Employer Impact: The independent contractor determination can be critical for a business, as both California and federal law provide employees with minimum wage, overtime pay and numerous other protections, while independent contractors don’t receive those benefits. Making the wrong call can lead to costly back pay, litigation and other penalties. YOUR 5-STEP ACTION PLAN Businesses that are subject to more than one set of laws governing how they classify and pay their workers are generally required to follow the stricter standard. For employers operating in the Golden State, this means you will largely need to follow California’s more onerous rules. Recent and pending changes at the federal level will be felt more by California employers with workers outside the state, or for businesses that need to comply with both state and federal standards in a multistate workforce. For your California operations, consider taking these steps now to ensure compliance: 1. Stay Up to Date on State Rules: California employers should not apply federal rule changes when they are less protective than state law. Instead, you should follow California’s unique rules, which are generally more stringent and nuanced than federal law. 2. Track Minimum Wage Changes: Because California’s exempt salary thresholds are tied to the state minimum wage, you’ll need to monitor and plan for increases, which regularly take effect at the beginning of the year. 3. Review Job Descriptions and Actual Job Duties: Regularly review employee job descriptions and update them as needed. Be sure to compare them to employees’ actual job duties to ensure exemptions are applied correctly under California’s stricter standards. You should also evaluate independent contractor relationships to confirm they satisfy California’s ABC test. 4. Audit Your Pay Practices: Consider auditing your current pay practices and contractor arrangements under both state and federal law. Confirm that your current classifications under overtime exemptions and the ABC test for independent contractors can survive the stricter California analyses. For exempt commissioned employees, ensure commissions constitute more than half of their earnings. From a bigger picture perspective, you’ll want to ensure all California wage-order requirements are satisfied. 5. Consult with Counsel: Your Fisher Phillips attorney can assist with reviewing your current pay and classification practices. We will continue to track developments on both overtime and worker classification rules, so make sure that you are subscribed to Fisher Phillips’ Insight System to get the most up-to-date information. If you have compliance questions, consult with your Fisher Phillips attorney or any member of our Wage and Hour Practice Group to assess and minimize potential risks. Your magazine: On your phone, on your tablet, on your schedule. connected stay NCDA.COM 25
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