June 2018 California Regulatory Updates

by Camille Bradbury on June 18, 2018

CALIFORNIA UPDATES 

Classifying Independent Contractors
As we reported last month, California employers must now classify independent contractors using the new A, B, C test.

To classify now as a 1099 independent contractor, workers must be:

A. Working independently, free of employer control and direction.
B. Perform work that is outside the usual course of the employer’s business on a regular basis.
C. Customarily engaged in their trade outside the employer’s business as evident by advisement, licensures, etc.

This three-prong test replaces the Borello test used in wage and hour cases.

California Clarifies the Rule in Paying Overtime for Non-Exempt Employees
The California Supreme Court ruled in Alvarado v. Dart Container Corp. of California that bonuses cannot be used to calculate overtime pay. Employers risk underpaying employees when bonus hours are factored into overtime rates.

  • Employers must use the regular rate of hourly pay and the relevant pay period of hours worked to determine the rate of overtime pay
  • Bonus pay can only be calculated using normal working hours, not including overtime hours

Considerations

  • Review existing policies for non-exempt workers surrounding bonus structures or overtime compensation
  • Train personnel on calculating overtime

Additional Resource
KPA’s What’s New in California: New Overtime Pay Considerations in 2018 Webinar

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Camille BradburyJune 2018 California Regulatory Updates