• California Employment Law: 2011 Legislative Update
  • November 9, 2011 | Author: Joshua B. Rittenberg
  • Law Firm: Much Shelist, P.C. - Irvine Office
  • It has been a busy year for California Governor Jerry Brown and members of the state legislature, who have enacted a flurry of employment laws set to go into effect in the coming months.

    Worker Classification Bill (SB 459)

    SB 459 makes California employers liable for civil penalties of $5,000 to $15,000 for each violation of "willful misclassification" of employees as independent contractors. In addition, if it is found that the employer has a pattern and practice of misclassifying independent contractors, the penalties can increase to a minimum of $10,000 to $25,000 per violation. The new law, which adds Sections 226.8 and 2753 to the Labor Code, defines "willful misclassification" as avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.

    In addition to the substantial civil penalties, employers that violate the law are required to post a notice about the violation on their website for one year. If they do not have a website, they must instead post the notice in an area available to employees and the general public. Employers are required to include the following information in the notice:

    • That the Labor and Workforce Development Agency or a court, as applicable, has found that the person or employer has committed a serious violation of the law by engaging in the willful misclassification of employees;
    • That the person or employer has changed its business practices in order to avoid committing further violations;
    • That any employee who believes that he or she is being misclassified as an independent contractor may contact the Labor and Workforce Development Agency (including the mailing address, e-mail address and telephone number of the agency); and
    • That the notice is being posted pursuant to a state order.

    Given SB 459, which adds to the already considerable damages that misclassification might lead to under federal law, it is now doubly important for California employers to audit their practices to ensure that workers are not misclassified as independent contractors.

    Wage Theft Prevention Act of 2011 (AB 469)

    AB 469 revises various Labor Code sections, and includes provisions classifying certain "willful" actions by California employers as misdemeanors. The most important change is the new Labor Code Section 2810.5, which requires private employers to provide a list of specific written information to all new non-exempt employees who are not covered by the terms of a valid collective bargaining agreement.

    Employers must provide the following information to employees upon hiring (in a form to be determined by the Labor Commission):

    • 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 in accordance with the requirements of the Labor Code;
    • 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, and 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.

    Employers must notify employees of any changes in this information within seven days, either by information on the employees' next pay statements or in a separate written form. Non-compliance with any of the technical provisions of Section 2810.5 will result in some form of enforcement action, including possible civil penalty assessments.

    Prohibited Use of Credit Reports (AB 22)

    AB 22 bans California employers from obtaining credit information about applicants or employees, with the following limited exceptions for private employers:

    • A managerial position that qualifies for the executive exemption from overtime;
    • A position for which credit information is required by law to be disclosed or obtained;
    • A position that involves regular access to bank or credit card account information, social security numbers and dates of birth (other than in connection with routine solicitation of credit card applications in a retail establishment);
    • 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;
    • A position that involves regular access to the employer's, a customer's or a client's cash totaling $10,000 or more during the workday; and
    • A position that involves access to confidential or proprietary information, defined as a legal "trade secret" under Civil Code 3426.1(d).

    Even where these exceptions apply, employers still must notify applicants or employees in writing that the credit report is being requested. Additionally, the report must be provided free of charge to the employee. Finally, if employment is denied, at least in part, on the basis of information obtained from the credit report, the employer must advise the applicant and provide the name and address of the credit reporting agency that supplied the report.

    Employee Pregnancy Leave (AB 592/SB 299)

    AB 592 and SB 299 prohibit employers from interfering with, restraining or denying leave for eligible workers under the California Family Rights Act and the state's pregnancy disability leave laws. This legislation also prohibits employers from terminating the health coverage of a female worker who takes leave because she is disabled by pregnancy, childbirth or a related medical condition.

    Maternity Insurance Coverage (SB 222/AB 210)

    SB 222 and AB 210 require health insurers issuing individual policies to provide maternity coverage for all who are insured under the policy.

    Gender Identification (AB 887)

    AB 887 redefines the term "gender" throughout current statutory law, including the Fair Employment and Housing Act. The bill also clarifies that California law prohibits discrimination on the basis of gender identity and "gender expression," which is defined as a person's gender-related appearance and behavior, whether or not usually associated with the person's assigned sex at birth. Employees must be allowed to appear or dress consistently with their "gender expression" in the workplace.

    Commission Agreements (AB 1396)

    AB 1396 requires out-of-state employers to provide written information about commission compensation to California employees, and to have written commission agreements in place as of January 1, 2013. The contracts must state how commissions will be computed and paid. AB 1396 also provides that if the parties continue working under an expired contract, the terms of that agreement are presumed to remain in full force and effect until the contract is expressly superseded by a new agreement or the employment relationship is terminated.