Answered: Your Questions on Labor and Employment Law Compliance

Answered: Your Questions on Labor and Employment Law Compliance


Okay! Good afternoon everyone. Thank you for joining us today. My name is Brian Smith’s, I’m director of global solutions here at Replicon and I have the privilege of being joined by Brian Dixon, who is co-chair of the wage and hour practice group at Littler Mendelson and during this webinar series we’re going to focus on challenges around global compliance and today webinar number 1 we’re going to be talking specifically about US labor law updates. So our agenda, we’re going to talk about challenges around global compliance, today we’ll focus on the U.S. We’ll talk briefly about how the time Intelligence Platform from Replicon can help overcome these challenges and we’ll review a specific customer example before we end on about ten minutes of Q&A with Brian from Littler. So a few housekeeping items, you’re on mute right now you will be during the presentation, the Q&A will be at the end of the webinar but you can submit your questions at any time and will be queuing those up through the administrator for Brian at the end. Okay! So top issues with global payroll, so UI did a global survey and 27 percent of the multinational organizations that were involved in polled they said that, Legislative Compliance was the biggest challenge that they face and we’ve got to tell you from a Replicon perspective, this is pretty consistent in our conversations and discussions with potential customers in the marketplace, the Legislative Compliance is definitely a concern! And as litigations go, it’s pretty common to see labor litigations in the news these days. And there are various issues that can have an impact on organizations and this holds true across countries and across industries. And in addition there’s a trend and you’ve probably seen some of them happen to very high-profile organizations very recently, the trend is that many of these litigations can turn into class actions and unfortunately that carries higher liabilities and more negative brand impact for some pretty visible companies very recently. But why is it so difficult? You know specifically here at Replicon you know being a work force management company, we specifically see that most organizations lack a unified system of time globally. And generally what we find is that disparate systems are deployed around the globe in a patch framework, and typically we’ll see organizations that have large employee populations in certain countries automate their, but when you get to medium & smaller population countries for an organization that’s when you start to see the disparity come in. It can be local solutions, Excel, Spreadsheets, Manual, you name it and that really creates some challenges. Getting that ready for gross pay and for payroll is a challenge and without a global system of record for time it’s very hard to account for things like collective bargaining agreements. Being up to date on a very very fluid variations in statutory compliance and labor law, it’s very hard to be ready for audits as well. And the number of global locations directly impacts complexity and it makes it harder to finalize grosspay accurately and also the more countries that an organization has, the harder it is to get a unified view of employees pay and all those other things. So we’d like to have a poll, we’d like to ask you how many countries your organization operates in, A. is less than 3 B. is 3 to 10 C. is 10 to 20 and D. is greater than 20. So administrator, let’s open the poll please. It will get about 20 or 30 seconds for everybody to click their answer. Okay Administrator! Let’s show the results! All right! Less than 3 and Above 20 are two biggest groups, so lots of complexity out there. Thank you very much for that! Okay! Let’s proceed. Okay, so labor compliance in the U.S. is pretty multifaceted. We have a list here, it’s not comprehensive this is just a sample of the compliance items that need to be adhered to. We’ll talk about work time today, overtime, scheduling and many other things and please if there’s something out on the list we would openly invite you and welcome you to ask a question at the end of the webinar. Now the Department of Labor here in the U.S. believes, actually believes that 7 out of 10 companies are at risk of non-compliance! And if you look at the year of 2017, there were nearly eight thousand filings in 2017 and just the top ten settlements alone added up to 2.7 billion dollars. And that you know that’s a lot of lost revenue and it hurt quite a few companies, but it hurt quite a few employees too. So you know we look at it from the perspective taking care of the employees, helping the companies as well and if you look at the increase since the year 2000, it’s been a stark difference 450 percent but, overtime is usually the most common culprit at 42%. And generally when you have an overtime implication there are back wages involved premier consulting. So Brian, this is where I will kick it off to you, so we can talk about issues around timekeeping requirements. Thank you very much Brian! I really appreciate that, I want to thank Replicon for sponsoring this very important webinar and valuable to all employers and I’m very pleased have the opportunity to work with Replicon again in this regard. So you know the key to wage and hour compliance certainly is good timekeeping. Most employers have some intuitive sense that timekeeping turns on having people use a time clock, many employers though are you know cognizant of the federal rule and the rule that most states follow which is the only thing a timecard has to have on it as the total hours of work. Certainly the more accurate your timecard is, the less likely it is you’re going to get claims regarding off the clock work or similar disputes and we want to be sensitive to the fact that some states California & Connecticut for example, require clock times to be on time cards, you cannot simply put logs, the total number of hours of work in a day. And the important consequence here is that, if your timekeeping is at all inaccurate, if a plaintiff can show that your time system is inaccurate it’s not capturing all work time then the burden of proof shifts to you is the employer to disprove the employees claim and that can be and I’ve had in my cases the nearly impossible burden of disproving an employee’s claim after a timekeeping system has shown to be inaccurate, that’s particularly true with respect to employees who work remotely such as service technicians who may work from their home and go directly to job sites. But these days one of the thing is we have to be very aware of with the mobile workforces that we all enjoy and have the opportunity to work with is that employees can work who our office based can often work from home they may have the privilege of working from one from home a day a week or they may be telecommuters who work from home on a consistent basis or they may be and we find this as an increasing issue employees who are expected just to check their email at night