On Aug. 31, 2017, a federal judge in Texas struck down the Department of Labor’s (DOL) 2016 overtime rule, stating that the DOL had exceeded its authority by issuing a new salary level requirement for white collar exempt employees.
The DOL is unlikely to appeal this court decision because the ruling does not put into question the DOL’s general authority to set any type of salary limit.
However, the DOL has also signaled its intention to propose a new overtime rule. The DOL has published a request for information (RFI) to invite the public to comment on the issues the DOL should consider before proposing a new overtime rule.
Employers are not required to comply with the 2016 overtime final rule. This ruling ensures that the rule will not take effect. Employers should monitor developments on a new overtime rule proposal.
DOL Rule on White Collar Exemptions
The Fair Labor Standards Act (FLSA) establishes minimum wage and overtime pay protections for many workers in the United States. However, the FLSA exempts certain workers, such as white collar employees, from these protections. The white collar exemptions apply to certain executive, administrative, professional, outside sales, computer and highly compensated employees.
To qualify for the executive, administrative or professional (EAP) exemption, an employee must meet a salary basis test, a salary level test and a duties test. The DOL’s 2016 overtime rule would have increased the required salary level from $455 per week ($23,660 per year) to $913 per week ($47,476 per year). Highly compensated employees (HCEs) must also satisfy the salary basis and duties tests to be considered exempt, but a different salary level applies to them. The DOL rule would have increased the required salary level for highly compensated employees from $100,000 per year to $134,004 per year.
Challenges to the 2016 Overtime Rule
In September 2016, a coalition of 21 states and a number of business groups filed two separate lawsuits challenging the new rule. These two lawsuits were combined in October. On Nov. 16, 2016, the court held a hearing on whether to grant an emergency injunction blocking the implementation of the rule. The judge presiding over the case issued his written ruling granting the injunction on Nov. 22, 2016.
On Aug. 31, 2017, the same federal court struck down the 2016 overtime rule stating that the DOL exceeded its authority when imposing the $913 per week ($47,476 per year) and $134,004 per year salary level limits.
The Future of FLSA Overtime Regulations
On July 26, 2017, the DOL published an RFI regarding the overtime exemptions for executive, administrative, professional, outside sales and computer employees. The purpose of the RFI is to gather information from the public before formulating a proposal to amend the FLSA or its regulations.
The RFI does not place any responsibilities on employers. However, any individual or organization interested in responding to the RFI must submit their comments to the DOL by Sept. 25, 2017. The DOL is encouraging individuals and organizations to submit their comments electronically, using the instructions in the Federal eRulemaking Portal.
When submitting a comment, employers should remember that, once submitted, comments are considered public records and will be published without editing. This includes any personal information provided.
More Information
Please contact Scurich Insurance for more information regarding current overtime rules, compliance with the FLSA or the RFI on overtime regulations.
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Business owners have a lot to consider when choosing insurance that fully protects their business. One coverage option, a business owners policy (BOP), can take the guesswork out of the process. A BOP bundles several types of coverage in one package, similar to the way a homeowners policy works, but is designed for small and midsized businesses.
BOP Key Features
A BOP generally combines the following types of coverage in one convenient bundle:
- Commercial property insurance—Covers losses to property from common perils. It also covers office equipment, furniture, inventory, machinery, raw materials, computers and anything else that is vital to business operations.
- General liability insurance—Covers a company’s legal responsibility for any harm it may cause to others, up to the policy limit. It also covers attorney fees and medical bills for anyone injured by the company.
- Business interruption insurance—Reimburses for loss of income if a covered disaster interferes with the successful operation of the business.
Exclusions
Although a BOP is a convenient insurance option for small to midsized business owners, it does not cover professional liability, auto insurance and workers’ compensation. Workers’ life, health and disability coverage is also excluded. For those exclusions, business owners can purchase separate insurance policies. Other examples include the following:
- Crime coverage—Although it is minimal, crime coverage can be added to a BOP to cover losses as a result of crime, such as employee dishonesty and computer fraud. Typical crime coverage ranges between $1,000 and $5,000.
- Data breach coverage—This coverage is commonly added to BOPs to help remedy the following losses resulting from data breaches:
- Notifying impacted individuals
- Hiring crisis communication consultants
- Defense and settlement costs from associated lawsuits
- Replacement of lost income
- Extortion and ransom payments
- Errors and omissions (E&O) coverage—Businesses that provide services for a fee can be sued by customers who claim that they were harmed because the business failed to perform its job properly. E&O coverage pays for any judgment for which the insured is found legally liable, up to the policy limit. It also covers legal defense costs.
