The Shifting Job Market in California, and the Emerging Challenges for Employers

The Shifting Job Market in California, and the Emerging Challenges for Employers

California Payroll Conference September 12, 2014

James Brown Partner, San Francisco, CA

[email protected] 415.781.7900

Jim Brown is the co-Chair of the firm's Employment and Labor Law Group. Mr.

Brown represents clients before state and federal courts and enforcement

agencies.

Michael Bernick Special Counsel, San Francisco, CA

[email protected] 415.781.7900

Michael S. Bernick joined Sedgwick after serving for nearly five years (1999-2004)

as director of the California Employment Development Department (EDD), the

10,000-person state department of labor.

. 

Job Volatility: Enormous Job Creation on an On-Going Basis

1992

1993

1994

1994

1995

1996

1997

1997

1998

1999

2000

2000

2001

2002

2003

2003

2004

2005

2006

2006

2007

2008

2009

2009

2010

2011

5,000

5,500

6,000

6,500

7,000

7,500

8,000

8,500

9,000

9,500

Enormous Job Creation Each QuarterQuarterly Gross Job Gains, 1992-2011 (in thousands)

Job Volatility: Enormous Job Destruction on an On-Going Basis

1992

1993

1994

1994

1995

1996

1997

1997

1998

1999

2000

2000

2001

2002

2003

2003

2004

2005

2006

2006

2007

2008

2009

2009

2010

2011

5,000

5,500

6,000

6,500

7,000

7,500

8,000

8,500

9,000

Enormous Job Destruction Each QuarterQuarterly Job Losses, 1992-2011 (in thousands)

Job Volatility: Movement of Workers Among Jobs-Separations

2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 20123,000

3,500

4,000

4,500

5,000

5,500

6,000

Enormous On-Going Worker Movement Monthly Separations, 2000-2012 (in thousands)

Job Volatility: Movement of Workers Among Jobs-Hires

20002001200120022002200320032003200420042005200520052006200620072007200820082008200920092010201020102011201120120

1000

2000

3000

4000

5000

6000

7000

Enormous On-Going Worker MovementMonthly Hires, 2000-2012 (in thousands)

Job Volatility: Average Job Openings On Any Given Day (In Thousands)

Job Volatility: Number of Job Seekers Per Job

2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 20120.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Number of Unemployed per Job Opening, 2000-2013

Breakdown in Full Time Employment and Rise of Project Based, Contingent and Part-Time Employment

1995 1997 1999 2001 20050

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

8,309 8,456 8,247 8,58510,342

1,968 1,996 2,032 2,089

2,4541,181 1,300 1,188

1,169

1,217

652809 769 633

813

Workers in Alternative Employment Arrangements, 1995-2005 (in thousands)

Independent contractors On-call workers Temporary help agency workers Employees of contract firms

Wo

rker

s (0

00s)

Growth in Involuntary Part-Time Employment

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Growth in Part-Time Employment (Involuntary)

Seasonally adjusted January data

Thousands employed

Growth in Staffing Industry

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

0

500

1,000

1,500

2,000

2,500

3,000

Temporary Help Services Employment, 1990-2014

Seasonally adjusted January data

Thousand Employees

Growth in the “Knowledge Economy” Jobs

Public Relations Specialists

Pharmacists

Network and Computer Systems Administrators

Human Resources, Training, and Labor Relations Specialists, All Other

Market Research Analysts and Marketing Specialists

Lawyers

Middle School Teachers, Except Special and Career/Technical Education

Management Analysts

Secondary School Teachers, Except Special and Career/Technical Education

Elementary School Teachers, Except Special Education

127.2128.3139.6141.9155.3159.7165.3168

191.8197.9

212222.5

249.3250.7

274.3305.1

355.6452.1

573.2586.1

"The Knowledge Economy" Projected Openings 2010-2020

(in 000s)

Greater Growth in Practical Economy Jobs

Janitors and Cleaners, Except Maids and Housekeeping Cleaners

Home Health Aides

Customer Service Representatives

Laborers and Freight, Stock, and Material Movers, Hand

Office Clerks, General

Combined Food Preparation and Serving Workers, Including Fast Food

Registered Nurses

Waiters and Waitresses

Cashiers

Retail Salespersons

0 500 1,000 1,500 2,000 2,500

246.4

706.3

338.4

319.1

489.5

398.0

711.9

195.9

250.2

706.8

682.0

837.5

959.6

980.2

1,011.5

1,146.5

1,207.4

1,324.3

1,775.9

1,958.7

Top Ten Occupations by Openings, 2010-2020

Total Openings

Growth

Job Growth and Educational Levels Required

Job GrowthJob Openings (including replacement)

0

10,000

20,000

30,000

40,000

50,000

60,000

U.S. Job Change 2010-2020: Job Growth and Openings (000s)

Doctoral or pro-fessional

Master's

Bachelor's

Associate's

Postsecondary non-degree

Some college, no degree

High school

Less than high school

Minimum Wage Issues In California

Minimum Wage Issues in California: The Wrath of Armenta v. Osmose, Inc.