or on the weekends check in once in the evening, once or twice on the weekend, it becomes the norm because that’s what the supervisor desires and that’s what the supervisor expresses disapproval about if it’s lacking and when those employees are non-exempt employees we certainly need to have a flexible timekeeping system that can capture those small amounts of time and that is the subject of our next slide Brian if you could take us there! I will be talking about the minimus time. A long time ago under federal law (and we do need to advance to the next slide) under federal law the (thank you) the.. A very practical rule grew into the compensation of employees and that is the de-minimis concept. And the de-minimis concept looks at three basic things, it looks to see if a particular activity that the employer is not recording or paying for is how long is that activity, how regular is that activity and how difficult is it to record that time and back in the day so to speak in the 19th this doctrine came into the federal labor law in the mid 1940s, recording work time was a real challenge and I think of course expectations were relatively low at that point in time a lot of employers had timekeepers who really you know when their major activities was to sit at the door to the factory and record the time when each individual came into work. Well we’re way beyond that and one thing that I think is happening is that the courts expectations are slowly increasing as to what the baseline is for an employer and one example of that is for example a recent case involving a casino in Las Vegas where the employer was not capturing ‘short’ you know five-minute pre-shift meetings that occurred every time the croupier and the dealers and the other service personnel came on duty and the employer said look we have the de-minimis rule you look at duration of activity, regularity of activity, difficulty in recording the time and the employer also pointed out that that de-minimis rule had just about become a per se rule in some people’s mind that you can exclude up to 10 minutes of work time per day and there were many Federal Court decisions to that effect. Here the court said, you know I see all the decisions including 10 minutes of work time but let’s look at the criteria there’s the activity is not particularly long but it’s very regular it happens before every shift and you do have a timekeeping system so what’s the difficulty in allowing people to add 3, 4 or 5 minutes to their time to reflect as consistent activities. So first takeaway here is that even under federal law the de-minimis rule is not a per se rule that allows or excuses sloppy record-keeping, particularly if the activity is consistent and then here let me take a step back my approach today is going to be using California which is often the most challenging state if not very much the most challenging state in which to do business from a compliance point of view and I’m going to use that as a point of contrast against other rules especially federal law here in the United States and in other states. So we have and we have a number of recent California Supreme Court decisions to discuss the most recent one is a case called truster and truster involved an individual who worked at a food service (a fast-food service) location and he was the assistant manager shift leader who was responsible for closing the store at the end of the day and the shutdown routine was he would punch out and then he would escort employees to their cars in the parking lot for security purposes (a very good practice on the part of the employer), he would be responsible for pulling a couple of chairs and tables that sat outside the restaurant into the restaurant and if some employee ran up to him at the end of the turnover period and said I forgot my you know briefcase, my lunch, box my purse in the store, you would unlock the store let them in and leave the guy in and the amount of time spent was four to twelve minutes per day and the employer did not dispute that and the case went to the California Supreme Court under the de-minimis doctrine and the employer of course is saying this is the de-minimis amount of time pointing to the Federal Rule it’s followed in every other state, we should follow it here, there’s actually in the California Civil Code there are principles of jurisprudence one of which was ignore Trifles. and the Supreme Court said no when we pay employees we are concerned about Trifles. Employees should be paid precisely and small amounts of time matter and while the Court did not say that there would be a failure in California to consider the de-minimis rule the Court did say in these circumstances there is no de-minimis exclusion and it’s fairly ironic the claim got to a California Supreme Court on four to twelve minutes of work time of day the employees total claim I think was somewhere between 100 and 200 dollars but nevertheless that’s decision. Well what are our takeaways here? As a practical matter we need to be thinking about you know what were the essential characteristics of a case and they were that the activity was consistent, it happened every day and the second thing is that and it was actually in a sense built into the shutdown policy. The other thing is that the employer didn’t dispute knowledge of the activity there was no issue you know we are as employers responsible for all work which we suffer or permit we know what permit means that means I allowed itself, what is suffer mean suffer can we have work time inflicted on us and the answer is to a degree we can if we know about something and we don’t stop the activity we are responsible for paying for it. So here you have consistency and you have knowledge and we just need to be aware in the future we’re going to have to capture that work time in particularly here in California, you know in addition to, in most of the issues here I think are going to fall in a couple of categories. One is opening up and shutting down, starting up and shutting down, logging in you know across the United States there are a lot of call centers whether you know there’s you know if you consistently have two or three minutes of login time, if your call center or your facility here is in California we need to be capturing that time. Another I think is we go back to the expectation that employees will check their email every evening, will check it once or twice on the weekend, where you know that’s really an established expectation we should capture that time, budget for that time and pay for that time and that tells us that we need increasingly flexible and mobile record-keeping, timekeeping solutions, to keep up with where the law is going. (and Brian can we go to the next slide and we’ll talk about rounding for a minute) Rounding time has also been embedded in a federal labor law for a long period of time. Basic rule is fairly simple, that is, you can round time as long as the employer and the employee share equal benefit and burden of the rounding practice that is it doesn’t work out in the long term to benefit the employer or the employee, it’s