I-9 Best Practices

With the recent increase in immigration enforcement priorities, employers should ensure that they are correctly completing and maintaining I-9 forms for their employees.

What is an I-9?

The I-9 form is used for verifying the identity and employment authorization of individuals hired for employment in the United States. All U.S. employers must ensure proper completion of Form I-9 for everyone they hire for employment in the United States. This includes citizens and noncitizens. I-9 forms must be completed with the first 3 days of employment for a new hire. On the form, an employee must attest to his or her employment authorization. The employee must also present the employer with acceptable documents evidencing identity and employment authorization. The employer must examine the employment eligibility and identity document(s) an employee presents to determine whether the document(s) reasonably appear to be genuine and to relate to the employee and record the document information on the Form I-9. 

Completing an I-9

• Verify that the employee completed every applicable field in Section 1 of the I-9 form. 
• Remember that the employer cannot stipulate which documents an employee must bring in for verification. The employee may provide any document the list allows. Employees need to provide either one item from List A or one item each from List B and List C.
• Employees with an "A" number must list it when completing Section 1. 
• Ensure that employees check one status box (citizen, permanent resident or work-authorized alien).
• If you need to correct information on the I-9, line out the old text, make an annotation, and sign and date it. Use the margins to annotate the form and attach an additional sheet if more room is needed.

I-9 Retention Best Practices

The following simple steps can clarify best practices for ensuring organizations file and retain their I-9 forms in a manner that is ready for an audit or inspection and that meets both Form I-9 retention requirements. Current employees should always have a Form I-9 on file.

1. Maintain Separately from Personnel Records- keep in a file (electronic or hard copy) or binder that is accessible only to a few individuals in the human resource department. Supervisors or managers should not have regular access to I-9 forms and documents because national origin, immigration status, marital status and other protected information may be disclosed on these forms or in the documents provided for their completion.
2. File Active Employee I-9s Alphabetically- Active employee I-9 records are often maintained alphabetically by the last name so that they can be easily audited against a current payroll list.
3. File Terminated Employee Separately- When an employee is terminated, pull their Form I-9 from the active employee section and determine retention requirements. 
4. Assess Retention Requirements- Place a sticky note or some other removable notation (do not write on the I-9 form itself) with 2 dates: 
5. One year after termination date (i.e. if an employee terminates on May 2, 2018, the one year after will be May 2, 2019)
6. Three years after hire date (i.e. if an employee’s hire date was November 15, 2017, the three years after hire date will be November 15, 2020)
7. Establish the latest of the two dates above and this is your retention date. The I-9 must be retained until this date.
8. Organize Terminated Employees' I-9s Chronologically by Retention Date- It is the most efficient to file terminated employees' I-9s chronologically according to their circled retention date.
9. Shred Terminated Employees' I-9s Past Retention Date

Auditing I-9s

If you discover problems with your I-9s, consider taking the following actions: 

Missing I-9s

If you have missing I-9s, you should complete the current version of the I-9 as soon as possible. You should not backdate the form when you sign it, although you should indicate the actual date employment began in the relevant section.

Missing or Incorrect Information on the I-9

The employer should not make any corrections to Section 1. If you find incorrect or missing information in this section, the employee will need to make any necessary corrections. To do so, the employee should draw a line through the incorrect information, enter the correct or missing information, and initial and date the corrected or missing information.

If an I-9 for a former employee contains incorrect or missing information, you can attach a signed and dated statement to the existing I-9 identifying the incorrect or missing information in the form and explaining that the I-9 cannot be corrected because the employee is no longer employed by you.

Employers should follow the same procedure for missing or incorrect information is in Sections 2 or 3. You should not try to conceal changes made to I-9s, either by erasing or covering up existing information. If there are too many errors to correct, you can redo the sections (2 and/or 3) containing errors on a new I-9 with the complete and accurate information, sign and date it with the current date, and staple it to the existing I-9. 

Whether you correct an I-9 on the existing form or on a new form, you should also always attach a signed and dated explanation of the action taken.

If Sections 2 or 3 were not completed on the existing form, you should complete them as soon as possible, list the actual date that the person’s employment began and sign and date the section with the current date. Also, attach a signed and dated explanation of the steps taken to correctly complete the I-9.

