January 19th, 2012

New Employment Laws For 2012 Require Immediate Action By Employers

January 19, 2012 – Last year, Governor Brown signed several new laws impacting employers in California, most of which took effect on January 1, 2012.  Unfortunately, employers do not have the benefit of much advance notice in revising their current personnel policies and practices to comply with these new laws.  Employers have to act quickly to ensure compliance in the new year.  Failure to take prompt corrective action could result in fines and large jury verdicts.  Some of the wide-ranging changes to California employment laws are discussed briefly below.

AB 469 – Written wage disclosures to new hires required.
AB 469 requires employers to provide all new non-exempt hires with a written disclosure containing the following information: (1) The employee’s rate or rates of pay; (2) Any applicable overtime rates; (3) Meal, lodging or other lawful allowances to be used against minimum wage; (4) The regular paydays; (5) The employer’s name and/or DBA’s used by the employer; (6) The employer’s main office or principal place of business address, and a mailing address, if different; (7) The employer’s telephone number; (8) The name, address and telephone number of the employer’s workers’ compensation insurance carrier; and (9) Any other information the Labor Commissioner deems material and necessary.

This new law applies to all private-sector employers in regards to employees hired in 2012.  Employers should review their offer letters to ensure compliance.  The California Labor Commissioner also has created a template disclosure form that employers may use to satisfy this requirement.

AB 1396 – Written commission agreements required.
AB 1396 requires employers to provide employees earning commissions with a written commission agreement.  The agreement must set forth the method by which commissions are to be calculated and paid.

It is critical to have a carefully drafted commission agreement.  Some important considerations in drafting commission plans include provisions regarding when the commission is earned (versus when it is paid out), what conditions have to be met to earn the commission, and what happens to unpaid and/or unearned commissions when the employment is terminated.  Failure to carefully consider and include such provisions can lead to costly litigation.

SB 459 – Additional penalties for willful misclassification of independent contractors.

SB 459 prohibits and penalizes the willful misclassification of independent contractors.  “Willful misclassification” has been defined as “avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.”

The penalties for willful misclassification include monetary penalties ranging from $5,000 to $25,000 for each violation, depending on whether the state finds that the company engaged in a pattern or practice of misclassification.  It also requires employers who have violated the law to post notices of the violations to the public, which could be very damaging to the employer’s public image.

In addition to the penalties mentioned above for misclassification, penalties will also apply if the employer charges fees to a misclassified independent contractor (i.e., rental space, material costs, license fees or equipment rental) where those fees would have been unlawful had the individual been properly classified.

While misclassification of an employee as an independent contractor was unlawful prior to the passage of SB 459, the new law ups the ante on the employer’s potential exposure and makes it even more important for companies doing business with independent contractors to carefully evaluate whether the independent contractor classification is legitimate.

SB 299 – Continued benefits during pregnancy disability leave required.

SB 299 requires employers to continue to maintain and provide group health insurance coverage to employees during a pregnancy disability leave of absence for up to four months over a 12-month period.  The coverage must remain at the same level and under the same conditions that would have been provided if the employee had not taken leave.
However, an employer may recover from the employee any premiums paid if the employee fails to return to work after the leave, except where the employee’s failure to return is due to circumstances beyond the employee’s control, such as the continuation, recurrence or onset of a health condition that entitles the employee to pregnancy disability leave.

As a result of this new law, employers should review their Employee Handbooks, leaves of absence policies and health insurance benefits summaries.

SB 559 & 877 – Genetic information and gender identity/expression discrimination prohibited.

SB 559 prohibits employment discrimination on the basis of genetic information.  “Genetic information” is defined to include any request for, or receipt of, genetic services, or participation in clinical research that includes genetic services, by an individual or any family member of the individual.

SB 877 prohibits employers from discriminating against employees based on their gender identity and gender expression, which includes the way employees express their gender through their dress and behavior.

Accordingly, employers should revise their Employee Handbooks and Equal Employment Opportunity policies to reflect these new protected categories. 

AB 22 – Use of credit reports for employment purposes limited.

AB 22 prohibits employers from obtaining a consumer credit report for employment purposes, except in limited circumstances where the position of the person for whom the report is sought is: (1) a position in the state Department of Justice; (2) a managerial position; (3) that of a sworn peace officer or other law enforcement position; (4) a position for which the information contained in the report is required by law to be disclosed or obtained; (5) 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; (6) 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; (7) a position that involves access to confidential or proprietary information; or (8) a position that involves regular access to $10,000 or more of cash. Assuming that one of these exceptions applies, employers must also provide detailed disclosures to the job applicant or employee and obtain written consent prior to obtaining a credit report.  Due to the highly technical requirements for obtaining credit reports and background checks for employment purposes, employers should not proceed without consulting with counsel.

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If you have any questions or would like assistance with compliance and policy updates, please contact a Lim Ruger attorney.  Lim, Ruger & Kim, LLP is trusted by Fortune 500 companies, international and entrepreneurial businesses for their legal needs.  Lim Ruger provides employment advice, employment and commercial litigation services, as well as corporate, business and real estate transactional legal services with offices in Los Angeles and San Francisco.  Website: www.limruger.com.

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