California Minimum Wage Increases

California employers should take note of the following minimum wage increases that took effect on January 1, 2020:

Statewide: $13 per hour, regular and tipped employees

Alameda: $15 per hour, regular and tipped employees

Belmont: $15 per hour, regular and tipped employees

Cupertino: $15.39 per hour, regular and tipped employees

El Cerrito: $15.37 per hour, regular and tipped employees

Los Altos: $15.40 per hour, regular and tipped employees

Mountain View: $16.05 per hour, regular and tipped employees

Oakland: $14.14 per hour, regular and tipped employees

Palo Alto: $15.40 per hour, regular and tipped employees

Redwood City: $15.38 per hour, regular and tipped employees

San Jose: $15.25 per hour, regular and tipped employees

San Mateo: $15.38 per hour, regular and tipped employees

Santa Clara: $15.40 per hour, regular and tipped employees

Sunnyvale: $16.05 per hour, regular and tipped employees

 

California Adopts New Independent Contractor Test

In a recent case, the California Supreme Court adopted a new standard for determining when a worker is an independent contractor, and when a worker is an employee. This is a major departure from how workers have been classified in the past, and will have far-reaching effects on employment and the gig economy.

The case, Dynamex Operations West, Inc. vs. Superior Court, involved delivery drivers for a parcel delivery company. Under the new, 3-factor “ABC” test adopted by the Court, a worker is presumed to be an employee, and will only be considered an independent contractor if:

1. The worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract and in fact;
2. The worker is performing work that is outside the usual course of the hirer’s business; and
3. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work being performed.

All three factors must be satisfied, or the worker will be re-classified as an employee. In adopting the new ABC test, the Court abandoned the traditional “right to control” test, which looked at numerous indicators of control, none of which was dispositive.

To see how this new test will play out, let’s look at an example of a software company that engages software developers, but wants to classify them as contractors. The company may tell the developer that it needs software in place to protect data security from hackers. The company may not give the developer any directions as to how to write the code for that software, and may not require the developer to do the work onsite, which may satisfy the first part of the ABC test. Also, the developer may be doing a lot of freelancing in the area of data security for different companies, satisfying the third part of the test. The problem is the second part. If the company is a software company, then software development could very likely be considered within the usual course of its business. The same analysis might apply to a package delivery company that wants to classify its delivery persons as contractors. On the other hand, a retail clothing chain that hires a software developer to work on its customer database may have a better chance of classifying that developer as a contractor.

Consequently, companies in California that use contractors need to take a hard look at how the relationship is set up. It is quite likely that under the new ABC test, many of those contractors will need to be reclassified as employees.

Follow me on Twitter @PaulHSpitz

Medical Marijuana Now Legal In Ohio

Ohio’s new medical marijuana law recently took effect, on September 8, 2016. This law, passed by the Ohio legislature, followed a failed ballot initiative that would have legalized marijuana in Ohio for recreational use, as well. The new law permits doctors to prescribe marijuana as treatment for a lengthly list of ailments, but patients will not be able to purchase smokeable marijuana. Instead, the treatment must either be ingested via an edible product, absorbed through a skin patch, or “vaped.”

There is an extensive list of qualifying conditions: AIDS, Alzheimers, amyotrophic lateral sclerosis (also known as ALS and Lou Gehrig’s Syndrome), cancer, epilepsy, fibromyalgia, glaucoma, hepatitis C, multiple sclerosis, parkinson’s, chronic or intractable pain, HIV+, post-traumatic stress disorder, sickle cell anemia, spinal cord disease or injury, traumatic brain injury, ulcerative colitis, and inflammatory bowel disease, among others. There is also a mechanism to add diseases and conditions to the list.

Physicians must obtain a special certificate from the state medical board in order to recommend medical marijuana. Doctors also must have a bona fide doctor-patient relationship with persons for whom they write prescriptions. Doctors must provide an annual report describing their observations of the effectiveness of medical marijuana on their patients, and will have immunity from prosecution for recommending medical marijuana.

There is an extensive regulatory scheme set up for all parts of the value chain – retail dispensaries, growers, distributors, and laboratories.

Initially, the Ohio Supreme Court’s Board of Professional Conduct issued an opinion ruling that because marijuana was still illegal under federal law, attorney’s could not advise clients on how to properly set up and operate a business under the state medical marijuana law without violating their professional ethics. Since that opinion was issued in August, the state Supreme Court has amended the Rules of Professional Conduct to allow attorneys to advise clients on compliance with the new law.

Because marijuana is still illegal under federal law, new medical marijuana businesses will face difficulties with financial transactions. Banks may be reluctant to allow such businesses to open accounts, and the businesses may not be able to take payment by credit cards. This means a variety of transactions will necessarily be cash transactions. In addition, the IRS requires payroll taxes to be paid electronically, which will present a problem when paying employees. While the Department of Justice has said that its policy is not to interfere with medical marijuana if state law is effectively regulating the market, that may not be enough for traditionally conservative and risk-averse banks and merchant card processors.

Does Your Uber Driver Make Any Money?

Today one of my twitter followers, and someone I actually know from the startup community here in Cincinnati, posted an interesting tweet:

“I always open up my @Uber/@lyft email receipts, wincing at the long ride I took, thinking it’ll be $20. It’s consistently less than $9. [celebratory emoticon]

The tweet got me thinking about whether this is actually something to celebrate. You see, I had just read an article in the New York Times about Lyft’s attempt to find a buyer, and had come across this bit of information:

“Companies like Lyft and Uber typically take 20 percent to 25 percent of the cost of each ride.”

That means that for my friend’s $9 drives, Uber and Lyft are typically taking out $1.80 to $2.25. To keep things simple, we’ll split the difference and say that they take out $2, leaving the driver with $7. As you may know, the people that drive for these companies provide their own cars and vans, and have to pay for their own gas and maintenance. My friend is in LA, and the average price of a gallon of regular gasoline today is $2.68, according to the LA Times. That comes out of the $7 left to the driver after Uber or Lyft have taken their cut. If the driver has to use half a gallon to pick up my friend and get her to her destination, that means $1.34 should be deducted from the $7. So the driver has netted a grand total of $5.66 on this gig, and that doesn’t take into account maintenance and depreciation on the car.

Still cause for celebration? That cheap ride is great for the passenger, but is the driver making any money? Perhaps there is a reason for the regulated rates that taxis charge – these rates ensure that the drivers can actually make money driving a taxi.