Final 2014 Recap
We mentioned last time that the Legislature adjourned for the year – leaving taxpayers and merit-shop contractors safe for a couple months. Governor Jerry Brown took action – and here are the results.
AB 155 (Alejo) Oppose. First ever State-Mandated PLA. Authorizes Monterey County Water Resources Agency to award a design-build contract but requires the agency to execute a PLA. Senate vote 25-10 Assembly vote 55-23. Brown signed the bill.
AB 1260 (Medina) Support. Support for Family Business enterprise. Would have defined a California family owned business for purposes of any provision of the Government Code that explicitly references this definition. Senate vote 34-0 Assembly vote 74-0. Vetoed.
AB 1522 (Gonzalez) Oppose. Paid Sick Leave. Mandates California employers (except unionized employers) provide paid sick leave to all employees. Senate vote 22-8 Assembly vote 52-25. Signed by Brown.
AB 1705 (Williams) Support. Definition of “Substantially Complex.” Public agencies can ignore retention limits if they define a project as complex, which has led some agencies to characterize ALL projects they pursue as complex. This bill narrows this loophole. Senate vote 35-0 Assembly vote 78-0. Signed by Brown.
AB 1723 (Nazarian) Oppose. Expansion of waiting time penalties. Places employers at a disadvantage because the establishment of underpayments should remain under the purview of an administrative hearing. Senate vote 22-11 Assembly vote 54-24. Signed by Brown.
AB 1870 (Alejo) Oppose. Training Contribution Allocations. Reduces PHCC’s ability to obtaining Journeyworker training contributions from the California Apprenticeship Council. Senate vote 23-10 Assembly vote 56-22. Signed by Brown.
AB 1897 (Hernandez) Oppose. Client Liabilities. This bill holds an innocent third-party individual or business liable for the employment obligations of another employer. Senate vote 22-12 Assembly vote 47-24. Signed by Brown.
AB 1939 (Daly) Support. Contractor Costs. Authorizes a contractor to recover, under certain circumstances, costs if a private work is deemed a public works project. Senate vote 36-0 Assembly vote 77-0. Signed by Brown.
AB 2416 (Gordon) Oppose. Wage Liens. Would have allowed workers to file a wage lien upon real and personal property of an employer, or other property owners, for unpaid wages and other compensation without a wage order. Senate vote 13-15 Assembly vote 43-27. Failed passage in Senate.
SB 785 (Wolk) Oppose unless amended. Design Build. Perpetuates a provision in law that establishes that any union contractor is “safe” for prequalification purposes irrespective of their experience modification. Senate vote 23-11 Assembly vote 68-5. Signed by Brown.
SB 792 (Padilla) Oppose. Union Coating Monopoly. Last minute “gut and amend bill” that creates a new monopoly for union painters to apply and remove anti-corrosion coatings. Senate vote 22-11 Assembly vote 53-23. Brown vetoed this bill saying “development of these standards is outside of the jurisdiction and expertise” of DIR and DTSC.
New Overtime Rules in Works
Later this year the US Department of Labor’s Wage and Hour Administration will release a draft regulation that, if adopted, would make important changes to the rules governing whether executive, administrative and professional employees must receive overtime pay for hours worked in excess of forty in a week under the Fair Labor Standards Act (FLSA).
While we will not know what the Labor Department will propose until the proposed regulation is published, we know that the Obama Administration will make an aggressive push to finalize the regulations. On March 13, 2014, President Obama issued a memorandum directing his intent to revise the overtime regulations. The smart bet is that the regulations will be finalized by the middle of 2016.
The changes to the overtime regulations could end with the salary threshold. But the proposed regulation may go farther. Executive, administrative and professional employees each have different substantive duties tests. However, the proposed regulation would likely focus on the exemption for executives. An executive need only manage a defined unit or establishment, supervise two or more employees, and have the authority to hire and fire or make recommendations about hiring, firing, promotions, or advancement. The Labor Department could propose to make this test more difficult to satisfy.
The proposed regulations may also clarify the meaning of “primary” in the “primary duty” test. Under the existing regulations, it is possible to be an exempt employee even when spending more than half of work time performing non-exempt work, for example, tending the cash register in a retail store or serving customers in a fast-food establishment. Courts have found employees for whom non-exempt work constituted 75 percent, 80 percent, or even 99 percent of their time to be exempt. The Labor Department may propose a bright line test of 50 percent or another fixed percentage as a floor for determining whether exempt responsibilities, like managing for an executive employee, are the “primary duty.”
In the meantime, employers who currently classify employees as exempt under the existing regulations should inventory their overtime practices. They should review job classifications and pay structures, compensate misclassified employees, eliminate “off the clock” practices and double-check rate calculations. The new overtime regulations will not be final for at least a year. But it is never too soon to avoid the risk of overtime liability
NLRB Rules on Independent Contractor
The National Labor Relations Board has published a decision (FedEx Home Delivery, 361 NLRB No. 55) holding FedEx delivery drivers to be employees under the National Labor Relations Act instead of independent contractors. This is in opposition to both arguments by FedEx and a ruling by the Court of Appeals for the District of Columbia in a related case involving FedEx drivers at a different facility.
In its September 30, 2014 decision, the NLRB clarified the test it will apply in future cases and specifically refused to adopt the reasoning of the Court of Appeals setting up a future battle at the United States Supreme Court. The proper classification of individuals as employees or independent contractors can be critically important for tax, benefits and other labor and employment purposes. The NLRB test articulated in the FedEx case reaffirms the totality of the circumstances approach the NLRB has historically used, but declined to find that “entrepreneurial opportunity” is always of primary importance.
Entrepreneurial opportunity has been defined as the opportunity for gain or loss in the business along with the ability to work for other companies, hire their own employees, and have a proprietary interest in their work.