Ideal Candidates for a BOP
Businesses that have the following characteristics are ideal candidates for a BOP:
- Operate in a physical location, whether home-based or outside the home
- Have assets that can be stolen, including products, cash, furniture and digital property
- Are at a high risk for lawsuits
- Employ less than 100 employees and have less $5 million in sales
The following types of businesses frequently purchase BOPs to protect from losses not covered by general liability insurance:
- Manufacturers
- Religious organizations
- Apartments
- Restaurants
- Technology consultants and solutions providers
- Wholesalers
- Retailers
Eligibility
Small to midsized businesses need to meet specific criteria to be eligible for a BOP. When determining eligibility, insurers consider factors that include the type of business, size of its primary location, class of business and revenue.
Premiums for BOP policies are based on eligibility factors, as well as financial stability, building construction, security features and fire hazards.
When purchasing business insurance, it is important to obtain the right amount. Contact Scurich Insurance for guidance as to whether a BOP is a logical choice for your business.
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Final Forms for 2017 ACA Reporting Released
On Sept. 28, 2017, the Internal Revenue Service (IRS) released final 2017 forms for reporting under Internal Revenue Code (Code) Sections 6055 and 6056.
- 2017 Forms 1094-C and 1095-C are used by applicable large employers (ALEs) to report under Section 6056, as well as for combined Section 6055 and 6056 reporting by ALEs who sponsor self-insured plans. Related draft instructions were released on Aug. 31, 2017, and have not been finalized at this time.
- 2017 Forms 1094-B and 1095-B are used by entities reporting under Section 6055, including self-insured plan sponsors that are not ALEs. Related draft instructions were released on Aug. 31, 2017, and have not been finalized at this time.
The 2017 forms are substantially similar to the 2016 versions, except that sections related to expired Section 4980H Transition Relief were removed.
ACTION STEPS
Employers should become familiar with the revisions to the forms, and prepare to file these final versions in early 2018.
Background
The Affordable Care Act (ACA) created reporting requirements under Code Sections 6055 and 6056. Under these rules, certain employers must provide information to the IRS about the health plan coverage they offer (or do not offer) or provide to their employees. Each reporting entity must annually file all of the following with the IRS:
- A separate statement (Form 1095-B or Form 1095-C) for each individual who is provided with minimum essential coverage (for providers reporting under Section 6055), or for each full-time employee (for ALEs reporting under Section 6056); and
- A transmittal form (Form 1094-B or Form 1094-C) for all of the returns filed for a given calendar year.
Reporting entities must also furnish related statements (Form 1095-B or 1095-C, or a substitute form) to individuals.
Forms must generally be filed with the IRS no later than Feb. 28 (March 31, if filed electronically) of the year following the calendar year to which the return relates. Individual statements must be furnished to individuals on or before Jan. 31 of the year immediately following the calendar year to which the statements relate.
2017 Forms and Instructions
The 2017 forms, as well as the 2017 draft instructions, are substantially similar to the 2016 versions. However, note the following changes:
- Section 4980H Transition Relief. Several forms of transition relief were available to some employers under Section 4980H for the 2015 plan year (including any portion of the 2015 plan year that fell in 2016). However, no Section 4980H transition relief is available for 2017. As a result, the 2017 draft instructions for Forms 1094-C and 1095-C were revised to remove references to Section 4980H transition relief. In addition, Form 1094-C has been revised to remove references to this transition relief. Specifically, the following two sections on Form 1094-C related to this transition relief have been designated as “Reserved” and should not be used: Part II, in the “Certifications of Eligibility” Section on Line 22, Box C; and Part III, in the “ALE Member Information – Monthly” table, column (e).
- Instructions for Recipient. Both individual statements (Forms 1095-B and 1095-C) include an “Instructions for Recipient” section. On both of the 2017 Forms 1095-B and 1095-C, the following paragraph was added: “Additional information. For additional information about the tax provisions of the Affordable Care Act (ACA), including the individual shared responsibility provisions, the premium tax credit, and the employer shared responsibility provisions, see www.irs.gov/Affordable-Care-Act/Individuals-and-Families or call the IRS Healthcare Hotline for ACA questions (1-800-919-0452).”
- Updated Penalty Amounts. Both sets of 2017 draft instructions include updated penalty amounts for failures to file returns and furnish statements in 2017. The adjusted penalty amount is $260 per violation, with an annual maximum of $3,218,500 (up from a maximum of $3,193,000, for 2016).