neutral. The other thing, the other rule is you can’t round work time beyond an increment of 15 minutes, can’t round to the nearest half hour, sorry that’s not allowed. But here’s a little sidelight on rounding, I had a client recently (the local hotel here in San Francisco) that received their next edition of their handbook from corporate headquarters which was located in the central United States and the managers were just very surprised that the tardiness rule had changed! When it now said that you’re only tardy if you’re more than seven minutes late. And they couldn’t figure why that was and I said you know what it is, it’s actually a very astute perspective on the rounding rule. It’s astute in the sense that if you have a strict rule that says everyone has to be here on the moment that you punch in, everyone’s going to have to show up early in the odds of their being an equal benefit or burden to the employer between the employee and the employer in the sense that in the long run it sort of averages out is greatly diminished by that kind of a rule, may not evaporate, may not go away but it’s diminished. The other thing we want to be sensitive to is that if you’re on to the nearest 15 minutes all your work activities have to start-stopped on the hour, the quarter hour or the half hour. So you can’t have a pre-shift meeting that starts five minutes before the, say the shift starts at 8:00 we expect everyone to be in the pre-shift meeting at 7:55, if you’re rounding up to 8 o’clock, you’re not going to have the equal benefit and burden. A couple other pointers here you know I thought was interesting, the largest class action ever had which actually involved more than a hundred thousand employees was a rounding class action and when we shifted through the data, very fortunately for this employer which had very widely varying schedules so we had sort of an intuition that rounding might be okay because people started all different times of the day and left at all different times of the day and there wasn’t like a whistle that blew and an expectation you’d be there at that you know when the clock struck the hour, but the interesting thing was to see how some employees obviously knew that the rounding rule existed they helped us while they were taking advantage of it at the end of the day some employees were gaining an extra 20 hours of time in the course of the year than they work because they knew what the rounding rule was and they knew to wait and pause to punch out at exactly the right interval and you know while in the general scheme of things that might not be good it helped balance out a lot of people who seem to be less aware of the rounding rule and they help keep the average in place. But one of the important things to realize is that you’re timekeeping system (every time keeping system) keeps the actual punch in time in its memory and so a plaintiff can come in and get from your timekeeping system the actual punch in times down to the second usually and it have tired an expert do the statistical analysis and tell you whether you’re rounding is working to your benefit or not. One of the most interesting little side lights here is I had a world wide technology company, a footprint everywhere. Recently that was trying to rethink its timekeeping system and its philosophy and their inclination was to go back to hand entry of time by non-exempt employees on the thought that employers will simply round their time on their own to the nearest you know quarter hour or five minutes and they were willing to accept you know because our worldwide technology company they could crunch any number but they were willing to accept employees recording of their time as opposed to an electronic recording system. The best practices here are really these, your best paying employees to the minute. If you’re worried about the fact that people may punch in and then have to walk to a work area or you know they punch in they go to the coffee room or the break room and then the locker room and then they go to the work area, your answer is more time clocks nearer work area and with today’s technology that’s an easy thing to accomplish. So let’s go on and talk around meal periods or about meal periods. Across the nation about half the states require meal periods and the general rule is a meal period has to be at least 30 minutes long and an employee has to be relieved of all duty during the meal period. After that you wind up with extreme variations in what states expect. On the federal level frankly federal law doesn’t require you to provide a meal period if you can keep your employees on their feet for eight straight hours and not feed them you are not in violation of federal law but again half the states have an affirmative requirement for meal periods and I think in the other half of the states everybody understands that you better feed your staff or you’re going to have a museum. But in those states that are particular we need to realize they’re wide variations for example in New York there are particular brackets of time within a shift that you have to have a meal period. Most states simply say that you have to have a meal period or provide the opportunity to have a meal period after a certain time interval for it’s often, it’s five hours here in California you have to be able to start the meal period before you work five hours that’s your basic rule of thumb. Some states are six hours, some states simply say you just have to provide it an employee the opportunity to eat, in hard-working Illinois a meal period could be only 20 minutes long but there the federal rule that you know if a meal period is going to be non work time under federal law that is if you can get federal law does require meal periods but if you don’t want to pay for a meal period it has to be at least 30 minutes long the employee has to be relieved fall duty. Let’s talk a little bit more about “California”, because California drives the analysis in meal periods and it does so because in California if you do not provide the opportunity (and I will underscore the word the opportunity) for an employee to start a meal period before the employee works more than five hours, you have to pay an extra hour of pay! It’s called premium pay. All of us think of it as a penalty but the California Supreme Court has told us that it’s actually pay not a penalty and that’s significant because the statute of limitations for a wage claim goes back 4 years, so for not providing meal periods an employee could that’s just conceivably you know they’re about 260 workdays in a year take off 10 for vacation go back for years you got a thousand work days you you know we reduced that a little bit maybe for holidays and sick and other absences but thinking about a thousand work days in four years you could have a thousand hour liability towards an employee or a material potential liability. So in California to have a compliant meal period because your obligation is to provide a client compliant meal period, you have to give the employee the opportunity to take it on time, it has to be at least 