1. Current HR Laws and Trends By Ken Tiratira, Executive Vice President Employers Group July 2016

2. Agenda Minimum wage increase initiatives Paid sick leave: state and local changes FLSA Overhaul and changes to the overtime exemption threshold Independent contractor classifications Pay equity CFILC Questions Open Discussion

3. State Minimum Wage Schedules California: currently $10/hour increasing by one dollar per year to $15/hr by 2022. – Indexed to inflation effective 1/1/2023 California city minimum wage thresholds in the following cities: – Berkeley, Long Beach, Los Angeles, Oakland, Sacramento, San Diego, San Francisco, San Jose, and Santa Monica

4. Paid Sick Leave California: Healthy Families Act. One hour of sick leave for every 30 hours worked, at least 24 hours or three days of paid sick leave per year. Six California cities have their own paid sick leave provisions varying in permitted uses, covered family members, accrual methods, accrual caps and other standards. – San Francisco – Oakland – Emeryvi8lle – Los Angeles – San Diego – Santa Monica

5. FLSA-Exempt vs. Nonexempt DOL Proposed Amendments Increase the Salary threshold for White Collar Exemptions – Sets the standard salary level at the 40 th percentile of weekly earnings for full-time salaried workers – Salary basis test increased from $455/week to $913/week ($47,476 annually) – Increases the total annual compensation requirement needed to exempt HCE’s from $100k to the annualized value of the 90 th percentile of weekly earnings for full-time salaried workers ($134,004 annually) – Establishes a mechanism for automatically updating the salary and compensation levels every three years Effective December 1, 2016. Automatic updates commence January 1, 2020.

6. FLSA-Exempt vs. Nonexempt Standard duties test and the highly compensated executive duties test remain unchanged

7. FLSA-Exempt vs. Nonexempt What can employers due in anticipation of the proposed rule changes? – Evaluate the classification status of your workforce to determine whether a worker is exempt or overtime-eligible – Conduct a privileged audit (attorney oversight) of your exempt workforce to determine what portions of your workforce will be affected by the proposed new rules.

8. Independent Contractor Classification US Department of Labor Wage and Hour Division Administrator’s Interpretation (AI) -”most workers are employees under the FLSA’s broad definitions” What’s at stake?: – Federal Tax Withholding – Unemployment Insurance – Overtime – Meal and rest periods – Workers’ Compensation

9. Independent Contractor Classification Internal Revenue Service Test – Behavioral: Does the company control or have the right to control the worker as well as how the worker does his or her job? For example, if a company provides training for the worker, this signals an expectation to follow company guidelines and therefore indicates that the worker is likely an employee. – Financial: Are the business aspects of the worker’s job controlled by the payer? (These include things like how a worker is paid, whether expenses are reimbursed, who provides tools, supplies, etc.). Only an independent contractor can realize a profit or incur a financial loss from his or her work. – Type of Relationship: Are there written contracts or employee-type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue, and is the work a key aspect of the business?

10. Independent Contractor Classification DOL Economic Reality Test-”Is the worker/independent contractor economically dependent on the supposed employer?” – The extent to which the services rendered are an integral part of the principal’s business. – The permanency of the relationship. – The amount of the alleged contractor’s investment in facilities and equipment. – The nature and degree of control by the principal. – The alleged contractor’s opportunities for profit and loss. – The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor. – The degree of independent business organization and operation.

11. California Fair Pay Act – Prohibits an employer from paying any of its employees at wage rates less than the rates paid to employees of the opposite sex for substantially similar work. – Employers must prove that wage differentials are based on seniority, merit, a system that measures earnings by quantity or quality of production or a bona fide factor other than sex. – Employees can be compared even if they do not work at the same establishment, or hold the “same” or “substantially equal” jobs Pay Equity

12. Exempt vs. Non-Exempt employee and medical leave Exempt employee returns to work and restricted schedules Employers who do not qualify under FMLA Disabilities under the ADA and FEHA Flex vs. Comp time Additional CFILC Questions

13. Thank You! Questions? 17