HR & Compliance Glossary

Administrative Services Only is an HR outsourcing model where a provider handles administrative HR functions like payroll processing and benefits administration without entering a co-employment relationship. The client company remains the sole employer of record, maintaining full liability and control.

At-will employment is a doctrine allowing either the employer or employee to terminate the employment relationship at any time, for any lawful reason, without notice. However, terminations cannot violate anti-discrimination laws, public policy, or implied contracts created by handbooks or verbal promises.

California Assembly Bill 5 codified the ABC test for determining worker classification. Under AB 5, workers are presumed employees unless the hiring entity proves: (A) the worker is free from control, (B) performs work outside the usual business, and (C) has an independent trade or business. Some professions have exemptions.

Co-employment is a legal arrangement where two entities share employer responsibilities for the same employee. In a PEO relationship, the PEO handles administrative employer duties (payroll, taxes, benefits) while the client company manages daily work activities, hiring decisions, and terminations.

The California Family Rights Act provides job-protected leave for employees to bond with a new child, care for a family member with a serious health condition, or address their own serious health condition. CFRA applies to employers with 5+ employees and provides up to 12 weeks of unpaid leave.

A compliance audit is a systematic review of an organization's adherence to employment laws, regulations, and internal policies. Audits typically examine I-9 forms, payroll practices, employee classifications, handbook policies, safety programs, and leave administration to identify risks before they become violations.

Daily overtime is a requirement in California and Nevada where employers must pay overtime for hours worked beyond 8 in a single workday, regardless of total weekly hours. This differs from federal law which only requires overtime after 40 hours per week.

An Employer of Record is an organization that serves as the legal employer for a worker for tax purposes while the worker performs services for another company. EORs handle payroll, taxes, benefits, and compliance, commonly used for international hiring or temporary staffing arrangements.

The Experience Modification Rate is a multiplier used to adjust workers' compensation premiums based on a company's historical claims experience compared to similar businesses. An EMR of 1.0 is average; below 1.0 indicates better-than-average safety performance and lower premiums.

An employee handbook is a document that communicates company policies, procedures, expectations, and legal disclosures to employees. California requires specific policies including harassment prevention, anti-discrimination, lactation accommodation, and leave policies to be documented and acknowledged by employees.

Employee misclassification occurs when workers are incorrectly classified as independent contractors instead of employees, or when non-exempt employees are improperly classified as exempt from overtime. California's AB 5 and the ABC test have made proper classification critical, with significant penalties for violations.

The Family and Medical Leave Act is a federal law requiring employers with 50+ employees to provide up to 12 weeks of unpaid, job-protected leave for qualifying family and medical reasons. California's CFRA provides similar protections with some expanded coverage for smaller employers and additional leave reasons.

HR Outsourcing refers to the practice of contracting out human resources functions to an external provider. Unlike PEO, HRO arrangements are typically more flexible and modular, allowing companies to outsource specific functions like recruitment, training, or HR consulting without co-employment.

California requires employers with 5+ employees to provide sexual harassment prevention training to all employees. Supervisors must receive 2 hours of training, while non-supervisory employees require 1 hour. Training must be completed within 6 months of hire and repeated every 2 years.

I-9 verification is the process of confirming an employee's identity and authorization to work in the United States using Form I-9. Employers must complete Section 2 within 3 business days of the employee's first day of work and retain forms for 3 years after hire or 1 year after termination, whichever is later.

California requires employers to provide a 30-minute unpaid meal break for shifts over 5 hours and a second meal break for shifts over 10 hours. Employees must also receive a paid 10-minute rest break for every 4 hours worked. Failure to provide breaks results in one hour of premium pay per violation.

Overtime refers to hours worked beyond the standard workweek or workday that must be compensated at a premium rate. Federal law requires 1.5x pay after 40 hours per week. California requires 1.5x after 8 hours per day and 2x after 12 hours per day, plus 1.5x for the first 8 hours on the seventh consecutive workday.

A Professional Employer Organization is a firm that provides comprehensive HR outsourcing through a co-employment arrangement. The PEO becomes the employer of record for tax purposes, handling payroll, benefits, workers' compensation, and compliance while the client company retains control over day-to-day operations and management decisions.

The Private Attorneys General Act is a California law that allows employees to sue employers on behalf of themselves and other employees for Labor Code violations. PAGA claims can result in significant penalties, with 75% going to the state and 25% to affected employees. Average PAGA settlements exceed $1 million.

Payroll taxes are taxes imposed on employers and employees based on wages paid. They include federal income tax withholding, Social Security (6.2%), Medicare (1.45%), federal unemployment (FUTA), and state-specific taxes like California's SDI, ETT, and SUI. Employers must deposit these taxes according to IRS schedules.

Per Employee Per Month is a common pricing model for HR services, PEO, and payroll providers. The fee is calculated by multiplying a set rate by the number of employees each month. PEPM pricing provides predictable costs and typically includes bundled services like payroll, HR support, and compliance monitoring.

California Senate Bill 553 requires most employers to establish and maintain a Workplace Violence Prevention Plan, provide employee training, and maintain a violent incident log. The law took effect July 1, 2024, and applies to most California employers with limited exceptions for healthcare and certain other industries.

Workers' compensation is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment. In exchange for mandatory coverage, employees relinquish their right to sue employers for negligence. Rates vary by industry, state, and claims history.

Wage and hour compliance refers to adherence to federal and state laws governing minimum wage, overtime pay, meal and rest breaks, and timekeeping requirements. California has some of the strictest wage and hour laws in the nation, with daily overtime requirements and mandatory meal periods.

Wrongful termination occurs when an employee is fired in violation of law or contract. This includes terminations based on protected characteristics (discrimination), retaliation for protected activities (whistleblowing, FMLA leave), or breach of employment contracts. Average employment claim defense costs exceed $160,000.