What California Employers Need to Know about Newly Classified Employees, Part 2

This post and the previous post outline the employers’ responsibilities to new employees under California state law as this year, California employers are finding themselves having to treat former independent contractors as employees. This not only applies to employers physically operating in California but also any employer who has workers located in the state.

(1) Provide all the correct papers.

(2) Give employees a handbook and have them acknowledge receipt.

(3) Pay the correct minimum wage.

(4) Disability Insurance, Workers’ Compensation, & Unemployment all apply.

(5) Provide breaks.

(6) Employers may need to provide healthcare coverage.

(7) Provide paid time off.

(8) Provide sick leave.

(5) Provide breaks.

California employers have to provide nonexempt employees with a paid 10-minute rest break for every four hours the employee works. These breaks should be given toward the middle of the day and are in addition to a 30 minute-minimum lunch break. California employers must also provide an additional meal break if an employee works more than 10 hours. For example, an independent contractor turned employee, who only works five hours a day, must be given – at a minimum – either a 10-minute rest break and a 30-minute lunch break during their shift or just a 40-minute lunch break.

Employers must also provide a reasonable amount of time and private location to accommodate employees needing to express milk. If an employer has a breastfeeding employee, then the employer should have and implement a lactation accommodation policy.     

(6) Employers may need to provide healthcare coverage.

While the individual mandate of the ACA is no longer in effect at the federal level, California recently passed its own individual mandate requiring residents to have health insurance.

Many independent contractors turned full-time employees may already have coverage to adhere to the state’s individual mandate; however, if not, then they will likely look to their employer for coverage. Under the ACA, an employee is full-time if they work at least 30 hours a week, therefore, entitled to an employer-sponsored health plan.  

Employer Mandate to Provide Healthcare

For employers, the ACA’s employer mandate still stands: generally, if an employer has 50 or more full-time employees and full-time equivalent employees (FTEs), then the employer is required to have a minimum essential coverage (MEC) of at least 95% of its full-time workforce (and their dependents) that meet the minimum value and is affordable. Otherwise, the employer may be subject to penalties

An employer-sponsored plan must (1) cover at least 60% of the total allowed cost of benefits expected to be incurred and (2) be capped at 9.83% of the employer’s household income for 2021 to satisfy the affordability threshold

For example, if a game designer – who was an independent contractor and is now considered an employee – is paid $37/hr for 140 hours of work in January, then $509 is the maximum amount for January the studio-employer may charge the designer to cover her health insurance cost. 

Continued Coverage

Additionally, when an employee leaves employment, the California Continuation Benefits Replacement Act (Cal-COBRA) requires group health plans, with two to 19 employees, to offer continued coverage for a certain period of time.

(7) Provide paid time off.

Similar to the provisions of the FMLA, the California Family Rights Act (CFRA) requires Californian employers with 50 or more part-time or full-time employees to provide eligible employees with up to 12 weeks (in a 12-month period) of leave for a family member’s serious health condition or the birth or adoption of a child. 

CFRA eligible employees are employees who worked for the employer for at least 1,250 hours over the last 12 months, which comes out to about 25 hours per week. While seemingly not of concern for the current IC-turned-employee crowd, given the fact that AB5 explicitly states its provisions are retroactive, employers with long-term independent contractors may have to provide CFRA leave to their newly classified employees.  

Additionally, California requires up to eight weeks (in a 12-month period) paid family leave under the Family Temporary Disability Insurance Program. Employees can take this leave to care for an ill family member or bond with a newly born or adopted child while still receiving a portion of their regular pay. Depending on the situation, this leave may be available to part-time employees as well as their full-time counterparts.  

(8) Provide sick leave.

Employees should be given paid sick leave for the following:

  • Diagnosis, care, or treatment of the employee’s existing health condition, or that of an employee’s family member;
  • Preventive care for the employee or an immediate family member;
  • For an employee who is a victim of domestic violence, to obtain legal, medical, or social services. 

Additionally, employees – including part-time and temporary employees – may earn at least one hour of paid leave for every 30 hours worked, up to three days (24 hours) of paid sick leave per year. An employee’s total accrued sick leave (including carryover) may not exceed six days (48 hours) per year.

Because of the novel coronavirus pandemic, Congress passed the Families First Coronavirus Response Act (FFCRA), providing employees of companies with less than 500 workers coronavirus-related paid sick leave and expanded FMLA leave until the Act expires at the end of this year. FFCRA provides that: 

  • If an employee leaves work because of COVID-19 testing or quarantine orders, then the employee is entitled to their full regular pay for two weeks.
  • If an employee leaves work to care for someone who has been ordered to quarantine, then the employee is entitled to up to two weeks of paid sick leave at ⅔ their regular pay. 
  • If an employee leaves work to care for a child whose school is closed, the employee may receive up to 10 additional weeks of expanded FMLA leave at ⅔ their regular pay.

For more information, contact Odin Law & Media here.