Dan
Welcome to Sound Business Insights. I’m Dan Watkins.
Kat
This episode is about managing employees in San Diego.
Dan
This podcast is not intended to provide legal advice.
Neil
Welcome back to Sound Business Insights. I’m joined today again by Katya Adams, who is the office administrator for the Watkins Firm, and she also does HR consulting for our clients. So today, Kat, we’re going to talk about managing employees. The laws in California are so stacked against employers. It’s amazing that we are able to employ people at all, but somebody’s got to make sense of all this. So today’s episode is going to be a little bit of a coaching session, right? Try to help some employers. And we’re mainly talking to people who are small business, medium sized business. Larger companies have their own HR staff. That’s not really what we’re about, is it?
Kat
That’s right.
Neil
So let’s start with, if you’re going to manage employees, you really have to have a framework that you’re working in. You kind of a set of rules. So can you talk to me a little bit about what’s the first steps? What are the first documents? What are the first things an employer has to have in place in order to have the framework within which to manage their employees?
Kat
Sure. Your policies and procedures should definitely be within an employee handbook. The employee handbook does have a set of things that it should always have a set of things that it should sometimes have and a set of things that it should never have. So, you don’t want to get too specific with your handbook. You don’t want a bunch of personalized company flair. A lot of it needs to be boilerplate. You’ve got to have a lot of requirements such as, you know, California laws regarding fair hiring. You need to have your own policy such as prohibited conduct. If you’ve got specific benefit policies such as insurance or vacation or bereavement, these are things that need to be in there. It needs to be a guide for the employer and a guide for the employee. But you also don’t want to get too specific.
Kat
I’ll have clients that will ask, well, is this where I put pay rates? No, this is not where you describe jobs and positions. These are things that should be in each individual employee’s file employment agreements. That gets brought up a lot. Whether that’s something that’s a requirement, no, in fact, a lot of times employment agreements are not necessary and all-encompassing employee handbook will apply to all of your employees. If you’ve got some higher-level employees that might be getting special commissions or a stock option or something, that’s where it’s more appropriate to put an employment agreement. But overall, a good employee file that contains all the required items such as the I nine, the W four identification, job description, any, you know, issues that have come up in terms of disciplinary actions, things like that. That’s what you want in your employee file.
Neil
And we want to make sure the employee signs the employee handbook. Is that correct?
Kat
Yes.
Neil
Why is that important?
Kat
Because you’ve got evidence that they’ve read all of the laws and procedures and policies, and that they understand these are the rest breaks that you’re entitled to. These are the meal breaks that you must take by your fifth hour. This is what happens when you’re calling out sick and this is who you have to give notice to. If somebody, if you feel that somebody is harassing you, this is who you come to. So it’s them signing off to let you know that, yes, I understand your rules, but it’s also them signing off of, yes, I understand my protections, my benefits,
Neil
So, and my responsibilities.
Kat
And my responsibilities. That’s right.
Neil
So how important is it to follow the policies and procedures and the management procedures that you’ve established within these documents?
Kat
Crucial. You have to be consistent. And that’s actually part of the reason a lot of times we advise against getting too specific in these handbooks. You know, we’ll have clients that want really specific policies when it maybe comes to their disciplinary actions and they’ll say, I would like all of our disciplinary actions to be one verbal warning, two written warnings, and then termination. Well, you shouldn’t do that because what happens when you catch an employee punching another employee in the face? You have to terminate them immediately. You’re not going to give them a written warning for doing that. So, and then
Neil
Another written warning and then a,
Kat
Yeah, right. So you have to protect yourself as the employer a little bit there. And conversely, you know, you might have an employee that’s breaking these policies, but man, they’re trying, they’re trying really hard and you want to be able to work with them a little bit more. And if you subject yourself to these really tight standards of, well, two warnings and you’re fired, you stand to lose some really good people if you’re trying to be consistent with your policies,
Neil
Especially in this labor market.
Kat
Yes.
Neil
So another of the common questions that we get comes down to a discussion about pay. There are basically two categories, hourly or exempt. Can you tell us a little bit about what the exempt category is for and then how you feel about salary versus hourly?
Kat
Sure. That is a topic, that’s probably the top three of everybody that I talk to. It’s very difficult for our clients to determine who is hourly and who is salary. And basically it just comes down to the law. And you can’t contract around the law. So you have to determine, a salaried person would be someone that’s like a professional, a licensed professional, maybe an outside salesperson, or what they call an executive administrative exemption. And that is, you know, somebody that may not be a licensed professional, but they’re a higher-level manager. They make individual decisions; they’re supervising other people. So that’s one component of it. Another component of it is the minimum pay. There is a minimum white collar exemption salary amount, and there’s a national one, and then there’s a California one. So be careful when you’re looking that you’re looking at the appropriate state level, minimum white-collar exemption. So then it comes down to, okay, well I’ve got this person, and I guess they could kind of really be on the exempt, but maybe they spend about 40% of their time supervising. If you’re not sure, just err on the side of caution. This is California. The judges will side with the employees. Don’t put yourself at that risk and liability, and if you’re in doubt, it’s probably best to pay them on an hourly basis.
