Reminder: California Minimum Wage Going Up 1/1/2016

There are so many new laws and rules going into effect that one obvious one may slip through the cracks.  The minimum wage in California is going up on January 1, 2016 to $10.00 per hour.   It says so right here on the old Minimum Wage Notice that has been around for a couple of years now. (HERE).

Because of the minimum wage increase, the California minimum salary for exempt "white collar" employees will increase to $3,466.6667 per month or $41,600 annually.  Also, those of you relying on the inside sales exemption (requiring minimum compensation of 1.5X minimum wage, take note that your employees will have to make at least $15.00 / hour).  

There are other wages pegged to minimum wage as well, but my boundless generosity is limited by time this morning. So, please consult with your attorneys, read your wage orders and labor code, and enjoy time with family and friends this holiday season. 

Best wishes for a safe and enjoyable holiday, and Merry Christmas.

Greg

 

IRS Lowers Standard Mileage Reimbursement Rates for 2016

Effective 1/1/2016, the IRS is lowering the standard mileage reimbursement rates, probably because of falling gasoline prices.  Most businesses reimburse employee's business use of their personal automobiles at the IRS rate. That rate will be going down from $0.575 to $0.54 on January 1, 2016.

Here is the text of the announcement, which is linked here.  Happy Festivus.

WASHINGTON — The Internal Revenue Service today issued the 2016 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2016, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 54 cents per mile for business miles driven, down from 57.5 cents for 2015
• 19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015
• 14 cents per mile driven in service of charitable organizations

The business mileage rate decreased 3.5 cents per mile and the medical, and moving expense rates decrease 4 cents per mile from the 2015 rates. The charitable rate is based on statute.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical or charitable expense are in Rev. Proc. 2010-51.  Notice 2016-01 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

U.S. Supremes Enforce Arbitration Agreement, Reversing California Appellate Court

The U.S. Supreme Court in Direct TV Inc. v. Imburgia (opinion here) took on the California Court of Appeal in a test of the Federal Arbitration Act's preemptive force. Guess who won?

This case involves Direct TV's attempt to include a class-action waiver in an arbitration agreement as part of its service contract with customers.  Before the U.S. Supreme Court in AT&T Mobility LLC v. Concepcion, 563 U. S. 333 (2011), ruled that such waivers were valid under the Federal Arbitration Act, state courts (like California's) could invalidate class actions waivers as "unconscionable" or invalid against public policy. See Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005).

So, Direct TV inserted a provision in its arbitration agreement that hedged against the possibility of invalidation by a state court, as explained by the Supreme Court in its opinion:

if the “law of your state” makes the waiver of class arbitration unenforceable, then the entire arbitration provision “is unenforceable.” Id., at 129. Section 10 of the contract states that §9, the arbitration provision, “shall be governed by the Federal Arbitration Act.”

This way, if California held that a class waiver is invalid, the whole case (class action and all) would be heard in court. 

Then, of course, the U.S. Supreme Court decided a case that preempted California law invalidating class-action waivers.  Even the California Supreme Court had to agree that if the Federal Arbitration Act applies, class action waivers in arbitration agreements are OK.  Therefore, one might say, the "law of the state" about class-waivers was gone.  What happened to this clause then? Well that's what this case is about.

The Court of Appeal interpreted the above language to say that the "state law" would continue to apply without regard to federal preemption.  That is, the "law of your state" would continue to prohibit class action waivers under this agreement, despite the preemption of the law by the Supreme Court.  And, despite the arbitration agreement's specific provision that the Federal Arbitration Act applies. 

6-3, the Supreme Court rejected the Court of Appeal's decision.  The Court decided that for the Court of Appeal to be correct, the term "law of your state" had to include "invalid" state law.  The Court then decided that the Court of Appeal would never have interpreted the term "law of your state" to include "invalid" state law unless this contract were an arbitration agreement. Therefore, because the Court of Appeal disfavored arbitration agreements, its decision violated the Federal Arbitration Act. 

nothing in the Court of Appeal’s reasoning suggests that a California court would reach the same interpretation of “law of your state” in any context other than arbitration. The Court of Appeal did not explain why parties might generally intend the words “law of your state” to encompass “invalid law of your state.” To the contrary, the contract refers to “state law” that makes the waiver of class arbitration “unenforceable,” while an in- valid state law would not make a contractual provision unenforceable. Assuming—as we must—that the court’s reasoning is a correct statement as to the meaning of “law of your state” in this arbitration provision, we can find nothing in that opinion (nor in any other California case) suggesting that California would generally interpret words such as “law of your state” to include state laws held invalid because they conflict with, say, federal labor statutes, federal pension statutes, federal antidiscrimination laws, the Equal Protection Clause, or the like. 

And as for disfavoring arbitration:

The view that state law retains independent force even after it has been authoritatively invalidated by this Court is one courts are unlikely to accept as a general matter and to apply in other contexts.

Justice Thomas believes the Federal Arbitration Act does not preempt any case brought in state court and would have affirmed the court of appeal. So he dissented on that special ground. 

Justices Ginsburg (writing) joined by Justice Sotomayor dissented on the merits, arguing that  Direct TV should be held to its original intent: to enforce the agreement only if state law (without regard to federal preemption) would allow the class waiver. The agreement was written before the Supreme Court ruled class action waivers were allowed and state laws to the contrary were preempted; therefore, the agreement's intent was not to include federal law in the mix.  

So, another anti-arbitration case goes by the wayside. But California's anti-arbitration case law remains on the books and strong because Armendariz and its progeny are still in force.  Therefore, it remains important to draft arbitration agreements in employment settings carefully.