- Code Series 2 (Section 4980H Safe Harbor Codes and Other Relief). The 2017 draft instructions for Forms 1094-C and 1095-C clarify that there is no specific code to enter on line 16 to indicate that a full-time employee who was offered coverage either did not enroll or waived the coverage.
- Corrected Forms 1095-C. The 2017 draft instructions for Forms 1094-C and 1095-C include additional information for employers that have errors on Forms 1095-C. Specifically, the draft instructions indicate that Forms 1095-C filed with incorrect dollar amounts on line 15, Employee Required Contribution, may fall under a safe harbor for certain de minimis errors. The safe harbor generally applies if no single amount in error differs from the correct amount by more than $100. If the safe harbor applies, employers will not have to correct Form 1095-C to avoid penalties. However, if the recipient elects for the safe harbor not to apply, the employer may have to issue a corrected Form 1095-C to avoid penalties. For more information, see Notice 2017-9.
- Reporting Catastrophic Coverage for 2017. The 2017 draft instructions for Forms 1094-B and 1095-B clarify that reporting for catastrophic coverage enrolled in through the Exchange remains optional for 2017. It was expected that health insurance issuers and carriers would be required to report this coverage beginning in 2017. However, the instructions clarify that reporting of catastrophic coverage enrolled in through the Exchange will remain optional for coverage in 2017 (filing in 2018).
- Formatting Returns Filed with the IRS. Both sets of 2017 draft instructions clarify that all returns filed with the IRS must be printed in landscape format.
In addition, a prior draft version of Form 1095-C for 2017 clarified that the “Plan Start Month” box in Part II of Form 1095-C will remain optional for 2017. The draft instructions for Forms 1094-C and 1095-C indicate that this box may be mandatory for the 2018 Form 1095-C.
Although the forms have been finalized for 2017 reporting, keep in mind that the IRS may include additional clarifications in the final instructions, once those are released.
Additional Resources
The 2016 versions of these forms are also available on the IRS website:
These forms must have been filed with the IRS no later than Feb. 28, 2017 (March 31, 2017, if filing electronically). However, the IRS extended the due date for furnishing individual statements for 2016 an extra 30 days, from Jan. 31, 2017, to March 2, 2017. The IRS does not anticipate extending the filing or furnishing deadlines for 2017 reporting.
According to the IRS, information returns under Sections 6055 and 6056 may continue to be filed after the filing deadline (both on paper and electronically). Employers that missed the filing deadline should continue to make efforts to file their returns as soon as possible.
The IRS also previously released:
More Information
Please contact Scurich Insurance for more information on reporting under Code Sections 6055 and 6056.
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Workers’ compensation is a system of no-fault insurance that provides medical and monetary benefits to employees or their survivors for work-related injuries, diseases and deaths.
The California Workers’ Compensation Act (WCA) defines employer responsibilities under the state’s workers’ compensation program. The Division of Workers’ Compensation (DWC) of the California Department of Industrial Relations monitors and enforces employers’ compliance with these requirements throughout the state.
Coverage Requirements
Almost all California employers must secure workers’ compensation coverage for their employees. The WCA defines an employee as any individual working for another individual or organization who is not an independent contractor. Employers are bound by WCA coverage requirements even if they only have one employee, regardless of whether the employee works full-time or part-time.
Coverage requirements also apply for temporary workers. Temporary employment agencies, employment referral services, labor contractors and any other similar entities hiring temporary workers are solely responsible for their employees’ coverage.
To meet coverage requirements, employers can either secure a workers’ compensation insurance policy from a private insurance company licensed to do business in California or apply for self-insurance certification with the Office of Self Insurance Plans (OSIP).
Self-Insurance
A self-insured employer uses its assets, rather than an insurance policy provided by an insurance carrier, to cover its obligations under the workers’ compensation program. Employers that wish to self-insure must obtain authorization from the OSIP. Whether the OSIP will grant this authorization depends on an employer’s financial strength, proposed benefit delivery system and loss prevention program. To qualify, an employer must:
- Have at least $5 million in shareholder equity;
- Have net profits of $500,000 or more for the five years immediately prior to the application;
- Make a deposit based on the employer’s expected future liabilities, with a minimum amount of $220,000;
- Hire a certified third-party administrator or ensure that internal staff becomes OSIP-certified to process and handle benefit claims; and
- Provide the following documents:
- Certified, independently-audited financial statements; and
- A proposed injury and illness prevention program that meets, at a minimum, Cal/OHSA safety and health regulations.
