 1, 2016, and all payments must be complete by December 15, 2016.  The DIR’s website has an easy form that employers can be fill out and submit to provide the DIR with the requisite notice of piece-rate back pay election and which can be found here.

This posting is but an overview of the specific, detailed, and sometimes complex requirements established by AB 1513 and Labor Code Section 226.2.  We encourage you to consider whether the risk of litigation or liability warrants taking advantage of this statutory protection.  For more information about this and other employment issues contact Jennifer Douglas Phillips or Owen Dallmeyer from DP&F’s Employment Group.

Employment Laws for January 1, 2016

Ringing in the New Year means time to implement the latest California employment laws.  Here is a summary of some of the more significant ones.  For more detailed information contact Jennifer Douglas Phillips via email.

Minimum Wage: The California minimum wage increases to $10.00 per hour.  Don’t forget this also means that salaried, exempt employees must now make at least $41,600 per year (twice the minimum wage).

Piece-Rate Pay (AB 1513):  If you pay your employees by piece-rate, you must separately reflect rest and recovery periods as well as non-productive work on employees’ wage statements.  Rest and recovery periods must also be paid at an hourly rate of either the average hourly rate of the employee for the applicable workweek or minimum wage, whichever is higher.  The applicable hourly rates for everything must be reflected on the wage statement (piece-rate, rest and recovery rate, non-productive work).

Affordable Care Act Reporting:  Applicable Large Employers (“ALE”), those with 50 or more full-time equivalent employees, must submit reports to the IRS by February 28 or electronically by March 31.   ALE’s must also provide tax Form 1095-C to each of their employees by January 31. More information about the ACA reporting requirements can be found here.

New Postings:  Make sure to obtain the latest posters and applicable wage orders and post them at your workplace.  If you are unsure what wage order should be posted discuss with your legal counsel or review the Labor Commissioner’s helpful publication entitled “Which Wage Order?” (A copy of it is here) You can obtain the fully compliant postings through the Cal Chamber.  Here is a link to its web store.

Seating for Employees:  This is not new, but the courts will likely issue decisions this year clarifying when employers are required to provide seats to employees.  Wage orders in California (governing nearly all employees) already contain provisions requiring employers to provide “suitable seating” to employees “when the nature of the work reasonably permits”.  There are numerous class actions pending around the state concerning this issue.  We encourage you to examine your workplace and provide seats to employees whenever possible.  If you are unsure if seating is appropriate in your workplace consult legal counsel for guidance and an examination of the potential risk in not providing seats.