Don’t Forget – California Changes Effective July 1, 2014

Posted on: May 1, 2014

Authored by: Steve Holden, Holden Law Group

Minimum Wage Increase


It is no secret that California minimum wage increases to $9.00 per hour.  Keep in mind the change affects more than the base rate for minimum wage employees.  It may have other impact on your payroll, employee classifications and business practices.

1. Overtime Rate Increase.  Obviously, the minimum wage rate increase will increase the overtime rate for minimum wage earners.  That begs the question of what is the correct overtime rate for non-exempt employees.  Most employers think that the proper overtime rate is equal to 1.5 times the employee’s base hourly rate.  It is, however, seldom that simple because overtime pay is based on the “regular rate of pay” which is the same or higher than the employee’s base hourly rate.

The “regular rate of pay” is a computed rate that includes many different kinds of remuneration, such as hourly earnings, piece work earnings, commissions, certain bonuses, extra pay for controlled standby time and the value of meals and lodging.  These items must all be tallied to determine the compensation for that pay period.  Ordinarily, the hours to be used in computing the regular rate of pay for a full-time employee may not exceed the legal maximum regular hours which, in most cases, is 8 hours per workday or 40 hours per workweek.  The agreed upon regular hours must be used if they are less than the legal maximum regular hours.With the variety of compensation plans employers use, such as weighted averaging when an employee works at more than one hourly rate of pay and the myriad of compensation traps presented by piece rate programs, calculating the regular rate of pay for all circumstances is beyond the scope of this article.  Some employers may opt to alter their compensation structures in order to simplify their pay practices.  Meanwhile, employers should ensure that their payroll software is sophisticated enough to calculate overtime properly based on the regular rate of pay.

2.  Exempt Employees.  The minimum wage increase may also require you to increase the salary you must pay to your exempt employees in order to meet the salary test requirement.  Employees classified under the white-collar exemptions must earn at least double minimum wage for full-time employment.  With the minimum wage increase this translates into a minimum monthly salary of $3,120 ($37,440 annually).  You should audit any exempt position that might be affected by the new salary test figures.

3.  Subminimum Wage Earners.  The rate change also affects employees whose pay rates are subminimum wage such as “learners” who have no previous similar or related experience in the occupation.  Make sure that these employees are still being paid at least 85% of minimum wage which would be $7.65 per hour.  Keep in mind that California law permits the subminimum wage in limited cases and only for the first 160 hours.

4. Hand Tools and Personal Equipment.  The new minimum wage will also impact employers who require employees to furnish their own hand tools and personal equipment, such as tool belts or tool boxes that are needed by the employee to secure those hand tools.  In the limited circumstances where an employee can be required to provide such items, the employee must be paid at least double minimum wage.  Again, review pay rates for these employees and make appropriate changes if needed.

5.  Notices.  So long as you show each new rate of pay on the timely, compliant and accurate wage statement issued with the paycheck in which the changes take place, you will not need to provide affected employees with an updated wage notice showing the change in pay rate.

6.  Postings.  Make sure your workplace postings are up to date reflecting the new minimum wage.  This includes posting your applicable wage order(s).  Most wage orders have already been updated and they can all be found at www.dir.ca.gov/iwc/wageorderindustries.htm.

 

Paid Family Leave Program


The California Paid Family Leave program is changing eligibility requirements.  Starting July 1st, workers may be eligible to receive PFL benefits when taking time off of work to care for a seriously ill parent-in-law, grandparent, grandchild or sibling.  This is in addition to parent, child, spouse or registered domestic partner previously allowed under the program.  The new PFL brochure is not yet posted online.  You should check in the coming days for the new version at www.edd.ca.gov/pdf_pub_ctr/de2511.pdf.

 

Personal Physician Designation


Effective July 1st, there is a new requirement for personal physician pre-designation in workers’ compensation.  The new changes further define the criteria that an employee must meet in order to properly pre-designate his or her personal physician to treat an industrial injury.  The major change: an employee must have group health coverage in place on or before the date the injury occurs.  The pre-designation information must be provided to all employees at time of hire and is included in the “Time of Hire” pamphlet produced by the Division of Workers Compensation (DWC). The pamphlet can be found at www.dir.ca.gov/dwc/DWCPamphlets/TimeOfHirePamphlet.pdf.

You should review any existing pre-designation forms on file to determine if they are still valid under the new requirements.