On May 7, 2013, the United States Court of Appeals for the D.C. Circuit struck down the NLRB’s August 30, 2011 Final Rule requiring employers to post notice of employee rights under the NLRA. National Association of Manufacturers, et al. v. NLRB, Case No. 12-5068 (DC Cir. May 7, 2013).

The Final Rule, entitled “Notification of Employee Rights under the National Labor Relations Act,” required in Subpart A that all employers subject to the National Labor Relations Act (NLRA) “post notices to employees, in conspicuous places, informing them of their NLRA rights, together with Board contact information and information concerning basic enforcement procedures.” The notice requirements included an 11×17-inch poster which described the NLRA in detail and informed employees of, among other things, their right to organize a union and to strike.

Subpart B of the Final Rule described how the Board would enforce Subpart A’s notice posting provisions. Once an unfair labor practice charge was filed alleging that the employer failed to post the notice, the Board would investigate and attempt to obtain the employer’s compliance. Thereafter, a formal complaint could be issued, followed by a hearing before an administrative law judge governed by the Board’s customary procedures. If the Board found that the employer failed to post the notice, the employer would be ordered to cease and desist from the unlawful conduct and to post the required notice.

Subpart B also established two ways in which future NLRB proceedings might be affected by an employer’s prior failure to post the required notice. First, the Board could toll the six-month statute of limitations for the filing of an employee’s unfair labor practice charge. Second, the Board could consider an employer’s “knowing and willful refusal” to comply with the notice posting requirement evidence of an unlawful motive “in a[ny] case in which motive is an issue.”

The Plaintiffs, the National Association of Manufacturers and the National Right to Work Legal Defense Foundation, alleged that the Final Rule exceeded the NLRB’s authority and that the Notice provision violated the Plaintiffs’ First Amendment Rights. The District Court for the District of Columbia held that the Board had authority to issue Subpart A requiring employer posting of employee rights, but exceeded its authority under the NLRA in Subpart B. National Association of Manufacturers. v. NLRB, 846 F. Supp. 2d 34 (D.D.C. 2012).

All parties appealed the District Court’s decision. Plaintiffs argued that the District Court erred in concluding the Board had the authority to promulgate Subpart A.  The NLRB argued that the District Court erred in concluding that it did not have the authority to promulgate the enforcement mechanism and penalties under Subpart B.

The Court of Appeals affirmed the District Court’s conclusion that the enforcement mechanisms of Subpart B were contrary to the NLRA. The Court primarily relied upon section 8(c) of the NLRA, which gives both employers and unions the right to express their views about unions, and about the benefits and drawbacks of union membership. Since section 8(c) clearly prohibits the Board from making an employer’s non-coercive speech regarding unionization an unfair labor practice, the Court of Appeal held that the Board could not make an employer’s failure to speak (by failing to post the notice) an unfair labor practice.  The Court held the Final Rule violates section 8(c) because it makes an employer’s failure to post the notice an unfair labor practice, and because it allows the NLRB to treat the failure as evidence of anti-union animus in unrelated proceedings.

The Court of Appeal reversed the District Court’s ruling upholding the validity of Subpart A.  Since the Board had expressly rejected the idea of asking for voluntary employer compliance with the notice requirement, the Court of Appeal concluded that Subpart A could not be severed from Subpart B.  It therefore vacated the Final Rule in its entirety.

The D.C. Circuit Court of Appeals decision follows on a similar ruling by the district court for the District of South Carolina last year. See Chamber of Commerce of the U.S. v. NLRB, 856 F. Supp. 2d 778 (D.S.C. 2012). The appeal in that case is now pending before the Fourth Circuit.

Comment

This case is a significant victory for employers, as the employer posting requirements are essentially no longer in effect.  Application of the Final Rule had previously been stayed by the Court of Appeals, and the NLRB’s website states that the posting requirement will not go into effect “until the legal issues are resolved.”  However, the Court of Appeals did not rule that the NLRB had no authority to promulgate Subpart A alone (relying on voluntary employer compliance).  Whether the Board will try this approach now is an open question.

Under California Labor Code Section 227.3, a California employer must immediately pay a terminated union employee for all “vested vacation time” unless the union representing that employee has negotiated a collective bargaining agreement (“CBA”) that “otherwise provide[s].”  In Choate v. Celite Corp,(2^nd Dist. May 2, 2013), the Court of Appeal for the Second District held that a CBA abrogates an employee’s right under section 227.3 to immediate payment for vested vacation time only if the waiver of those rights is “clear and unmistakable.”