30 minutes long, it can’t be interrupted and you have to be free to leave the premises and I think there’s only one other state that I know of where you have to be free to leave the premises I believe that’s ‘Nebraska’ and you know to leave the premises in California’s interesting requirement you’d think that the court would be focused on employees having rest and nourishment but I always think of the free to leave the premises requirement mean that you have the opportunity to run out pick up the dry-cleaning so there’s a little bit of mixed motive here. The important thing to realize is this, you do have to provide the employee the opportunity to take a timely compliant meal period. Some employers will allow employees to skip their meal periods because the employee wants to leave early if you do that we obviously need a system to record that employees have the opportunity to leave and didn’t and that’s usually you know that the best way to address that is to have a daily query to the employee through the timekeeping system, a pop up so to speak. Did you have an opportunity to take timely compliant meal periods today? Yes or No. And same question for rest periods (that we’ll come to in a minute) and that allows you to have an ongoing record as to whether employees waive their meal periods. One other things that I will say apart from a timekeeping system one things (I will quite frankly say I preach) is that even with a pop up button you can run into problem, time a wage claim now where the employee says my manager told me it was a busy retail environment, at a resort the manager coerced me into pushing, it told me I always had to push the button, yes I had the opportunity to take my meal period even when I didn’t. So the takeaway, the ultimate takeaway on meal periods is we need a accurate recording system, we do need the pop-up button and your best proof that the opportunity to take a timely compliant meal period was provided, is that you actually required the employee to take the meal period and to accurately record it and again accurate recording is your ultimate way to good compliance in that regard. So Bryan when we go for a meal periods on to rest periods and chat about rest periods for a moment. Rest period oddly enough are required in many fewer states than meal periods. If you look across the United States there are only about a dozen states that require rest periods. The usual criterion is when an employee works a certain number of hours you have to have a rest period in the middle of that period of time. Here in California again and most states don’t have a penalty that the employee can claim for a mistrust period. In most states what happens is someone complained to the local department of labor you might have a visit by your friendly local department of labor representative and a query about providing rest periods and making sure you comply with the local law and again there’s only around 10 states that affirmatively require rest periods to be provided. The rest periods are fundamentally different than meal periods in the sense that you have to rest periods considered work time. Rest period is considered non work time only if it exceeds 20 minutes during the day and the employee is free to use the time for whatever purpose he wants or she wants and so brief intervals in the day were say the machinery goes down or the network goes down temporarily, aren’t going to get you non-work time, there is simply a compensable rest period. Here in California we have a 2 challenges! One is, we want to have some record that in fact rest periods were provided to employees and if you don’t have to punch out for rest period what are you going to do? Some employers very very very few and their employees punch out for rest periods but that’s not really your best practice because inevitably people won’t punch in and out that often, that frequently, twice a day from my rest periods and you begin to build a sort of reverse inference because of the missing rest period punches that rest periods weren’t provided. So again a radio button at the end of the shift that says “Did you get your rest periods?” is your best solution and you know it doesn’t have to be a button it can be a field, it can be a click mark, a mouse click that could provide you the answer. The important thing we want to appreciate here in California is that there’s a recent decision called Augustus in which the California Supreme Court said that rest period also has to be free of all duty, you have to be not even obligated to be listening to your radio during a rest period and that can be a challenge if you’re the only security guard on duty, here in California you can turn off your radio for ten minutes twice a shift which we hope can give rise to some security concerns but again you can wind up paying the premium if you don’t do that. Brian, let’s talk about another state and its rest period obligations in Washington. Washington is sort of an activist state on rest periods, maybe it’s just the opportunity to go out and get another coffee from one of their many fine Coffee provisioners but in Washington if you miss a rest period you get 10 more minutes of pay. In California (you know the value proposition California is a little different) if you miss a rest period you get an hour of pay but you don’t get work time, it’s just an extra hour premium pay. In Washington those extra 10 minutes count as work time, you have to have a record-keeping system that’s flexible enough to allow you to add that work time because it also counts towards overtime in Washington. Okay Brian! Let’s go on and talk about a subject that most employers don’t worry about too much but I think it’s important to touch on for moment and that is tracking sleep time. We’re going to talk about sleep time here not at the sense that I’m asleep at my desk or I’m asleep on my feet or I’m asleep leaning against the wall, we’re going to talk about sleep time in terms of something that happens structured in the employment environment. I’m going to touch on it briefly because it doesn’t concern that many employers that this individual who’s lying across his desk does not have to be paid for that time, it could be a rest period so we have to watch out for that maybe you have to stand there for 20 minutes to count out the time when you can start saying this is not your rest period, that would be important or you might discipline him for creating a safety hazard because he might fall out of his chair and hurt himself. You can see on the screen the basic rules for when sleep time is under work is work time. I want to emphasize that if someone actually resides on the premises, you know which happens in domestic employment, for example, you might have a living person there’s a different rule and then as you look at what time an employee’s actually working because they’re you know they’re working and living at their resident, they’re working at their residents you know that dividing work time and it’s different. But there are a few things that if you do have an employee’s asleep on the premises you want to be aware