As you may be aware, on January 1, 2020 California enacted Assembly Bill 5, a change to the labor code which classified ALL workers as EMPLOYEES unless they met a three-part “ABC Test” that includes:

A.  The person 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.

B. The person performs work that is outside the usual course of the hiring entity’s business.

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

While there are several types of businesses and occupations that are currently exempted from the ABC Test, AB 1925 offers an opportunity to exempt “small businesses” that fit specific criteria. The definition of small business within AB 1925 is:

• Is independently owned and operated.
• Is not dominant in its field of operation.
• Has fewer than 100 employees.
• Has average gross receipts of fifteen million dollars ($15,000,000) or less over the previous three years.

SMALL BUSINESSES FORM THE HEART OF THE RECREATIONAL DIVE INDUSTRY. IF YOU AGREE, DEMA urges you to contact your lawmakers immediately and ask them to support AB 1925.  You can easily reach your state Senator and Assembly Member by clicking here and inputting your address.  The website will permit you to send an email directly to your lawmaker’s office.

DEMA has also included email verbiage that can automatically be sent to your lawmaker, or you can substitute your own comments, if you choose.

AB 1925 WILL BE UNDER CONSIDERATION BY THE CALIFORNIA LEGISLATURE DURING THE WEEK OF FEBRUARY 10.  PLEASE WRITE TO YOUR STATE LAWMAKERS TODAY!

While DEMA cannot dispense legal advice, we do strongly suggest that all dive businesses consult with their legal counsel about how AB 5 could impact them, prior to using “independent contractors.” 

Background:

This law codifies a California Supreme Court Decision from 2018 involving Dynamex, a courier and delivery service that offers on-demand and same day pickup and delivery services nationwide.  In 2004 Dynamex converted its drivers from employees to independent contractors and a group of drivers sued to retain the protections available to “employees.” The California Supreme Court issued a decision in April 2018 wherein the court reinterpreted S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989), a test that has long been utilized in California for determining whether a worker should be classified as an “employee” or “independent contractor” for the purposes of a wage order. 

In reassessing Borello, the court adopted a new standard that presumes ALL workers in California are EMPLOYEES instead of contractors.  The court ruling places the burden of correctly classifying the worker on the EMPLOYER, and the classification decision is made by using a required three-part “ABC test.” While this is the first time such a test has been created by a court without legislative approval, similar tests do exist in other states, adopted by their respective legislatures.    AB 5 now makes this “ABC test” part of the California labor code.

What is Required to Classify a Worker as an Independent Contractor?

According to AB 5, employers can only classify a worker as an “independent contractor” by establishing that such classification is proper under the newly adopted “ABC Test.” A “no” answer to any of these standards presumes the person is an employee rather than an independent contractor.

PART A: The person 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.

PART B: The person performs work that is outside the usual course of the hiring entity’s business.

PART C: The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

AB 5 also retains the 12-part Borello test for certain professions.  Additional details can be found on this website. https://www.dir.ca.gov/dlse/FAQ_IndependentContractor.htm

AB 5 has been tied to worker issues in the “gig economy.” For example, under this law it appears that drivers for Lyft or Uber could be reclassified to “employees” rather than independent contractors.  As such, the hiring entities (Lyft or Uber in this example) are now required to pay payroll taxes and premiums for workers’ compensation, Social Security, unemployment, and disability insurance. 

While some professions have been exempted from the law, the law itself is generating confusion, and until enforcement begins taking place there may be conflicting opinions arising from the bill’s implementation.  DEMA highly recommends contacting your legal counsel to obtain their opinion and advice on the use of independent contractors.

Your Support is Needed Immediately - New Department of Labor Overtime Rules

Time is running out to contact your elected representatives in Congress to express ask your representatives to disapprove the US Department of Labor’s new rules on the salary threshold for overtime pay. Now that the rules have been announced, they are subject to a 60-legislative day provision in the Congressional Review Act, permitting 60 legislative days for the Congress to vote to overturn the rule with a simple majority. Without congressional disapproval, the rules are set to go into effect on December 1, 2016.

On June 14, 2016 DEMA submitted a letter to 100 US Senators asking them to disapprove of the new rules, and asks for your support in contacting your elected representative as well.

» You can find your US Representative by clicking here and entering your zip code.

» You can find your US Senator by clicking here and entering your state.

Your message to your Representative and Senator should be personalized and we encourage you to add details about the work of your organization and how the final rule would impact your company.  The following text may help guide you:

DEMA continues to believe that the salary threshold is set too high, and that the minimum salary level for exempt employees should instead be keyed to government data on regional cost-of-living differences or to changes in the Consumer Price Index.  The final rule includes a 100 percent increase to the minimum salary threshold. This is likely to disproportionately impact small businesses in the diving industry and their employees, especially those in low cost-of-living areas.

Please read below to learn more about the new rules and the potential impact of the overtime rule on your company.

__________

On May 18, 2016 the US Department of Labor released its new rules on the salary threshold for overtime pay.  DEMA is disappointed with the new rules, which have been established without congressional vote and which more than double the salary threshold below which workers will be eligible for overtime, from its current $455 per week ($23,660 per year) to $913 per week ($47,476 per year).  The rule goes into effect on December 1.

Additionally, the final rule includes a mechanism for automatically updating the salary threshold every three years (a change from the proposal of yearly adjustments). The next automatic update to the salary threshold would be on Jan. 1, 2020, and the new salary level will be announced 150 days before it takes effect.  The minimum salary level is set based on the 40th percentile of wages of full-time salaried employees in the lowest wage Census region (currently, the South).

