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Employment Law Updates in 2016: Q&A with Phyllis Cheng

Posted by Sam Keshavarz

January 26, 2016

Questions about employment law updates in 2016

During our recent webinar, we gave attendees the opportunity to ask employment law expert Phyllis Cheng about employment law updates in 2016.

Here are the top attendee questions with answers from Phyllis Cheng, DLA Piper partner and former Director of the Department of Fair Employment and Housing.

Top questions about employment law updates in 2016:

Disclaimer: Phyllis' answers are intended as general guidance only and should not be relied upon as specific legal advice.

1. How does a company go about closing that gap? Even for those who have been at a company for years. Is there a pay scale per tenure that can be used for each job description?

The pay scale per job (and per tenure) is determined by each company and it should reflect the nature of the business, the geography and generally, the compensation offered by other, competitive employers. Employers can decide to evaluate tenure as a factor affecting compensation but that decision is up to each employer.

However, if tenure captures years of service, then it can fall under the “seniority” category of bona fide factors that can be used to explain wage gaps.

2. What does it mean to have seniority system? Is it sufficient to say that a man has more seniority than the woman to explain difference in pay?

A seniority system typically reflects a documented system that defines “seniority” and establishes when and how seniority is evaluated when determining compensation and career advancement.

Generally, seniority and/or experience level would be a legitimate business reason for paying one person more than another. Ideally though, the employer would have a compensation grid wherein there is an established range for each role, e.g., 10% more or less to reflect a variety of legitimate business reasons including seniority.

3. In a university setting, is there a way to justify that an admin asst in the business dept. is paid higher than an admin asst in the English dept. because business typically pays higher than an English career. The job duties are similar between the 2 jobs.

The hypothetical addresses equal pay for equal work rather than equal pay for substantially similar work, because both university jobs are administrative assistants. If the jobs are classified the same and has the same job duties, then they should fall within the same compensation range, with difference based on seniority, merit, quality and quantity of production, etc.

However, if the job duties are substantially similar but not identical (i.e., female-dominated administrative assistant jobs versus male-dominated IT technician jobs), then an evaluation of skill, effort, responsibility and working conditions, along with any of the bona fide, non-gender based factors (seniority, merit, quality or quantity of work) should be applied to justify a pay difference.

4. Question: Rumor has it that if you change an employee from exempt to non-exempt as a result of this legislation, that they will do a 2-year "look back" to ensure that the person really was exempt to begin with. Is that true?

There is no regulation or legislation that prompts a look back when employers change employee classifications. However as a practical consideration, employees and/or employee attorneys may be looking for a basis to make a claim when employers change employee classification.

Therefore, the fact that the Department of Labor has issued a proposed rule changing the exempt criteria provides a solid basis for employers to revisit their employee classifications in 2016 without having to explain to employee groups why they did it (other than to point to the DOL proposed changes).

Remember the DOL prefers to have more non-exempt than exempt positions.

5. Do you have to meet the duties test to qualify for exemption under highly compensated employees?

Yes, highly compensated employees must also meet the duties test of one of the three exemptions. See:

At present, the duties test is used for employees in executive, administrative, and professional (EAP) occupations and for those in highly compensated employees (HCE). However, DOL has set the proposed new threshold for both EAP and HCE based solely on compensation.

Nonetheless, DOL has sought public comment on the existing duties test on the proposed regulations. When the overtime regulations are published in mid to late 2016, there should be more clarity on future application of a duties test.

6. Are bonus and other forms of variable pay factored into the $50,440/year mark, or is that ONLY base compensation?

In a further effort to respond to changing conditions in the workplace, DOL is also considering whether to allow nondiscretionary bonuses to satisfy some portion of the standard test salary requirement.

Currently, such bonuses are only included in calculating total annual compensation under the HCE test, but some stakeholders have urged broader inclusion, pointing out that in some industries, particularly the retail and restaurant industries, significant portions of salaried EAP employees' earnings may be in the form of such bonuses. The Department of Labor has requested comments on this issue.

See their FAQ here.

7. What does BLS mean?

Bureau of Labor Statistics.

8. Are the DOL proposed OT rules definitely expected to go through or is there still a possibility that they will not?

The DOL proposed rules amending exemptions are expected to go through in mid to late 2016. Here is the website for the Notice of Proposed Rulemaking for further information.

9. Is this AB 1513 for all part time employees?

AB 1513 applies to all employees in California who are paid based on piece rate or an activity based formula.

However, AB 1513 allows employers who meet very specific requirements to have until April 30, 2016 to program their payroll system to perform the calculations under the average-hourly-rate approach.

(I) The employer was acquired by another legal entity on or after July 1, 2015, and before October 1, 2015.

(II) The employer employed at least 4,700 employees in this state at the time of the acquisition.

(III) The employer employed at least 17,700 employees nationwide at the time of the acquisition.

(IV) The employer was a publicly traded company on a national securities exchange at the time of the acquisition.

10. If employee's base is $50,000 but has a quarterly performance bonus which annualized would be $5,000 would this employee be considered exempt or non-exempt?

The Department of Labor has requested comments on the issue of bonus compensation. See their FAQ here.

Additionally, the classification would also depend on whether the employee meets the current duties test for one of the three exemptions.

11. With Piece Rate - If we alert them via memo to ensure they track productive time vs. non productive time and breaks but they don't for whatever reason...do we have an obligation to ensure they list their break time or are we ok since we told them to track it on their own?

A best practice is to document a consistent communication to all employees that they are able to take paid breaks and outline the employer process for time tracking. That way the employer shifts the burden to employees to be responsible for tracking their paid time.

12. How do we get copy of WHD guidance memo?

You can access the memo here.

13. Is SB 588 only limited to the IWC wage orders or all labor codes?

SB 588 grants the Labor Commissioner more enforcement authority to hold employers responsible for wage theft. Visit their website for more info here.

14. Does the presence of a Collective Bargaining Agreement change any of these new laws? Which can be subject to collective bargaining, and which cannot?

If valid and meeting specific conditions, the provisions of an applicable collective bargaining agreement (CBA) control the wages and conditions of employment.

15. Do these changes apply to any other states in the US?

The notice of proposed change to the salary rule for the FLSA affects employers in all states. The California Fair Pay Act (SB 358) directly affects employers with California employees but is also expected to indirectly impact employers throughout the United States because California employees can now compare their salaries to coworkers beyond their worksites. See this article for more analysis.

16. Can records of wages and wage rates be online? We are going paperless.

You should get the advice of counsel before publishing records of wages and wage rates online, because there may be concerns regarding disclosure of trade secrets and other matters.

17. SB 588 regarding employer personal liability . . . please define "managing agent"

The language used in SB 588 is: employer, owner, director, officer, or managing agent of the employer. Whether employees act in a managerial capacity [i.e., are managing agents] hinges on the degree of discretion the employees possess in making decisions that will ultimately determine corporate policy. (Kelly-Zurian v. Wohl Shoe Co., Inc. (1994) 22 Cal.App.4th 397, 421.)

18. Are you aware of any data or analysis on how pay inequities have led or instigated unionization efforts?

No, we do not have any data on whether pay inequities have instigated unionization efforts.

19. When will the proposed FLSA changes go into effect?

The proposed rules are expected to go into effect by mid or late 2016.


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Topics: HR Compliance, Legal, Wage-and-Hour, Employment Law