[An Employer’s Checklist for Hiring Employees Under California’s Labor Code]

 

Labor Code § 2810.5; A Contemporary California Wage Protection Statute 

As many business owners have come to realize, in California, incorrectly hiring an employee, or incorrectly paying an employee comes with some significant risks in California.  The sanctity of wage payments made to employees has historically received significant protection, even predating the federal Fair Labor Standards Act of the 1930 by some forty years.  There is no sign California will veer from this path. And indeed, some nine years ago, on January 1, 2012 to be exact, Labor Code §2810.5 (“Section 2810.5”) became effective.  Section 2810.5 was part of Assembly Bill 469 of 2011, known as the “Wage Theft Protection Act.”  While most employers do not intentionally steal wages, and the name of the Act is patently offensive to many honest employers, it does illustrate one point: Like any error on your state or federal tax return, even an innocent error when setting and paying wages to an employee can lead to severe sanctions. 

 

Why Failing to Comply with Section 2810.5 can be Costly  

Audits by the United States Department of Labor and the California Employment Development Department are noticeably on the increase.  These agency audits have proven painful to employers who do not pay in accordance with basic federal and state minimum wages and overtime laws.  However, the worst-case scenario is that an aggrieved employee retains a lawyer to litigate not only their individual grievance, but the claims of other employees.  This is typically done under the California Private Attorney General Act (Cal. Lab. C. §§ 2698, et seq. hereinafter, “PAGA”).  

Pursuant to the provisions of PAGA, a private attorney or law firm can obtain substantial civil penalties for the clients and the State of California against an employer if that employer fails to pay employees in accordance with the provisions of the California Labor Code and the California Wage and Hour Order applicable to the type of industry or occupation governed under the Wage Order.  Worse still, a class action could arise if employees are subject to the same policy which creates the violation.   

 

The Checklist to Hiring 

       1.  Ascertain which Wage and Hour Order Applies to Your Business

     California utilizes 12 “industry” orders based on the type of business being conducted, and 5 occupational orders when the industry order is inapplicable.  Consequently, an employer, preferably in consultation with a well versed labor attorney, should determine which Wage and Hour Order governs their         business or the occupation that will need to be filled by the new hire.  An excellent guide to assist a prospective employer in determining which Wage and Hour Order applies is published by the California Department of Industrial Relations (“DIR”) and found here: https://www.dir.ca.gov/dlse/whichiwcorderclassifications.pdf

       2.  Hire Consistent with the Requirements of Section 2810.5

As subsequently amended Section 2810.5 mandates “an employer” to provide “each employee a written notice, in the language the employer normally uses to communicate employment-related information to the employee,” and, as subsequently amended, those including the following:  

(A) The rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission, or otherwise, including any rates for overtime, as applicable. 

(B) Allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances. 

(C) The regular payday designated by the employer in accordance with the requirements of this code. 

(D) The name of the employer, including any “doing business as” names used by the employer. 

(E) The physical address of the employer’s main office or principal place of business, and a mailing address, if different. 

(F) The telephone number of the employer. 

(G) The name, address, and telephone number of the employer’s workers’ compensation insurance carrier. 

(H) That an employee: may accrue and use sick leave; has a right to request and use accrued paid sick leave; may not be terminated or retaliated against for using or requesting the use of accrued paid sick leave; and has the right to file a complaint against an employer who retaliates. 

(I) Any other information the Labor Commissioner deems material and necessary. 

       3. Use the California Form for Section 2810.5

Thankfully, the statute also mandates the California Labor Commissioner to “prepare a template that complies with [the forgoing] requirements” and also directs the Labor Commissioner to make that template available to employers.  Indeed, that template can be found at California Department of Industrial Relations URL here: https://www.dir.ca.gov/dlse/lc_2810.5_notice.pdf 

While an employer can use an offer letter to address many of the requirements set forth in Section 2810.5, we strongly recommend using the form so that the information required under Section 2810.5 is not inadvertently omitted.  If you use an offer letter or other custom piece of correspondence to satisfy the requirements of Section 2810.5, have the letter reviewed by a qualified employment law attorney. 

