Dan
Welcome to Sound Business Insights. I’m Dan Watkins.
Katya Adams (Kat)
This episode is about the most common questions we get from our employer clients.
Dan
This podcast is not intended to provide legal advice.
Neil
Welcome back to Sound Business Insights. I’m sitting with Katy Adams. Kat is the office administrator for the Watkins Firm and she handles HR responsibilities as well as providing HR consulting to our clients. So Kat, tell me a little bit about the type of HR work you do for our clients.
Kat
So as a non-attorney, I can offer services to build policies and handbooks for our clients. I can walk them through their proper ways of hiring, onboarding, recordkeeping, the rules they in have to follow in their employees have to follow pitfall, you know, pretty much anything that’s not the attorney legal advice route. I can provide them with all of the labor laws and all the rules they have to follow.
Neil
We’re talking mostly about small and mid-sized businesses. Larger companies are going to have their own HR staff. The majority of businesses are just small companies and that’s really most of our clients and that’s who we’re talking to today. So with that in mind, I’d like to ask you about some of the most common questions that we get on the topic of hr. And we’ve been talking a little bit about how you pay people specifically. So you said one of the most common questions you get is, am I required to pay for vacation? Am I required to pay overtime? What are some of those questions and what are the right answers?
Kat
So the way we work with our small and medium business clients is first I get to know their current practices. So I send them a questionnaire and it covers, you know, what are you currently doing or what are you looking to do? And that gives me a sense of how little or how much they want to put out to their employees. And a lot of times they don’t know how to answer those questions. So I’ll say, are you offering a PTO policy? And a lot of times it’s, do I have to? No, you don’t have to. You have to pay sick time, you don’t have to pay holidays. And then a lot of times the question that they get stuck on is, what are your policies for authorizing overtime? And a lot of times they’ll say, well we don’t want to pay overtime. Well that doesn’t matter.
Kat
You have to, if the employee works overtime. Now there’s ways to get around that you can build specific schedules. So maybe have an employee work only a seven hour shift so that if they get distracted and go a little bit over, it’s not the same as an employee with an eight hour shift. And so that potentially eliminates that overtime and they say, well, why can’t I just pay them a salary? Well now you’re talking about the exempt versus non-exempt and I have to really break it down for them. Number one, what is this employee doing? Number two, how much are they getting paid? Number three, now that we’ve determined what they’re doing, can they pass that test of the exemption rules, whether it’s for an outside salesperson or are they a professional or are they an executive admin person? And I help people figure it out.
Kat
And a lot of times I tell them, now you have to pay this person on an hourly basis. You can certainly still pay them a salary. And a lot of people do that. A lot of people will pay a salary to what we call hourly employees. But you still have to track their time. You have to track when they’re coming, when they’re going, that they’re taking all the appropriate meal and rest breaks. And if there is any overtime, you have to make sure to pay it in addition to that salary. So a lot of times that doesn’t always necessarily make sense. The other thing that overtime comes into account that a lot of people don’t know about are bonuses and commissions. Yes. So if you pay a bonus, that is a commission style. So it’s non-discretionary basically is what it comes down to. And you have employees that are working overtime, that overtime rate has to be incorporated into your commission calculations.
Kat
So it kind of just becomes very burdensome Yes. On the employer. And if they want to do that and they have the bandwidth and they’re not going to get in trouble, go ahead. You know, there is the matter of retention, which we talked to them about. You want to be competitive, you want to, you know, reward your people, but also think about what this means for you. How much risk are you exposing yourself to with this crazy record keeping that you’re having to do. Just pay these people hourly and you know, if they work overtime and there’s commissions, you have to make sure you plan for that.
Neil
And on the same track, if you have people that are basically working on straight commission, you always have to track the hours here in California because we have to make sure that people are being paid a minimum wage. So even if they’re technically on straight commission, you have to at least pay them their working hours at minimum wage. The equivalent of Correct.
Kat
Right. And keeping an eye out for overtime because it doesn’t matter whether they’re purely commissioned or not, if they’re working 10 hours in a day and their job description doesn’t fit within those exemption standards, you have to pay them that overtime.
Neil
So California has some very harsh laws for employers, but one of them is there is very specific information which must be provided on the pay stub and that they must track. Can you tell us a little bit about that?
