Oct. 13, 2011
Summary Of New Employment Laws That Will Apply To California Employers In 2012
Let’s start with the good news. Governor Brown vetoed several unappealing employment bills, including (1) AB 267, which would have invalidated forum selection and choice of law provisions in employment contracts with California employees, (2) AB 325, which would have required California employers to provide bereavement leave, and (3) SB 931, which would have imposed new requirements for use of payroll cards.
Now the bad news.
Governor Brown signed the following employment related bills into law:
AB 469 (Notice of Pay Details): This new law requires employers to provide each employee, at the time of hire, with a notice that specifies (1) the pay rate and the basis, whether hourly, salary, commission or otherwise, as well as any overtime rate, (2) allowances, if any, claimed as part of the minimum wage, including meals or lodging, (3) the regular payday, (4) the name of the employer, including any “doing business as” names used by the employer; (5) the physical address and telephone number of the employer’s main office or principal place of business, and a mailing address if different, and (6) the name, address and telephone number of the employer’s workers’ compensation carrier. The employer must notify each employee in writing of any changes to the information set forth in the notice within 7 days of the changes, unless such changes are elsewhere reflected on a timely wage statement or other writing required by law to be provided. The law also significantly increases the penalties that can be imposed on an employer who fails to timely pay or appeal from a Labor Commissioner award of wages or penalties to an employee, including in some circumstances authorizing a temporary restraining order preventing the employer from doing business in California.
AB 22 (Credit Report ban): Limits California employers’ ability to use credit reports for employment purposes. Under the new law, employers (with the exception of certain financial institutions) are prohibited from obtaining or relying on credit reports for applicants and employees, unless the report is sought in relation to (1) a position in the California Department of Justice; (2) a managerial position (defined as a position that qualifies for the executive exemption from overtime); (3) a sworn peace officer or other law enforcement position; (4) a position for which credit information is required by law to be disclosed or obtained; (5) a position that involves regular access (other than in connection with routine solicitation of credit card applications in a retail establishment) to people’s bank or credit card account information, social security number, and date of birth; (6) a position in which the employee would be a named signatory on the employer’s bank or credit card account, authorized to transfer money on behalf of the employer, or authorized to enter into financial contracts on behalf of the employer; (7) a position that involves regular access to cash totaling $10,000 or more of the employer, a customer, or client during the workday; and (8) a position that involves access to confidential or proprietary information (defined as a legal “trade secret” under Civil Code 3426.1(d)). Even if the employer is permitted to obtain a credit report under one of the exceptions outlined above, the employer must first provide written notice to the applicant or employee, specifying the permissible basis for requesting the report and providing a box for the employee/applicant to check off to request a copy of the report, which must be provided free of charge and at the same time the employer receives its copy of the report. If employment is denied based on information in a credit report, the employer must advise the applicant/employee and provide the name and address of the credit reporting agency that supplied the report.
SB 459 (Misclassification of Independent Contractors): This new law creates stiff penalties for willful misclassification of employees as independent contractors. The law defines “willful” as “voluntarily and knowingly misclassifying” an individual. The law also makes it unlawful for an employer to charge an individual who has been willfully misclassified any fees or other deductions from compensation if those fees and deductions (e.g. for licenses, space rental, equipment) would have been prohibited had the individual been properly classified as an employee. In the event of a finding of willful misclassification, penalties may be assessed in the range of $5,000 to $25,000 per violation. Additionally, an employer in violation may be ordered to display prominently on its Internet web site (or other area accessible to employees and the general public) a notice that explains the employer has been found guilty of committing a serious violation of the law by willfully misclassifying employees, along with other prescribed information. The new law also imposes joint and several liability on individuals who, for money or other valuable consideration, knowingly advise an employer to treat an individual as an independent contractor to avoid employee status. Excepted from liability are employees who provide advice to their employer, and licensed attorneys providing legal advice to the employer.
