ask the attorney: ca edition

– KPA CONFIDENTIAL –

Ask the Attorney: CA Edition

SpeakersSpeakers

Moderator Presenter

Becky RossMarketing Manager

[email protected]

John P. Boggs, Esq.Fine, Boggs & Perkins LLP

[email protected]

QuestionsQuestions

If you have questions during the presentation, please submit them using the “Questions” feature

Gender Identity Discrimination (AB 887)

California is at it again!

New law specifically prohibits discrimination against a person based upon their gender identity OR their “gender expression” (defined as “a person’s gender-related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth.”)

“Wear a 3-piece suit today, dawn a dress tomorrow.” This new law will seemingly allow an individual to choose his or her attire and alter behavior based upon their expression of gender at any given moment.

Gender Identity Discrimination (AB 887)(cont’d)

What You Should Do:

Employee Handbooks and other personnel policies should be updated to specifically address this new prohibition.

HotlinkHR makes this process easy through automated publication and tracking Signatures electronically.

If Fred shows up in a dress and asks to be called Frederica, DO NOT take adverse employment action – be sure to call counsel for advice. You will most likely have to accommodate this situation.

Commission Agreements (AB 1396)

Did we mention that California is at it again?!

Effective January 1, 2013, ALL employment agreements that involve the payment of “commissions” must be put into writing!

And that’s not all! There’s even more RED TAPE. The following must also happen:

Pay plan must include a “complete” and “accurate” description of all terms of commission calculation and payment.

Signed copy of pay plan must be given to the employee.

Commission Agreements (AB 1396)Cont’d

Continuing with the RED TAPE:

Employer must receive a signed receipt from employee acknowledging receipt of the pay plan.

If the agreement or pay plan expires, and the parties continue to work under those terms, the terms are in full force and effect until a new contract or pay plan is signed.

HotlinkHR can be used to satisfy these requirements by using the Pay Plan Builder and the automated publication and Signature tracking features.


What You Must Do:

Ensure that all employment agreements that include payment by commission be put into writing.

Ensure that the agreement includes a specific breakdown of how the commissions are to be calculated and paid. Provide a signed copy of the contract to the employee.

Receive a signed receipt for the contract from the employee.


SAMPLE LANGUAGE:

Commissionable Gross. Commissionable Gross is the vehicle’s selling price plus dealer-installed aftermarket products (but excluding security systems, insurances, warranties, sealants, etc.) minus the total expenses associated with those vehicles as determined by normal and customary company accounting procedures. Commissionable Gross does not include: (1) the vehicle's cost as defined below; (2) Commissionable Gross Reserve, as defined below; (3) all costs in any way associated with the sale of the vehicle including but not limited to: costs related to dealer trades or similar transportation costs, costs related to commitments made by the dealership to the customer at the time of the sale for additional equipment, accessories or alterations or repairs, bank and finance company fees, management fees. Such costs may also include sublet fees with mark-up, an internal cost-basis between departments and/or retail rates charged to the department by other departments and/or outside entities; (4) a pre-delivery preparation fee of $ ______ (which includes such items as detailing, preparation for sale, and alarm wiring harness, etc.); (5) the difference between the trade allowance credited to the customer for their trade minus the trade's actual cash value determined by the dealership (over allowance amount); (6) compensation to personnel who share in the Closed Sale; and (7) good-will adjustments made to obtain the sale or to maintain the sale as a Closed Sale. Commissionable Gross also does not include factory incentives, holdback paid to the dealer or the amount of an under allowance on a trade.


SAMPLE LANGUAGE:

Commissionable Gross Reserve. Certain products may include a Commissionable Gross Reserve (which is an amount of the Commissionable Gross on which a commission is not paid and is determined by the dealership at its sole discretion and which may vary) in an amount established from time to time in the sole discretion of the company that is added to the actual net cost. That Commissionable Gross Reserve will be available for review upon request. The standard Commissionable Gross Reserve on new vehicles is $ and on used vehicles is $ . A non-standard Commissionable Gross Reserve may be included with certain vehicles (including, but expressly not limited to, specialty vehicles, custom vehicles, special allocation vehicles and/or limited supply vehicles) which may be different from the standard Commissionable Gross Reserve and will vary from vehicle to vehicle. The amount of the non-standard Commissionable Gross Reserve in these cases shall be set by the dealership in its discretion prior to placing the vehicle up for sale and the exact amount of that Commissionable Gross Reserve may be obtained by any employee by asking the General Manager prior to selling the vehicle. Vehicle Cost. The vehicle's cost, for a new vehicle, is the vehicle's 'invoice' cost plus the costs related to any equipment, flooring fees, accessories or alterations or repairs made to the vehicle and any related factory delivery fees or charges (e.g. Express Delivery fees). The vehicle's cost, for a used vehicle, is the vehicle's actual cash value or its acquisition cost (or the averaged or adjusted cost) plus all costs related to the vehicle's acquisition, reconditioning, and warranting including but not limited to: buyer fees, transportation fees, auction and bank fees, all reconditioning costs, costs related to accessories and alterations, lot damage costs, flooring costs and/or management fees determined by the dealership, and costs related to warranties included as standard equipment on the vehicle. Costs of sale (as used herein) and specifically costs of reconditioning or repair may include sublet fees with mark-up, an internal cost-basis between departments and/or retail rates charged to the department by other departments and/or outside entities.


SAMPLE LANGUAGE:

From time to time at the dealership’s sole discretion, the dealership may, and has the right to, average the vehicle cost’s between two or more vehicles purchased by the dealership, may make internal cost allocations between different departments, or may adjust the vehicle’s cost up or down to reflect market conditions or the vehicle’s history (e.g., the length of time the vehicle has been in stock). The adjustment or averaging in these cases shall be set by the dealership in its discretion prior to placing the vehicle up for sale and that adjustment may be obtained by any employee by asking the General Sales Manager prior to selling the vehicle. Closed Sales. No commission or unit credits will be awarded on any sale until the sale is 'closed.' A sale is not 'closed' until the Dealership has been paid in full on the transaction and all related paperwork is properly completed and approved. To be a closed sale, the vehicle or product must have been delivered to the customer and/or installed on the vehicle. A sale (including a special order vehicle) is not a Closed Sale until all paperwork is completed, the sale is fully paid for and/or funded by a financial institution, the vehicle or product is delivered to the customer, and the deal meets the requirements of Earned Commissions, as defined below, and at least 120 days have passed since the delivery of the vehicle to permit for return, adjustment, cancellation, etc. Earned Commissions. Employee must be an employee of the Company at the time a sale becomes a closed sale for any Commission or Bonus to be considered earned, regardless of the work done or the fact that Employee was employed when the sales agreement was entered into or the order was taken. In simple terms, Employee must be employed at the dealership at the time the deal(s) become Closed Sales. Until that time, no commission or bonus has been earned by Employee. Split Commissions. Occasionally it will be necessary to split the commission and the unit credit on the sale of a unit between two or more people. Management reserves the right to split all relevant commissions and unit credit by any percentage it deems appropriate. The decision of the General Manager on the division of commissions and unit credits is final. A split commission equals less than a full unit for the purpose of a Close Sale, but can be combined with other Split Commissions in full units (Closed Sales). For example, two 50%-split commissions equals a full unit (that is, one Closed Sale.)


What You Must Do:

Ensure that any time employment or commission terms change, a new agreement meeting all of the above-described requirements is put into place.

Impact:

Many dealers already use written pay plans on a consistent basis, and we have always recommend that commission-based pay plans ALWAYS be put in writing. But the “process” involved in this new law is going to be a chore and challenging.


Impact:ACCOUNTABILITY! This new law is going to pose a

HUGE compliance challenge. Dealers must set up a

process of “accountability” and “checklists” for the development and issuance of any commission pay plans.

No more “cocktail napkin” pay plan.

HOTLINKHR SOLVES THIS PROBLEM!!!!!

“Wage Theft” Law and New Employment Disclosures (AB 469)

In an effort to address the failure of employers to pay the applicable minimum wage to certain classes of employees (so-called “wage theft”), this law requires new disclosures to employees, and significantly increases penalties for non-compliance.

Employers must provide a NEW NOTICE (i.e., more RED TAPE) at the time of HIRING an employee (on a template to be developed by the Labor Commissioner) in the language the employer normally uses to communicate employment-related information, which must include the following information:

The rate or rates of pay, and whether paid by the hour, shift, day, week, salary, piece, commission, or otherwise, including any applicable overtime rates.

