• New Laws for California Employers
  • November 11, 2011 | Authors: Wendy M. Lazerson; Christine de Bretteville
  • Law Firms: Bingham McCutchen LLP - San Francisco Office ; Bingham McCutchen LLP - Palo Alto Office
  • On Jan. 1, 2012, numerous laws impacting employers will go in to effect. Below is a brief summary of the most significant laws relating to California employers, some of which will require immediate and substantial changes in employment policies and practices.

    I. Restricting Credit Checks by Employers: Assembly Bill 22

    This law prohibits most employers (except financial institutions and other businesses required by law to perform credit checks) from obtaining consumer credit reports for employment purposes unless the position of the person for whom the report is sought is one of the following:

    • A managerial position;
    • A position in the state Department of Justice;
    • A sworn peace officer or other law enforcement position;
    • A position for which the information contained in the report is required by law to be disclosed or obtained;
    • A position that involves regular access to specified personal information for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment;
    • A position in which the person is or would be a named signatory on the employer’s bank or credit card account, or authorized to transfer money or enter into financial contracts on the employer’s behalf;
    • A position that involves access to confidential or proprietary information; or
    • A position that involves regular access to $10,000 or more of cash.

    In addition, the new law requires an employer to provide written notice informing the person whose consumer credit information is sought of the employer’s specific reason for obtaining the report.

    II. Clampdown on Misclassifying Workers: California Senate Bill 459

    As explained in greater detail in our client alert on Oct. 14, 2011,1 this law will make it unlawful to (1) engage in “willful misclassification” of an individual as an independent contractor and (2) charge any fee or make any deduction from compensation for such expenses as space rental, services, repairs, goods or materials, where such deduction would be illegal for an employee. “Willful misclassification” means avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor. The law does not define the terms “voluntarily and knowingly,” however, leaving substantial uncertainty as to what would and would not constitute a violation. The law imposes penalties of no less than $5,000 and no more than $15,000 for each violation, and fines from $10,000 to $25,000 for “pattern and practice” violations, which are also undefined. The law requires that employers found to have misclassified employees prominently display for one year on their websites a notice to employees and the general public stating that they have “committed a serious violation of law by engaging in willful misclassification of employees.” This law will be enforced by the California Labor and Workforce Development Agency and the Labor Commissioner.

    III. Commission Agreements for Services Rendered in California: Assembly Bill 1396

    Section 2751 of the Labor Code requires an employer who has no permanent and fixed place of business in California, and who enters into an employment contract involving commissions as a method of payment for services to be rendered in California, to put the contract in writing and to set forth the method by which the commissions are required to be computed and paid. An employer who does not comply with those requirements is liable to the employee in a civil action for triple damages. Section 2751 was invalidated by Lett v. Paymentech, Inc., 81 F.Supp.2d 992 (N.D.Cal. 1999) based on its application to out of state employers. AB 1396 amends Section 2751 to “restore” the employee protections of the statute. Specifically, the new law provides that by Jan.1, 2013, the requirements of Section 2751 will apply to all employers entering into employment contracts using commissions as a method of payment for services rendered in California. Section 2751 no longer provides for triple damages in civil actions arising out of violations of the statute.

    IV. Ensuring Parity for Domestic Partners in Health Insurance Plans

    Senate Bill 757 — This law addresses the issue of California-based employees of out-of-state employers who are in domestic partnerships and are not provided benefits on par with those provided to spouses of insureds. The bill requires that every policy or certificate for health insurance that is marketed, issued, or delivered to a resident of California, regardless of the situs of the contract or master group policy holder, must offer or provide coverage for a registered domestic partner that is equal to the coverage provided to the spouse of an employee, insured or policyholder, and may not discriminate in coverage between spouses or domestic partners of a different sex and spouses or domestic partners of the same sex.

    Senate Bill 117 — This law is intended to address the concern, raised by state government contractors who cover employees with a same-sex spouse or registered domestic partner dependent under their group medical insurance benefits plan, that they were competitively disadvantaged compared to contractors who provide these benefits only to employees with opposite-sex spouses. The bill requires state contractors with contracts of $100,000 or more who provide medical insurance benefits to employees and their dependents to provide equal benefits to employees with same-sex spouses and/or registered domestic partners.

