2. The Shifting Job Market in California, and the Emerging Challenges for Employers California Payroll Conference September 12, 2014

3. James Brown Partner, San Francisco, CA james.brown@sedgwicklaw.com 415.781.7900 Jim Brown is the co-Chair of the firm's Employment and Labor Law Group. Mr. Brown represents clients before state and federal courts and enforcement agencies. Michael Bernick Special Counsel, San Francisco, CA michael.bernick@sedgwicklaw.com 415.781.7900 Michael S. Bernick joined Sedgwick after serving for nearly five years (1999-2004) as director of the California Employment Development Department (EDD), the 10,000-person state department of labor..

4. Job Volatility: Enormous Job Creation on an On-Going Basis

5. Job Volatility: Enormous Job Destruction on an On-Going Basis

6. Job Volatility: Movement of Workers Among Jobs-Separations

7. Job Volatility: Movement of Workers Among Jobs-Hires

8. Job Volatility: Average Job Openings On Any Given Day (In Thousands)

9. Job Volatility: Number of Job Seekers Per Job

10. Breakdown in Full Time Employment and Rise of Project Based, Contingent and Part-Time Employment

11. Growth in Involuntary Part-Time Employment

12. Growth in Staffing Industry

13. Growth in the “Knowledge Economy” Jobs

14. Greater Growth in Practical Economy Jobs

15. Job Growth and Educational Levels Required

16. Minimum Wage Issues In California Minimum Wage Issues in California: The Wrath of Armenta v. Osmose, Inc. Armenta v. Osmose, Inc., 135 Cal.App.4th 314 (2005): CA law requires employers to pay the minimum wage for each and every compensable hour of work performed. Employers cannot average out the total amount of pay through per diem, salary, or hourly wage payments to determine if an employee has been paid the minimum wage for all hours worked.

17. Minimum Wage Issues In California Minimum Wage Issues in California: The Wrath of Armenta v. Osmose, Inc. Piece work or commission pay cannot be averaged for purposes of minimum wages during non-sales/non-production time.

18. FCRA ONSLAUGHT OF CLASS ACTIONS Background Check Litigation – It Seemed Like a Good Idea at the Time!

19. FCRA Onslaught of Class Actions  Whole Foods Markets  CEC Entertainment (Chuck E. Cheese’s)  Extended Stay Hotels  O’Reilly Automotive Stores  Century 21 Department Stores  Axcess Financial Services (Check ‘N Go)  Nine West  Panera  American Multi-Cinema  Lexis-Nexis  Kelly Services, Inc.  Cathay Bank Companies Facing Class Actions Filed This Year

20. FCRA Onslaught of Class Actions Key Allegations in Class Actions  No “stand alone” disclosure  “At-will” employment reference  Release of liability included  No “ ” box to request a copy  Included as part of job application document  Equal Employment Opportunity affirmation

21. FCRA Onslaught of Class Actions Background Check Litigation – Best Practices No “pro-forma” background checks on all applicants.  California limits the use of credit reports.  “Ban the box” ordinances, such as San Francisco’s Fair Chance Ordinance, limit the timing and use of criminal history inquiries. Check your forms –The disclosure and authorization form should be a stand-alone form  No release of liability  No “at-will” affirmation  Allow applicant to request copy Check industry specific rules.

22. Commission Agreement Issues The Biggest Problems We See with Commission Agreements The commission agreement is not in writing signed by the employee and/or the employer fails to provide an employee with a receipt in violation of Labor Code § 2751. No clear definition of when commission “earned” The agreement provides for illegal chargebacks. The agreement fails to guarantee minimum required payments, such as minimum wage, 1.5 times the minimum wage for inside sales employees, and overtime on commissions for nonexempt employees. 1 2 3 4

23. Misclassification-IC v EE Independent Contractors – Don’t Be a Control Freak The biggest issue is still the right to control the details (or manner and means) by which the work is performed to accomplish the desired result. Standard company practices and policies — such as standardized form contracts for independent contractors increase chance of class action. Labor Code § 226.8, which prohibits intentional misclassification.

24. Misclassification–Exempt v. Non-Exempt The Battle Continues Plaintiffs’ attorneys are increasingly focusing on sales exemptions  Inside sales exemptions are limited (Wage Orders 4 and 7)  Outside sales – are they actually engaged in sales away from the employer’s place of business more than 50% of the time? “Home” office work doesn’t count.

25. Misclassification–Exempt v. Non-Exempt The Battle Continues As minimum wage increases take effect, the minimum salary for California white collar employees is also automatically increasing. Exemptions should be based on a realistic assessment of job duties. July 1, 2014: Minimum wage went from $8.00 to $9.00 per hour. This is the equivalent of $720 per week, $3,120 per month, and $37,440 per year January 1, 2016: Minimum wage goes to $10.00 per hour. This is the equivalent of $800 per week, $3,466.67 per month, and $41,600.04 per year.

26. Off-the-Clock Work (After-Hours Emails, Preparation Time Issues, etc) Tracking Time and Avoiding Off-the-Clock Claims Require nonexempt employees to report all of their work time and structure their work as much as possible to avoid the need to perform work outside of standard business hours. Watch out for duties to be performed outside of regular work hours: Tracking and responding to emails and/or work-related telephone calls. Writing reports and/or transmitting work-related data (whether electronic or on paper). Planning travel routes, reviewing documents, and/or rehearsing presentations. Overly restrictive on call requirements. Don’t transform commute time into compensable travel time. Dangers of rounding practices.