In the Choate case, each January, Celite Corporation calculated a yearly “vacation allotment” based on each employee’s length of employment and the number of hours they worked the year before. Under the applicable CBA’s, employees terminated from Celite were entitled to “receive whatever vacation allotment is due them upon separation.”

For 25 years, both Celite and the Union understood this provision in the CBA’s to refer to the “vacation allotment,” and not to include pro rata vacation time vested in the year of termination. Plaintiffs, former Celite employees, filed a class action lawsuit on behalf of all employees who were terminated and not provided their pro rata vacation time for the year of their termination. They also sought waiting time penalties under Labor Code Section 203.

Although both the union and the employer interpreted the CBA’s to waive the employees’ rights to vested vacation time, the Court of Appeal held that this understanding was irrelevant, because the waiver in the CBA’s was not “clear and unmistakable.” Because the CBA’s lacked this clarity, Celite was required to pay terminated employees for all their vested vacation time.

The Court of Appeal also rejected Celite’s contention that plaintiffs’ claims were preempted by Section 301 of the LMRA. Having established a “clear and unmistakable” standard for a waiver of Labor Code Section 227.3, the Court of Appeal concluded that no interpretation of the CBA’s was necessary.

The Court of Appeal nevertheless reversed the trial court’s grant of summary adjudication as to waiting time penalties, finding that Celite’s refusal to pay vested vacation time, although intentional, was not “willful” within the meaning of Labor Code Section 203 because it acted “reasonably” in the “good faith belief” that the CBA’s provisions were enforceable.

Recommendations

Employers should review their CBA’s to determine whether any waiver of vested vacation rights is “clear and unmistakable.” While the Choate decision does not require a CBA to make an express reference to Labor Code Section 227.3, it would be good practice to include such a reference in future agreements.

By Michael Early

Piece Rate Pay Plan Held to Violate California Law

In  Gonzalez v. Downtown LA Motors, 2013 WL 820723 (March 6, 2013)*, the Court of Appeal for the Second District held that an auto dealership that paid employees for repair work on a piece rate basis must also separately pay those employees at the minimum hourly rate for waiting time and for time spent doing other work.  The court held that the employer did not meet its minimum wage obligations even though it insured that its piece rate employees’ average hourly rate exceeded the minimum wage.  The Court of Appeal therefore affirmed an award of $1.5 million to a class of 108 employees based on their average uncompensated waiting time.

In Gonzalez, the defendant paid its repair technicians a flat rate (ranging from $17 to $32 per hour) for each “flag hour” a technician accrued.  The number of “flag hours” assigned to repairs was based on a fixed amount of time expected to complete each repair.  Employees were paid based on the number of flag hours assigned to each repair task, regardless of how long the task actually took to complete.

As with most piece rate pay systems, defendant’s employees only accrued flag hours for the repair work they were given.  Time spent waiting for repair orders or performing other duties was “unpaid.”  To insure that employees were compensated at or above the minimum wage rate for all hours worked, defendant calculated what each employee’s pay for all hours worked would have been at the minimum wage and, if necessary, supplemented the employee’s pay to meet that amount.  Defendant argued that its pay system satisfied California’s minimum wage laws because every employee earned at least the minimum wage for all hours worked.

The Court of Appeal disagreed.  The court held that Wage Order No. 4, subdivision 4(B), which requires payment of the minimum wage “for all hours worked,” requires that employees be compensated at the minimum wage for “each and every separate hour worked.”  Since defendant’s employees were only paid based on the piece rate or “flag rate” for repair work they performed, they did not earn any direct compensation for time spent waiting for repair work or performing other tasks.  The failure to pay the minimum wage for time spent waiting for repair work or performing other tasks could not be rectified by averaging the employees’ piece rate compensation over all hours worked.

The court further held that defendant’s compensation scheme violated California Labor Code sections 221 and 223, which require an employer to pay all employee hours at the statutory or agreed rate, and prohibit an employer from improperly collecting wages paid to an employee.  The court held that averaging piece rate wages over total hours worked “results in underpayment of employee wages under Labor Code section 223, as well as an improper collection of wages paid…under Labor Code section 221.”  Since the average hourly rate actually paid to defendant’s employees was lower than the flat rate they were promised for repair work under their employment contracts, the court held that the defendant was effectively crediting wages accrued during “flag” hours to pay non-piece rate hours in violation of these Labor Code provisions.

