Wage & Hour Laws - Meal Penalties in California

Federal and State Wage and Hour are important to follow for the companies that supply and use a contingent workforce. Not following or understanding these laws can lead to costly violations that can be easily avoided. 


California, for example, is a State that has many Wage and Hour law considerations.  If you operate a business in California or utilize California residents to perform work in other States there are several important things to consider for meal breaks. 

Employees in California are entitled to an unpaid 30-minute, duty-free meal period after working for five hours and a paid 10-minute rest period per four hours of work. 

California Labor Code section 226.7 prohibits employers from requiring employees to work during any mandated meal or rest period. Employers who fail to provide the mandated meal period or rest period must pay the employee one additional hour of pay at the employee's regular rate of compensation for each work day that the meal or rest period is not provided.


A minimum of thirty (30) minute meal is required every five (5) hours unless the scheduled shift ends at six (6) hours and is mutually agreed upon between client manager and worker.  If meal is not received the employee is due one (1) hour of their wage as a meal penalty.  Employees only receive one (1) meal penalty per day regardless of how many are incurred. 

The only exceptions to the rule are when

The nature of the work objectively prevents an employee from being relived of all duty

AND

The on-duty meal break is agreed to in writing by the employee and his or her employer

AND

The employee is paid for the meal break

To ensure that your company complies with the labor law, you should:

Review meal and rest period policies for contingent workers to ensure they meet with the law

See if any positions qualify for “on-duty” meal periods and ensure that the appropriate agreements are signed

Make sure all employees read and acknowledge in writing that they understand your company’s meal and rest break policy

If a worker is not able to take their required break, you must pay the additional hour of pay they are owed

Ensure that your managers and supervisors monitor employees to make sure that they are taking their statutory breaks and mark the breaks on their timecards

Make sure you keep good records! 

The Basics of Staffing Markups

The total size of contingent workforce payroll in the U.S. is expected to rise to $164 billion by 2018. The opportunity for companies to capitalize on this trend, increasing the productivity and flexibility of their workforce, has become more widely known in recent years. Additionally, companies are using contingent workers in more highly skilled roles to augment internal staff and in these roles the bill rates - hourly rates including all costs and fees charged to the client company by the staffing supplier - increases as the pay rate does.

In many cases, the companies that supply contingent labor to clients on an hourly basis use a fee model that based on a percentage of the pay rate, often referred to as a markup. This 'markup' consists of several components, including:

• “Burden” (employer taxes, payroll costs, workers compensation insurance, etc.)
•  Recruiting personnel and expenses
•  Overhead (general and administrative costs)
•  Profit margin

The pay rate (aka hourly rate) of the worker plus the markup is called the bill rate. Markups can range from 30% to 60%+ with an average in the high thirtieth percentiles across all skill disciplines. Some staffing suppliers promote rates below 30% and, conversely, some services may charge 75% to 100%+ markups.


The Burden costs vary based upon the worker’s skill specialization, the risk of the job, the State in which the worker is employed, the total volume of payroll with a client, and the payment terms. Recruiting costs and pay rates may differ from assignment to assignment, as different factors such as the availability of talent, ‘going’ market pay rates and length of assignment come into play. 

For example, if a contingent worker is engaged on a three (3) month assignment (12 weeks at 40 hours or 480 total hours) the following total costs would apply relative to the pay rate of the worker and markup:

		Total Payroll + Staffing Markup ("Billings")
Pay Rate	Total Payroll	30%	35%	40%	45%	50%
$15	$7,200	$9,360	$9,720	$10,080	$10,440	$10,800
$25	$12,000	$15,600	$16,200	$16,800	$17,400	$18,000
$50	$24,000	$31,200	$32,400	$33,600	$34,800	$36,000
$100	$48,000	$62,400	$64,800	$67,200	$69,600	$72,000

There are other ways that contingent labor is delivered to clients including fixed markup costs, statement of work or milestone based pricing, per unit or task pricing, or fixed bill rates. For the most part however contingent labor in the is delivered with a markup on pay rate. If your company is using or supplying contingent labor then it is helpful to understand how the marketplace prices these services in order to maximize profits and productivity. 