Neil
Some might argue that the question of wanting people to be on a salary, it would avoid the issue of overtime, is that in fact the case?
Kat
It is not the case. You cannot get around overtime. You can still pay your hourly people a salary. That’s perfectly allowed. And a lot of companies do that as I think as a, we’re recruiting and retention tool. But if it is determined that your employee is someone that doesn’t mean the exempt and you know, they’re, they have to qualify for overtime. You still have to track their time every day. You have to not only make sure that they’re not getting overtime, but you also have to make sure that they’re taking the applicable rest breaks. Are they taking their meal break by the fifth hour? A couple of ways to skirt around that. They’re pretty tight. If you’ve gotten an employee that works six hours or less in a day, they can sign a meal waiver. But other than that, it’s pretty difficult to do unless you can prove that there’s nobody there to replace that person.
Kat
So if you’re working in a regular retail store office, you know, something like that, you need to have ample coverage. So these people take meal breaks, but um, yeah, you, you can’t get around not paying overtime. There is one way that a lot of our clients, uh, ask about, and that is the modified work week schedule. Hmm. So I’m, I’m sure you’ve heard, Hey, this person works four 10 hour days in order to have Fridays off. Yes. Well, how do you compensate for that? Because 10 hours in a day is overtime. And that is a question I get a lot. Well, when do I pay overtime? Is it on a daily or a weekly basis? And the answer is, well, it’s both. So if they work 10 hours in a day and then 40 something hours in a week, you have to pay both on the daily and the weekly level.
Kat
What you can do as an employer is you can create one of these modified schedules, and that entails getting your entire company together and putting some proposed schedules to a vote. So you can say, you know, my company is going to offer that you can work four 10 hour days and have Fridays off, or you can work four nine hour days and have a four hour Friday, whatever slew menu item you want of these different proposed schedules. If all of your employees say, I agree, it’s great, let’s go. You then take that, put it into a formal letter, and you submit it to the Department of Industrial Relations and then they keep it on file so that if any of your employees tries to come back and say, well, they didn’t pay me overtime, you can say, well, wait a minute, you signed off on this modified schedule that allowed for a more flexible work schedule, but you can’t get the overtime in the process,
Neil
And that’s the reason why they need you. So as an advisor, most, I don’t think most employers would understand that if we wanted to go to four 10 s there’s a formal process I have to go through, otherwise I’m going to be owing two hours of overtime every day. Right?
Kat
That’s right.
Neil
So Kat, another of the challenges that we have based on the luxuries of modern technology is we have this walking computer we carry with us everywhere we go, our cell phones, and with it we can text, we can email what are the issues that employers face as far as texting employees, emailing employees, and having employees access work related emails after hours or on the weekends.
Kat
Very relevant topic. You have to, first of all, granularly break it down to your exempt versus your non-exempt employees. Let’s start with the non-exempt, your salaried people, your professionals, whoever it may be, you can have them answering calls and emails and text messages however often you’d like because they are salaried. What you should be careful about is if you’re expecting them to use personal resources, their personal cell phone, if you’re not providing them with a company cell phone
Neil
mm-hmm. <affirmative>
Kat
If you’re having them work from home, uh, and using their own internet, you should really consider some kind of a tech stipend. Or, you know, some people call it an internet stipend. There is no law that currently dictates what that amount should be. The law just says that it should be reasonable. I’ve heard numbers all over the board from $10 to a hundred dollars.
Kat
So it, it really depends on what kind of work the person’s doing, how many of their own resources they’re ex expanding. And one other thing that a lot of people don’t know about is you’re not required to pay this to everybody. If you’ve got an employee that is asking, I would like to work from home, and you’re giving them that benefit, they are working from home by choice. So you don’t have to pay any kind of stipend. Interesting. But if you’ve got, you know, an employee that say it’s a doctor and you want them to be on call all the time, and you’re expecting that they are using their cell phone to respond to you as needed, you need to pay that some, some kind of a stipend because you’re expecting them to use their resources.
Neil
And if you allow employees to access work emails after hours and on the weekends, are you opening yourself up to some sort of exposure relating to overtime work?