Commission-Based Pay Plan Held to Violate California Law

The Gonzalez case falls fast on the heels of a federal court decision on commission-based pay from the Southern District of California, Balasanyan v. Nordstrom, Inc. , — F.Supp.2d–, 2012 WL 6675169 (S.D. Cal. Dec. 20, 2012).  In Balasanyan, a federal judge reached a similar conclusion respecting Nordstrom’s sales associate commission plan.

Nordstrom pays its sales associates a commission based on net sales.  Like the defendant in the Gonzalez case, Nordstrom sought to insure compliance with minimum wage laws by calculating each employee’s minimum hourly rate for all “selling time” and supplementing any employee’s pay, if necessary, to insure that it was at least equal to the minimum wage rate for all “selling time” hours.  Nordstrom’s “selling time” includes 1.5 hours of non-commission producing work (such as stocking) per shift.  While Nordstrom separately paid employees an hourly rate for “non-selling time,” the non-commission producing work included in “selling time” hours was only compensated based on commissions earned (or by Nordstrom’s supplementation of an employee’s pay).

Plaintiffs brought claims under both the federal FLSA and California law asserting that their commission pay could not be used to compensate them for time spent on non-commission producing activities.  Nordstrom moved for summary judgment on both claims.  The District Court held that Nordstrom’s compensation plan was lawful under the FLSA, because employers are permitted under the FLSA to average employee wages over total time worked in a week to determine if FLSA minimum wage requirements are satisfied.  Since Nordstrom guaranteed pay at or equal to the federal minimum wage through commissions (or by supplementing) based on “selling time” hours, FLSA minimum wage requirements were met.

As in Gonzalez, however, the District Court held that Nordstrom’s commission plan violated California law because it averaged employee wages over total hours worked, and failed to compensate them at the minimum wage for “each and every separate hour worked.”  The District Court rejected Nordstrom’s argument that stocking and other duties were compensated through sales commissions because such duties were related to (and increased) sales and sales commissions.  The District Court held that “compensation must be directly tied to the activity being done,” and that “activities that are only indirectly related to sales or services must also be [separately] compensated.”  Since Nordstrom’s employees were not compensated directly for stocking or other work, those hours were in essence uncompensated by Nordstrom’s commission plan under California law.

The trial court therefore denied Nordstrom’s motion for summary judgment on plaintiff’s California minimum wage claims.  Nordstrom’s request for permission to file an interlocutory appeal of the summary judgment order was denied last month.

Analysis

There are several objections to the decisions in these two cases.  Both cases relied heavily on the decision in Armenta v. Osmose, Inc., (2005) 135 Cal.App.4^th 314.  In Armenta, the plaintiffs were employed by a company that maintained utility poles in remote areas.  Although paid (per a collective bargaining agreement) well above minimum wage, plaintiffs were not paid for hours spent traveling to and from job sites, loading vehicles, or attending safety meetings.

In Armenta, the employer contended that the minimum wage laws were satisfied because total employee compensation exceeded the minimum wage for the all hours worked.  This contention was, of course, rejected.

Armenta is distinguishable on several grounds.  First, both pay structures are distinguishable from Armenta because defendants guaranteed their employees the minimum wage for every hour worked, leaving no work time uncompensated.  Second, the guarantees of the employers in Gonzalez and Balasanyan insure minimum employee compensation, while the piece rate and commission based components of the pay plans incentivize employees to increase their compensation based on productivity and sales.  Third, there is a logical disconnect between the right to pay an employee based on a piece rate system that includes a guarantee that their hourly wage will not fall below the minimum, and the court’s insistence that an employee must be paid separately for every hour of work, regardless of whether the employees were “making pieces.”

Recommendations

The deadline for appellate review has not passed for either of these decision, and it is possible that a higher court may reach a different conclusion.  Nevertheless, California employers should review their piece rate and commission-based pay plans to determine whether employees are directly paid at least minimum wage for each hour worked.  If employees under these plans have uncompensated waiting time hours or perform duties that are not directly compensated through piece rate or commission wages, employers should consider modifying their pay plans to avoid potential liability for failure to comply with California’s minimum wage laws.

*A publication order for this previously unpublished opinion was entered by the court on April 2, 2013.

Gabi’s profile can be found HERE.

