News and Reports

2008 Employment Law Updates

In the past year, we have seen a dramatic increase in the number of “wage & hour” claims made by employees against their California employers; and going forward in 2008, we expect these types of claims (both individual and class action lawsuits) to make up the bulk of new court filings.

We report on ten (10) new laws and several additional matters which every California employer should be aware of and take steps to avoid potential claims in 2008:

1.  Minimum Wage Increase. The Minimum Wage will again increase on January 1st 2008 from $7.50 per hour to $8.00 per hour, which translates to an increase of about $1,040 per year per employee. There are additional areas in which this increase in pay will significantly impact employers:
a.  Poster Updates.Free copies of the required posting are available for download online at http://www.dir.ca.gov/wp.asp
b.  Overtime Rate Increase. Employees earning minimum wage will also earn more for overtime - $12 per hour for time and half, and $16 per hour for double time.
c.  Split-Shift Premium Payment Increase. Employees working a split-shift (a work schedule with work periods during the same day but interrupted by an unpaid time gap established by the employer, other then a meal break) are entitled to receive an additional hour’s pay for each eight (8) hours worked, paid at the minimum wage; obviously, the split-shift premium will increase from $7.50 to $8.00 per day.
d.  Minimum Meal & Lodging Credits to Employees Increase. California law allows certain employers to deduct from minimum wage paid to certain employees costs for providing meals and lodging. The qualified amount employers may deduct will increase by 6.7%.
e.;  Increased Earning for Overtime Exempt Employee. To remain qualified as “exempt” from overtime laws (i.e. those employees who are not paid overtime), each exempt employee must earn at least two times (2x) minimum wage. Therefore, as of January 1st 2008, overtime exempt employees must earn at least $640 per week (40 x $16), i.e. $2,773.34 per month or $33,280 per year. If paid less, they will fall out of their overtime exemption and must be paid overtime and given meal and rest breaks.
f.  Increased Earning for Overtime Exempt Employees Covered by Collective Bargaining Agreements. Employees covered by a valid collective bargaining agreement will be exempt from state overtime laws, provided the agreement is valid and the employee receives (1) premium wage rates for all overtime worked; and (2) a regular hourly rate of not less than $10.40 per hour (one and one-third minimum wage).

2.  Information Printed on Paychecks. To help prevent identity theft, effective January 1st 2008, employers may only print 4 of the 10 digits of an employee’s Social Security Number on paychecks. Willful violation of the new law is a misdemeanor – every employer should therefore make sure its payroll department/payroll company complies with this new law.

3.  Family Leave Expanded. Effective January 1st 2008, employers with fifty (50) or more employees must grant family leave to employees who want time off to care for a child of any age; parents-in-law; grandparents; grandchildren and registered domestic partners. Employers with fifty (50) or more employees should update their Employee Handbooks.

4.  New Leave Of Absence For Spouses Of Active Duty Military. Effective November 2007, businesses with twenty-five (25) or more employees must on as little as two (2) day’s notice, provide up to ten (10) days unpaid leave to employees who are the spouse of anyone on active duty military (currently deployed) who is on leave. Employers with twenty-five (25) or more employees should update their Employee Handbooks.

5.  Payroll Records Must Now Be Retained for 5-Years. Effective January 1st 2008, the applicable statute of limitations for employees to bring civil actions to recover wages will increase from two (2) to three (3) years (and from three (3) to five (5) years in cases of alleged willful misconduct by the employer). All employers should therefore keep their payroll records for all employees (including terminated employees) and records of each employee’s job classifications for at least five (5) years.

6.  Change to Highly Paid Computer Professional Overtime Exemption. Effective January 1st 2008, the hourly rate to qualify for this exemption is being decreased from $49.77 per hour to $36 per hour.

7.  New I-9 Forms. All U.S. employers are required to complete and retain an I-9 Form for each of their employees within three (3) business days of the date the employee starts to work. Completed I-9 Forms and accompanying ID documents should be kept in a single file in a locked file cabinet to document that the Company is complying with all applicable immigration laws. Effective December 25th 2007, all employers must use a new I-9 Form for new hires. Existing employees need not fill out the new form, as long as the company has an I-9 Form on file and has not been requested to re-verify the employees eligibility to work in the U.S. Copies of the new I-9 Form can be downloaded from the U.S. Immigration Services’ website, http://www.uscis.gov/i-9/.

8.  Meal & Rest Period Documentation. In Murphy v. Kenneth Cole, (April 2007), the California Supreme Court increased the applicable statute of limitation from one year to three years (by finding that employees are to be compensated, employers are not penalized) for “meal and rest break” violations. To avoid potential claims, employers should ensure employees are taking their meal and rest breaks and talk with an attorney to help minimize their exposure.

9.  New Mileage Reimbursement Requirements. In Gatusso v. Hart-Hanks Shopper, Inc. (November 5th 2007), the Supreme Court found that the IRS guideline for mileage compensation, accepted by the California Department of Labor Standard Enforcement as full compensation for mileage since 1993, will no longer automatically be considered “full compensation” for mileage – since it does not take into account the actual costs of operating a vehicle. According to the Supreme Court, full compensation is a matter for negotiation between the employee & employer, and must take into account the costs of gas, vehicle maintenance, depreciation and insurance. Employers should speak with an attorney to help minimize potential claims.

10.   Notice of GPS Tracking of Employees. In 2007, we saw an increase in the number of businesses who tracked their employee’s location during the workday with GPS devices. Such devices include certain company provided cell phones, PDA’s and other hand held or vehicle mounted electronic devices. To avoid potential claims of invasion of privacy by their employees, employers should adopt a formal GPS Tracking policy.

11.   Company Credit Card/Account Use by Employees. Over the past several years, we have seen an increase in abuse by employees of company provided credit cards and company accounts. To help curtain abuse, we recommend that employers adopt formal credit card use policies.

12.   Review of Insurance Coverage. It would be a good idea to review all of insurance policies and exclusions to ensure proper coverage for current business activities. We recommend two items in particular:
a.  Employment Practices Liability Insurance. Purchasing EPL insurance through a reputable insurer that is “admitted” by the California Department of Insurance is a good way to help minimize exposure to litigation costs.
b.  Employee’s Who Drive For Work. Under California law, all drivers are required to have automobile insurance providing a minimum of coverage i.e. $15k per person/$30k per event. Personal automobile insurance may not, however, cover the company in the event an employee is involved in an accident while driving for work. We therefore recommend that businesses purchase additional coverage to cover the business’ liability for employees who use personal vehicles on the company’s behalf. Typically, this can be added to the company’s CGI coverage and an insurance agent/broker will be able to confirm if you are covered (and applicable limits).

Before 2008 gets underway, companies should be certain to review their written employment policies and each employee’s compensation, making note of the new laws. If you have questions, please call Neil Klein or Doug Wade.