“Wage Theft” Law and New Employment Disclosures (AB 469) – cont’d

Any allowances claimed as part of the minimum wage, including meal or lodging allowances.

The regular payday designated by the employer.The name of the employer, including any “doing business as”’ names used.

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

The telephone number of the employer.


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

(Take a breath…almost finished here…)

Any other information the Labor Commissioner deems material and necessary.

ALSO…any time any of the information in the notice changes, the employer must provide an updated notice

within 7 days of the change, unless the changes are provided in a timely wage statement, or required by another law within the seven-day period.


Exception!

The notice requirements do not apply to employees covered under an overtime exemption, or employees covered under a collective bargaining agreement, if the bargaining agreement governs wages, hours of work, and working conditions, provides for premium overtime wages, and has a base rate of pay at least 30% higher than the state minimum wage.

New Pay Day Notice can be automated in HotlinkHR


Some Additional Things This Law Does:

Employees may recover attorney’s fees in enforcing a judgment for unpaid wages under the Labor Code. (L.C. 1194.3)

Civil and criminal penalties for employers who willfully fail to pay a final court judgment or final order of Labor Commissioner – this means jail time too – possibly up to a year. (Yikes!) (L.C. 1197.2)

Employers now required to maintain payroll records at least 3 years (used to be 2). Also, employer may not prevent employee from keeping a personal time record of hours worked. (L.C. 1174)


Bottom Line:

Dealers will be subject to major new penalties for failure to pay the applicable minimum wage. Dealers will also be required to provide a new notice at the time of hiring non-exempt employees not covered under a CBA that meets certain requirements, providing information about wages and employment information, and to update the notice within one week of changing any information in the notice.

Pregnancy Leave and Related Health Care Coverage (AB 592)

This new law makes interfering with, restraining, or denying the exercise of pregnancy disability leave an unlawful employment practice, and declares the changes as declarative of existing law.

Nothing really new here on the law against pregnancy discrimination or pregnancy leave,

EXCEPT!...

Pregnancy Leave and Related Health Care Coverage (AB 592) – cont’d

Any employer with 5 or more employees must MAINTAIN

and PAY ($$$!) for health care coverage for the entire leave period up to four months (beginning on the day the leave commences) – even if the employee is not otherwise eligible for leave under the FMLA or the CFRA.

The law requires extension of the coverage at the same level and under the same conditions as if the employee had continued working during the pregnancy disability leave period.

Organ Donation Leave of Absence - (SB 272)

“Brown and Company” are still tinkering with this one!

Last Year’s SB 1304 provided for a mandatory paid leave of absence for employees who donate an organ (30 days) or bone marrow (5 days) within a one year period.

The new law clarifies a few things:

The days of leave are business days, and not calendar days.

The 1-year period is measured from the date that the employee begins the leave, and consists of 12 consecutive months.

Organ Donation Leave of Absence - (SB 272)- cont’d

For purposes of vacation, sick leave, or Paid Time Off, the leave of absence may not be considered as a break in the employee’s continuous service.

The employer may condition the initial receipt of the leave upon the employee’s use of earned but unused days of Paid Time Off.

Bottom Line: New law strengthens employees’ rights to take leave for organ or bone marrow donation.

Independent Contractor Misclassification - (SB 459)

New law significantly INCREASES the PENALTIES for WILLFULLY MISCLASSIFYING employees as an “independent contractor.”

“Willful misclassification” means “avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.”

Employers are also prohibited from attempting to assess charges or fees against the misclassified worker if doing so would not be permitted had the classification been accurate.

Independent Contractor Misclassification - (SB 459) – cont’d

What happens if you violate these new rules?

Subject to penalties of up to $25,000.

In addition, an employer that is found guilty of willful misclassification by the Labor and Workforce Development Agency or a court will be required to prominently post information about the violation for two years on its website, and in an area available to both employees and the general public.

Be careful with Dealer Trade Drivers and Tent Sales!

Employment Screening of Credit Reports - (AB 22)

The new law prohibits the use of credit reports for employment purposes, unless an exception applies.

