Tag Archives: employer

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The Nuances of Overtime Pay

Employers and employees often have confusion regarding overtime pay, which can ultimately lead to costly disputes. One of the most important steps an employer can take is determining whether the employee is exempt or non-exempt.

Employers are required by law to pay all employees at least minimum wage for every hour worked and a non-exempt employee must be paid the proper overtime pay rate for any additional overtime hours worked. This general rule seems simple enough, but there are numerous factors that must be considered when it is applied in practice.

Exempt Employees

If an employee is exempt, it means that he or she is not entitled to receive overtime pay (In other words, they are “exempt” from overtime pay). Generally, exempt employees are personnel who possess decision making responsibilities. They must meet specific tests regarding their job duties and must also be paid a minimum weekly salary, as set by law. Below are a few examples of the various types of exempt employees:

  • Executive exemption: To fall within the executive exemptions, the employee must be a manager who has the authority to direct and supervise the work of at least two other full-time employees. Typically, an executive has the power to make hiring and firing decisions on behalf of the business.
  • Administrative Exemption: If an employee’s primary job duty is office work, the administrative exemption may apply. An administrator performs non-manual work that is linked to managing or operating the business. An administrator usually has some discretion to make key decisions for the business.
  • Professional Exemption: If an employee has an advanced degree or has obtained specialized knowledge by attending extensive school, the professional exemption may apply.
  • Outside Sales Exemption: If the employee’s main job is to make sales calls outside of the employer’s place of business, the outside sales exemption may apply.

Non-Exempt Employees

A non-exempt employee has the right to receive overtime pay. The state law where the employee works determines the amount of overtime pay that is due. Federal law sets the minimum amount of overtime pay, which is one and a half times the employee’s regular rate of pay after 40 hours of work in a workweek.

If a non-exempt employee is paid a salary, federal law requires the employer to divide the employee’s salary by the actual hours worked to determine the employee’s hourly rate. The appropriate overtime pay rate is one and a half times this rate. Of course, the applicable state law may be greater than what is required under federal law. As a result, it is important for employers to consult with a local attorney to verify the appropriate rate of overtime pay is being used.

If you have questions regarding business law matters, contact us today to schedule an initial consultation. Leslie S. Marell has been practicing business and commercial law for over 25 years. She is established in private practice and has extensive legal experience counseling companies in the areas of business contracts and transactions, purchasing, sales, marketing, computer and technology law, employment law and day to day legal matters. Let us provide your company the advice and guidance you need.

 

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Getting Sales Commission Agreements in Writing Avoids Disputes (and in some states, it’s the law!)

Whether you are an employer or an employee, it is important to have your sales commission agreements in writing. In fact, several states (including California) require any employer that pays commissions to employees providing services in the state to have a written agreement with the employee. The contract must outline how the commissions are computed and how they will be paid.

A sales commission agreement should clearly explain how the commissions are calculated and when they will be paid. The employee should be provided a signed copy of the contract and the employer should retain a signed acknowledgement of receipt of the contract by the employee.

In setting forth the calculation of commissions, the terms “sales” and “profits” must be defined. If returns, refunds, cancelled orders or other such occurrences impact the calculation, this must be clearly stated in the contract. It should also set forth when a commission is earned. Is it earned when an order is placed, when the goods are shipped or when the customer pays?

What about bonuses? You must look at the applicable state law, but in California short-term productivity bonuses are excluded from the definition of “commissions.” This can be a tricky area, however. For example, if the California employer has agreed to pay a fixed percentage of sales or profits as compensation for work, that can be considered a commission. It is common for bonuses to be based on a percentage of sales or profits, so this can create some ambiguity in what constitutes a commission. As a result, the best strategy is to have a clear and concise written agreement that sets forth the bonus plan and/or commission plan in order to avoid any disputes with the employee.

It is important to note that most employers do not have contracts with their at-will employees, so the sales commission agreement should contain a provision stating that the employee’s at-will status is not changed by the existence of the written commission’s agreement.

There are numerous other factors that must be considered when drafting a sales commission agreement. If you need assistance creating this type of contract or you have questions regarding your company’s contractual needs, contact Leslie S. Marell for help. We serve as general counsel to clients who do not require, or choose not to employ, a full-time lawyer in-house. Call today to schedule your initial consultation.

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Essentials for Employment Contracts

When your business is ready to hire employees, it is essential to get legal help. An employment contract can be used to outline the legal relationship between your entity and your employees so there is no confusion regarding the rights and duties of the parties. Having an agreement in writing can help your business avoid misunderstandings and litigation in the future.