Self-insured employers are subject to audits by both the DWC and OSIP. These audits are used to verify that self-insured employers are making benefits payments promptly and properly.
Certain employers are not allowed to self-insure. These employers include:
- Professional employer organizations;
- Leasing employers;
- Temporary service employers;
- Any employer in the business of providing employees to other employers; and
- Employers that have allowed their coverage to lapse (unless they receive authorization from the DWC).
Group Self-insurance
Multiple employers can create self-insurance groups by combining their assets to insure against their individual liabilities. Authorization for group self-insurance requires employer groups to show they have sufficient financial stability to meet all their obligations under the WCA. In addition, a group of employers seeking to self-insure must:
- Operate in the same industry;
- Make a deposit equal to 135 percent of its estimated future liabilities;
- Have sufficient funds to cover any losses and administrative expenses for at least eight of out of 10 years;
- Obtain excess insurance for claims over $500,000; and
- Report to each member of the group any possible conflict of interest between the group and any vendors.
Self-insurance Annual Renewal
Self-insured employers must submit annual reports to show their continued compliance with eligibility requirements. These reports are also used to assess the adequacy of each self-insurance deposit.
Employers that are required to deposit additional funds to their initial deposit must make their contributions within 60 days of filing their annual report or by May 1 of the year in question, whichever is comes first.
COVERAGE NOTICE REQUIREMENTS
Employers subject to the WCA must display a notice in a conspicuous place stating that they have workers’ compensation insurance coverage that complies with the WCA. Failing to display this notice constitutes a misdemeanor and may be considered evidence that the employer does not have insurance.
The coverage notice must be available in English and Spanish and must include specific information about the employee’s rights and obligations under the WCA. The DWC has issued a model poster that employers can use to fulfill these requirements.
An employer that fails to provide this notice must allow its employees to be treated by their physician of choice for any injuries that occur during the time the notice is not displayed.
In addition to the posting requirement, employers must provide the same information to new employees at the time of hiring (or by the end of their first pay period). New employees must also receive instructions on:
- How to obtain appropriate medical care for job-related injuries;
- The role and function of the primary treating physician; and
- How to obtain and submit the form the employee must use to notify the employer he or she wants to use a personal physician.
- If an employer is insured, the insurance carrier is responsible for providing the employer with copies of a notice that contains all the required information for new employees.
INJURY Reporting Requirements
Under the WCA, employers have reporting obligations any time an employee sustains a work-related condition that results in:
- Lost work time beyond the employee’s work shift at the time of injury; or
- Medical treatment beyond first aid.
For this purpose, “first aid” means any one-time treatment and any follow-up visit for observation of minor scratches, cuts, burns, splinters, or other minor industrial injuries that do not ordinarily require medical care. Treatment that meets this definition is still considered “first aid” even if it is provided by a medical professional.
Note: Effective
Jan. 1, 2017, workers’ compensation insurance carriers are required to report all work-related injuries,
including those that involve only first aid with no lost work time, to the California
Workers’ Compensation Insurance Rating Bureau (WCIRB). The WCIRB uses this information to, among other things, help determine an employer’s premium rates for workers’ compensation insurance.
However, this change does not affect an employer’s injury-reporting obligations under the WCA. An employer may chose, but is still not required, to report injuries that do not result in lost work time or treatment beyond first aid.
When an employee incurs medical expenses for first aid, the billing medical provider has an obligation to report the treatment to both the DIR and the employer’s insurance carrier. The medical provider’s report (or an employer’s voluntary report of a first-aid-only injury for which no medical expenses are incurred) is what triggers an insurance carrier’s obligation to report the claim to the WCIRB under the new rule.
This reduces an insured employer’s incentive to pay medical bills for first-aid-only treatment out of pocket instead of allowing its workers’ compensation insurance carrier to cover the expenses, because these types of claims can now affect an employer’s premium rates regardless of how the first-aid treatment expenses are paid. �
Within one working day after an employer receives notice or first obtains knowledge of an employee’s work-related injury that results in lost work time or medical treatment beyond first aid, the employer must:
- Provide the employee with Form DWC 1 (“Workers’ Compensation Claim Form & Notice of Potential Eligibility”);
- Ask the employee to complete the employee section of form DWC 1 and return it to the employer;
- Complete the employer section of the form; and
- Within one working day after receiving the form back from the employee, submit the fully completed form to its insurance carrier (or directly to the DIR, if the employer is self-insured) and provide a copy to the employee.