California’s Governor Jerry Brown recently signed a number of bills into law.  The following are a few that will affect the business of private employers.

AB2103: Employment, Wage And Hour, Overtime

This new law will exclude overtime hours from the fixed salary of a nonexempt employee, notwithstanding an “explicit mutual wage agreement” to the contrary.  The proposed law stated its intent to explicitly overturn the decision of Arechiga v. Dolores Press, Inc., 192 Cal. App. 4th 567 (2011).

In the Arechiga case, a janitor and his employer agreed that payment of a fixed salary of $880 a week would provide compensation for 66 hours of work each week. The Court of Appeal held that this method of payment comported with California overtime law, and that no additional overtime compensation was owed. The Court rejected the employee’s contention that existing Labor Code Section 515(d) prohibits any sort of agreement that would allow a fixed salary to serve as a non-exempt employee’s compensation for anything more than a 40 hour workweek.

This bill now amends Labor Code 515, adding section (c)(2): Payment of a fixed salary to a nonexempt employee shall be deemed to provide compensation only for the employee’s regular, non-overtime hours, notwithstanding any private agreement to the contrary.

AB 2674: Employment Records/Right To Inspect:

This new law revises section 1198.5 of the CA Labor Code to now provide:

• Employers must maintain personnel records for a minimum of three years after termination of employment.
• Employers must provide a current or former employee (or their representative) an opportunity to inspect and/or receive a copy of those records (at the employee’s expense) not later than 30 calendar days from the date of a written or oral request, except during a lawsuit filed by the employee relating to a personnel matter .  Previously, employee shad a right to just inspect the records, not obtain a copy of those records.
  • Current employees are permitted inspection at their place of work or at another location agreeable to the employer and the employee;
  • Former employees are permitted inspection at the place where the records are stored, another agreeable location or a copy by mail (at the employee’s expense).
  • Requests are limited to once a year.
  • An employer who fails to permit the inspection:
    • Is liable for a penalty of $750;
    •  is guilty of an “infraction” (previously, it was a misdemeanor).
    • A current or former employee may also bring an action for injunctive relief to obtain compliance with this section.

AB 1255: Employee Compensation/Itemized Statements

This new law will add section 2 (A)-(C) to labor code 226 that governs the requirement to furnish itemized statements to employees.  Current law provides for the recovery of penalties up to $4,000 in connection with any injury due to an employer’s knowing and intentional failure to provide those wage statements.  This new law tells us specifically what that “injury” is.  It states that the employee is “deemed to suffer injury for purposes of the section” if:

• The employer fails to provide a wage statement; or
• The employer fails to provide accurate and complete information as currently required by section 226 AND the employee cannot easily determine from the wage statement alone, one or more of the following:
  • The gross wage amount or net wages paid to the employee, total hours worked of non-exempt employee,  all deductions, the dates of the period for which the employee is paid, the hourly rates;
  • Which deductions the employer made from gross wages to determine net wages;
  • The name and address of the employer.

AB 1744: Employee Compensation/Itemized Statements

Effective July 1, 2013, temporary services employers are now required to provide additional information on their employees’ wage statements.   In addition to the pay stub requirements of Labor Code 226 discussed above, these employers must also include on all pay stubs: 1) the rate of pay for each temporary assignment during the pay period; and 2) the total hours worked for each legal entity to which the temporary worker was assigned.

Temporary services employers must also include the physical address of the main office, the mailing address if different from the physical address of the main office, and the telephone number of the legal entity for whom the employee will perform work.

SUMMARY

The majority of these laws go into effect on January 1, 2013.  Employers should review their policies to ensure compliance.  For assistance, contact KHK.

KH&K seeks senior litigation lawyer to join our growing and highly respected practice.  Candidate must have portable business, and interest in managing attorneys (and ideally an interest in taking on some firm management responsibility.)  Trial and/or class action experience preferred.  We offer a unique, flexible working environment with great clients and significant professional opportunity.  Please inquire by email HERE.

The court, following established California case law, held that although there is a First Amendment right to anonymous speech, this right is not absolute and does not extend to defamatory statements.  Read the Court’s Opinion HERE.

The anonymous Tweeter’s Petition for Writ of Mandate to the California Court of Appeal was summarily denied.

The Equal Employment Opportunity Commission (EEOC) has recently amended its Age Discrimination in Employment Act (ADEA) regulations. These amendments are aimed at regulations pertaining to disparate impact claims and the reasonable factors other than age (RFOA) defense. The revised regulations appear to define the RFOA much more narrowly than under existing law, potentially making it more difficult for employers to mount a defense to age discrimination claims.

