Making a List and Checking It Twice – Key Employment Considerations For The New Year

You may be asking yourself: How is it already almost 2019?! With the New Year fast approaching, for those employment law enthusiasts out there, here are some legal issues that you want to keep in mind as you look back on 2018 and forward to 2019:

1. Compensation

Year-End Bonuses: Employers distributing holiday bonuses, holiday gift cards, year-end merit bonuses, and other types of compensation to nonexempt employees should consider whether the compensation must be included in a nonexempt employee’s “regular rate” of pay when calculating overtime. The Code of Federal Regulations carves out some specific types of pay that need not be included in an employee’s regular rate of pay. For example, Section 778.211 excludes purely discretionary bonuses and section 778.212 excludes gifts for Christmas and other special occasions.  So, an employer giving employees gift cards for the holidays or other special occasions is not required to incorporate the value of those gift cards into an employee’s regular rate of pay as long as the amounts “are not measured by or dependent on hours worked, production, or efficiency.” See 29 C.F.R. § 778.212(a); 29 U.S.C.A. § 207.

New Minimum Wage: Another year, another minimum wage increase. Employers should ensure all nonexempt employees are paid at least minimum wage. Pursuant to California’s Minimum Wage Order, starting January 1, 2019, California state minimum wage will increase to $11 per hour for employers with 25 or fewer employees, and $12 per hour for employers with 26 or more employees. The minimum wage in certain California cities is also increasing in 2019. For example, minimum wage will increase to $12.00 per hour in San Diego, $13.80 per hour in Oakland, and $15.00 per hour in San Jose on January 1, 2019.

California Equal Pay Act: 2016, 2017, and 2018 each saw amendments to California’s Equal Pay Act. As a reminder, the amended California Equal Pay Act prohibits an employer from paying any of its employees wage rates that are less than what it pays employees of the opposite sex, or of another race or ethnicity, for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions. The new year is a good time to review pay practices to ensure racial and gender pay equity and perform privileged internal pay audits to identify and resolve any potential pay disparities.

  1. Performance Evaluations

Accurate and Specific Feedback: As managers and supervisors complete annual performance evaluations, remember that evaluations should be accurate and specific.  Although discussions about performance may be difficult conversations to have with subordinates, effective performance management is an important part of the employer/employee relationship. Performance evaluations can also inform promotions and raises, and are valuable evidence in employment cases.

Female Representation in Leadership Pipelines: As we previously summarized, Governor Jerry Brown recently signed into law SB826, which requires all publicly held corporations based in California to have at least one woman director by December 31, 2019, among other things. As employers perform their annual evaluations and recommendations for promotions, it may be prudent to consider the representation of women in leadership pipelines.

  1. New Training Requirements

Don’t forget about California’s new sexual harassment training laws.  As we summarized earlier this year, Governor Jerry Brown recently signed into law SB1343, which expands sexual harassment training requirements. By January 1, 2020, employers with at least five employees must provide: 1) at least two hours of sexual harassment prevention training to all supervisors; and 2) at least one hour of sexual harassment prevention training to all non-supervisors. The training must be provided every two years.

  1. Independent Contractor Classifications

As we’ve discussed in a prior blog post, in 2018 the California Supreme Court in Dynamex implemented a new ABC test for independent contractor classification under the California wage orders. As the year closes, it may be a good idea to re-evaluate worker classifications to ensure compliance with the new ABC test.

Of course, this list is not exhaustive and merely highlights some best practices and legal issues that may be top of mind for employers at the start of the New Year. Orrick’s experienced employment attorneys are here to assist you in navigating these complex issues.