In addition, employers must fill out Form DLSR 5020 (“Employer’s Report of Occupational Injury or Illness”) and send it to their insurance carriers or claims administrators within five days after first receiving notice or obtaining knowledge of an injury.
In the event that an employee becomes the victim of a crime while on an employer’s premises, the employer must provide written notice to the employee, within one day of the crime, stating that he or she is eligible for benefits resulting from physical and psychiatric injuries.
Reporting for self-insured employers
When employers secure coverage with a policy from an insurance company, the insurance company will work with the employer on preparing, maintaining and submitting reports and records that the DWC requires to monitor compliance with California law.
An employer that decides to self-insure, however, must meet certain reporting obligations on its own. One of these obligations is to file an annual report as prescribed by the DWC. Annual reports must show:
- The amount of all compensation claims;
- The amount of benefits paid to date;
- An estimated amount of future liability on open claims under state and federal laws;
- The average number of employees and the total wages for each adjusting location;
- A list of all open indemnity claims; and
- The amount of security deposit made by the employer.
MORE INFORMATION
Please see the DWC website or contact Scurich Insurance for more information on workers’ compensation laws in California.
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Federal minimum wage law is governed by the Fair Labor Standards Act (FLSA). The current federal minimum wage rate is $7.25 per hour for nonexempt employees. California law complements federal law and, in some cases, prescribes more stringent or additional requirements that employers must follow. Whenever employers are subject to both state and federal laws, the law most favorable to the employee will apply.
The Division of Labor Standards Enforcement (DLSE), part of the California Department of Industrial Relations, enforces and investigates minimum wage violation claims.
Minimum Wage Rate
The current minimum wage rate in California is $10 per hour. A separate minimum wage rate applies for sheepherders, equal to $1,777.98 per month. “Employee wages” are the entire amount of compensation an employee receives for his or her labor or services. Wages can be fixed or based on time, task, piece, commission or other method.
On April 4, 2016, Governor Jerry Brown signed a bill into law that will increase California’s minimum wage rate to $15 per hour by 2022.
New Minimum Wage Rate Implementation
The minimum wage increase will be phased in over several years in separate schedules for employers, depending on the employer’s workforce size.
|
Minimum Wage Rate |
Effective Date
|
|
26 or more employees
|
25 or fewer employees
|
|
$10.50 per hour
|
N/A
|
Jan. 1, 2017
|
|
$11 per hour
|
$10.50 per hour
|
Jan. 1, 2018
|
|
$12 per hour
|
$11 per hour
|
Jan. 1, 2019
|
|
$13 per hour
|
$12 per hour
|
Jan. 1, 2020
|
|
$14 per hour
|
$13 per hour
|
Jan. 1, 2021
|
|
$15 per hour
|
$14 per hour
|
Jan. 1, 2022
|
|
Adjustment for inflation
|
$15 per hour
|
Jan. 1, 2023
|
|
Adjustment for inflation
|
Adjustment for inflation
|
Jan. 1, 2024
|
After the rates described above are implemented, the state will adjust the minimum wage rate annually to reflect the rising cost of inflation.
The law allows the governor to temporarily suspend the minimum wage rate increase schedule if the state’s economic condition does not support an increase. Under a temporary suspension, the implementation schedule would be delayed by one year. However, the governor may not implement a temporary suspension more than twice.
|
Lodging
|
|
Room (alone)
|
$47.03 per week
|
|
Room (shared)
|
$38.82 per week
|
|
Apartment
|
Two-thirds of ordinary rental value up to $564.81 per month
|
|
Apartment (couple)
Both individuals must work for the same employer.
|
Two-thirds of ordinary rental value, up to $835.49 per month
|
|
Meals
|
|
Breakfast
|
$3.62
|
|
Lunch
|
$4.97
|
|
Dinner
|
$6.68
|
Meals and Lodging Credits
If the employee voluntarily agrees in writing, employers may generally include in employee wages part of the cost of meals and lodging they provide.
The adjacent table provides the maximum amount employers may credit for meals and lodging. Special rules exist for sheepherders and employees of organized camps.
- Sheepherder wages cannot be offset by meal and lodging credits; and
- Organized camps may deduct the entire value of meals and lodging from the salary of a student-employee, camp counselor or program counselor.
Refer to the wage orders mentioned below for more information on industry-specific meal and lodging credits.