The ADEA prohibits both intentional discrimination (disparate treatment) against employees over the age of 40, and the application of neutral policies that adversely affect older workers (disparate impact). In Smith v. City of Jackson, 544 U.S. 228 (2005), the Supreme Court recognized that an employee could bring a disparate impact claim under both Title VII and the ADEA, but it clarified that the scope of disparate impact liability under the ADEA was more narrow. To defend against such claims under Title VII, an employer must show a “business necessity.” However, the Supreme Court held that under the ADEA, an employer need only show that it relied upon a “non-age factor that was ‘reasonable.’” The employer is not required to consider alternative polices that would have a lesser impact on older workers, as with the “business necessity” defense.

The new EEOC regulations appear to undercut the Supreme Court’s rulings by imposing a more rigorous standard on employers asserting an RFOA defense. The regulations now require that the employer show that its practice was “objectively reasonable when viewed from the position of the prudent employer mindful of its responsibilities under the ADEA under like circumstances” (emphasis added). The “prudent employer” standard is rooted in tort law, which imposes a duty to avoid harm. Thus, under the new regulations, a reasonable factor other than age is “one that an employer exercising reasonable care would use to avoid limiting the opportunities of older workers, in light of all surrounding facts and circumstances.”

In creating a “prudent employer” standard, the EEOC brings the RFOA defense much closer to the required “business necessity” showing under Title VII by requiring employers to consider the potential impact that policies and practices may have on older workers prior to implementing them.

Practical Considerations for Employers

These new regulations are bound to spur an onslaught of new litigation and investigations by the EEOC. The EEOC and/or private counsel will be focused on the following issues:

• The business purpose for the practice and how closely related the practice is to the stated business goal
• Whether alternatives to the practice were available and the rationale behind choosing the practice in question
• Steps taken by the employer to mitigate the impact of the decision on older workers
• Whether the employer considered the fact that the criteria used for hiring, firing and/or promoting may involve age-based stereotypes

To avoid potential litigation, employers should discuss and document the rationale behind each decision and ensure that managers and supervisors are cognizant of the potential adverse impact certain practices may have on older workers. Further, all management personnel should undergo anti-discrimination training that focuses specifically on age discrimination. Finally, employers should carefully examine all business decisions with an eye toward avoiding adverse impact on older workers, and, if necessary, consider alternatives that will avoid potential discrimination.

By Jessica Madrigal

New Requirements for New Hires

California has passed new legislation (the Wage Theft Protection Act), effective January 1, 2012, that imposes new requirements on employers with respect to new hires. Specifically, California Labor Code Section 2810.5 will require that employers disclose certain information to employees “at the time of hiring” in the form of a written notification. The specific requirements are outlined below:

What Information Must be Disclosed to New Hires?

Labor Code Section 2810.5 requires employers to provide written notice to employees “at the time of hiring” of the following information:

1. the employee’s pay rate and basis for pay rate (e.g. salary, commission, hourly, etc.);

2. allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances;

3. the regular payday designated by the employer;

4. the name of the employer, including any “doing business as” names used by the employer;

5. the physical address of the employer’s main office or principal place of business, and a mailing address, if different;

6. the telephone number of the employer;

7. the name, address, and telephone number of the employer’s workers’ compensation insurance carrier;

8. and other information the Labor Commissioner “deems material and necessary” (nothing further has been designated by the Labor Commissioner to be included in the new hire notices at this time)

What if There Are Changes or Modifications to the Information Contained in the Notice?

• If any changes are made to the above information, employers must provide notification to the employee within seven days either by including the updated information on the employee’s next pay statements or in a separate written form. Thus, for information that typically appears on an employee’s wage statement (i.e. pay rate), an amended notification form does not need to be issued as long as those changes appear on the employee’s next wage statement. For changes in other information, such as the name and address of the employer’s workers’ compensation carrier, which is generally not included on wage statements, an amended notification form would have to be provided to the employees.
• The Labor Commissioner has indicated that it will be creating a sample notification form as well as a FAQ sheet to assist employers in complying with the law, which will be available on the Division of Labor Standards and Enforcement website in mid-December.

Which Employees do the Notification Requirements Apply To?