Kat
I’m sure I’ll skip over one or two because it is a laundry list. But yes, you have to have their correct name and address, your correct name and address their rate of pay, the pay range for which they’re getting paid, either the hours amount or the salary amount, if there’s any overtime that must be shown on there. California mandated sick leave balances must be on there. If you offer PT O, their PTO balance must be on there. That’s at the very least. And a lot of people don’t know about the sick leave bank requirement. Right.
Neil
What do we do for clients to help them become aware of what’s required and to help them set up the process?
Kat
Well, if you’re using a good payroll company, you would hope that they can assist you with that. But I just provide my clients with a punch list. Here are all of the bullet points that you must hit on your pay stub.
Neil
So the process of being an employer starts from the minute your first interview and goes all the way through the time when a company leaves your employee. And at each step there are things that employers must be paying careful attention to. So in the hiring process, what are some of the questions that you get asked by employers about what can I ask? What can’t I ask? What should I stay away from entirely?
Kat
I hope at this point everyone would know certain things that you can’t ask, uh, you know, related to age or sexual orientation or religion. But you do have to be careful because sometimes you want to try to get personal and make them feel comfortable. Well be careful that you’re not starting to talk about kids and marriage and, and things like that. A lot of times, um, interviewees will volunteer that information and that’s great, but you want to be careful to not engage too much to the point where it could get inappropriate. The big thing I get, and this is right after the interviewing process, is the background checks. Yes.
Kat
California is very stiff with background checks. And I want to say it was a few years ago that they passed the something to do with the box ban the box background check law so you can no longer run a background check on anybody until you offer conditional employment, which is very different from how it used to be before you could fill out an application and say, you know, do you have any convictions? You can’t do that anymore. So it forces you to interview people that you might not have interviewed before. And not only that, but once you run the background check, which the person must sign off on, you have to have the right forms. That’s another pitfall as people just say, oh well I just ran a background check. Well, first of all, you can’t do that without them signing off on it. Second of all, the form that they sign off on has to be in the legal format.
Kat
But if something does pop, that doesn’t mean you get to take the conditional employment away. It has to be a crime that is directly related to the job that they’re going to be doing. Hmm. So for example, if you’re hiring a bookkeeper and then you gave them a conditional um, offer of employment and you said, okay, great, now I’m gonna run this background check on you sign off, they sign off and they pop for embezzlement, perfectly normal, acceptable legal reason to revoke employment. If they get popped for a D U I, you can’t take away their employment for that because them driving under the influence has nothing to do with them handling a fiduciary duty. And a lot of people will say, well, they’re exercising bad judgment. That is specifically per this law, not a reason to revoke employment.
Neil
So Kat, we’ve gotten through the hiring process, we’re onboarding now and we’re, this is a point where you really have to have your a game put together as an employer. And that starts with the employee handbook. In your mind, what does an employee handbook do and what are some of the things that we have to counsel our clients to make sure our in their employee handbooks and are enforced?
Kat
An employee handbook has to be general. It should really be a lot of boiler plate. I’ve had clients in the past come back and say, well, I don’t feel that this handbook has enough of my company’s flare. We don’t want your company’s flare in there. It needs to be very basic. It needs to be very boiler plate. We’ve had other clients that try to get really specific, well I want a warning system with two warnings verbal, one warning written, and then you’re out. And we tell them, don’t do that. Don’t back yourself into a corner. You need to keep it broad. You need to keep the laws in there. It’s a combination of these are rules that we as the employer have to follow and these are rules that you as the employee have to follow. And here are policies and procedures, here’s how we, uh, we handle PTO.
Kat
Here’s how we handle discrimination complaints that you can lodge to us. Things like that. The other thing too is a lot of people think that you have to have employment agreements. You don’t, uh, if you’ve got, you know, just a team of administrative workers that are processing documents, there’s nothing that the employee handbook won’t cover for them. It’s not like you’ve got people that you’re giving stock options to or, you know, something kind of convoluted like that. That’s where you’re talking about bringing in employment agreements. But there’s a general misconception with a lot of people that you have to have employment agreements. The employee handbook does have a set of what it really should have, your pay days, your vacation policies, your, you know, all of the prohibited conduct standards. Mm-hmm. <affirmative>, things like that. So it just, it needs to be this good combination of being inclusive enough but not being too tight to put you as the employer in a corner. Because every situation is different. You can’t say that you’re going to terminate somebody after two warnings when they potentially have an offense that’s immediately resulting in termination. So you, you have to keep things like that in mind. And you know, it’s important to reiterate that these are our company’s policies and procedures, but open door policy, here’s who you see, here’s who your manager is, here’s who responsible is responsible for hiring and firing. Those things are semi in the handbook, but it also needs to be an open conversation as you’re onboarding.