An employment contract should be drafted to meet your business’s specific needs and the job position covered in the agreement, but below are a few factors to consider:

  • The contract should set forth all information regarding how the employee will be paid, including salary, hourly wages, commissions and bonuses.
  • The hours the employee is expected to work should be defined, as well as whether the worker is expected to perform his or her job duties in the office or if he or she has the ability to work remotely.
  • If your business intends to grant equity in the company to attract employees, the terms should be detailed in the employee contract. This includes addressing topics such as the type of stock grant, exercise price, options for acceleration and vesting term.
  • Any benefits that will be provided to your employees should be covered in the agreement. Examples of benefits to address are 401k or pension programs, health insurance, vacation and sick leave, maternity or paternity leave and other similar perks of the job. The contract should specifically discuss any requirements that must be met before the benefits can be exercised.
  • You should have your employee sign a non-disclosure agreement (NDA). This could be a stand alone agreement, or it could be made a part of the employment contract. It is important to describe what must be kept confidential, as well as the consequences of violating the NDA provisions.
  • In most situations, you will want the contract to specify that the employment is “at will.” Otherwise, you should clearly set forth the term of employment. Additionally, the grounds for termination should be outlined and if compensation will be paid upon termination.
  • If your business is in a competitive industry, you may want to consider including a covenant not to compete for a certain period of time after the employee stops working for you. However, since the courts do not favor restraining an individual’s ability to work, you should obtain legal counsel in drafting these provisions and to determine if they are enforceable in your state. For example, California holds non-competition agreements to be unenforceable.

To ensure that your employment contract provides you with the most protection from liability available, contact Leslie S. Marell to schedule an appointment. Our office is located in Torrance, California, but we proudly serve businesses of all sizes from all over the country.

 

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Do You Need to Update Your Vacation Time and Sick leave Policies?

Employers should be aware that wage and hour issues are often the basis of employee lawsuits. As a result, it is important for employers to ensure that their employee handbooks are updated, including policies regarding vacation time and sick leave.

Vacation Time

An employee is typically not entitled to paid vacation unless the employer has agreed to provide it. Although this seems like a simple rule, many disputes between employers and employees still arise.

An employer that provides vacation benefits to its employees must ensure that its policies comply with the law. For instance, an employer in California is not allowed to implement a “use it or lose it” policy. Once your employees have earned their vacation pay, you cannot take it away from them. However, employers are permitted to set a limitation on the amount of vacation pay that can accumulate. While you can set a maximum amount for the total amount of vacation pay that can accrue, you cannot require your employees to use the vacation time in the same year it is earned. It is important to have a knowledgeable attorney review your policies to verify they comply with the applicable state law.

What happens when an employee has accumulated vacation pay and is terminated? Under most circumstances, the employer must pay the terminated employee for the vacation pay that has accrued as wages at the employee’s last rate of pay.

The most crucial step in employer’s avoiding litigation over vacation pay is to draft a vacation policy in compliance with the applicable law. It should cover a variety of topics including eligibility requirements, rate paid, caps on accrual amount and whether approval must be obtained to use vacation time.

Sick Leave

In September of this year, California’s governor signed a new sick leave law which becomes effective in July. The new law requires the majority of California’s employers (public and private sectors) to provide their workers with at least three paid sick days per year. Employers can use the accrual method or give the sick days in a lump sum. Employers are allowed to limit the accrual of paid sick days to 48 hours (six days), as well as limit the use of paid sick days to three per year. Connecticut, the District of Columbia and 16 cities, including New York City and Philadelphia have enacted sick leave laws. It appears that new sick leave laws are on the horizon in other states as well. As a result, as the laws change in your state, it is important to have a lawyer review your policies to determine if they comply with the changes.

Sound confusing? It can be, so don’t procrastinate in getting help. Contact Leslie S. Marell for assistance in updating your employee handbooks as well as your employment agreements.

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Does Your Employee Handbook Properly Cover Overtime Pay?

Employers are required to pay workers a minimum wage set by law for all hours worked. If an employee is non-exempt, they must be paid suitable overtime pay right for any additional time worked. Overtime pay may seem like a simple topic, but it can get more complex when applying it in real-life situations.

Initially, you must determine whether your employees are exempt, which means they are not entitled to receive overtime pay for extra hours worked. Examples of employees exempt from receiving overtime pay include:

  • White Collar. The term “white collar” has been used to describe certain professionals that are exempt from overtime pay. To qualify for the white collar exemption, an employee’s job responsibilities must meet certain conditions and they must receive a minimum weekly salary, as dictated by law.
  • Executives. Managers who supervise the work of a minimum of two other full-time employees fall within the executive exemption. An executive employee typically has the power to hire and fire other employees.
  • Administrators. If the employee’s primary job is to perform office work, the administrative exemption applies. This type of employee’s job relates to the supervision, management or operation of the company. An administrator often has decision-making authority on behalf of the business.
  • Professionals. A professional exemption applies if the employee has obtained an advanced degree or has acquired specialized knowledge by attending extended schooling.
  • Outside sales. Employees whose main job involves making sales calls which require the employee to routinely be away from the employer’s place of business may be exempt from receiving overtime pay.

The above list is not exhaustive and there may be other exemptions that apply, so employers should consult with an experienced employment attorney to verify that the appropriate exemptions are being applied and that your business is in compliance with the laws governing overtime payment.

If you need assistance creating or updating your employee handbook to deal with overtime pay or any other employment law matter, contact Leslie S. Marell for help. We serve as general counsel to clients who do not require, or choose not to employ, a full-time lawyer in-house. Call today to schedule your initial consultation.