Kat
Absolutely. So now this is where we start talking about the non-exempt employees, your hourly people back in the day, pre covid, pre-technology of everybody logging in remotely. You would just lock that access down so that you’re not opening yourself up to the liability of having people work off the clock. That is not the reality anymore. Most people have access of some kind after hours, whether it’s to log in through a computer or something on their cell phones. We recommend a lot of times to prevent any kind of cell phone access just because then you’re putting that person in a position of being on call all the time. So now you are, you’re facing these off the clock risks, but then you’re also facing the risk of burnout. You’ve got somebody that’s constantly not able to disconnect and take time off. You don’t want to do that. So definitely try not to text message on a personal phone to an hourly employee if you can, especially after hours. And then the employees that do have access, whether it’s through a computer or an iPad for maybe they work from home as the employer, be very clear, this is your work schedule. You are not expected to pop on over the weekend and respond to emails, work within your work schedule. When you’re done, you’re done. There is no expectation unless it’s prearranged ahead of time.
Neil
If you’ve seen it and if you’ve established it in the employee handbook and in the policies and procedures not to access work emails after hours or on the weekends and you see it occasionally, that’s probably not an issue. But if you see it consistently, should an employer take an action, communicate with their employees and say, our policy is we don’t allow access on the weekends or in the evenings. The risk that they’re facing is a claim of overtime, unpaid overtime.
Kat
Well, the risk is unpaid wages. I mean, are your employees clocking in when they pop in on this Saturday to check this email? Probably not. And they’re doing it because they’re good employees and they want to work hard and they want to catch up. So ultimately, yeah, you have to discipline your good workers. Those people that work through their lunches, another big no-no, you can’t do it. The people that you know work that extra overtime, you’re going to pay it, but you know, that is a burden. And then same thing, those people that, oh, well I just shot a cell phone call to this person real quick because I wanted to do a good job. Thank you. But you can’t go against these policies because number one, you’re not getting a text stipend. Number two, you’re potentially working when you’re not clocked in. You have to be paid for all the time that you spend working. So that’s how you have to approach your employees is this is us making sure that you are being taken care of.
Neil
And while we’re on the topic of technology and cell phones, how about social media? What social media policies can companies put in place and what is a, what is a best practice when it comes to social media for an employer?
Kat
A Canton book should have a couple different social media policies. One of them talks about proprietary and confidential information not being released through social media. Another one, my, now this is where you kind of tow the fine line because you have to be careful to not take away your employees, uh, free speech. So if you’ve got employee A and employee B talking about what a terrible place your company is to work, you can’t discipline them for that because in theory, they’re unionizing in a public open forum and it’s illegal to, to, for them to not do that. Um, but then there’s kind of a fine line because then if they start talking about certain things that might break confidentiality or might harm your business with things that are untrue, that’s where you can take action.
Neil
Very good. So another common mistake I think employers make is they don’t provide enough information on the pay stub. The best alternative is obviously having a good payroll company, but there are laws, if you’re paying your people yourself, there are laws on what has to be on their pay stub. What are some of those rules?
Kat
A lot. Your address, your company name, their address, their name, at least the last four of the social security number, their hourly rate, the number of hours they worked, the pay range, their bank of their required California sick leave. If you give them P T O and vacation, the amount that they have in that policy. So quite a bit.
Neil
I know that you’ve had concerns about people that combine some of these pots, like their P T O and accrued sick leave. Why is it a good idea to keep those separate?
Kat
Because sick leave is governed by a completely different set of laws than P T O. Sick leave is a requirement. P T O is not, P T O is, or vacation, however you refer to it are vested wages, sick is not. What that means is if you’ve got a bank of leave for your employees and you’re combining your sick time and your P T O policies and you’ve got an employee that quits, you have to pay them everything in that bank. But if you split the banks, you don’t have to pay back sick time. You only pay back the P T O. So from a business standpoint, it’s smart to keep those separated.
Neil
Good. We’re going to move into what we’re going to call the Kat lightning round. So these are best practices regarding various issues that employers face and questions that were asked obviously a lot by our clients. So on the topic of interviews, Kat, what can you and can’t you ask in an interview?
Kat
Don’t ask them how old they are. Don’t ask them about personal relationships, you know, really the, the obvious stuff. But I think the challenge becomes when you’re interviewing with a really likable person and they start to tell you about their personal situations. I’ve got kids, I was just vaccinated and boosted against covid. You want to be careful that you don’t start engaging too much, that you start saying some personal things or asking questions that now this person might deem as inappropriate or uncomfortable
Neil
Reviews. Do we have to give reviews? And then what are the metrics that we use for them? How do we set expectations? How do you measure performance and how do you document it? Big topic.
Kat
Yes. There is currently no law that requires annual reviews. A lot of standard procedure will be to give annual reviews either on an anniversary basis or a calendar year basis. A lot of companies like to do all of their reviews once at the same time. Whether it’s for budgeting purposes or they just carve out that time. Other companies like to space it out and have everybody’s review on an anniversary date. Some people just give reviews as they feel like it, it’s all about what your policy says, and this is where you have to have a well-crafted policy that, like I said, is not too specific. So maybe your policy says something like, you can expect a review on or around your anniversary here every year. You will not be guaranteed a pay raise, but we will evaluate performance. And it’s, it’s a pretty broad language that says what might or might not come up, but it doesn’t guarantee anything.
