The recent session of the California legislature produced a series of new laws that will impact the state’s private sector employers in 2012. While few labor and employment bills escaped the veto pen of former Governor Schwarzenegger, Governor Jerry Brown has opened the legislative floodgates during his first year in office. The laws summarized below take effect on January 1, 2012, unless noted otherwise. These laws add substantial new workplace rights and obligations in areas such as background checks, leaves of absence, payment of wages, and discrimination.
AB 22—Limitations on Use of Credit Reports
Under new Labor Code section 1024.5, employers may no longer obtain credit reports for employees or applicants unless the person falls within a limited exception and the employer provides written notice informing the person for whom the report is sought and the specific reason for requesting the report. Except for certain financial institutions, employers cannot obtain a consumer credit report for employment purposes unless the position of the person for whom the report is sought is: (1) managerial; (2) law enforcement; (3) one for which a credit report is required by law; (4) one having access to bank or credit card account information, social security numbers, and dates of birth; (5) a position in which the person would be a signatory on an employer bank or credit card account, or authorized to transfer money or to enter into financial contracts on behalf of the employer; (6) a position that involves access to confidential or proprietary information; or (7) a position that involves regular access to cash totaling $10,000 or more. Employers should no longer perform credit checks on applicants or employees unless the position of the person meets one of these exceptions. Employers who perform credit checks should revise their notice and disclosure forms to comply with the notice requirements of AB 22.
SB 459—Independent Contractors
This bill adds new Labor Code sections 226.8 and 2753 to impose new penalties on companies who engage in “willful” (i.e., knowing and voluntary) misclassification of workers as independent contractors. The law also imposes penalties on companies if they charge a misclassified worker a fee, or make deductions from the worker’s compensation for any purpose, including for goods, materials, space rental, services, government licenses, repairs, equipment maintenance, or fines. The penalties range from $5,000 to $15,000 per violation. If the employer has engaged in a pattern and practice of these violations, the penalties increase from $10,000 to $25,000 per violation. Misclassified workers also may recover damages. In addition, a violating employer will be required to display prominently on its website a notice stating, among other things, that it has committed a serious violation of the law by engaging in the willful misclassification of employees and that it has changed its business practices to avoid committing further violations. Employers who use independent contractors should carefully evaluate whether such workers are properly classified and, if not, modify their work terms and conditions or convert them to employees.
AB 1396—Commission Agreements Must Be Written
This bill amends Labor Code section 2751. Whenever an employer enters into an employment contract with an employee for services to be performed in California, and the employee is to be paid with commissions, the contract must be in writing and must set forth the method by which the commissions are to be computed and paid. Every employee is entitled to a signed copy of the contract and must provide a signed receipt to the employer. This law will take effect on January 1, 2013. Employers should put all commission agreements in writing and sign them. Employers also should have employees sign and return an acknowledgement of receipt, which should be maintained in the employee’s file.
AB 240—Liquidated Damages for Minimum Wage Violations
This bill amends Labor Code sections 98 and 1194.2. In any action to recover wages because of payment of less than the state minimum wage, an employee is now entitled to recover (in a claim before the Labor Commissioner as well as in a civil suit) liquidated damages equal to twice the wages unlawfully unpaid plus interest. The statute provides a defense if the act or omission giving rise to the claim was in good faith and the employer had reasonable grounds for believing the act or omission was not a violation of the minimum wage obligation.
AB 469—Wage Information
This bill, known as the Wage Theft Prevention Act of 2011 and modeled after a similar New York law, adds a variety of new rules, procedures, and remedies to strengthen enforcement of the Labor Code’s wage and hour requirements. Perhaps most significantly, the law adds Labor Code section 2810.5, which requires an employer to provide each non-exempt employee, at the time of hiring, a notice containing all of the following information: (1) rate(s) of pay and basis for them, whether by the hour, shift, day, week, salary, piece, commission, or otherwise, including any overtime rates; (2) allowances, if any, claimed as part of the minimum wage, including for meals or lodging; (3) regular payday designated by the employer; (4) name of employer, including any “doing business as” names used; (5) physical address of employer’s main office or principal place of business, and mailing address if different; (6) telephone number of the employer; (7) name, address, and telephone number of the employer’s workers’ compensation insurance carrier; and (8) any other information the Labor Commissioner deems material and necessary. The employer must notify each employee in writing of any changes to the information given in the notice within seven calendar days of the changes unless the changes are reflected on a timely wage statement or another writing. The notice requirements do not apply to employees who are overtime-exempt or covered by a collective bargaining agreement, as long as the agreement provides for overtime pay and a regular hourly rate at least 30% above the state minimum wage. The Labor Commissioner is directed to prepare a template notice that complies with these requirements. Employers should monitor the DIR website for the template at www.dir.ca.gov
AB 887—Gender Identity and Gender Expression Protected
This bill expands the protections afforded employees and applicants under the Fair Employment and Housing Act (FEHA) and Unruh Civil Rights Act by adding “gender expression” and “gender identity” as protected classifications. “Gender expression” is expressly defined as a “person’s gender-related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth.” Employers should revise their EEO policies and training materials to include these new protected categories.
SB 559—Prohibition on Genetic Information Discrimination
This bill expands the FEHA and Unruh Civil Rights Act to expressly prohibit discrimination based on genetic information. The law prohibits employers from taking adverse employment action against an applicant or employee based on genetic test results (of the individual or family member), manifestation of a disease or disorder in a family member, or a request for or receipt of genetic services (e.g., cancer screening). SB 559 essentially offers the same employment-related protections as the federal Genetic Information Nondiscrimination Act (“GINA”) enacted in 2008. Employers should: (1) update their EEO policies to include genetic information as a protected category; (2) review and edit job applications, medical leave forms, pre-employment physical forms, wellness program forms, and related documents to omit any requests for genetic information.
AB 592—Adds Interference Claims to Leave Laws
This bill amends the California Family Rights Act and the California Pregnancy Disability Leave Act to expressly prohibit an employer from taking any action to “interfere with, restrain, or deny the exercise of” rights provided under these laws. The existing federal Family and Medical Leave Act contains similar language authorizing an interference claim.
SB 272—Organ/Bone Marrow Donor Leave Clarified
A recently enacted law, the Michelle Maykin Memorial Donation Protection Act, grants employees leave of up to five days for a bone marrow donation, and up to 30 days for an organ donation, within a one-year period. Lab. Code § 1510. SB 272 clarifies the statute in several respects. First, the leave periods are “business days.” Second, the one-year period is 12 consecutive months measured from the leave start date (i.e., a rolling 12-month period). Third, this leave does not amount to a break in service for purposes of any paid time off accrual. Finally, an employer can require the employee to use earned sick leave, vacation, or other paid time off during the leave in specified amounts: up to five days for bone marrow donor leave, and up to two weeks for organ donor leave. Employers should revise their leave policies to incorporate these changes.
SB 299—Paid Medical Benefits for Pregnancy Disability Leave
This bill requires the employer to maintain, and pay for, group health insurance coverage for an employee on pregnancy disability leave for the full duration of that leave (up to four months) on the same terms as existed before the leave. SB 299 authorizes an employer to recover premium costs it paid from the employee if the employee fails to return to work after her leave expires and
the failure to return is not due to: (1) the employee taking another leave under the California Family Rights Act (e.g., bonding leave), or (2) the continuation, recurrence, or onset of a health condition that entitles the employee to another pregnancy leave or other circumstances beyond the employee’s control. Employers should revise their pregnancy disability leave policies and related benefits procedures to comply with this new requirement.