of and that is, you need to have employees punch out for their sleep period and that’s something that very few employers do that have sleepover employees, (employers do that have sleepover employees), they simply expect to deduct eight hours when in fact that’s a record-keeping issue and we need to have a record of that. You also have to be able to record interruptions of sleep at night if someone has to get up and attend to something an alarm goes off whatever you need to pay for that. The 3rd requirement is that a lot of employers miss is that you can only exclude sleep time on shifts of 24 hours or more and I’ve had a lot of cases in the group-home industry where the shift isn’t quite 24 hours, so you need to (which we’re going to) exclude sleep time on shifts, you need to block out where is my 24 hour cycle for each exclusive sleep time. And Brian we’re going to go on here and talk a special rule here in California. In California oddly enough “Sleep time can be work time!” Life is good! You can be surfing in your dreams and be paid for it here in California. There’s a odd decision, another recent decision from the California Supreme Court (you might notice a little bit of a negative trend here) where the Supreme Court took a very narrow view in California’s wage orders or 15 of them for different industries, they pointed out that there is only a specific exclusion of sleep time in one of the wage orders for ambulance attendants and therefore there can’t be any exclusion in any of the other wage orders, very surprising decision! I think its surprised even the California Labor Commissioner and what we’re seeing now is a lot of claims for employees who work in the field, who you know in the past employers would have been intuitively thought if you’re asleep I’m having to count that as work time and we’re seeing a few heartbreaking cases in the domestic employment arena where people sleep over (they’re not residing on the premises) but they’re sleeping over three, four days a week then somebody else comes in and provides care for an elderly or disabled individual and we’re getting a lot of claims for I want to be paid for 24 hours a day. So again that’s just a cautionary note! We have to be very conscious of that, many of you may be aware that both Congress and here in California there were recent changes in the law to provide additional overtime protections for domestic workers, if we’re employing domestic workers we have to be very sensitive to that. So Brian let’s talk about a few scheduling challenges and look at our next slide. So a couple recurring issues in timekeeping systems that we need to be aware of, in one of them if you happen to have 24-hour operations or even shift operations in some cases is what happens if my workday crosses from one work week into the beginning of the next work week, we all have to have a work week, should be in our handbook, it should be posted, should be defined and whenever we cross from one work weekend to the next or one work way to the next, the counter starts over again in terms of we’re counting towards 40 or 8 hours in a day. The only statutory exception to that is Colorado. Colorado interesting enough you have to pay overtime based upon continuous shift hours, so again a timekeeping system that can track that, that it can incorporate rules that allow you to track continuous shift hours is going to be very important in Colorado. But let’s go to, every employer has a work week, in the beginning you know when you come back to work on such a work week is 2 calendar week Sunday-Saturday come back to work Monday morning, your counter starts over. Well the counter started over you know Saturday at midnight! What if your shift starts Saturday at 10:00 p.m. night shift 10:00 p.m. goes to 6 a.m. Sunday, well you’ve got 2 hours in the prior work week that have to be counted as overtime and six in this work week that have to be kept towards overtime. A lot of time keeping systems will throw all those hours into one work week or the other and that’s not correct, that is not compliant timekeeping. So you need a system that can address that issue. We talked a little bit about overtime based on continuous hours there are in Colorado, another one which I find fascinating is, so I remember the first time that a client called me up and said, “You know we’ve got an employee going to Singapore on business”, that’s sort of nice, they said, “How do we keep his time?” Now I am thinking, you know after a while we begin to realize that we probably want to keep the time in continuous California hours because otherwise we’d have to have a change we’ll work where you can go through all the perambulations of changing the work week, when the employee is only going to go for a week. So we kept him continuously on California time. I do have to say I was stumped when the client came back and said what about the international day laughing, we’re going to have an extra day and we finally worked out a solution but really when you have employees who are travelling more commonly across time zones in the US and they’re non-exempt employees, the easiest solution is to keep your time in the hours of the home off. And if all of this is not enough of a challenge that’s Brian, let’s turn our page one more time and talk about paid sick leave. Paid sick leave is as all of you know and I heard that many of you have more than 20 locations. In the bane of every employers existence we could spend easily half a day talking about paid sick leave but it would probably make us all ill by the time we’re done so I’ll just focus on a couple of high points here. You know we’ve got state, cities and municipalities all imposing paid sick leaves. A lot of it is reaction to the current administration, you know the Obama administration was very activist administration from changing labor laws, Trump administration is not! So we see a lot more activity at the city and county level than we have in the past. Paid sick leave laws you know, a lot of employers say, “What’s the issue?” I always provided the sick leave but the thing we have to keep an eye on is that the potential uses for paid sick leave are often much broader than they are for a conventional sick leave policy. Here in California, my inclination and actually looking across the United States not just California, the only thing that I think is excluded from the use of paid sick leave is taking the dog to the vet and I’m sure we’ll get there soon. The challenges of paid sick leave are different mandated accrual rates, you have different caps on how much can be approved, you have different annual use amounts that are the maximum use amounts and they often just make things really a hard burnish. They conflict! Here in San Francisco for example, we have a state law that has a very convenient paid sick leave, if you grant an employee three days of paid sick leave once a year you pretty much discharged your paid sick leave obligation, employee gets to use them, you can’t authenticate the use, it’s like three days of just paid time off. Some cynics would say but it gives the employees