• The new law applies to all non-exempt employees hired on or after January 1, 2012 so these notifications do not need to be provided to current employees.
• Section 2810.5 does not apply to employees who are exempt from overtime laws or employees covered by a valid collective bargaining agreement if their regular rate of pay exceeds California’s minimum wage by at least 30%, and if their overtime compensation is paid at the proper premium wage rate. Despite this exception, it is good practice to provide this notice to all new hires for two reasons: 1) To avoid disputes over whether the notice was due in the event employees classified as exempt later claim they were misclassified; and 2) as for union employees, not all employees are eligible to become union members immediately upon hire and would thus not fall under this exception. The fact that they may eventually become union members is immaterial, because Labor Code 2810.5 requires that the notice be provided “at the time of hiring.”

• Although not required by the law, a copy of this new hire notice should be kept in each employee’s personnel file in case there is ever a dispute regarding compliance with this requirement.
• Finally, although some information addressed in the written notice is already contained in the workplace posters mandated by other laws, Section 2810.5 does not change any of those posting requirements.

What Are the Disclosure Requirements Each Pay Period?

California Labor Code Section 226 requires that employers provide accurate itemized wage statements to each employee semimonthly or at the time of each payment of wages. This is not a new requirement, but ensuring that accurate wage statements are provided to employees will also help employers meet the notification requirements set forth under the new legislation described above. Section 226 requires that the following information be included on employee wage statements:

1. gross wages earned;

2. total hours worked by the employee (this requirement does not apply to employees who are salaried and exempt from payment of overtime);

3. the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis;

4. all deductions (i.e. taxes, medical insurance, etc.), provided that all deductions may be aggregated and shown as one item;

5. net wages earned;

6. the inclusive dates of the period for which the employee is paid;

7. the name of the employee and the last four-digits of his or her social security number or an employee identification number other than a social security number;

8. the name and address of the legal entity that is the employer; and

9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee

• A copy of the wage statement and record of the deductions must be kept by the employer for three years at the place of employment or at a central location within the State of California

What Should Employers do to Ensure Compliance with the New Notification Requirements?

Employers should be working diligently to prepare notification forms so that they are ready to be distributed to any new hires as of January 1, 2012. It is also a good idea to take this opportunity to review itemized wage statements to ensure they are in compliance with California law.

Within San Francisco city limits, employers of 20 or more employees are subject to the Health Care Security Ordinance. The following is a plain-English summary of these provisions, which can be somewhat perplexing for employers and employees alike, and the changes to the law effective in 2012.

San Francisco’s Health Care Security Ordinance (HCSO) requires mid to large-size employers in the City (for-profits with 20 or more employees and non-profits with 50 or more employees) to spend a minimum amount on their employees’ health care. Employers can choose how to make these health care expenditures, including purchasing health insurance, setting up health spending accounts, or enrolling employees in the City’s Healthy San Francisco Program. Employers with 1-19 employees are exempt from the HCSO provisions.

Employees covered by the HCSO, “covered employees,” are those employed for at least 90 calendar days and perform at least eight hours of work per week in San Francisco.

The new HCSO regulations, effective January 1, 2012, change the minimum health care expenditure rates and the annual salary figure exempting certain employees from the HCSO.

2012 Health Care Expenditure Rates

Large Employers (100+ employees) – minimum health care expenditure rate increased to $2.20/hour (previously $2.06/hour).

Medium-Sized Employers (20-99 employees) – the minimum health care expenditure rate increased to $1.46/hour (previously $1.37/hour).

The minimum expenditure rates require employers to pay a certain amount for each employee’s health care services, or reimbursing the costs of those services, in addition to wages and compensation.

The expenditure rate is to be paid for each hour worked by a covered employee for that quarter. Required health care expenditures are calculated by multiplying the total number of “hours paid” to each covered employee by the applicable expenditure rate. “Hours paid” include both work hours and any paid time off, including vacation and sick leave.

2012 Annual Salary Exemption Figure

Managers, supervisors, or confidential employees who earn an annual salary at or above $84.051 (or $40.41/hour) in 2012 are exempt from coverage under the HCSO (previously $81,450, or $39.16/hour). In other words, these employees are not “covered employees” and the employer need not pay health care expenditure rates.

San Francisco employers are must comply with several city-wide ordinances regulating labor and employment, such as the HCSO, in addition to state and federal labor laws.

Source: http://sfgsa.org/index.aspx?page=418

- Katie Weeks