Tipped Employees
In California, employers must pay tipped employees a wage rate equal to or greater than the state’s minimum wage rate. Employers may not deduct a tip credit from their employees’ wages. Tip payments include any tip, gratuity, money or other gift a patron gives an employee over and above the actual amount of the goods, food, drink, items or services the patron received from that business.
Employers cannot enter into contracts with their employers to override tipped employee regulations.
Subminimum Wage Rates
California law allows disabled workers, apprentices, learners, student-employees, camp counselors and program counselors to receive wage rates below the minimum state rate. In certain cases, a license may be required for a subminimum wage rate to apply. When a license is required, the DLSE may set the terms and conditions of employment. Licenses may be revoked if the employer violates any term or condition of employment set by the license.
Disabled Workers
Employers that obtain a special license issued by the DLSE may pay disabled workers a wage rate below the state’s minimum wage rate. Employers must generally obtain a separate license for each disabled employee. These licenses are valid for up to one year, and must be renewed on a yearly basis.
Nonprofit employers, including sheltered workshops and rehabilitation facilities, may receive a general license to employ disabled employees at subminimum wage rates, instead of individual licenses for each employee. Employers may be required to renew these licenses every year or on a more frequent basis.
Apprentices and Learners
The DLSE may also issue special licenses authorizing employers to pay subminimum wage rates as low as 85 percent of the state’s minimum wage rate to employees during their first 160 hours of employment in occupations in which they have no previous similar or related experience.
Organized Camps
Employers operating an organized camp can pay their student-employees, camp counselors and program counselors a minimum wage rate equal to 85 percent of the state minimum wage rate. These employers can also deduct the entire value of meals and lodging they provide to these employees.
Minimum Wage Rate Exemptions
California’s minimum wage rate requirements do not apply to certain occupations and industries. Separate specific minimum wage rate and payment requirements, described in a series of minimum wage orders, apply for these employees. Consult the wage orders below for information on affected industries:
Other exceptions to California’s minimum wage rate requirements include individuals who are closely related to their employer (parent, spouse or child) and outside sales personnel.
Notice and Postings
Employers are required to post and maintain updated information on the state’s minimum wage rate. The Industrial Welfare Commission (IWC) has provided a model poster that employers can use.
Employers covered by one of California’s industry-specific wage orders must also display a copy of the applicable wage order. These wage orders are available on the IWC’s website.
Prohibited Wage Discrimination
In general, the California Equal Pay Law prohibits employers from discriminating on the basis of sex in the payment of wages.
Subject to some limited exceptions, female and male employees are entitled to equal pay for substantially similar work. Substantially similar work is determined by evaluating the level of skill, effort, responsibility and performance under similar working conditions.
California’s Equal Pay Law allows employers to pay different wages for employees of opposite sex when the wages are based on:
- A seniority system;
- A merit system;
- A system that measures earnings by quantity or quality of production; or
- A differential based on any bona fide factor other than sex.
A bona fide factor other than sex, such as education, training or experience, exists only when the employer demonstrates that the factor is:
- Not based on or derived from a sex-based differential in compensation
- Job-related (with respect to the position in question); and
- Consistent with a business necessity.
“Business necessity” means an overriding legitimate business purpose. Business necessity does not exist when the employee can demonstrate that the employer could have implemented or used an existing alternative practice that would avoid a wage differential while serving the same business purpose.
Penalties
Criminal, civil and administrative penalties may apply for violations of California’s minimum wage laws.
Criminal Penalties
Employers that violate California’s minimum wage laws commit a misdemeanor, punishable by a fine of at least $100, imprisonment for at least 30 days or both a fine and imprisonment. Employers that violate tipped employee regulations also commit a misdemeanor, punishable by a fine of up to $1,000, imprisonment for up to 60 days or both.
Civil Penalties
Employers that pay wages below the state minimum wage rate or that violate California’s equal pay laws are subject to civil lawsuits, and could be ordered to pay:
- The difference between what an employee’s wages should have been and what they actually were (plus interest);
- Liquidated damages (in an amount equal to the wage difference plus interest); and
- Court costs and reasonable attorneys’ fees.
Employers may avoid paying liquidated damages if they can prove that their actions were in good faith.
Employee lawsuits must be filed within two years of when the violation takes place (or within three years, for willful violations). In the case of any wilful violation, the DLSE can request and obtain injunctions against any further violations.
The identity of any employee that files a complaint for wage discrimination with the DLSE will remain confidential during an investigation and will not be disclosed until the validity of the claim is established.