If an exception does apply and a potential employer seeks a credit report, the bill changes the notice requirement to require a description of the specific exemption allowing the use of the

report. BUT, most, if not all, new vehicle dealers will be exempt from the general prohibition because the bill specifically exempts entities subject to the federal Gramm Leach Bliley information privacy and safeguard laws — which apply to dealers who offer credit for consumer vehicle purchases, or arrange for consumer vehicle financing.

Employment Screening of Credit Reports - (AB 22) – cont’d

Additional exceptions that may apply to dealerships include:

Managerial positions covered under the overtime exemption for executives.

Positions involving regular access to:Bank or credit card account informationSocial Security Numbers; andBirthdates

Employment Screening of Credit Reports - (AB 22) – cont’d

Positions where the applicant would be:A named signatory on the employer’s bank or credit card account;Authorized to transfer money on behalf of the employer; orAuthorized to enter into financial contracts on behalf of the employer.

Positions involving access to confidential or proprietary information.

Positions involving regular access to at least $10,000 in cash of the employer, customer, or client during the workday.

Impact?: Probably little to no impact for most new car dealers,other than notice requirements.

New Case Law Updates

Moreno v. Sonic-Calabasas A, Inc.

The California Labor Commissioner has tried for years to impose its “Berman” process on employers – even where the dispute is covered by a valid arbitration agreement. (What’s the “Berman” process?!)

The California Supreme Court agreed with the Labor Commissioner and held that employers must go through the “Berman” process even if a valid arbitration agreement covers the dispute. If the employer does not like the result, it can appeal and then go to arbitration. DOES THIS MAKE ANY SENSE!?



The U.S. Supreme Court didn’t think so either. Our firm recently and successfully petitioned the U.S. Supreme Court to get the California Supreme Court’s decision reversed. The U.S. Supreme Court has now “vacated” (that’s legalese for OBLITERATED!) the California decision.

The U.S. Supreme Court directed the California “high court” to “reconsider” its position on forcing the “Berman” process on parties who have a valid arbitration agreement covering their dispute.



In short, the U.S. Supreme Court has said that if the arbitration agreement is governed by the Federal Arbitration Act (FAA) – and the CNCDA arbitration agreement is so governed – then states (and that includes California!) cannot impose any special or additional procedural requirements on the parties. So, if the California Supreme Court follows the U.S. Supreme Court’s rulings on this issue – and it must do that – then the California high court should rule that parties to an arbitration agreement governed by the FAA need not go through the “Berman” process.



Why is this important?

2 Good Reasons: (1) Precedent; and (2) Litigation costs.

Moreno is very important because it could serve as a defining moment on the enforceability of arbitration agreements governed by the FAA. For years the California courts have tried to frustrate the use of arbitration agreements in the employment context. Hopefully, Moreno significant put a halt to that. Also, forcing parties to go through the Berman process only served to increase the cost of litigation.


Gonzales v. Downtown LA Motors

Wage/Hour Class Action filed by FLAT-RATE technicians seeking, among other things, compensation for so-called “waiting time.”

Through expert testimony, the plaintiffs showed that over the years, their average “wait time” per day ranged from .39 hours to 1.85 hours per day. According to the court, “wait time” means waiting time between repair orders that was not “trivial” or “insignificant.”

The trial court concluded – consistent with the Labor Commissioner’s position – that these FLAT-RATE technicians had to be compensated above and beyond their piece-rate compensation for this unproductive down time.



The trial court awarded plaintiffs app. $1.4 million in unpaid wages, penalties, and interest.

The trial court’s decision is on appeal, so there is no legal precedent at this time.

We believe the decision is wrong. The piece-rate or “flag-rate” system is designed to compensate employees for all hours actually worked, not just the particular job being performed at any moment. Having to pay extra compensation for time spent waiting between jobs seems entirely inconsistent with the piece-rate system.



At this time, we recommend that dealers amend their written pay plans to expressly include language saying that the flag-rate compensation is intended to and does pay for all hours worked – not just the particular job related to the “flag” compensation.

Dealers may also consider drafting “hourly” pay plans with a flat-rate “bonus.” Disadvantage of this pay plan is OT liability is a little more expense.


THE END…FOR NOW…

QUESTIONS?

Contact InformationContact Information

37– KPA CONFIDENTIAL –

The recorded webinar will be emailed to you today

www.kpaonline.com

Becky Ross

[email protected]

866-356-1735

ask the attorney: ca edition

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