Lauren Sims is the article’s author and the Director of Human Resources.

Whenever you require professional Human Resources or Payroll guidance to navigate the ever-changing landscape of California and Federal Employment Laws & Regulations, contact us for a no-obligation consultation.

eqHR Solutions provides professional, tactical and strategic human resources support; ADP payroll product implementation/training and payroll processing services for businesses throughout Southern California.

New Test for Independent Contractors in California

The ABC Test for Independent Contractors

At the end of April, the California Supreme Court issued its long-awaited opinion in Dynamex Operations West, Inc. v. Superior Court, clarifying the standard for determining whether workers in California should be classified as employees or as independent contractors. The Court held that there is a presumption that individuals are employees, and that an entity classifying an individual as an independent contractor bears the burden of establishing that such a classification is proper under the “ABC test.”

When classifying an individual as an independent contractor the employer must establish each of the following three factors, commonly known as the “ABC test”:

A.  that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and

B.  that the worker performs work that is outside the usual course of the hiring entity’s business; and

C.  that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Failure to establish all the above three factors results in a determination that a worker is an employee and thus not an independent contractor.

In other jurisdictions that have been using the ABC test already, most have agreed that proving “B” is the most difficult. It is often a tough call as to whether a worker’s services are in the employer’s “usual business,” particularly for specialized functions such as marketing or human resources that a company may need to run its business but may or may not be considered essential to its core business. 

One interpretation used in other states such as Massachusetts is to consider whether the service the worker is performing is “necessary to the business of the employing unit or merely incidental.” Here are some examples:

• A motor vehicle appraisal company cannot classify an appraiser as an independent contractor because the appraiser is performing an essential part of the appraisal company’s business.
• A drywall company cannot classify an individual who is installing drywall as an independent contractor because that worker is performing an essential part of the business.
• Conversely, an accounting firm hires an individual to move office furniture. That worker may be classified as an independent contractor because moving furniture is incidental and not necessary to the accounting firm’s business.

Application of the ABC test may make it more difficult to classify workers as independent contractors rather than as employees and may make it more difficult for companies to defend that classification.

Companies that utilize independent contractors should immediately consider whether those workers are properly classified under the ABC test.

Lauren Sims is the article’s author and the Director of Human Resources.

Whenever you require professional Human Resources or Payroll guidance to navigate the ever-changing landscape of California and Federal Employment Laws & Regulations, contact us for a no-obligation consultation.

eqHR Solutions provides professional, tactical and strategic human resources support; ADP payroll product implementation/training and payroll processing services for businesses throughout Southern California.

Can I Reduce an Employee's Temination Notice Period?

An employer asks: "Steve gave his two weeks’ notice today, I’m worried he will be disruptive during these 2 weeks and he will contact clients and perhaps take contact information and other company documents. Can we let him go now?”.

This is a frequent question from employers and usually our answer is “yes,” but there are a couple of things to consider:

1. If you require two weeks’ notice in your employee handbook, then you can let the employee go immediately, but you must pay out the 2 weeks pay of the notice period.
2. If you do not require two weeks’ notice, then you should consider the consequences:

• For the purposes of final pay rules and unemployment insurance, the separation from employment will be considered an involuntary termination and not a voluntary quit. Therefore, you will need to provide the employee with a final check for all wages due, including any accrued and unused vacation or paid time off (PTO) at the time you tell them you are ending their employment. If you were to allow the employee to work the next two weeks, the final wages would be due on the last day of employment, more than 72 hours’ notice was given.

• The employee will be entitled to unemployment benefits if they file, as the Employment Development Department (EDD) will consider the separation to be “involuntary,” since the employee had stated an intent to work for two additional weeks, and the employer decided to end the employment at an earlier date. If you had allowed the employee to work out the notice period, they would not have been eligible for benefits.

Employers need to weigh the exposure when deciding to cut a notice period short. If the employee truly poses a risk to the environment and the intellectual property of the business, then it may be worth letting them go immediately.

Employers also have the option of letting the employee go and just paying out the notice period regardless of their policy, which may be the safest option. However, the financial impact is much less to allow them to file for unemployment. Either way, the employers should ensure they understand the implications.