    V. Clarifying California’s Organ and Bone Marrow Donor Leave Law: Senate Bill 272

    Existing law requires an employer to grant a leave of absence to an employee who is an organ donor or a bone marrow donor, with up to 30 days in a one-year period for organ donation, and up to five days in a one-year period for bone marrow donation. The leave of absence for either donor is not a break in his or her continuous service for the purpose of his or her right to salary adjustments, sick leave, vacation, annual leave, or seniority. The new law clarifies the law by providing that:

    • The days of leave are business days rather than calendar days;
    • The employer may require that the employee use up to five days of PTO for bone marrow leave and up to two weeks of PTO for organ donation leave; and
    • The 12-month period for measuring entitlement is "rolling" based on the date of the leave request.

    VI. Requiring Out-of-State Coverage for Workers’ Compensation: Assembly Bill 228

    Prior to the enactment of this law, employees injured during an out-of-state assignment could be denied coverage in accordance with law where their employer did not have workers’ compensation insurance covering claims relating to injuries occurring out of state. AB 228 closes this gap by amending California Insurance Code Section 11780.5 to authorize the State Compensation Insurance Fund (“SCIF”) to provide workers’ compensation coverage to a California employer whose California employees temporarily work outside the state.

    VII. Compensation Recovery Actions and Liquidated Damages: Assembly Bills 240, 197 and 469

    Under current law, an employee may bring a claim alleging payment of less than the minimum wage through an action in court or by bringing the claim before the Division of Labor Standards Enforcement (“DLSE”). The Labor Commissioner, chief of the DLSE, is authorized to investigate employee complaints and provide for a hearing in any action to recover wages, penalties, and other demands for compensation. An employee seeking relief through this administrative process cannot receive liquidated damages, though workers can recover liquidated damages in a court action. The amount of liquidated damages a court may award to an employee is equal to the amount of wages unlawfully unpaid plus interest. Under the new law, the Labor Commissioner may award liquidated damages pursuant to administrative complaints alleging payment of less than the minimum wage. The Labor Commissioner will also have the same discretion enjoyed by courts in deciding whether to award liquidated damages, and in what amount. In addition, the amount of liquidated damages that may be awarded to an employee is increased to twice the amount of wages unlawfully unpaid plus interest. Under the new law, in addition to being subject to a civil penalty, any employer who pays or causes to be paid to any employee less than minimum wage shall also pay restitution of wages to the employee.

    VIII - The Wage Theft Prevention Act of 2011: Assembly Bill 469

    Added: Labor Code Section 2810.5: Notice of wages — The law adds Section 2810.5 to the Labor Code, requiring employers to provide new hires with a notice specifying:

    • The rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission,  or otherwise, including any rates for overtime, as applicable;
    • Allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances;
    • The regular payday designated by the employer;
    • The name of the employer, including any “doing business as” names used by the employer;
    • The physical address of the employer’s main office or principal place of business as well as a mailing address, if different;
    • The telephone number of the employer;
    • The name, address and telephone number of the employer’s workers’ compensation insurance carrier; and
    • Any other information the Labor Commissioner deems material and necessary.

    The law requires notification of each employee in writing regarding changes to the information included in the notice within seven calendar days unless such changes are reflected on a timely wage statement. The law directs the Labor Commissioner to prepare and make available to employers a template complying with the notice requirements. Notably, Section 2810.5 does not apply to exempt employees, state employees, or employees covered by valid collective bargaining agreements that expressly provide for the wages, hours of work and working conditions of the employee, as well as premium wage rates for all overtime hours worked and a regular hourly rate of pay.

    Added: Labor Code Section 1197.2: Criminal Liability — The new law adds Section 1197.2 to the Labor Code, providing that employers who willfully fail to pay a final court judgment or final order of the Labor Commissioner for wages due is guilty of a misdemeanor and subject to a fine ranging from $1,000 to $20,000 and/or imprisonment.

    Added: Labor Code Section 200.5: New Fees — Under current law, the DLSE must commence an action for collection of a statutory penalty or fee within one year after the penalty or fee became final. The new law extends the period within which the DLSE may commence a collection action to three years, applying only to penalty assessments or fees that become final on or after the effective date of the Act, or Jan. 1, 2012.

    Revision to Labor Code Section 226: Itemized Wages — Adds to the items required to be listed in itemized wage statements the name and address of the legal entity that secured the services of the employer in connection with farm labor contractor employers. Employers are also required to retain a copy of the wage statement and to keep the record of deductions on file for three years.