AB 887 (Gender Identity and Expression): This new law amends the Fair Employment and Housing Act (as well as various other laws) to make clear that discrimination on the basis of gender identity and “gender expression” is prohibited. Gender expression refers to a person’s gender-related appearance and behavior, whether or not stereotypically associated with the person’s assigned sex at birth. The new law also requires employers to allow an employee to appear or dress consistently with the employee’s gender expression.
AB 1236 (E-Verify): This new law prohibits the state, or a city or county, from requiring employers to use E-Verify as a means of verifying employees they hire are authorized to work in the United States.
AB 243 (Farm Labor Contractors): This new law requires employers who are farm labor contractors to disclose to employees the name and address of the legal entity that secured the employer’s services. This information must be disclosed as part of the employees’ itemized wage statements required by Labor Code section 226.
SB 126 (Agricultural Labor Relations): This new law deals with petitions objecting to the conduct of an election before the Agricultural Labor Relations Board and specifies that where the ALRB refuses to certify an election because of employer misconduct that, in addition to affecting the results of the election, would render slight the chances of a new election reflecting the free choice of employees, the labor union shall be certified as the exclusive bargaining agent for the bargaining unit.
AB 1396 (Commission Pay Arrangements): which requires commission pay arrangements to be set forth in a written contract. All employers must comply by January 1, 2013. Under the new law, whenever an employer enters into a contract of employment with an employee for services to be performed in California and the employee’s compensation involves commissions, the contract must be in writing and set forth the method by which the commissions will be computed and paid. The employer must give a signed copy of the contract to the employee and must retain the employee’s signed receipt of the contract. In the event the contract by its terms expires but the parties nevertheless continue to work under the expired contract, its terms are presumed to remain in full force and effect until the contract is expressly superseded by a new contract or the employment relationship is terminated. For purposes of the new law, “commissions” are defined in accordance with Labor Code section 201.4 as compensation paid to any person in connection with the sale of the employer’s property or services and based proportionately upon the amount or value thereof. However, the new law specifies that “commissions” does not include short-term productivity bonuses nor bonus and profit-sharing plans, unless they are based on the employer’s promise to pay a fixed percentage of sales or profits as compensation for work.
SB 299 (Pregnancy Disability Health Coverage): Requires California employers to continue group health coverage to employees on pregnancy disability leave for up to four months. California employers with five or more employees have long been required to comply with California's law permitting employees disabled by pregnancy to take a leave of absence of up to four months for the disabling condition. This leave is in addition to traditional "maternity leave," which separately provides the employee up to 12 weeks of leave for baby bonding (if the employer has 50 or more employees and is covered under FMLA/CFRA). Prior to passage of SB 299, employees on pregnancy disability leave were entitled to the same benefits provided by an employer to employees on other types of disability leaves. With respect to continuation of group health benefits, many employers limit the continuation of such coverage to 12 weeks, as this is the required time period for continuation of coverage under the FMLA/CFRA for family and medical leaves of absence. Thus, effective January 1, 2012, California employers must extend the continuation period to four months for pregnancy disability leaves.
As specified in the legislation, group health benefits must be continued on the same terms and conditions as if the employee continued actively reporting to work. Therefore, if the employer pays the entire premium for employee coverage, it must continue to do so for up to four months of pregnancy disability leave. If the employee normally pays a portion of the premium, the employee may be required to continue making such contributions (either for self or for dependent coverage) during the leave. Additionally, if the employee fails to return from pregnancy disability leave, the employer may recoup from the employee the premiums the employer paid to continue the employee's coverage during the leave, unless the reason the employee did not return is because of a continuing disability or because the employee took a separate protected leave (e.g. maternity leave) under the FMLA/CFRA.
Unless otherwise specified (e.g. AB 1396) most new laws take effect January 1, 2012.
In light of these impending changes to California law, employers may want to review their current policies and practices for compliance. Please do not hesitate to call your attorney at Hill, Farrer & Burrill LLP if you would like assistance in the review or revision of your employment policies or practices, or if you have questions about how to comply with these new laws.