Jim Root on California’s New Labor Code

Wednesday, 06 April 2016 Posted by International SPA Association

For California spa directors, Assembly Bill 1513 Piece-Rate Compensation – New Labor Code has created a flurry of concern and confusion within the industry. ISPA turned to longtime CEO and President of Glen Ivy Hot Springs and former Chairman of ISPA, Jim Root to get his perspective on how this bill has affected his business and how it may affect other businesses in California. 

ISPA: What exactly is the AB 1513 Piece-Rate Compensation – New Labor Code?

Root: The background on this bill is that historically a piece-rate or commission-based employee is paid for the work they complete; they are not paid an hourly rate for the hours they are on the job. 

A couple of years ago a California court stated that as long as commissioned employees are paid for the work they are completing, everyone is all good. However, they wanted the employer to look at all the hours the employee was on the job, to ensure that the employee was taking home at least a pay that is greater than minimum hourly wage. 

This created a lawsuit of Downtown Motors, a California automobile mechanic shop, the employees did not have commissioned work to work on so they were not paid for the time they were at the shop, but not working. The lawsuit awarded them with back wages for all the time they weren’t paid but were at the workplace.

As a result of this lawsuit, this bill became a law and went into effect on January 1, 2016. All employers must be compliant by July 2016. Glen Ivy proactively changed their compensation model several years ago. They are paid an hourly rate for every hour they are at the workplace, and we no longer use the commission-based structure, we switched to fee-for-service. With fee-for-service the employee is paid a certain set amount when they perform a service plus their hourly rate. 

It is our understanding you can still have a commission-based compensation structure; you just have to put an hourly rate in place for the employee while they are on the clock. 

ISPA: What are some of the challenges spa industry owners may have to face and address with this new bill?

Root: I think the biggest challenge is this law allows for past employees to bring a claim towards their former employer and seek the non-productive hourly wages they did not receive while on the job. Therefore, massive record keeping and adjusting of procedures are going to be the keys to this change. For the employee, it changes how they are compensated, now they are an hourly employee, but I have found this to be a positive change as it provides stability in the employees’ pay.  This is not an increase in pay to the employee, just a redistribution of the money. 

Additionally, now that employees are paid hourly they can be utilized for cleaning, restocking inventory, greeting guests and working on continuing education. This is an opportunity to leverage that relationship with the employee and to me, this could help operators improve their business. 

ISPA: What are some of the steps spa owners/directors need to take in order to remain compliant with the new bill?

Root: Every operator should quickly and proactively understand the requirements and take steps to become compliant. Depending on the size of their company they could reach out to an employment attorney, a human resource consulting company, or even their payroll processing company. They would all have the resources to help them make the changes they need to make.  

Generally speaking, they will need to enact a clock-in and clock-out procedure, paying the employees the minimum hourly wage, and following the rest, meal and overtime labor law requirements. 

ISPA: What’s your best piece of advice to spa owners and directors trying to navigate this new bill while protecting their business from any potential legal actions relating to pay claims in the future?

Root: The Downtown Motors case set the precedent for the California workforce. There is nothing they can do about potential back claims; however, the sooner they become compliant with this law, it will limit the claims moving forward. 

ISPA: Any advice for those going through this change?

Root: This is all doable and the more you get into it, you will discover the opportunity. These changes emphasis the importance of being a part of professional industry organizations like ISPA, as the community together can help individuals going through this and any future changes we may have to make. 

Were you aware of these recent changes? How are you dealing with it? Feel free to reach out to ispa@ispastaff.com to provide your point of view. 

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