09/28/2017

Determining employee classification, status and more


Jammed schedules, late patients, lunchtime meetings, excess overtime, early morning staff huddles, meal and rest break requirements: All can tempt practice owners to find myriad creative ways to manage employee costs. But practice owners who are unfamiliar with complex labor laws or are not paying wages appropriately could be risking an unwelcome invitation to a wage and hour claim or lawsuit.  

It is important that employers review and understand the basic principles of wage and hour laws. Employers must follow both the federal standards and California laws that provide greater protections for employees.

This article, part I of a two-part series, covers the updated Wage Order 4-2001; exempt versus nonexempt classification; independent contractor classification; timekeeping; and wage statement requirements.

Updated wage order reflects minimum wage changes

The California Industrial Welfare Commission wage orders regulate wages, hours and working conditions across 17 industries or occupations, and employers must comply with the IWC wage order and California labor laws applicable to their business or industry. Wage Order 4-2001 (professional, technical, clerical, mechanical and similar occupations) governs the dental industry. Employers are required to post a copy of this wage order in the practice where employees can access it.

The California Department of Industrial Relations (DIR) updated Wage Order 4-2001 to reflect the 2017-18 increases in the state minimum wage. CDA members should be aware that although Wage Order 4-2001 is included in the CDA Practice Support resource “2017-18 Required Poster Set,” the DIR released the updated wage order after the poster set was printed. Therefore, employers or practice owners should print and post the updated Wage Order 4-2001 over the top of the expired wage order contained in the current Required Poster Set. CDA Practice Support will include the updated wage order in the next printing of the Required Poster Sets in 2019.

Duties, not title, determine employee classification

California employers should carefully consider how to classify an exempt and nonexempt employee because of the complexity of this area of law and the potential for fines and penalties for employers. There are also potential awards of back overtime pay and waiting time penalties for employees when an employee is misclassified.

Generally, exempt employees are key personnel who possess management and decision-making responsibilities and are performing these tasks more than 50 percent of the workday.

An employee with a title of office manager may not qualify as an exempt employee if his or her actual duties do not meet the exemption requirements. For example, an employee given the title of manager does not necessarily become exempt just because he or she opens or closes the practice alone, manages patients or does similar work of other front-office staff support, as the employee’s duties may not meet exemption requirements.

Practice owners should also be wary of classifying a dental hygienist as an exempt employee unless the employee performs managerial duties in addition to patient care. The professional exemption classification does not include dental hygienists except in very limited circumstances.

In short, practice owners should always assume employees are nonexempt unless they clearly meet the job duties and requirements of an exempt position and will earn at least two times the current minimum wage on a monthly basis.

Law, not desire, determines employment status

Classification of employees as independent contractors largely depends on federal and state tests, not an employer’s desire to reduce administrative burdens or payroll costs.

The state agencies most involved in determining independent contractor status are the Employment Development Department, which is concerned with employment-related taxes, and the Division of Labor Standards Enforcement, which is concerned with whether the wage, hour and workers' compensation insurance laws apply. The Employment Determination Guide contains a worksheet of questions that employers can use to determine employment status.

As a general rule of thumb, employers should ask themselves several questions to help ensure they are not misclassifying employees as independent contractors:

  • Is the worker employed by an outside agency contracted to perform work?
  • Is the relationship expected to be long term?
  • Will the individual be supervised or controlled in any way by the practice owner or a manager?
  • Is the nature of the individual’s work associated with the practice’s core business?
  • Is the worker expected to work set office hours and follow practice policies?
  • What is the degree of permanence of the working relationship?

Dental hygienists are commonly misclassified as independent contractors. However, dental hygienists’ work is largely dependent on the direction of the dentist. They are expected to adhere to practice policies, and the nature of the workplace relationship is generally long term. Furthermore, their work is integral to core business success. Dentists should err on the side of caution and classify them as employees. 

Defined timekeeping practices — a part of every company policy

Accurate timekeeping records should reflect the start and end times of the workday. The timecard should also include time for the meal period — recording the start and end of the meal period.

Employees “own” their timecards and should accurately report all time worked and immediately report any errors to a supervisor. Employees should be required to verify that their time record is accurate and should sign and acknowledge that they accurately reported all hours worked for the pay period. All employees, including hygienists paid on “piece-rate” or per-patient compensation, should report hours worked and be compensated for non-productive time. California wage and hour regulations that apply to hourly employees also apply to piece-rate employees. More information on piece-rate compensation is available on the Department of Industrial Relation’s website.

At the end of the payroll period, the employee must receive at least minimum wage for each hour worked, despite slow production hours, time between patients or slow production days. Employers should communicate to employees the expectations that other tasks can be assigned during slow production.

Company policy should generally define timekeeping practices and communicate to employees the consequences for:

  • Falsification, destruction, modification or removal of time records;
  • Early or late recording of time; or
  • Recording another employee’s time records.

Employees should understand that once “clocked in” the expectation is that they are ready to begin work. At the start of the workday, any time taken to put away personal items or have coffee or breakfast should be “off the clock” work. Similarly, time spent gathering personal items or waiting for a ride home after the workday has completed should be conducted off the clock.  Conversely, a nonexempt employee should not be working “off the clock” and not recording hours, if actually engaged in work.

Wage statement requirements

California has very specific requirements for the information that must be included on an employee’s wage statement, and an employer could face penalties for failure to meet these requirements. The following information should be included on an employee’s paystub or wage statement:

  • Gross wages earned
  • Total hours worked (excluding salaried employees)
  • Number of piece-rate units earned and any applicable piece rate
  • All deductions
  • Net wages earned
  • Dates of pay period
  • Employee name and last four digits of Social Security number or other employee ID
  • Name and address of the employer
  • Applicable hourly rates for the pay period with number of hours worked at each rate
  • Paid sick leave time (can be included on a separate piece of paper)

Payment for overtime, travel and education

Part 2 of this two-part series on paying employees will cover payment of overtime, travel and education; rest and meal periods; and compensation for all time worked, regardless of whether the work was scheduled. Watch for it in the November 2017 CDA Update. 

Find employment-related resources, including the 2017-18 Required Poster Set, at cda.org/practicesupport.



Related Items

The U.S. Citizenship and Immigration Services on July 17 released a new Form I-9, Employment Eligibility Verification. Practice owners who are hiring or planning to hire employees soon may continue to use the current version of the Form I-9 or may choose to use the new version of the form through Sept. 16, but must begin using the updated Form I-9 beginning Monday, Sept. 18.

Many dentists dream of opening their own practices. And while they may have spent years refining their clinical skills, they are often less familiar with the business side of dentistry. This is especially true when it comes to employment law, an area of frequent claims against dental practice owners. Dentists should heed particular caution to the rules and regulations surrounding meal and rest periods.

A number of local minimum wage increases across California will take effect July 1, 2017. Eligibility rules may vary among these locations. Practice owners should review the individual city ordinances and follow posting requirements to be in compliance. Employers should update practice employee manuals and policies accordingly. Employers in the cities of San Francisco and Los Angeles are also due to comply with local leave laws beginning July 1.

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