Administrative Penalties
In addition to the civil penalties described above, the DLSE may issue citations for any employer that violates the state’s minimum wage laws. Cited employers may be subject to fines as follows:
- $100 per underpaid employee for each pay period in which the employee is underpaid, for a first offense; and
- $250 per underpaid employee for each pay period in which the employee is underpaid, for a second or subsequent violation.
Employers can appeal these fines by requesting a hearing within 15 days of receiving the citation.
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OSHA’s cranes and derricks operator certification standard becomes effective on Nov. 10, 2017.
Employers that use cranes and derricks in construction must comply with this standard. Employers should also become familiar with this standard if their employees work in areas or sites where cranes and derricks are in use. Finally, crane lessors that provide operators or maintenance personnel with the equipment they lease also have duties under the standard.
This Compliance Overview presents some frequently asked questions and answers compiled by OSHA regarding operator and signal person qualifications and operator certification.
LINKS AND RESOURCES
- OSHA’s cranes and derricks in construction website
- OSHA’s cranes and derricks FAQs
- OSHA’s small entity Compliance Guide for cranes and derricks in construction standard
OPERATOR QUALIFICATION & CERTIFICATION
IMPORTANT: On Sept. 26, 2014, OSHA published a final rule that extends the deadline for crane operator certification in the cranes standard at
29 CFR 1926.1427 for three years, to
Nov. 10, 2017 (published in the
Federal Register). The final rule also extends the employer’s duty to ensure that operators are competent to operate the crane safely for the same three-year period. During this extension, OSHA will address operator qualification through additional rule-making. OSHA will provide updated information about the crane operator certification and qualification requirements as it becomes available on OSHA’s
cranes and derricks in construction page.
What must employers do before the operator certification requirements go into effect to ensure the competency of their operators?
Employers must ensure that equipment operators are competent through training and experience to operate the equipment safely (see 29 CFR 1926.1427(k)(2)). If an employee assigned to operate a crane does not have the required knowledge or ability to operate the equipment safely, the employer must train that employee before allowing him or her to operate the equipment and must evaluate the operator to confirm that he or she understands the information provided in the training (see 29 CFR 1926.1427(f) training requirements).
Does OSHA require operators to be certified under existing state, county or city licensing programs?
The answer depends on whether the licensing criteria meets the minimum requirements (“federal floor”) in 29 CFR 1926.1427(e)(2) and (j). If a state or local jurisdiction has a licensing program that meets the federal floor, OSHA requires the employer to ensure that all operators operating within that jurisdiction are licensed by that state or local jurisdiction, unless they are qualified by the U.S. military (see §1926.1427(a)(1)).
This requirement went into effect in November 2010. Note, however, that the crane standard’s operator certification requirements do not supersede state or local licensing laws. If the licensing program does not meet the federal floor, OSHA does not require operators to be licensed in accordance with that program, although the operator may still be subject to action by the state or local authority for failure to comply with its requirements.
Who will determine if a state or local operator certification process meets the federal floor requirements in 29 CFR 1926.1427?
Initially, states or local governments are responsible for determining if a state or local operator certification program meets the requirements of 29 CFR 1926.1427(e)(2)(i-ii) (see §1926.1427(e)(2)(iii)).
OSHA does not require compliance with a state or local licensing requirement unless the state or local authority that oversees the licensing department or office assesses that program and determines that it meets the minimum requirements in §1926.1427(e)(2)(i) and (ii), including satisfying the substantive testing criteria of §1926.1427(j) through written and practical tests and providing testing procedures for relicensing.
OSHA does not intend to require compliance with a state or local licensing requirement absent a public statement by the authority with oversight responsibility for the licensing office that the licensing program meets OSHA’s minimum requirements and the reason for that determination. However, OSHA has the final authority in determining that the program meets minimum OSHA requirements.
Is the option for qualification by the U.S. military available to employees of private contractors working under contract to the Department of Defense?
No. This option is only available to civilian and uniformed employees of the Department of Defense. When the operator certification requirements are in effect, private contractors must use one of the other options for operator certification/qualification available under 29 CFR 1926.1427.
Does OSHA endorse or approve testing bodies for operator certification or other purposes under the cranes standard?
No. OSHA does not evaluate or approve crane operator training courses or crane operator certification testing bodies. Under the cranes standard, operator certification testing bodies must be accredited by a nationally recognized accrediting agency (29 CFR 1926.1427(b)(1)(i)). Currently the American National Standards Institute (ANSI) and the National Commission for Certifying Agencies (NCCA) are the two organizations that OSHA has identified as nationally recognized accrediting agencies.
