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New Labor and Employment Laws in California

Published by on October 21, 2011

California Governor Jerry Brown has recently signed into law several pieces of legislation that will significantly affect California employers.  The new laws are even worth reading for non-California employers as they will give you an idea of what the future may hold.  Our update after the break. Effective January 1, 2012 (unless otherwise stated), the […]

California Governor Jerry Brown has recently signed into law several pieces of legislation that will significantly affect California employers.  The new laws are even worth reading for non-California employers as they will give you an idea of what the future may hold.  Our update after the break.

Effective January 1, 2012 (unless otherwise stated), the new California labor and employment laws include:

AB 22. This new law prohibits most California employers from using 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 relates to (1) a position in the California Department of Justice; (2) a managerial position (defined by 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)).

If the employer is permitted to obtain a credit report under one of the exceptions, 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 or 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 or employee and provide the name and address of the credit reporting agency that supplied the report.

SB 459. This new law enacts penalties for willful misclassification of individuals as independent contractors instead of employees.  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 pay if those deductions or fees would have violated the law if the individual had not been misclassified. In the event of a finding of willful misclassification, penalties may be assessed in the range of $5,000 to $15,000 per violation or $10,000 to $25,000 for each violation if the employer was engaged in a pattern or practice of misclassification. An employer in violation may be ordered to display on its web site (or other area accessible to employees and the general public) a notice that explains the employer has committed a serious violation of the law by willfully misclassifying employees, along with other prescribed information. Individuals who, for money or other valuable consideration, knowingly advise an employer to treat an individual as an independent contractor to avoid employee status will be jointly and severally liable with the employer for misclassification.  Employees who provide advice to their employer and licensed attorneys providing legal advice are excepted from this liability.

SB 299. This new law requires employers to continue group health coverage to employees on pregnancy disability leave for up to four months.  Distinct from traditional FMLA/CFRA leave, California employers with five or more employees have previously been required to comply with California’s law permitting employees disabled due to pregnancy to take a leave of absence of up to four months for the disabling condition.  Formerly, employees on pregnancy disability leave were entitled to the same benefits provided by an employer to employees on other types of disability leaves.  Many employers limited the continuation of benefits to 12 weeks, as this is the required time period for continuation of coverage under the FMLA/CFRA.  Effective January 1, 2012, California employers must extend group health benefits on the same terms and conditions as if the employee continued actively reporting to work for four months for pregnancy disability leaves. If the employee fails to return from pregnancy disability leave, the employer may recover 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 under the FMLA.

AB 1396. This new law requires all commission pay arrangements to be set forth in a written contract by January 1, 2013. Under this new law, whenever an employer enters into a contract of employment 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 this law, “commissions” are defined under 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.  The new law, however, specifies that “commissions” do 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.

AB 469. This new law requires employers to provide each employee, at the time of hire, with a notice that specifies (a) the pay rate and the basis of pay, as well as any overtime rate, (b) allowances, if any, claimed as part of the minimum wage, including meals or lodging, (c) the regular payday, (d) the name of the employer, including any “DBAs” used by the employer; (e) the physical address and telephone number of the employer’s main office or principal place of business, and a mailing address if different, and (f) 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.

AB 887. This new law amends the various California laws, including the Fair Employment and Housing Act, to define “gender” discrimination to include discrimination based on gender identity and gender expression.  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.  While the ability of an employer to require an employee to adhere to reasonable workplace appearance, grooming, and dress standards remains intact, the new law also requires employers to allow an employee to appear or dress consistently with the employee’s gender identify or gender expression.

AB 243. 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 as part of the employees’ itemized wage statements.

Governor Brown also vetoed several labor and employment bills including legislation that would have: (1) invalidated forum selection and choice of law provisions in employment contracts with California employees, (2) required California employers to provide bereavement leave, and (3) imposed new requirements for use of payroll cards.

California employers should ensure that their policies and procedures are updated to comply with these new laws.

The text of the new laws are available here.

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