the opportunity to use that sick leave for a very broad and very broad range of purposes. San Francisco on the other hand has mandated accrual rate and no upfront advance. San Francisco doesn’t have an annual cap on accrual or the cap operates actually over a two-year period not a one-year period. So you immediately have the need to be extraordinarily nimble in providing paid sick leaves. I do a few comments and just have given up on terminating employee for absenteeism they said it would cost less to do that then it does to have a compliant paid sick leave program that covers you know all the states in which they do operations in each little municipalities variations, some employers go for the middle-of-the-road, they distill all the requirements to a core sort of lowest common denominator and then they worry a lot when it comes around to terminating someone. But we do need to track it we need to be able to label it, we need to approve it, track its use and in some states export it, export the accrual and use on to the paid stff. And why don’t we take a look at statutory overtime needs which is our next option, subject. Most of us are familiar with a federal 40 hour overtime standard, it’s been with us at the federal overtime law, things start at 48 hours overtime for a 48 hours a week back in 1938 and then it came down through a series of steps 46, 44 or 42, 40 and landed on 40 hours sometime in the late 1940. States are free to vary the overtime obligation in multiple regards. They can say, when do you have to pay overtime, they can change the rate at which you have to calculate overtime and they can change what activities count as hours of work towards overtime. A lot of employers get focused on hmm yeah there’s a different overtime threshold, they’re not thinking about how you calculate the overtime and what activities have to be counted towards that threshold. Our daily overtime states Alaska, California, Oregon only for certain I think number related employers, Nevada recently changed its wall so certain lesser paid employees get daily overtime, Kentucky has 7th day overtime premium. So that’s a summary of your different obligations across the United States in terms of variations from 40-hour overtime. A lot of employers, here for example in California you have alternative work schedules, very elaborate process for getting you know going to 4 ten-hour days instead of 5 eight-hour days, you have to make sure you go through the process, the end of the process is you have to submit your schedule to the State Department of Labor. The State Department of Labor will post it on the website. Then ofcourse will look you know if they find an employee is working for ten-hour days and you’re not on the website you’re going to get sued in the class-action for a loss of overtime. So we have to be mindful of that and we also have to have a timekeeping system that will allow you to flex, to show overtime after only 10 hours of work in a day. I had a client, another international technology company, some years ago they had invented 8-hour over time in their timekeeping system so when they had a 4 day per week – in our state scheduled it would tell the employees just put down two thirds of two hours of overtime every day and then we multiply that by time and a half you’ll come up with 10 total hours for the day. Not-Not a solution, we had a very interesting meeting with the United States Department of Labor about that issue and the major challenge is getting over the incredulity of the Department of Labor that we could not do a better job of calculating overtime and we can’t create additional burdens for ourselves either voluntarily or perhaps involuntarily, less voluntarily through union negotiations and Brian we can take a look at our next slide, Non-statutory Pay Bbligations and we just need to appreciate that in both Union and non-union environments, an employer can adopt the obligation to pay additional overtime or other premiums like shift premiums, lead person premiums for lead people to different kinds of work premiums and one thing that’s of a recurring note is especially with all the living wage ordinances that are enacted on the county and municipal level, your rates to pay have to vary by geographic location, these days you have to be sensitive to that, here in the San Francisco Bay Area your rate of pay can vary as you drive on you know from San Francisco to San Jose both of which have living wage ordinances and if you go up to East Bay through San Leandro, Emeryville, Oakland and Berkeley (make a loop of the entire Bay nice drive) you’re living wage rate changes from one municipality to the next and there is the setting aside the horrible challenge of do I have to change the wage rate because you stopped at a stoplight in San Leandro on the way to Berkeley we have be sensitive to those living wage living wage ordinances. I’ve actually suggested at the California Chamber of Commerce that they actually encourage the legislature to pass the labor law which would be that a living wage ordinance will only be valid in California if it’s filed with a labor commissioner and posted on their website because one of the greatest challenges for employers (as I’m sure you all know) is try and figure out if a municipality in fact has a living wage ordinance, I mean there’s no register of all those challenging things. And let’s go on and we’ll take a few minutes here and then wrap up for our Q&A. For Regular Rate Calculations, one of the things I emphasized earlier is when we look at compliance across the United States we need to be able to think about what activities are worked on, capture those & record those. We have to know, what is the threshold after which we pay overtime and that again could be state obligation, it could be from a union contract, it can be just as a matter of policy, a lot of employers for example pay time and a half for work on holidays, they adopt that burden voluntarily. And lastly, you have to know the rate at which you’re going to pay the overtime and because the rate can vary based upon location, you need to be able to identify where hours are being worked when they’re processed into your payroll system, so that you can do the appropriate calculation for that location. And the greatest example of that is fairly simple and that is under federal law you basically divide all of an employee’s compensation into 2 buckets, one bucket is called the regular compensation it’s things we intuitively include in the in the overtime calculation, your hourly rate, your shift differential, your lead person premium, your commissions, just about all of your bonuses, in fact their bonuses discretionary doesn’t necessarily mean it’s excluded from the regular rate calculation and you get a you know one bucket the other bucket are things that are excluded from the regular rate they’re identified by statute they include things like health insurance, business expense reimbursements, retirement plan, reimbursement of business expenses, holiday pay, sick leave pay, vacation pay, those things are in other buckets. When we take the