Armenta v. Osmose, Inc., 135 Cal.App.4th 314 (2005):

• CA law requires employers to pay the minimum wage for each and every compensable hour of work performed.

• Employers cannot average out the total amount of pay through per diem, salary, or hourly wage payments to determine if an employee has been paid the minimum wage for all hours worked.

Minimum Wage Issues In California

Minimum Wage Issues in California: The Wrath of Armenta v. Osmose, Inc.

• Piece work or commission pay cannot be

averaged for purposes of minimum wages

during non-sales/non-production time.

FCRA ONSLAUGHT OF CLASS ACTIONS

Background Check Litigation – It Seemed Like a Good Idea at the Time!

FCRA Onslaught of Class Actions

Whole Foods Markets CEC Entertainment (Chuck E. Cheese’s) Extended Stay Hotels O’Reilly Automotive Stores Century 21 Department Stores Axcess Financial Services (Check ‘N Go) Nine West Panera American Multi-Cinema Lexis-Nexis Kelly Services, Inc. Cathay Bank

Companies Facing Class Actions Filed This Year

FCRA Onslaught of Class Actions

Key Allegations in Class Actions

No “stand alone” disclosure “At-will” employment reference Release of liability included No “” box to request a copy Included as part of job application document Equal Employment Opportunity affirmation

FCRA Onslaught of Class Actions

Background Check Litigation – Best Practices

• No “pro-forma” background checks on all applicants. California limits the use of credit reports. “Ban the box” ordinances, such as San Francisco’s Fair

Chance Ordinance, limit the timing and use of criminal history inquiries.

• Check your forms –The disclosure and authorization form should be a stand-alone form No release of liability No “at-will” affirmation Allow applicant to request copy

• Check industry specific rules.

Commission Agreement Issues

The Biggest Problems We See with Commission Agreements

The commission agreement is not in writing signed by the employee and/or the employer fails to provide an employee with a receipt in violation of Labor Code § 2751.

No clear definition of when commission “earned”

The agreement provides for illegal chargebacks.

The agreement fails to guarantee minimum required payments, such as minimum wage, 1.5 times the minimum wage for inside sales employees, and overtime on commissions for nonexempt employees.

1

2

3

4

Misclassification-IC v EE

Independent Contractors – Don’t Be a Control Freak

• The biggest issue is still the right to control the details (or manner and means) by which the work is performed to accomplish the desired result.

• Standard company practices and policies — such as standardized form contracts for independent contractors increase chance of class action.

• Labor Code § 226.8, which prohibits intentional misclassification.

Misclassification–Exempt v. Non-Exempt

The Battle Continues

• Plaintiffs’ attorneys are increasingly focusing on sales

exemptions Inside sales exemptions are limited (Wage Orders 4 and 7) Outside sales – are they actually engaged in sales away

from the employer’s place of business more than 50% of

the time? “Home” office work doesn’t count.

Misclassification–Exempt v. Non-Exempt

The Battle Continues

• As minimum wage increases take effect, the minimum salary for California white collar employees is also automatically increasing.

• Exemptions should be based on a realistic assessment of job duties.

July 1, 2014:

Minimum wage went from $8.00 to $9.00 per hour.

This is the equivalent of $720 per week, $3,120 per month, and $37,440 per year

January 1, 2016:

Minimum wage goes to $10.00 per hour.

This is the equivalent of $800 per week, $3,466.67 per month, and $41,600.04 per year.

Off-the-Clock Work (After-Hours Emails, Preparation Time Issues, etc)

Tracking Time and Avoiding Off-the-Clock Claims

• Require nonexempt employees to report all of their work time and structure their work as much as possible to avoid the need to perform work outside of standard business hours. Watch out for duties to be performed outside of regular work hours:

Tracking and responding to emails and/or work-related telephone calls.

Writing reports and/or transmitting work-related data (whether electronic or on paper).

Planning travel routes, reviewing documents, and/or rehearsing presentations.

Overly restrictive on call requirements.• Don’t transform commute time into compensable travel time.• Dangers of rounding practices.