       4. Complying with the Preliminary Requirements of Section 2810.5

Let’s break down the two, preliminary requirement s of Section 2810.5.  It is important to note that not just California based employers are covered.  Subdivision (a)(1) uses the words, “an employer”.  Thus, any employer, likely wherever located, who employs a person residing in California probably will come under the provisions of Section 2810.5.  

Second, the language requirement of Section 2810.5 imposes on the employer a duty to convey the information in the same language that the employer uses to communicate with the employee in other employment matters.  Consequently, if the employer communicates with the new employee in Spanish, Mandarin or some other language, the employer must translate the provisions of Section 2810.5 into that language and provide it to that employee. Again, fortunately, the Department of Labor Standards and Enforcement (“DLSE”) has conveniently translated Section 2810.5 into six languages, and copies of these can be downloaded free from the DLSE at URL: https://www.dir.ca.gov/dlse/Governor_signs_Wage_Theft_Protection_Act_of_2011.html

       5. Setting Wages; the Applicable California Minimum Wage

Section 2810.5 requires the employer to provide in the form, the wage rate or rates that are applicable to the person being hired.  This is likely the most challenging portion of complying with Section 2810.5.  Be mindful of the fact that, while certain specific exclusions exist, almost all employees must be paid the higher of either the California or local minimum wage, not the federal minimum wage which is always lower. Further, while there can be more than one wage, for example a regular rate for productive work, another wage, typically lower, can be set for other duties, such as travel time.  Regardless, the rate set cannot fall below the applicable minimum wage.  The California minimum hourly wage is different for employers who have 25 or fewer employees, than employers who employ 26 or more employees.  A chart to the hourly minimum wage is published by the DIR and found here: https://www.dir.ca.gov/dlse/faq_minimumwage.htm   

CAUTION:  Some California cities and counties have adopted a higher minimum wage through enactment of a local ordinance.  A good reference to determine if such a local ordinance trumps the California minimum wage is found at the University of California at Berkeley, Labor Law Center.  See: https://laborcenter.berkeley.edu/inventory-of-us-city-and-county-minimum-wage-ordinances/ 

When setting the salary of an exempt employee because their principal duty meets the Wage and Hour Order the test for an administrative, professional or supervisory exemption, remember to pay that position two times the applicable annual minimum wage 

If your employee is being paid solely on either a piece-rate or a commission basis or is employed under the “outside salesperson” exemption, special rules and analysis is required to verify that the California Labor Code and applicable Wage and Hour Order is not violated.  PLEASE STOP:  Hire and consult with an experience attorney.  Don’t go it alone! Chances are exceedingly good you will also hire an employee’s attorney! 

        6. Allowances, Sick Leave and Other Provisions

While it is possible for a California employer to obtain credits against the minimum wage for providing employees with meals and lodging, this too should be completely reviewed by a qualified attorney.  Similarly, the employer should have their sick leave policy reviewed and approved by counsel before hiring their first employee.  For these reasons, this article does not discuss these critically important compliance topics. 

Conclusion  

While you must hire an employee in full compliance with federal mandates, Section 2810.5 is your checklist for complying with the unique legal requirements imposed on employers seeking to retain workers in California. Thoughtful consideration of a myriad of laws goes into properly classifying and offering employment opportunities to individuals.  Getting it right generally involves securing an experienced, qualified employment law attorney in California.  Get it wrong, and the employer can likely assume that they hired an employee and the employee’s lawyer at a cost they could not have envisioned. Call us today for a free consultation (925) 609-7600. 

Jon Webster is the Principal Senior Attorney at our firm. Jon has successfully represented both employers and employees in litigating claims brought under California Labor Code 2810.5

Jon Webster 

Principal Attorney