• Can I deduct money owed to our company by an employee on his or her final payroll check?
• Is my organization required to offer holiday pay?
• When are rest and meal periods required?
• What is Minimum Wage?
• Must I provide employees with paid sick and vacation leave?
• Can I hire help in my office under an independent contractor basis and if so, what are the legal parameters?

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• Can I deduct money owed to our company by an employee on his or her final payroll check?

Maybe.  Generally, an employer can lawfully withhold amounts from an employee’s wages under the following circumstances: (1) when required or empowered to do so by state or federal law, or (2) when a deduction is expressly authorized in writing by the employee to cover insurance premiums, benefit plan contributions or other deductions not amounting to a rebate on the employee’s wages, or (3) when a deduction to cover health, welfare, or pension contributions is expressly authorized by a wage or collective bargaining agreement.

Depending on the jurisdiction, an employer’s ability to deduct amounts from an employee’s wages due to a cash shortage, breakage, or loss of equipment may be limited and regulated by state statutes.  In California, for example, several court decisions significantly restrict an employer’s ability to take an offset against an employee’s wages.  These limitations prohibit an employer’s ability to collect debts owed to the employer through “balloon” payments deducted from a final payroll check or deductions for past payroll advances.  When in doubt, it is always best to work with an experienced, certified human resources specialist and/or labor and employment law attorney.  At MMC, Inc., our human resources and legal department is always happy to address your workplace questions and concerns.

• Is my organization required to offer holiday pay?

Generally, no.  Hours worked on holidays, Saturdays, and Sundays are treated like hours worked on any other day of the week. Employers are not legally required to offer employees with paid holidays and if an employer closes its business on holidays and gives its employees time off from work with pay, the employer is doing so based on a practice or benefit the employer has adopted.  Additionally, there is nothing in the law that mandates an employer pay an employee a special premium for performing work on a holiday, Saturday, or Sunday, other than the premium that might attach to overtime hours worked.  [In California, for example, work performed by non-exempt employees in excess of eight hours on a workday usually requires an overtime premium, in addition to work that may be performed in excess of 40 hours in a workweek.]

• When are rest and meal periods required?

As a general rule, the federal Fair Labor Standards Act (FLSA) does not require employees be given meal or rest breaks.  However, if employers do offer short breaks (lasting about five to 20 minutes), federal law considers these short breaks to serve as time which employees can take and still be compensated.  Bona fide meal periods (typically lasting at least 30 minutes), serve a different purpose than short rest or snack breaks and are not typically considered time in which employees must be compensated.

In many states, non-exempt employees must be provided with a duty free, rest period.  California requires employees who are scheduled for at least 5 hours to be provided with a net free 10-minute break that may be taken as reasonably possible and during the middle of a work period, so generally once every four hours of an eight hour scheduled workday.  Failing to provide for a rest period can expose an employer to wage and hour violations and penalties that can add up to hundreds if not thousands of dollars.  So violations should be avoided altogether. 

Similarly, meal periods must also be observed by most employers in many state jurisdictions.  Meal periods, should be duty free and provided when employees are scheduled to work a full work day.  Generally, an employer will want to have non-exempt employees clock out to document the observance of a meal period.  Whether an employee is permitted to eat off the work site or not will vary from employers and jurisdictions.  However, assuring that an employee can refresh and have time to eat, without working through this time is the goal for most enforcement divisions in jurisdictions protecting this basic employee right.

• What is Minimum Wage?

According to the United States Department of Labor, the federal minimum wage for hourly, nonexempt employees is $7.25 per hour, effective July 24, 2009.  Now what this means is that U.S. employees, subject to the Fair Labor Standards Act, must be paid at least $7.25 per hour.  However, depending on state law (which work in conjunction with federal laws, as opposed to separate and apart from federal law) an employer may need to also pay an employee additional monies to meet a state and/or specific city’s minimum wage laws as well.  For example, in much of California, the minimum wage is $8.00 per hour.  In San Francisco, California the minimum wage is $9.36 per hour.  So if an employer is subject to federal, state, and local minimum wage laws, a private employer in San Francisco would not have a choice and cannot choose to pay an employee the lower federal or state minimum wage but must pay at least $9.79 per hour to all employees. 