Importantly, the Labor Department decided not to make changes to the “duties test,” part of the three-pronged test for establishing exemption from overtime eligibility. In a draft rule released last year, DOL hinted that it might limit the definition of “primary duty” to duties on which an exempt employee spends 50% or more of his or her working hours. In many situations, that would have meant that employers would need to track the hours and tasks of exempt employees to ensure that they had accurately identified the employee’s primary duty. So, with no changes to the duties test, the basic test for determining who in your organization remains exempt from overtime eligibility under the executive, administrative, or professional exemptions is as follows: 

• The employee must make over the new salary threshold of $47,476;
• The employee must be salaried;
• The employee must perform exempt duties (executive, administrative, or professional).  

While DEMA supports the principle of modernizing and streamlining the Fair Labor Standards Act, including the overtime rules, DEMA’s written public comments, filed last September, expressed our concerns that this rule, as proposed (and as now enacted), contains a threshold which is too high and that the minimum salary level for exempt employees should instead be keyed to government data on regional cost-of-living differences or to the changes in the Consumer Price Index.  Such a dramatic increase will create the necessity for many workers in every sector of the diving industry to be re-classified as hourly, increasing costs, with the result being that it will be difficult to allow these individuals to attend educational and technical conferences that are critical to maintaining their expertise and their positions with an employer.  DEMA’s comments also pointed out that these rules may cause employers to consider reducing their work forces, and they do nothing to help employers and employees account for the way people work today; the rules actually discourage the concept of working remotely; they favor elimination of mid-level management and entry-level administrative positions, and they make it more difficult for lower-level employees to climb the professional employment ladder.  The rules attempt to create a one-size-fits-all framework in a modern work environment that otherwise rewards flexibility.

DEMA will continue to work toward a legislative solution to keep DOL’s overtime rule from taking effect in December, and will continue to share updates on this important issue as they become available. If you have questions about this issue, please email DEMA at publicpolicy@dema.org or contact us at 858-616-6408. 

Additionally, the final rule includes a mechanism for automatically updating the salary threshold every three years (a change from the proposal of yearly adjustments). The next automatic update to the salary threshold would be on Jan. 1, 2020, and the new salary level will be announced 150 days before it takes effect.  The minimum salary level is set based on the 40th percentile of wages of full-time salaried employees in the lowest wage Census region (currently, the South).

Importantly, the Labor Department decided not to make changes to the “duties test,” part of the three-pronged test for establishing exemption from overtime eligibility. In a draft rule released last year, DOL hinted that it might limit the definition of “primary duty” to duties on which an exempt employee spends 50% or more of his or her working hours. In many situations, that would have meant that employers would need to track the hours and tasks of exempt employees to ensure that they had accurately identified the employee’s primary duty. So with no changes to the duties test, the basic test for determining who in your organization remains exempt from overtime eligibility under the executive, administrative, or professional exemptions is as follows:

• The employee must make over the new salary threshold of $47,476;
• The employee must be salaried;
• The employee must perform exempt duties (executive, administrative, or professional). 

While DEMA supports the principle of modernizing and streamlining the Fair Labor Standards Act, including the overtime rules, DEMA’s written public comments, filed last September, expressed our concerns that this rule, as proposed (and as now enacted), contains a threshold which is too high and that the minimum salary level for exempt employees should instead be keyed to government data on regional cost-of-living differences or keyed to the Consumer Price Index.  Such a dramatic increase will create the necessity for many workers in every sector of the diving industry to be re-classified as hourly, increasing costs with the result being that it will be difficult to allow these individuals to attend educational and technical conferences which are critical to maintaining their expertise and their positions with an employer.  DEMA’s comments also pointed out that these rules may cause employers to consider reducing their work forces, and they do nothing to help employers and employees account for the way people work today; the rules actually discourage the concept of working remotely; they favor elimination of mid-level management and entry-level administrative positions, and they make it more difficult for lower-level employees to climb the professional employment ladder.  The rules attempt to create a one-size-fits-all framework in a modern work environment that otherwise rewards flexibility.

Earlier this year, before the announcement of the final version of these rules by the Department of Labor, DEMA approached members of Congress and asked for their support in delaying or overturning the plan.  Now that the rules have been announced they are subject to a 60-legislative day provision in the Congressional Review Act, permitting 60 legislative days for the Congress to vote to overturn the rule with a simple majority.

If you are concerned about the impact of the overtime rule on your company, we strongly urge you to contact your elected representatives in Congress and share how this change will affect your company’s bottom line.

You can find your US Representative by clicking here and entering your zip code.

You can find your US Senator by clicking here and entering your state.

Your message to your Representative and Senator should be personalized and we encourage you to add details about the work of your organization and how the final rule would impact your company.  The following text may help guide you:

DEMA continues to believe that the salary threshold is set too high, and that the minimum salary level for exempt employees should instead be keyed to government data on regional cost-of-living differences. The final rule includes a 100 percent increase to the minimum salary threshold. This is likely to disproportionately impact small businesses in the diving industry and their employees, especially those in low cost-of-living areas.

DEMA will continue to work toward a legislative solution to keep DOL’s overtime rule from taking effect in December, and will continue to share updates on this important issue as they become available. If you have questions about this issue, please email DEMA at publicpolicy@dema.org or contact us at 858-616-6408. 

• Congressman Ami Bera
• Senator Barbara Boxer
• Congresswoman Judy Chu
• Senator Dianne Feinstein
• Congressman Devin Nunes
• Congressman Scott Peters
• Congressman Mike Thompson