Neil
And do you have to have written performance management system metrics that you use, how you’re going to evaluate people or can you handle that more on an individualized basis?
Kat
I think it’s important to show that you have consistency so that if something comes up with an employment claim, you don’t have one employee saying that you treated them differently from other employees. That’s a big thing to keep in mind on a day-to-day basis when you’re managing people, you have to treat everybody consistently, um, or at least consistently in, in relation to their positions. A lot of companies, you’re going to have different people of different levels. So of course you may not treat, you know, a higher level executive the same way as an entry level person. Yes. But when it comes to these policies, yeah, if you’ve got a written form that you use for one person, you should use that same form for everybody maybe in that department or in that position so that nobody can ever come back and say that you treated somebody differently.
Neil
Discipline is an area we get asked about a lot. Does an employer need to have a formal discipline and evaluation process? What are the risks that they face and what are the best practices when it comes to discipline?
Kat
It is definitely best practice to have disciplinary process and to have it be pretty consistent. Again, not everything is cookie cutter. There are certain offenses that there is no disciplinary process. You, it immediately warrants a termination. But if you’re trying to work with somebody, you should try to have consistency. You know, maybe you start with a couple verbal warnings with the employee, you express the problem and then you express the expectations and the goals and then you document those. And if it doesn’t improve, then maybe you outline a formal performance improvement plan. You write out what the issues are, you write out what they’ve already been discussed. You write out what the goals are, you sit down with the employee, you go over it, you have them sign off on it. In some cases people do performance improvement plans.
Kat
In other cases you just step it up to verbal warnings. And I think it just depends on what you’re trying to accomplish.
Neil
Mm-hmm. <affirmative>
Kat
with this person, how much, what, what, how big of a problem it is. Performance improvement plans are a good form to have in place, uh, especially to protect you as the employer. Because if there is ever a claim, then you can really show that you put in a lot of effort to work with this person. And I think it is also a fair benefit to the employee because you’re giving them a lot of opportunities because you want to make it work.
Neil
Yes. If there’s a written warning given and the employer refuses to sign it, what do you do?
Kat
You just write on the signature line, “refused to sign”
Neil
Easy, and then California’s just a harsh state when it comes to termination. They make it very difficult for us to, um, manage out employees who aren’t working. Um, what in your mind is a best practice for documenting evidence to support continuing disciplinary issues, performance issues? What do you counsel our clients to do so that if it comes time to terminate, you’ve got enough of a body of evidence,
Kat
Document everything, verbal conversations, follow them up with an email when appropriate to the employee. Dear employee, this is what we just talked about. This is what we’re going to do to try to improve this by, you know, within a couple of weeks. And then we’ll, we’ll touch base again. So verbal conversations, written conversations, everything that happens, put it in a file. I get a lot of questions of does it have to be a specific form? No, you can just write yourself an email. You can jot out a document on a piece of paper, type it out, write it out, stick it in the file as long as there’s some kind of documentation and do it as soon as it happens. Don’t wait two weeks after the fact.
Neil
Right. So that it’s fresh and clear.
Kat
That’s right.
Neil
So Kat, as we wrap up what’s been a really productive conversation, Thank you. Employers in California face monumental challenges. It’s amazing what we have to keep track of. How do you work with our clients and when does it start? And if they need help, what can they do to access you and to get the help and support that they need?
Kat
Sure. So as a business owner, especially a, a small business owner, if you’re just starting out, you probably don’t know about a lot of labor laws. So when the attorneys put our clients in touch with me for drafting an employee handbook, we start the process with me giving them a questionnaire that outlines a lot of their policies and practices. And along the way, while talking to the clients to answer these questions, we realize that the clients did not know about a lot of required laws, required sick leave, required sexual harassment training for companies of five or more. And I help to walk them through what those requirements are for them as a California employer. Also when they’re reviewing the initial draft of the handbook, they come to realize that there’s a lot that they didn’t know of, laws that they have to follow, things that they have to do for their employees. And so what they learn along the way is if there is something they don’t know how to handle as an employer, they can then turn around and call me and I can either tell them what the current labor law is or if we see we’re starting to run into a potential situation with a risk of disability issues than employee or leave issues or harassment. They’ve got a whole team of employment attorneys. I can get them the opportunity for that.
Neil
Really appreciate your time today, Kat. Thank you.
Kat
Thank You.
Dan
You can learn more about the Watkins Firm at https://watkinsfirm.com or call our office at (858) 535-1511.