Neil
Sure. And in this day and age, social media is one of those necessary evils that we as business people have to address. What are some of the questions that we get about social media policies? Are social media policies part of the handbook or is that a separate document altogether?
Kat
Social media policies are part of the handbook. There’s a lot of concern that people have. Uh, what can my employees can and what or can say and what can’t they say? You cannot prohibit your employees from basically unionizing on social media. So if they all want to get together and talk about what a bad workplace your company is, you can’t stop them from doing that.
Neil
Wow.
Kat
Because that’s, you know, I don’t remember the name of the, um, the specific law, but that’s, it protects you from uh, you know, not being able to kind of unionize. Um, but there are rules about proprietary information and confidentiality and not releasing that on social media. Uh, you know, there’s also rules of disparaging comments that could impact the business and things like that. So there’s a very fine line of what they can and what they can’t say. And that’s, that should all be covered in
Neil
So in addition to having a well organized end proforma handbook, it’s also important to have a file on each employee. Is it not? Yes. What needs to be in an employee’s file?
Kat
You have to have the W four and the I nine for your employees that are, you know, out paid, not as an independent contractor. And that’s also important because at any point government agencies can come in and demand to see all of your documentation relating to I nine. You should have the identification, you should have the resume, the interviewing, the job description, the offer, what their pay is, any disciplinary things documented, any uh, positive things, documented, anything re anything, uh, related to benefits, any certifications. It’s good to just have a nice little indexed file that if push comes to shove and you all of a sudden have to produce an employee file, you have a nice organized system of showing, okay, well here’s everything positive that we did for this employee. Here’s everything that, uh, was reprimanded. Here is why this employee may be as compensated more because they have all these certifications to their name. So the more organized and the more documentation you have in there, the less risk later down the road.
Neil
And Kat. So part of the reason to keep accurate records and to maintain discipline as an employer is when a dispute arises. And it’s not, if it’s really when, isn’t it winning a dispute is all about the documentation. Can you address some of those issues?
Kat
Yes. So as an HR person or as a company owner or as a manager, you should always document any kind of interaction that happens with your employees that’s out of the ordinary. So if somebody comes to you and they have a complaint, they’re worried about these people that they’re working with or their hours and you counsel them on, here’s what we’re going to do. Once they leave the office, sit down, type it out, document the conversation. Conversely, if you’re going to discipline somebody, you know, bring them, a lot of questions I get is, do I have to do a a written warning right away? Do they have to sign off on it? No. You can bring them into the office and say, I’ve noticed that you’ve been showing up late every day consistently for two weeks. What’s going on? Is there anything we can help out with?
Kat
And then you see what they say and you say, okay, well we’re just having a conversation, but here’s what I would like to see happen. So the conversation should address the problem and what the goal is to fix it. Yes. And then same thing, the employee leaves the office, you sit down, you document it, you put it in their file. If it happens again, you can bring them in and say, Hey, this is the second time we’re having this conversation. Last time we talked about X, Y, Z and we said this and this was going to happen. It has not. Once again, let’s aim for this to be the product of what’s going to happen. Unfortunately next time this will be a written warning. And then you just do that progression.
Neil
Is it a best practice to follow through on even oral conversations with a enjoyed our conversation, the goal we’re trying to accomplish is this and the kind of improvements we’d like to see or this or does that really fall into more of a written reprimand then?
Kat
I think it’s on a case by case basis. I think it certainly doesn’t hurt when I say written warning, it’s also a lot of times something that the employee will sign off on.
Kat
Yes, it’s a formal document, formal document written warning. And by the way, they don’t have to sign it.
Neil
Right.
Kat
They can refuse to sign it and if they refuse to sign it, you just put refuse to sign on their signature line. Um, yeah, I think it’s good to follow up with an email. A lot of times it shows transparency, it shows, um, you know, hey, let’s make sure we’re on the same page. You can be really positive about it and this is how we’re going to solve this issue. These are the resources we can provide you. And then if it works, it works.
Neil
And if not, we have a document that backs up.
Kat
Right. The entire process.
Neil
Kat, another area that employers might get tripped up in is the sick leave law here in California. Can you tell me a little bit about some of those issues and what employers should be aware of and watch out for?