Lauren Sims is the article’s author and the eqHR Solutions Director of Human Resources.

Whenever you require professional Human Resources or Payroll guidance to navigate the ever-changing landscape of California and Federal Employment Laws & Regulations, contact us for a no-obligation consultation.

eqHR Solutions provides professional, tactical and strategic human resources support; ADP payroll product implementation/training and payroll processing services for businesses throughout Southern California.

How to Determine Your Employees Regular Rate of Pay

Employees Regular Rate of Pay

Both California Overtime Law and Federal Overtime Law require that non-exempt employees are paid overtime based on a "regular rate of pay." This regular rate or pay is not simply the given hourly rate of pay but is a computed rate based on all the compensation that is earned for the week. 

The regular rate of pay is calculated by dividing the total pay, except for flat sum bonus, for the by the total number of hours actually worked. The California Supreme Court recently decided, in Alvarado v. Dart Container Corporation of California, held that for purposes of calculating the regular rate, a flat sum bonus is to be allocated only to the non-overtime hours worked.

This means that the flat sum bonus should be factored into an employee’s regular rate of pay by dividing the amount of the bonus by the total number of non-overtime hours actually worked during the relevant pay period (rather than dividing all compensation received during the pay period by all hours worked), and using 1.5, not 0.5, as the multiplier for determining the employee’s overtime pay rate. 

Below are examples of how to calculate the regular rate of pay.

1. An employee is paid exclusively on an hourly basis, that amount is the regular rate of pay.

• Employee earns $10.50 per hour, overtime pay would be $15.75 at time and one-half and $21 at double time.

2. An employee is paid two or more rates by the same employer during the workweek, the regular rate is the weighted average, which is determined by dividing the employee's total straight-time earnings for the workweek, including earnings during overtime hours, by the total hours worked during the workweek, including the overtime hours.

• An employee works 32 hours at $12 per hour and 10 hours during the same workweek at $10.50 per hour, the weighted average (and thus the regular rate for that workweek) is $11.64. This amount is calculated by adding the employee's $489 straight-time pay for the workweek ((32 hours x $12/hour) + (10 hours x $10.50/hour) = $489) and dividing it by the 42 hours the employee worked ($489 / 42 hours = $11.64 per hour regular rate). The overtime premium of $5.82 (half the regular rate) is added to the employee's wages for each one and one-half overtime hour worked, and an additional overtime premium of $11.64 is added to hourly wages for each hour of double time earned.

3. An employee is paid an hourly rate plus a flat-sum bonus for the workweek, the flat-sum bonus is divided by only the non-overtime hours worked and added to the hourly rate of pay to determine the regular rate of pay to compute overtime. 

• An Employee works 32 hours at $14 per hour and earns a $50 attendance bonus, the regular rate is calculated by dividing the bonus by the number of non-overtime hours ($50 / 32 hours) for a rate of $1.56. This is added to the base hourly rate of $14 for a regular pay rate of $15.56 per hour at which overtime hours must be paid.

4. For employees paid by the piece or commission, one of the following methods may be used to determine the regular rate of pay for purposes of computing overtime:

•  The piece or commission rate is used as the regular rate, and the employee is paid one and one-half times this rate for production during the first 4 overtime hours in a workday and double time for all hours worked beyond 12 in a workday.
• Divide the employee's total earnings for the workweek by the total hours worked during the workweek. For each overtime hour worked, the employee is entitled to an additional one-half the regular rate for hours requiring time and one-half and an additional full rate for hours requiring double time.

5. To compute the overtime rate of pay for a full-time (40-hours per week) salaried, nonexempt employee, the employee's regular hourly rate equals 1/40th of the employee's regular weekly salary.

6. To compute the hourly rate for a nonexempt employee paid on a fixed weekly salary:

• Multiply the monthly remuneration by 12 (months) to obtain the annual salary.
• Divide the annual salary by 52 (weeks) to obtain the weekly salary.
• Divide the weekly salary by the number of regular work hours up to the legal maximum hours per week (40) to obtain the regular hourly rate.