Benefits of Temp-To-Hire

Hiring a worker on a temporary basis is a great way to try out a potential new employee before extending them an offer for direct hire employment.  It’s also a great way to implement a new position within a company before creating a new role.

Rather than hiring the worker as a full-time, internal employee – engage a worker can be done easily through an Employer of Record service. 

During a probationary period, usually lasting from 8 to 14 weeks, the temporary employee’s performance can be evaluated and a decision on whether he or she should be hired full-time or let go can be made.

BENEFITS OF TEMP-TO-HIRE

·         Extended interview period - Temp-to-hire allows a company to “get a feel” for someone over a period of time in a way that is difficult to accomplish during a short interview. For example, does the worker fit with the rest of the team? Do they have a good work ethic? Can they work under pressure?

·         Engage workers quickly and easily - Temp-to-hire candidates can be engaged quickly and easily through an Employer of Record service. These services (see Emergent's website for more information) handle all statutory employer responsibilities, including background screening, on-boarding, and payroll processing during the workers assignment – enabling you to focus on your core business needs.

·         No obligation to hire - If a company finds that the worker is not a good fit, they can disengage with the worker before or at the end of the contract. without having the obligation to hire them.

·         Evaluate long-term hiring need - Whether a company is hiring to address recent growth or a newly created positions, temp-to-hire provides the time to ensure that the position is needed before adding to the internal headcount.

·         Free to end assignment at any time - If a temp-to-hire candidate isn't a good fit, the assignment can be ended at any time.  When the candidate is the employee of an employer of record service, legal exposure is minimized.

·         Reduced benefits spend - Companies that use temp-to-hire workers do not incur benefits or vacation time costs during the probationary period when engaged through an Employer of Record service. 

·         Alternative to high recruiting costs - Temp-to-Hire and Employer of Record arrangements can offer significant cost savings versus hiring a permanent employee through traditional means. 

Misclassified Staff at General Motors Sue Over Pay

Workers at a car factory in Ohio are suing General Motors for $4 million in back pay after they claim they were wrongfully classified as temporary employees. The workers claim they were paid forty percent less than their "permanent" counterparts. 

The group of workers were hired in 2006 and laid-off the following year before being brought back on board six months later. When they were re-hired, they claim that they wrongfully reclassified as temporary workers. 

See News Article Here for More Information

Co-employment and the contingent workforce: Do you know the risks?

Co-employment is a relationship between two or more employers whereby each has the legal responsibilities to the same employee.

Co-employment issues can present problems for the companies that supply contingent labor (temps, contractors, consultants, freelancers, and the like) and their clients. Often, client companies erroneously believe that the staffing company or other supplier they engaged the temp worker through is the sole employer of that worker. 


However, if the client company manages that contingent worker on a day to day basis, they could be regarded as a co-employer or special employer of the worker in conjunction with the worker's statutory employer - often a staffing company or 'payrolling' company. 


With co-employment, each company is liable for the decisions made by the other party. This means that if a contingent employee files a legal complaint and wins, both the supplier of the worker and the client company could be responsible for paying damages.


Co-employment risk is challenging to eliminate entirely, but there are many things you could take into consideration to reduce your risk considerably.


For the client company utilizing the contingent worker(s) services the following considerations may be observed:

• Do not discuss pay rates, increases or bonuses - this is the responsibility of the worker's statutory employer. A statutory employer is generally one who is liable for workers' compensation according to a statute establishing such an employment relationship. 
• Do not discuss opportunities for regular full-time employment without consulting the worker's employer. 
• Do not request that the worker complete timecards or forms with the client company's name on them. The worker's employer is responsible for all timecards and on-boarding paperwork (such as applications).
• Do not counsel assignment employees concerning: tardiness, punctuality, attendance, dress code, child-or elder-care arrangements or other personal matters.
• Do not inform an assignment employee that he or she is terminated or suspended. 
• Refer all questions relative to pay, benefits, duration of position or opportunity for employment to the worker's employer.
• Report any absences, tardiness or unacceptable behavior to the worker's employer.
• Inform the worker's employer about any changes in an employee's work schedule.

Emergent can help your company considerably reduce co-employment risks when working with contingent labor. 


Call us today on 855 250 5000 or e-mail info@emergent.com to find out how we can help you navigate the risks of hiring temporary labor!