SIGNAL PERSON QUALIFICATIONS
What qualifications must a signal person possess?
A signal person must:
- Know and understand the type of signals used;
- Be competent in the application of the type of signals used;
- Have a basic understanding of equipment operation and limitations, including the crane dynamics involved in swinging and stopping loads and boom deflection from hoisting loads; and
- Know and understand the relevant requirements of the provisions of the standard relating to signals.
How does an employer know whether a signal person is qualified?
Under 29 CFR 1926.1428, employers must determine that a signal person is qualified through the assessment of a qualified evaluator, who must meet one of the following definitions in §1926.1401:
- Third-party qualified evaluator (“an entity that, due to its independence and expertise, has demonstrated that it is competent in accurately assessing whether individuals meet the qualification requirements in this subpart for a signal person”). The signal person must have documentation from a third-party qualified evaluator showing that he or she meets the qualification requirements.
- Employer’s qualified evaluator (not a third party) (“a person employed by the signal person’s employer who has demonstrated that he or she is competent in accurately assessing whether individuals meet the qualification requirements in this subpart for a signal person”). The employer’s qualified evaluator assesses the individual, determines that the individual meets the qualification requirements and provides documentation of that determination. This assessment may not be relied on by other employers.
(See 1/9/12 Interpretation Letter to William Irwin, Jr. and 6/28/11 Interpretation Letter to Walter Wise.)
Must the required training and qualification of a signal person be performed by an accredited organization?
No, but employers must have documentation of the signal person’s qualifications available at the worksite, either in paper form or electronically. For example, the documentation may be accessed from a laptop or tablet, via email or be transmitted from an off-site location by facsimile. While a physical card may serve as proof of a signal person’s qualifications, it is not the only means allowed by the cranes standard.
The documentation must specify each type of signaling (e.g., hand signals, radio signals, etc.) for which the signal person is qualified under the requirements of the standard. The purpose of this documentation is to ensure the on-site availability of a means for crane operators and others to determine quickly whether a signal person is qualified to perform a particular signal for the hoisting job safely.
(See 1/9/12 Interpretation Letter to William Irwin, Jr. and 6/28/11 Interpretation Letter to Walter Wise.)
Do Union and Trade Association Apprenticeship Certification Programs qualify as third party qualified evaluators for purposes of evaluating signal person qualifications in accordance with 29 CFR 1926.1428(a)(1)?
OSHA’s cranes standard requires each employer of a signal person to use a qualified evaluator (a third party or an employee) to verify that the signal person possesses a minimum set of knowledge and skills (29 CFR 1926.1428(a)). In general, OSHA does not evaluate or endorse specific products or programs, and, therefore, makes no determination as to whether a certification program meets the definition of a “qualified evaluator (third party).”
It should be noted, however, that in the preamble to the cranes standard, OSHA stated that “labor-management joint apprenticeship training programs that train and assess signal persons would typically meet the definition for a third-party qualified evaluator…”
(See the preamble to the cranes standard in the Federal Register at 75 FR 48029.)
With regard to training, the employer is ultimately responsible for assuring that its employees are adequately trained regardless of whether the employees’ qualification is assessed by the employer or a third party.
(See 1/9/12 Interpretation Letter to William Irwin, Jr. and 6/28/11 Interpretation Letter to Walter Wise.)
Does a certified operator automatically satisfy the criteria for being a qualified signal person under 29 CFR 1926.1428?
No. To qualify as a signal person, the operator would need to be evaluated by a qualified evaluator, satisfy the specified testing requirements for signal persons under 29 CFR 1926.1428 and documentation must identify the types of signaling (e.g., hand, radio, etc.) for which the operator has been evaluated.
In some cases, the operator’s certification process may also satisfy the signal person qualification requirements, depending on the qualifications of the certifying organization, the content of the certification exam and the documentation provided by the certifying organization. In general, the qualifications of a signal person and an equipment operator are not considered one in the same.
I received a license or certificate from an accredited organization as a trainer in signaling. Does this qualify me to be an evaluator of the qualifications of signal persons?
Not necessarily. While being an accredited trainer may indicate that the trainer possesses the skills for effectively communicating subject matter to trainees, a qualified evaluator must also have demonstrated that he or she is competent in accurately assessing whether individuals have the qualifications required by the cranes standard. For further information regarding signal person qualifications, refer to related fact sheets.
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