Employers should remember that California law requires that overtime wages be paid no later than the regularly scheduled payday of the payroll period following that in which overtime was earned. While the law permits the delay of overtime pay by one payroll cycle, any straight time hours worked must be paid on the regular payday of the payroll period in which they were earned.

Lauren Sims is the article’s author and the Director of Human Resources.

Whenever you require professional Human Resources or Payroll guidance to navigate the ever-changing landscape of California and Federal Employment Laws & Regulations, contact us for a no-obligation consultation.

eqHR Solutions provides professional, tactical and strategic human resources support; ADP payroll product implementation/training and payroll processing services for businesses throughout Southern California.

Protect Yourself when Providing Employee References?

Reference checks are a useful way for employers to gather information about applicants that might not be discovered through the application and interview process. However, despite the usefulness of reference checking, many employers are concerned about lawsuits from former employees based on information provided in response to a request for a reference, and liability for the actions of employees where the company failed to conduct a thorough reference check. 

California is one of many states that provides immunity to employers when they provide reference material to prospective employers. This means that an employer cannot be sued for defamation, as long as the employer provides information related to job performance, qualifications, and eligibility for rehire. It does not protect statements about an employee's constitutionally protected speech or activities, nor statements about an employee's union or other concerted activities. 

An employer is protected if its statements are based on credible evidence. Employers should be careful that if they choose to provide information, the information must be truthful. The employer should not provide a glowing reference for an employee who was terminated for misconduct for example. An employer is no obligation to provide a reference for an employee, but once they chose to do so, they have a duty not to misrepresent the facts. 

Below are a few general guidelines for providing references for prior employees:

1. Maintain control of the information- limit who can give references and what information can be provided. All reference requests should go through a single person, usually an HR professional.
2. Be consistent in how requests are handled- ensure that the same process is followed for each reference request to avoid any claims of discrimination.
3. Get permission from the employee- require all job candidates to complete an application form that includes a release for employers from which they might request a reference.
4. Limit remarks to the inquiry- focus on the employee's work habits and conduct (timeliness, ability to get along with co-workers, etc.) and job performance and do not discuss the employee's personal life, marital problems, even if those personal problems affected their work performance.
5. Exercise good judgment in determining what negative information should be volunteered if the reference seeker does not ask specific questions related to an area of deficiency or poor work. Ensure that all comments are related to the job, critical to successful job performance, and critical to the performance of the job.
6. Provide truthful information- former employees certainly will have a case for claiming defamation if false information is provided. Even when providing true information, you must be cautious of the way in which it is presented. Opinions about an employee's character ("he was unmotivated and lazy") are far more susceptible to legal actions that are objective measures of job performance ("he only completed half of his assignments on time").
7. Give specific facts- instead of saying that an employee was unable to achieve deadlines, say “We had a 30-day turnaround time for completing projects, and he/she usually averaged 40 days to complete the projects.” Let the caller reach their own conclusions about the performance.

Many employers have chosen to limit the content of their communications with prospective employers to simply stating facts like:

• The dates of the worker’s employment,
• Their job title, and
• Whether they are would re-hire the employee.

Even in companies where this is the policy, there is still risk that managers will be contacted directly to provide a reference. In industries that are close-knit, it often happens that managers from one company will call a manager from another to discuss a potential candidate. This is why it is important that companies train their managers on how to provide information in a way that doesn’t expose them to defamation claims.

Lauren Sims is the article’s author and the eqHR Solutions Director of Human Resources.

Whenever you require professional Human Resources or Payroll guidance to navigate the ever-changing landscape of California and Federal Employment Laws & Regulations, contact us for a no-obligation consultation.

eqHR Solutions provides professional, tactical and strategic human resources support; ADP payroll product implementation/training and payroll processing services for businesses throughout Southern California.

Understanding Non-Compete and Non-Solicitation Agreements

In California, non-compete agreements are illegal and void for employees and independent contractors.

The three main types of restrictions are (1) a true noncompete where an employee cannot work for a competitor, (2) a non-solicitation of customers restriction, and (3) and non-solicitation of employee’s restriction.

