March 4, 2019
It can be tough keeping up with the complexities of human resource laws and regulations, especially in California. With all the new compliance rules, how can you stay on top of everything, especially if you’re running a business?
As your accountant and trusted business advisor, we’re here to help. While we’re not legal experts in HR, we are well-versed in some of the hot-button issues you can expect in 2019.
California’s Private Attorneys General Act. This law, better known as PAGA, allows employees to bring lawsuits against employers on behalf of themselves for any violation of the California Labor Code.
Some companies in Stanislaus County have already been served with lawsuits under PAGA. Here are a few common red flags:
- Time rounding practices need to be neutral and cannot favor the employer. Employees need to be paid for all time worked.
- Exempt or non-exempt employees need to be classified correctly and paid according to wage laws.
- All required documentation must be provided to employees upon hiring and termination.
- All overtime owed needs to be paid.
Your best defense against PAGA lawsuits is to make sure your policies are up to date and in compliance with employment and labor laws. Most importantly, follow wage and overtime laws. It’s also a good idea to have arbitration agreements with your employees. The agreements can’t protect you against PAGA actions, but they can mitigate the damage.
To learn more about PAGA, read this in-depth article from Brown Law Group.
Employee classification. Are you classifying your contractors and employees correctly? Misclassifying an employee as an independent contractor can lead to a number of consequences.
Let’s start with the difference between employees and independent contractors. Individuals are presumed employees unless you can prove all of the following:
- The employer has no control or direction when it comes to the performance of the work.
- The worker is doing work that is outside of the key operating functions of the business.
- The worker is independently involved in the industry or trade they are contracted for.
You can’t treat someone as an independent contractor because they request it. Part-time assignments, rare supervision and work with multiple employers also do not justify the status.
If you’re mislabeling a worker as an independent contractor, you could be liable for employment taxes and penalties; you could also subject yourself to investigation by government agencies. You could also face a lawsuit from the employee in question for failing to fulfill labor code regulations such as wage and hour requirements. Employers should start with the presumption that all workers are employees.
For more detailed information regarding the classification of employees and independent contractors (and other helpful HR content), consult with the California Chamber of Commerce.
As always, please call your accountant if you have any questions — we’re happy to help with challenging situations you might encounter.