first bucket actually under federal law it’s really simple you take all the regular compensation you divided by the hours worked and you pay one-half of that result for overtime it’s a half-time calculation. Under California law in the law of about half a dozen other states, they reject the federal calculation in this regards. if you are just paid to take a non-exempt employee and pay the employee salary, the employee works 42 hours, you divide this hour by 42 hours you get an hourly rate and pay halftime. If they work 50 hours you do the same math but the halftime rate is dropped and you do 60 hours and it’s drop even more you might invite them to a minimum wage problem and for that particular category of employees, employees are paid by salary. That kind of a paid plan fluctuating Work Week pay plan results in a diminished halftime rate as an employee’s hours grow and they’re about half a dozen states that rejected that California is one leave Alaska is another and all right on top I can’t remember the others but we have to be aware of that and it comes back in a major way when you have a mis-classification case, someone claims I should have been paid overtime, I wasn’t paid overtime, under Federal Law you would divide their salary by their total hours worked in their claiming and pay half time under California law you divide it by 40 maximum straight time hours and you pay time and a half. One little spin that came down recently in a case called Alvarado, California Supreme Court said the same rule about how you calculate overtime on the salary applies to lump sum bonuses, you know, if you pay somebody a hundred dollars as an attendance bonus at the end of the year and everybody gets $100 regardless of how many hours they work, you divide the bonus by the straight time hours worked during the period of time the bonuses earned and you pay time and a half on the bonus. let’s focus a lot of plaintiffs lawyers on the appropriate calculation of overtime, what we call regular rate class actions are very a boon to plaintiffs lawyers because your timekeeping system pays everybody the same way so it’s like an instant class action if the formula is not correct you’re going to have an overtime liability. The result of that is we do a lot of regular rate audits for clients, basically sit down, go through all your paid codes, they should be defined, their scope should be defined and running, go through all the paid codes, determine if they are in fact going into the overtime calculation or not, it’s not an extraordinarily difficult complex. Complexity can grow depending upon if you have multiple union contracts and lot of different pay codes, but doing a regular rate audit is a very prudent thing to do today because of plaintiffs lawyers are very attuned to it as a potential source of an instantly certifiable class action. So I would like to end on the note that you know there are risks out there, there’s a lot more class action litigation as Brian mentioned, there are easy ways to mediate your primary liabilities, do a regular rate audit, make sure your employees are classified appropriately, have an internal audit procedure, just have somebody in payroll call up 25 employees every pay day randomly chosen and say are you being paid correctly, do you have any issues with your pay, are you working off the clock and most importantly have a timekeeping system that can provide the flexibility and the accuracy you need in order to take people accurately. And with that Brian I think the programs back to you! Perfect! Thank you for that insight Brian, we definitely appreciate that and and you know brings the thought process of having an accurate time system that’s where Replicon comes in. I’ll tell you about that very quickly, but first we want to pull the audience to see you know how organizations are managing labor compliance, will be quick here so we can get to the questions. Administrator, please show the poll. Okay, so A. is Manual B. is Outsource C. is Local Systems or Processes in each country and D is All of the above. Okay administrator, let’s see the results. All right! So, 54% is Manual, so half the group is doing it manually and 20% is doing All the above including Outsourcing. Ok, so that’s typically what we see (like to keep moving here) Okay! So this is where Time Intelligence comes in and our platform can solve all of these challenges not only here in the US and all the issues that Brian talked about but abroad as well and I’ll be very brief so we can get to the questions. Multi-national organizations face a lot of complexity, from multiple countries, multiple locations within those countries, multiple entities within those locations, lots of different employee types they don’t sit at desks all of them anymore, their collective bargaining agreements, work councils in Germany that creates complexity for pay, for PTO, has to be done in a different format for each country. That’s where a provider like Replicon comes in, we can handle all of those solutions and we can solve this problem and this is the way that we generally see organizations approaching payroll leakage, controlling costs and trying to be compliant is that it’s a patched network of things. Large countries with large employee counts are automated and it goes down to excel or manual from there it’s not really out of balance for us to see a 10,000 play company with 36 or more time systems. And really this is kind of how we approach that and I’ll be quick, we have at the left time capture, at the right is where we interact with our clients through the solution, we grab time signals in structured and unstructured. Structured is us interacting with the employee time clocks, phones, iPads, computers, those other things. Unstructured is where we’re getting time data from a system that already exists in the ecosystem like gate access, security, telephony systems, those kinds of things. Now, we provide context to all of that information, we look at in-and-out punches, we look at PTO, we compare that by location, by schedule and activities by applying time to different jobs, different tasks, all those things. Now, the rules platform is where we configure it specifically to each client. We capture the time, we normalize it, we validate it then we apply compliance. Compliance can be federal, it can be state here in the US, it can have collective bargaining agreements, all those things. Then we apply the proper pay rules in the proper format and we send it through workflows to the right groups all over the world and in this case the client is using compliance services so the compliance lives in the technology and then our team here at Replicon, monitors for changes to statutory compliance out in the field, here in this case we’re sending payroll information to a payroll provider through our workbench, we’re getting employee demographics from an HRIS system to an integration and we’re doing global time off and we’re doing it in a single platform and the other thing that I’ll say on the previous slide generally we’re seeing disparate deployments because traditional time systems