We know that much of this may seem confusing.  If you have questions, please do not hesitate to contact MMC at (800) 899-MMCI (6624).  You can also visit http://www.dol.gov/dol/topic/wages/minimumwage.htm to learn more.

• Must I provide employees with paid sick and vacation leave?

The federal Fair Labor Standards Act (FLSA) does not require employers to provide employees with payment for vacations, sick leave or holidays.  However, innovative jurisdictions like San Francisco, California require certain employers to provide employees with sick leave.  And generally, if an employer does provide paid vacation, sick leave or holidays, the employer must not discriminate in the manner it provides the same to other similarly situated employees.  Moreover, in some jurisdictions, like California an employer must treat accrued paid-time-off and/or vacation hours as a form of deferred compensation which must be paid at the last rate of pay when an employee separates from employment.  Otherwise, these benefits have been traditionally considered as arising from marketplace agreements wherein certain employers and employees bargain for the same. 
Please be aware that certain sick leaves may be covered for eligible employees.  Generally, providing for the time off is mandatory, but any compensation sought by an employee from his or her employer while on sick leave is a matter that may be covered through local jurisdiction and/or short term disability benefits that may be covered through other resources. 

• Can I hire help in my office under an independent contractor basis and if so, what are the legal parameters?

Yes, but be certain you’ve correctly classified workers as “independent contractors.” There is no “one” definition of what the term "independent contractor" means and it can vary depending on the context (e.g., IRS versus EDD determinations).  Merely identifying someone as an “independent contractor” in order to avoid paying payroll taxes, minimum wage or overtime, purchasing workers’ compensation, state disability, and unemployment insurance is unlawful.

For most employers, misclassification problems arise when independent contractors seek benefits from unemployment insurance or for on the job injuries.  When this occurs, an employer’s error can result in penalties and liabilities that have grave impact on the viability of a business.  Thus the reason why MMC works diligently to assure employers doesnot make classification errors.

Some of the factors considered for correctly classifying workers as “independent contractors” include:

• Whether the person performing services is engaged in an occupation or business distinct from that of the principal
• Whether or not the work is a part of the regular business of the principal or alleged employer
• Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work
• Whether a worker has invested their own money and resources in equipment or materials required by his or her task to complete work for the organization retaining their independent contractor services
• Whether the service rendered require a special skill
• Whether the occupation, locality, and work being performed is usually done under the direction of a principal or specialist without supervision
• Whether there is an opportunity for profit or risk of loss assumed by the independent contractor based on his or her’s managerial skills
• The length of time which the services of the independent contractor are to be performed
• The degree of permanence of the working relationship
• The method of payment, whether by time or by the job
• Whether or not the parties believe they are creating an employer-employee

In California, where there is an absence of control over work details, an employer-employee relationship will be found if (1) the principal retains pervasive control over the operation as a whole, (2) the worker’s duties are an integral part of the operation, and (3) the nature of the work makes detailed control unnecessary. (Yellow Cab Cooperative v. Workers Compensation Appeals Board (1991) 226 Cal.App.3d 1288.)  Other points to remember in determining whether a worker is an employee or independent contractor are that the existence of a written agreement purporting to establish an independent contractor relationship is not determinative (S. G. Borello & Sons, Inc. v Dept. of Industrial Relations (1989) 48 Cal.3d 341, 349.) And the fact that a worker is issued a 1099 form rather than a W-2 form is also not determinative with respect to independent contractor status. (Toyota Motor Sales v. Superior Court (1990) 220 Cal.App.3d 864, 877.)