The only exception in California is for the owners of a business, corporation, LLC, or partnership. If you sell your ownership in a business, you can be prevented from turning around and soliciting your former customers and taking them from the business you sold.

If an employer terminates an employee who refuses to sign such an agreement they may be liable for wrongful termination in violation of public policy.

An employee can be prohibited from using trade secret and confidential information.

For example, they can be prohibited from using a confidential customer list to solicit customers. However, the claimed protection of trade secrets cannot be used to impose a noncompete. A contract term saying an employee cannot use confidential company information to solicit customers post-employment is a valid protection of company information. This allows a former employee to compete, so long as they are not using confidential information.

What about Non-Solicitation restrictions?

Most states allow employers to ask employees to sign non-solicitation agreements, in which they agree that they will not solicit their coworkers for a given period after leaving the company. Some states will even allow a “no hire” agreement, in which the employee agrees not to hire former coworkers, even if the employee has taken no steps to actively seek out or encourage the coworkers to leave the company.

In California, the courts have generally held that “no hire” agreements are illegal. In other words, your employer cannot stop you from hiring co-workers who decide to leave of their own accord.

On the other hand, a non-solicitation agreement that merely prohibits you from actively reaching out to former coworkers about job opportunities is more likely to be enforced. However, even then, the agreement should be limited in time (for example, one or two years) and scope (for example, limited to coworkers with whom you worked).

What about a Non-Poaching agreement?

Careful, the federal government is starting to go after companies who have agreements with other companies not to “poach” or solicit their employees. The Department of Justice views this as violating Anti-trust laws is starting to file criminal charges against employers in these arrangements. 

The bottom line about non-compete and non-solicitation agreements is that in most cases they are illegal and are not enforceable in California. Even if you are an out of state employer who employs workers in California, they can still not be enforced. Many employers still have employees sign these agreements and think they are enforceable, which is surprising considering the stance that California has taken on the matter. 

Lauren Sims is the article’s author and the Director of Human Resources.

Whenever you require professional Human Resources or Payroll guidance to navigate the ever-changing landscape of California and Federal Employment Laws & Regulations, contact us for a no-obligation consultation.

eqHR Solutions offers professional, tactical and strategic human resources support; ADP payroll product implementation/training and payroll processing services for businesses throughout Southern California.

Summer Interns are Coming - Are you Prepared?

If you are planning on hiring summer interns this year, you should be aware of the issues involved. Employers always ask the question, should I pay my interns? The easiest and safest answer is yes, you should pay your interns at least the minimum wage and thereby avoid any potential claims and issues.

However, now that the Department of Labor has adopted a "primary-beneficiary test" for determining whether interns are employees, more employers are considering have unpaid internships.

This new text eliminates the prior rigid test whose six parts all had to be met for someone to be considered an unpaid intern and not an employee.

The new federal guidelines apply in California, as the state doesn't have policies or case law on the topic.

The new DOL test does not require each of its seven factors to be met. The new test includes consideration of the extent to which:

• Both parties understand that the intern is not entitled to compensation.
• The internship provides training that would be given in an educational environment.
• The intern's completion of the program entitles him or her to academic credit.
• The internship corresponds with the academic calendar.
• The internship's duration is limited to the period when the internship educates the intern.
• The intern's work complements rather than displaces the work of paid employees while providing significant educational benefits.
• The intern and the employer understand that the internship is conducted without entitlement to a paid job at the internship's end.

If an employer decides to offer unpaid internships, there must be clear communication and documentation that both the intern and the employer have agreed that the internship will be unpaid.

Employers should also connect the internship with the academic progression of the intern. If the intern can get academic credit for the internships, it will go far in supporting that the internship is to the primary benefit of the intern.

Employers should be cautious that managers do not view interns as potential free summer labor. Employers should provide interaction, learning, mentoring and other training opportunities to create a valuable experience for their interns.

Lauren Sims is the article’s author and the Director of Human Resources.

Whenever you require professional Human Resources or Payroll guidance to navigate the ever-changing landscape of California and Federal Employment Laws & Regulations, contact us for a no-obligation consultation.

eqHR Solutions offers professional, tactical and strategic human resources support; ADP payroll product implementation/training and payroll processing services for businesses throughout Southern California.