Employment Law Issues to Avoid

Employee Classification

Misclassification of employees as independent contractors is a common mistake made by California employers. Workers can be classified as one of two options: a full-time employee (W-2) or an independent contractor (1099). Full-time W-2 employees are covered by wage-and-hour laws, and impose additional tax obligations on an employer, including federal unemployment insurance contributions, Medicare, and Social Security. On the other hand, employers are not required to pay into these programs for independent contractors.

While it may seem convenient for your business to classify its workers as contractors, misclassification of your employees as contractors can run your business into trouble. In most industries operating in California, courts presume that a business’ workers are employees, and the burden is on the business to show that its workers are contractors.  Worker misclassification not only deprives employees of their rights, but also has the potential to incur astronomical penalties to the California employer.

Pay a fair wage

There is a federal minimum wage that is currently set at $7.25/hour. However, each state may independently set its own minimum wage. In California, minimum wage is further defined by county, and city ordinances. The appropriate minimum wage is always the highest amount applicable to the business.

It’s imperative that employers meet the standards set for minimum wage based on the state in which they conduct business. Federally, the Wage and Hour Division of the Fair Labor Standards Act conducts cross-country investigations to make sure employers comply with federal wage-and-hour laws. In California, other entities like the Employment Development Department are tasked with enforcement of wage-and-hour laws across the state.

Pay overtime when it is owed

Overtime laws are similar to those regarding minimum wage. There are federal laws that regulate overtime that employers are required to pay in addition to laws regulated by individual states. Federal law dictates that employees must be paid at least 150% of their regular rate for any hours worked over a standard 40-hour workweek. Some employees may be classified as exempt if certain requirements are met, including a minimum annual salary.

Employers that violate the aforementioned requirements are subject to a penalty of up to $1,000 for each violation.

Enforce vacation time

While there is not a federal requirement to pay out employees for unused vacation time upon their departure from an organization, various states require employers to do so. About half of the states have legislation in place to determine whether or not employees get paid out for their unused vacation hours. In California, earned vacation time is considered wages. Therefore, if an employee is voluntarily or involuntarily terminated, the vacation time must be paid to the employee as if they were hours worked. That may be more reason to enforce a company policy that employees use their time off every year.  Well rested and recharged employees are more productive and your company culture will benefit from your desire to ensure their happiness.

Make workplace safety a priority

The Occupational Safety and Health Act (OSHA) enforces the requirement of a safe workplace for all employees. OSHA regulations require safety protocols such as providing safety gear when working with heavy machinery, ensuring the safety of workers working in confined spaces (such as manholes), preventing exposure to harmful substances like asbestos or lead, and training workers on how to protect themselves in various situations, among many others.

OSHA also regulates safety in workplaces across the country. If an employee feels that their safety is jeopardized in their place of work, they can file a direct complaint for review by OSHA. Additionally, they perform regular investigations without advance notice. Oftentimes inspections are scheduled based on imminent danger, prior injuries and hospitalizations, worker complaints, or follow-ups.

Should OSHA identify any violations during an inspection, they will issue a citation which includes the date by which the violation must be corrected. However, fixing the violation will likely be insufficient to abate liability. OSHA levies fines of up to $13,653 per violation it finds. Willful or repeated violations may incur greater costs of up to $136,532 per violation.

Productivity and safety are directly correlated.  A scared workforce is an unproductive workforce.

Prevent workplace discrimination

Workplace discrimination includes sexual harassment in addition to unequal treatment or harassment based on race, gender, religion, age, or nationality. Under federal law, the Equal Employment Opportunity Commission (EEOC) is responsible for protecting employees from discrimination because of their race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, disability, age (age 40 or older), or genetic information.

Employees are able to submit complaints to the EEOC if they feel they are unfairly treated or harassed at their place of work. Once a claim is submitted against an employer, it can either be settled privately or in court. Employee lawsuits are extremely expensive. The average employee lawsuit is upwards of $250,000. Additionally, about 67% are ruled in the plaintiff’s favor when taken to litigation.

Has your company examined its workplace handbooks and training protocols? If not, ask our team about ways to be certain you are legally compliant.

Show your team members that you care about them and value their hard work by creating a safe and fair work environment. For help with compliance, reach out to our experts at @VirtualCounsel to help protect your business from potential exposure.  

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