that are available commercially here in the US to multinationals don’t scale, they don’t scale up to ten thousand or down to one and that’s where this platform comes in and we’re able to do that. We also compliance services in 60 countries and growing, the system is also delivered in 20 or more languages. I’m going to skip this example and Brian, here we go with the QA. First question that I have for you, if the corporate office is in New York and there are employees working remotely in other states, what states meal period rules apply, the corporate office or the state in which the employee works same aggressed periods? It would be the state in which the employees work. There’s been an increasing amount of litigation around multi-state employees that if someone is for example stabily positioned in Connecticut and working remotely to an office in New York, Connecticut’s rules would apply. All right, great! Next question, Does the paid sick leave relate to only not exempt employees? NO, paid sick leave is an obligation that generally, it’s going to vary here when more challenges, it can vary by state, municipality and county. But it’s a general rule the paid sick leave obligation applies to both exempt and non-exempt employees. Great! Okay, next question, Have the overtime rules changed? I guess that can be federally at state level!? There hasn’t been a lot of change in which states require what overtime federal laws remain the same since for about late 1940s, states pretty much stable in that regard, the one change is just a few years ago Nevada changed its rules so that lesser paid employees do get daily overtime in that state. okay Okay! Next question, Can we pay compensatory off instead of overtime? As a general rule NO. Comp time often generates wage claims, you do have to cash out all overtime every pay period so you can’t approve paid time off across multiple pay periods, you can’t if you’re paying people bi-weekly and somebody works an hour of overtime in the first week of the pay period you should count and pay that as overtime but you could tell the employee I want you to work an hour and a half less in the second week of the pay period so the total gross pay of the employee is the same but record-keeping immediately becomes extremely complex and a lot of employers have the mistaken notion that if by working overtime and we have a comp time system, I’ll just give you one hour off well no it would have to be an hour and a half off with pay so comp time has no savings and it raises a lot of compliance program issues just about a medium. Okay great! Next question is for me! We have to resort to manual calculations because of our unionized environment. Does your solutions support this requirement? The resounding answer is absolutely Yes. Our rules engine what we do is we configure collective bargaining agreements into the solution, so when time is captured our solution actually interprets which payrolls should be used and you have the opportunity to put pay rates in our solution. So what we do is we actually send you or your payroll provider a statutorily compliant gross payroll file that’s been evaluated for the proper payrolls per the union negotiations. Okay, this is back to you Brian, once you start paying overtime wages do you have to break it out by how many hours are worked in a week or how many in a pay period 80 hours? You have to follow whatever the statutory or union contract rule is and that is just you mentioned 80 hours Brian the only employer that can pay overtime after 80 hours in a two-week period are certain health care employers that if implemented an 8 and 80 pay plan and under 8 and 80 pay plan you have to pay time and a half after 8 hours in a day and 80 hours in a two-week period, but if there is an employer out there who’s thinking gee I can just pay overtime after 80 hours of work a week period and I am not a health care employer you have a compliance issue that you really need to pay attention to immediately. And Brian, there’s a (B) portion to that question as a follow-up statement they start paying OT wages when a timecard reflects 80.25 hours 15 minutes over their normal hours. Well that one I’ll say is new to me I’m not quite there’s probably some other rationale behind that pay system but you know overtime is 40 hours a week under federal law, 8 hours a day in Alaska, California after 12 hours in a day in Colorado and after 8 hours a day possibly in Nevada and I’m not seeing a fit you know the only readily apparent exception is an 8 and 80 pay plan for a healthcare employer so I’m not seeing a fit. There are some very other esoteric exceptions for you know fire and police activities of municipalities but I’m not thinking we’re talking about to the fire chief here. Okay, so that may be one of the things that can be sent to sales at Replicon and maybe we can make a connection with Brian at Littler after the fact and we have one for you (I know we’re over time everybody apologies for that) we have one more question, Workers residing in another state and traveling frequently back and forth to the company’s headquarters different state and it’s about a 60/40 split, which state rule applies and do the changes during the time you are staying in each state that apply? That’s one of the world’s best questions! Yes. The California Supreme Court confronted that issue with employees that traveled from Texas into California and you know for what it’s worth the California Supreme Court said that if you work a day whatever that means in California, California is at least meal and rest period obligations would apply to you, they never have figured out if, specifically I don’t think whether California’s overtime rules would apply. The only safe thing to do in this circumstance is to apply whatever of the two states rules provide a better result for the employee. The multi-state of employee travel issues are coming to the fore, they come up occasionally because it’s not usually large groups of employees to travel so we don’t see class-action litigation around it so much but again the only safe alternative there is to apply whichever states rules are more favorable to the employee and also to think about your travel so that people aren’t traveling across workweeks. If you want to have non-exempt employees come to a meeting, make sure all the travel is within one workweek and then you can have one set of rules you know because the fundamental compliance foundation for a wage and hour is is the workweek. So have your employees travel within the workweek and quite frankly the overtime rules unfortunately discourage employers from having non-exempt employee. Great! Well Brian, thank you so much for your expertise and your insight, on behalf of Replicon we appreciate your participation today. Thank you to everyone in the audience. On your screen you’ll see if you have any questions or comments or if you need to get in touch with us please reach out to [email protected] Please enjoy the rest of your day! Thank you very much. Thank you Brian. Thank you!

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