Kat
Lots of issues on that one. First of all, it is required for everyone. Unlike a lot of other laws that might kick in, once you’ve got five plus employees, 25 plus employees, everybody has to provide this sick leave. It doesn’t matter whether your employee is part-time, full-time, everybody gets it. The accrual rate for everybody is one hour for every 30 hours that you work. When the law first came out, it applied to all of California and it had a certain threshold for how much an employee can accrue in a year and how much they can use in a year. Fast forward about two years and San Diego, Los Angeles, San Francisco and probably a couple others, amended those laws to increase those caps. So now as an employer you have to figure out where your geographical boundaries are and are you required to stick to the California minimums or the San Diego minimums, which are much higher.
Kat
We tell our people, well if you’re, you know, in the outskirts of San Diego, that puts you out of those geographical bounds and you don’t have to comply with San Diego laws, you can go off of the lesser California, which say, okay, I only have to give my employees three days of sick leave as opposed to five in San Diego. But if you’re the type of business where your employers are traveling all around the county, the argument could be made that they are working within the bounds of San Diego and you should be paying them based on the San Diego laws. So we often advise our clients just better safe than sorry, the courts will always side with the employee and not with you. So set yourself up for success and just do it to the benefit of the employee and pay them the San Diego, which is higher.
Kat
People will often ask, well I already have a vacation policy, can’t I just throw the sick time in there? Sure you can. However, vacation and PTO are vested wages and you have to pay your employee out when they leave whatever vacation and PTO they’ve accrued. Sick leave is not. So if you have an employee that’s got, you know, barely any PTO because they’ve used it all up but they have 40 hours in a sick leave bank and they quit because you’ve co-mingled those accounts, you now have to pay out 40 plus hours. Right. The other thing, like we talked about, you have to display it on the pay stub. You have to, you know, have your really good record keeping and sick leave in terms of what they can and can’t use it for. This is another question I get a lot. They can use it for clearly themselves being sick, for taking a family member to a medical appointment or caring for a family member.
Kat
But really at the end of the day they can use it for anything because if they claim that they need a mental health day or they need to get out of town for mental health issues, you cannot ask for a doctor’s note if somebody is using sick leave that’s directly in the law. So really you shouldn’t question what your employees are using their sick leave for. They have it, just let them use it. They do have requirements that they have to give you a certain amount of notice before using that sick leave if possible. But at the end of the day, you just kind of have to let them use it how they’re using it.
Neil
And what about employees who have exhausted their sick leave and they’re still missing work, still calling in sick?
Kat
Right. So that’s where it starts to get slippery because you don’t have to pay them. So a time that they’re not there, clearly you don’t have to pay, but you also have to provide accommodations. So if that accommodation is allowing them time off to get well to go to doctor’s appointments, whatever the case might be, you have to work with them. It has to be a progressive system with a lot of communication, a lot of record keeping, making sure that you tell the employee, okay, this is what we’re able to do. And if it eventually gets to the point where the job is just not being done, then you have to go to the next step. And a lot of times that might involve, we’ll temporarily find somebody that can do that job until this employee who’s having health issues is well enough to come back. You can’t just indefinitely get rid of somebody because they keep getting sick. But, but the answer is no. You don’t have to pay them for that time unless you are a 25 plus employee company and it’s a covid issue. Don’t forget you’ve got your supplemental covid leave that you have to have. And then again, once you get a certain number of employees, now you’re getting into F M L A and that’s another way that they can collect money.
Neil
So one of the best things Kat, about having you on their side is that they’re going to face questions all the way through their life as an employer. Isn’t it great to have someone that you can pick up the phone and call and say, how do I handle this? Or what are my responsibilities in this situation? Or what’s my risk if I choose to do something else? Is that most of what you’re doing on a day in day basis?
Kat
And that’s what it comes down to is we just advise, well, here’s what you can do. And technically you’ve, you’ve done everything that you have to do. However, the advice is this is what you should do to eliminate your risk. And a lot of times that’s where the attorneys will step in and, and really guide, uh, the clients on the liability, what their responsibilities are to accommodate under a d a, if they’re a certain amount of employees, if they’re starting to dip into the F M L A pool and what they can do to lessen risk of a lawsuit
Neil
Well, as an employer, I’ve really enjoyed our conversation today and I appreciate you, Kat. Thank you.
Kat
Thank you.
Dan
You can learn more about the Watkins firm@watkinsfirm.com or call our office at (858) 535-1511.