Self Help Plan for Small Companies to Avoid Labor Law Problems in California

September 26, 2006; 02:45 AM

California's labor laws have given it a reputation as a "non business friendly" state that makes life difficult for employers. As consultants, we find many California small businesses seriously non-compliant with many state employment standards and regulations. New laws in 2005 and this year have increased penalties and fines for businesses that neglect their Human Resources obligations.

A business owner could face serious fines or disruption if a government agency finds his or her company in violation of California's labor code regulations. The plaintiff bar attorneys have prospered from this state's confusion of rules and regulations and have targeted and threatened many small businesses with litigation. This has become more of a problem for employers since the passage of the California Private Attorney General Act (PAGA) in 2004 which allows private lawsuits on compliance issues from third parties. Since the changes and new restrictions on workers compensation litigation, which took effect in 2005, many plaintiff lawyers are focusing on basic compliance issues to make up for the loss of their injured worker cases.

For small California business employers, it is in their best interests to take the steps necessary to ensure they are compliant with the state's labor laws. The guidelines outlined here are intended for use by employers with under 50 employees. (Larger businesses must also comply with other regulations). Here are the primary five areas on which a business owner will need to focus:

#1 Update Employment Law Posters! -- The California Labor Dept. and the federal governments require employers to post information related to wages, hours and working conditions in an area frequented by employees where it may be easily read during the workday. The number of posters required is determined by the size and nature of your business but could total up to ten or more. An employer can obtain the required California and federal posters through these websites: http://www.dir.ca.gov/WP.asp and http://www.dol.gov/osbp/sbrefa/poster/matrix.htm. The business owner may want to consider purchasing an approved "combination" poster which condenses and combines all the necessary posters. These can be found online at http://allinoneposters.com or http://www.ihrsource.com or similar sites on the Internet.

Employers should study and make sure they understand the regulations on these posters to determine which regulations are applicable to their business so they can answer questions from employees.

#2 Businesses must be compliant with all safety and health regulations -- In California, every employer has a legal requirement to provide and maintain a safe and healthy workplace for its employees, according to the California Occupational Safety and Health department standards. As of 1991, each employer must have in place a written, effective Injury and Illness Prevention Program (IIPP). This does not have to be a complex document but must encompass certain elements. An employer can get an outline from the state for developing a plan for their work site at http://www.dir.ca.gov/dosh/dosh_publications/iipp.html. Besides developing a plan, there is a requirement that businesses train their workers on preventing workplace hazards (and document that training). The IIPP plan must be updated every time a business changes their operations where the hazards involved also change. In addition, all employers with over ten employees must also keep an accident and injury log (OSHA 300). This can be downloaded with instructions at http://www.dir.ca.gov/dosh/dosh_publications/RecKeepOverview.pdf.

#3 Employers must pay closer attention to how they pay their employees - In California; most state employment regulations "trump" federal regulations because state standards are usually stricter. Many small business owners make the mistake of paying all or many of their employees a straight salary to keep payroll a simple process. This can be a very perilous approach as they most probably will violate overtime rules which have very stiff penalties. We advise that every business study the CA Industry Wage Commission (IWC) orders applicable for their particular industry at http://www.dir.ca.gov/IWC/WageOrderIndustries.htm to know the legal requirements for overtime wages, breaks and lunch periods for that firm's workers.

A critical area many small businesses fail to recognize is the proper classification of employees, as they apply to mandatory overtime pay -- exempt from overtime or not exempt. This can be an area which the employer may need some professional advice, but the general rule is that every employee should be paid hourly and paid overtime according to the IWC orders unless the proper testing is done to make a case for an exemption which usually only applies to top managers or certain professional employees. Some guidelines are available at http://www.management-advantage.com/products/overtime-exempt.html.

#4 Employers must Respect Employees' Privacy and secure personnel files -- Today the law protects the privacy of employees with some pretty severe sanctions against employers who violate a person's medical privacy or identity, even if unintentional. The employer should separate personnel information into two files -- a personnel file (with payroll tax forms, or basic job information in it such as training documents, performance reviews and disciplinary or commendation notices) and a separate confidential file with medical, credit, benefits and personal family or dependent information. Supervisors or other interested management must be restricted in their access to the personnel file only. Only the person designated as the human resources record keeper is to be entrusted with the access to the confidential file. Also the employer must make sure these files are always secured. For a more thorough discussion on employer's responsibilities on employee privacy, businesses can download this article at http://www.hunton.com/files/tbl_s47Details%5CFileUpload
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#5 Employers must verify their employees' legal work status -- The immigration authorities are under increasing pressure to enforce the current laws, and experts agree that enforcement will increase in the coming years as the debate wears on this issue. There have been some well publicized raids all over the country. The I-9 employment form must be completed properly by every employer on every employee, even US citizens. These documents must be completed properly and kept up to date if certain documents are presented on an employee's legal status to work in the US. Attached are two good primers and forms on the employer's responsibilities in that area which can be found at http://www.ahmcp.com/articles/employer_records.html or http://www.twmlaw.com/resources/formI9.html.

As a further measure, an employer should also use the government's free service to verify that the social security numbers being presented by applicants are valid, which will reduce the chances that they are hiring an illegal alien. Instructions for verification online are available at http://www.socialsecurity.gov/employer/ssnv.htm. This may become a requirement soon as the immigration service cracks down on employers. The government is now using tax filings with mismatched or invalid social security numbers to look for employer who knowingly hire workers who are in the US without proper labor authorization.

While this article is not inclusive of every labor code issue employers may face, it does cover the "hot" areas which will give a small business owner a running head start to being compliant with California state and the federal laws. It might be a prudent investment for every business owner with more than five employees to have a human resource and payroll audit done periodically by an HR professional to help them spot areas of vulnerability and non compliance so they can address those issues now, rather than in crisis or litigation.

Copyright 2006 -- Daniel Curtin, Curtin & Associates

Daniel Curtin, SPHR is the Principal of Curtin & Associates; a Los Angeles based human resources consulting firm and a WEHO chamber member. An award winning professional, he has over 28 years of corporate and executive level experience in his field. He has contributed to scholarly books and articles and has been interviewed by local print and TV media. More information on Curtin & Associates is available at http://www.hrsolutions-socal.com.