Sexual Harassment Updates

Under the California Fair Employment and Housing Act (“FEHA”), an employer who knew or should have known of harassment among its employees must take expeditious and appropriate corrective action as well as any reasonable steps to prevent future harassment.

Assembly bill 76 expands the employer’s liability to include harassment by non-employees. As a result, employers are now responsible for the discriminatory or harassing conduct of clients, vendors, and other non-employees who frequent the workplace so long as the employer knew or should have known of the harassing conduct and failed to take expeditious and appropriate corrective action. While the courts do take “the extent of the employer’s control” into consideration, the guidelines of this provision are not clear. Removing or transferring an employee from a job with exposure to the harassing third party is not an appropriate corrective action. The employer must take steps to resolve previous harassment and especially to prevent future instances which could jeopardize other employees.

Assembly bill 196 updates the definition of sex discrimination as set form in California’s FEHA to include “gender.” Section 422.76 of the Penal Code defines "gender" as "the victim's actual sex or the defendant's perception of the victim's sex, and includes the defendant's perception of the victim's identity, appearance, or behavior, whether or not that identity, appearance, or behavior is different from that traditionally associated with the victim's sex at birth." Under AB 196 employers can require employees to comply with reasonable grooming, dress code, and workplace appearance standards consistent with state and federal law. However, employees must be permitted to dress in accordance with their “gender identity,” which may include cross dressing. Gender-based discrimination including an employer’s decision to fire, to not hire, or to not promote those employees perceived to be effeminate males or masculine females is prohibited under AB 196. Also prohibited is gender-based harassment including repeated failure to address the employee by proper name and pronoun, refusal to permit the employee use of the appropriate bathroom and persistent questions regarding the employee’s medical history. These changes present new challenges to managers.

Employers should add gender identity to the list of protected categories in their employee handbooks.

For any questions surrounding this post or employment law questions in general, please contact Richard E. Quintilone II, Esq. at worklaw.cc.

Employment Law

Overtime

The Department of Labor’s new FairPay regulations announced on April 20, 2004 increase the number of workers eligible for overtime compensation by raising the salary threshold from $8060 per year to $23660 per year or $455 per week. These regulations, effective August 23, 2004, guarantee overtime protection to 6.7 million Americans including 1.3 million low-wage workers who were previously ineligible for overtime compensation.

The new overtime regulations require that employees earn 1.5 times their regular rate of pay for all hours over 40 hours in a workweek. However, Section 13(a)(1) of the Fair Labor Standards Act exempts those employees working in a bona fide executive, administrative, professional or outside sales capacity. Certain computer employees may also be exempt professionals under Section 13(a)(1) or Section 13(a)(17).

There are three tests for exemption: salary level, salary basis, and job duties.

Salary Level

The minimum salary level required for exemption is $455 per week. This salary must be paid “free and clear,” meaning it cannot include the value of non-cash items that an employer may provide an employee including board, lodging and other facilities (i.e. meals furnished to restaurant employees). The minimum salary may also be paid in equivalent amounts for periods longer than one week—$910 for biweekly, $985.83 for semimonthly, and $1971.66 for monthly periods.

Highly compensated employees performing office or non-manual work paid $100,000 or more annually, of which at least $455 per week must be paid on a salary or fee basis, are also exempt if they “customarily and regularly” perform at least one of the exempt responsibilities of an exempt executive as defined in the standard tests for exemption. “Customarily and regularly” does not include isolated or one-time tasks. It includes work performed “normally and recurrently” every workweek but not necessarily constantly. Total annual compensation includes commissions, nondiscretionary bonuses and other nondiscretionary compensation earned in a 52 week period. It does not include credit for board, lodging and other facilities, payments for medical or life insurance, and payments to retirement plans or other fringe benefits.

The salary may be prorated if the employee works only part of the year and employers may make one final payment within one month after the end of the year to meet the $100,000 annual minimum. Employees whose compensation does not meet or exceed $100,000 by the end of the year can still be tested for exemption under the standard duties test. The highly compensated test does not apply to non-management production line workers and non-management employees who work in maintenance, construction and other occupations involving repetitive manual work and requiring physical skill and energy.

Salary Basis

An exempt employee must also be paid on a salary basis. This salary must be received by the employee each pay period at a “predetermined amount” that cannot be reduced based on fluctuations in the quality and quantity of work performed. This salary must be paid in full for any week in which the employee performs any work, except for certain identified exceptions. However, exempt employees need not be paid for any week in which they perform no work. If the employee is “ready, willing, and able” to work the employer may not make deductions from the predetermined amount for time when no work is available. There are seven exceptions to this “no pay-docking” rule, detailed in the Department of Labor’s FairPay Seminar. It is important to be familiar with these exceptions and the improper forms of deduction as “an actual practice of making improper deductions” will result in the loss of the exemption. Exemption will not be lost if the employer clearly communicates regulations against improper deductions and enacts complaint mechanisms for improper deductions, reimburses employees for any improper deductions and commits to future compliance.

It is also acceptable to compensate professional and administrative employees on a “fee basis.” This requires an employee to be paid an agreed sum for completing a single job, regardless of hours worked. A fee payment satisfies the minimum salary level requirements for exemption if the fee is at a rate of at least $455 per week if the employee worked 40 hours.

Outside sales employees and licensed or certified doctors, lawyers, and teachers are exempt regardless of their salary. Also exempt are certain computer-related occupations paid at least $27.63 per hour. The salary level and salary basis test do not apply to these professions.

Job Duties

In addition to salary requirements, exempt executive employees must meet the following three job requirements: 1) the employee’s primary function is management 2) the employee must “customarily and regularly” direct the work of two or more employees; and 3) the employee must have the authority to hire and fire other employees or have particular weight given to her suggestions regarding hiring, firing, advancement and promotion of other employees. These requirements are defined and described in detail in the Department of Labor’s FairPay Seminar.

Employees performing administrative job functions and salary requirements also meet exemption requirements only if their primary duty is office or non-manual work “directly related to the management or general business operations of the employer or the employer’s customers.”

Learned professionals who meet salary requirements and whose occupation requires “advanced knowledge” in a field of science or learning normally acquired through an extensive course of “specialized intellectual instruction” also meet exemption requirements. Examples include lawyers, doctors, teachers, engineers, actuaries and accountants. “Advanced knowledge” according to the Department of Labor regulations cannot be attained at the high school level. It is defined by the “consistent exercise of discretion and judgment” in the workplace and by reaching decisions through analysis and interpretations of varying facts or circumstances. Occupations which may be performed with a general degree in any field or with knowledge gained from an apprenticeship do not meet the “prolonged course of specialized intellectual instruction” requirement. There are exceptions to this rule which are further discussed in the FairPay Seminar.

Also eligible for exemption are those employees whose job function requires “imagination, originality or talent in a recognized field of artistic or creative endeavor.” Examples include musicians, writers, essayists, actors, graphic artists, photographers and painters. Exempt status is determined on a case by case basis for those employees who fall within this category.

Effect on California

The higher threshold for the salary test level does not effect California’s employers as existing California regulations mandate overtime pay for all California employees who earn less than $28,080 per year or $585 per week. California employers must still follow the state’s existing stricter overtime regulations. However, California does not have a highly compensated employee test and it is uncertain whether the state will adopt such a standard to conform to the DOL’s new highly compensated employee test.

A detailed comparison of the new FairPay regulations and California’s existing overtime regulations can be found on the California Chamber of Commerce website.