    Revision to Labor Code Section 240: Bonds for Violation of Wage Law — Under current law an employer who has been convicted of a subsequent wage violation or who has failed to satisfy a judgment can be required by the Labor Commissioner to post a bond to ensure continued compliance with wage laws. AB 469 amends Labor Code Section 240 to extend the potential time an employer is required to maintain a bond from six months to two years. Under the amended language employers who fail to post a bond as required may also be compelled by the Labor Commissioner to provide an accounting of assets. Employers who refuse to provide an accounting may be subject to a fine of up to $10,000.

    Revision to Labor Code Section 243: Loss of Ability to Do Business in State — Employers who within a 10-year period have twice been convicted of wage violations, or who have twice failed to satisfy a judgment for the non-payment of wages, may immediately be subject to a court order prohibiting them from doing business in the state unless and until a bond is deposited to secure compliance or payment of the judgment.

    Revision to Labor Code Section 1174: Payroll Records — Current law provides that payroll records be retained for two years. The new law provides that payroll records shall be kept at a central location for not less than three years. The section also specifically notes that employers may not prohibit employees from maintaining personal records of hours worked or piece-rate units earned.

    IX. Clarifying Employees’ Rights Under the California Family Rights Act and Pregnancy Disability Law

    Assembly Bill 592 — Currently there is no explicit provision in either the California Family Rights Act (“CFRA”) or the Pregnancy Disability Leave (“PDL”) Law making it unlawful for employers to interfere with, restrain or deny leave for eligible workers under these laws (although decisional law would prohibit such conduct). Assembly Bill 592 addresses this issue by adding such express language into those statutes. It also makes it unlawful for employers to terminate the health coverage of a worker who takes leave because she is disabled by pregnancy, childbirth or a related medical condition.

    Senate Bill 299 — Under current law, employers need to maintain and pay for the employer’s portion of the premium for health insurance coverage for employees taking leaves of absence only when those leaves are covered by the FMLA or CFRA, thus leaving a gap in coverage for those employees ineligible for FMLA who are on pregnancy disability leaves. Senate Bill 299 closes that gap by requiring an employer to maintain and pay for coverage under a group health plan for up to four months for an employee who takes leave under the PDL regardless of whether the employee is also protected by the FMLA.

    X. Defining “Gender,” “Gender Identity” and “Gender Expression” in Various Laws: Assembly Bill 887

    This bill refines the definition of “gender” used in numerous statutes that require equal rights and opportunities and prohibit discrimination based on specific enumerated characteristics to include a person’s “gender identity” (the gender that one sees oneself as) and “gender expression,” and defines “gender expression” as a person’s gender-related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth. Current law requires an employer to allow an employee to appear or dress consistently with the employee’s gender identity, notwithstanding that person’s sex as assigned at birth. The new law adds the requirement that employees be permitted to dress in accordance with their gender expression as well. This likely adds little to the existing requirement since gender expression is usually aligned with gender identity. Still, employers should consult counsel with respect to the issue of dress requirements until this issue is clarified.

    XI. Discrimination Regarding Genetic Information: Senate Bill 559

    California’s Fair Employment and Housing Act and Unruh Civil Rights Act prohibit discrimination in housing and employment based on a number of protected categories. SB 559 will prohibit discrimination on the additional basis of genetic information. In the employment context, the law reiterates the nondiscrimination protection afforded by the federal Genetic Information and Nondiscrimination Act (“GINA”). SB 559 has a broader reach, providing protection on the basis of genetic information across all of California’s civil rights laws, going beyond GINA’s coverage of employment and health insurance and applying in the context of public accommodations, education, health and life insurance, and mortgage lending.

    The Hospital Patient and Health Care Worker Injury Protection Act: Assembly Bill 1136

    The California Occupational Safety and Health Act of 1973 (“Cal OSHA”) establishes safety requirements of employers and employees, including the use of safety devices and safeguards reasonably necessary to render employment safe. Willful or repeated violations are a crime. AB 1136 adds Section 6403.5 to the Labor Code, amending Cal OSHA to require that an employer maintain a safe patient handling policy to replace manual lifting and transferring of patients, provide trained lift teams, or train staff in safe lifting techniques in general acute care hospitals. Employers are also required to adopt a patient protection and healthcare worker back and musculoskeletal injury prevention plan, including a safe patient handling policy component, to protect patients and healthcare workers.

    1 Bingham client alert, Oct. 14, 2011 — http://www.bingham.com/Media.aspx?MediaID=13004