Governor Brown was busy signing new legislation this year which impacts California employers. Below is a list of the more significant laws that will impact operations and which require your immediate attention for compliance.
Unless specified, all new legislation goes into effect on January 1, 2012.
Credit Checks Prohibited
Currently, employers have been permitted to request a credit report as part of a background check for employment related purposes, on the condition that the applicant is provided prior written notice that the report was being sought. Under this new legislation, such credit reports cannot be taken into consideration for the employment of most employees.
California employers may only use a consumer credit reports for employment purposes if the report is sought for one of the following:
A managerial position*;
A position in the state Department of Justice;
A sworn peace officer or other law enforcement;
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 confidential information such as credit card account information, Social security number, or Date of birth;
A position which the person can enter into financial transactions on behalf of the company;
A position that involves access to confidential or proprietary information; or
A position that involves regular access to cash totaling ten thousand dollars ($10,000) or more of the employer, a customer, or client, during the workday.
If one of the above conditions are met, and the employer obtains a consumer credit report, it must provide the person for whom the credit report is sought with written notice informing him or her that a report will be requested, the specific reasons for obtaining the report as provided in the statute, and a check box allowing the applicant to request a copy of the credit report at no charge.
*The law will permit credit checks to be conducted for certain employees working in a managerial position. The definition of “management” is very specific. To be a “manager” for purposes of this new law, the employee must be a exempt employee covered by the “executive exemption” under the California Industrial Commission Wage Order.
What Should I do? Review your pre-employment practices and contact the company that conducts your backgrounds checks to ensure that credit checks will be performed in conforming with these new restrictions.
Health Insurance Coverage During Pregnancy Disability Leave
Under current law, the continuation of health insurance coverage for employees on a pregnancy disability leave of absence was only required to the same extent and for the same length of time that the employer provided for other temporary disability leaves.
Under the new law, employers with five or more employees are required to continue to maintain and pay for health coverage under a group health plan for an eligible female employee who takes Pregnancy Disability Leave (PDL) up to a maximum of four months in a 12-month period. (SB 299 ) The insurance benefits to be provided must be done so at the same level and under the same conditions as if the employee had continued working during the leave period (similar to the requirements under the Family and Medical Care Leave Act or FMLA).
If an employee is required to contribute a portion of the premium, the employee must continue to pay their portion of the premium during the PDL leave, at the same level she normally would have paid, had she not taken the leave.
If an employee fails to pay their portion of the health insurance premium during the leave, an employer can recover from the employee the costs of healthcare if both of the following conditions occur:
(I) The employee fails to return from leave after the period of leave to which the employee is entitled has expired.
(ii) The employee’s failure to return from leave is for a reason other than one of the following:
(1) The employee taking another leave under the California Family Rights Act (CFRA); or,
(2) The continuation, recurrence, or onset of a health condition that entitles the employee to leave under paragraph (1) or other circumstance beyond the control of the employee.”
What Should I do?
Review your PDL and health insurance coverage policies to ensure compliance with this new law.
Update any notices given to employees at the time of pregnancy disability leave. The notices should include information regarding the payment of healthcare, and also notify the employee under what circumstances the employee may be required to reimburse the employer for the premium
Independent Contractors – Willful Misclassification
If an employer willfully mis-classifies a worker as an independent contractor instead of an employee this new law provides that penalties of between $5,000 to $25,000 shall be imposed upon the employer (SB 459)
Willful misclassification is defined as: “avoiding employee status for an individual by voluntarily and knowingly mis-classifying that individual as an independent contractor.”
A provision of the new law will also impact Hiring Managers, Human Resources Consultants, or Recruiters as the legislation provides that any person who advises an employer to treat an individual as an independent contractor…shall be jointly and severely liable with the employer. (There is an exclusion for attorneys providing advice to their clients).
The fines for repeat violations increase to between $10,000 and $25,000.
As an additional penalty, the law also provides that any organization that is found to have improperly treated workers as independent contractors must “display prominently on its internet website” a notice that they have “committed a serious violation of the law by engaging in the willful misclassification of employees” and provide specific information to workers about filing a claim.
What Should I do? Evaluate any independent contractor relationships to ensure that they meet the criteria for proper classification to avoid penalties being assessed by a finding of misclassification.
Commission Agreement Must be In Writing (effective January 1, 2013.)
Employers who pay employees on a commission basis must put those commission agreements in a signed written contract. (AB 1396)
The requirements are that the written agreement must set forth:
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the method by which the commissions will be computed and paid,
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if the contract has a term which expires, but the parties keep working under the same terms as stated in the expired contract, then the contract terms are presumed to remain in effect, unless superseded by a new written contract or the employment relationship is terminated.
What Should I do? If any employee is paid on a commission basis, review their file to determine if the pay arrangements have been reduced to a detailed written agreement, signed by you and the employee. If not, contact our office for assistance in drafting a Commission Pay Plan that conforms to California law on the issues of minimum wages, draws against commissions, vesting, charge backs and deductions
Notice of Pay Details
“Wage Theft Prevention Act”
When new non exempt employees are hired, employers are required to provide a notice that specifies:
The name of the employer, including any “doing business as” names;
The physical address of the employer’s main office or principal place of business and any mailing address, if different;
The telephone number of the employer;
The rate of pay;
The basis of the compensation, whether hourly, salary, piece commission or otherwise, including any overtime rate;
Allowances, if any, claimed as part of the minimum wage, including meal and lodging allowances;
The regular pay day designated by the employer as required under the Labor Code;
The name, address and telephone number of the employer’s workers’ compensation carrier.
The law also requires the employer to provide notice of any other information the Labor Commissioner deems “material and necessary” although this has not yet been determined. The Labor Commissioner is expected to provide a template of the information they deem material and necessary.
Also, if there are any changes to the information contained in the original notice then the new information must be provided to the employee, in writing, within seven calendar days of the changes, unless such changes are elsewhere reflected on a timely wage statement or other writing required by law.
In addition to being subject to a civil penalty, under the new law, any employer who pays any employee less than minimum wages must pay restitution of the wages to the employee. It will now also be a misdemeanor for any employer who willfully violates any wage statute or order, or willfully fails to pay a final court judgement or final order of the Labor Commissioner for wages found to be due.
Another aspect of the new legislation is that the statute of limitations has also been extended from one (1) year to three (3) years for the Division of Labor Standards Enforcement to commence an action for the collection of a penalty or fee.
What Should I do? Create a form or contact our office for a form entitled Notice to New Hires that complies with this new requirement to provide the necessary information to your new employees.
Organ and Bone Marrow Donor Leave
Currently the law in California states that an employee must be provided up to 30 days of paid leave in a one-year period for organ donation and up to five days of paid leave in a one-year period for bone marrow donation.
The new legislation clarifies that the days of leave are business days, not calendar days, and that the one-year period is measured as a rolling period measured forward from the date the employee’s leave begins. Additionally, the leave is not to be considered a break in service for purposes of benefit accrual and seniority. (SB 272)
Employers can require employees to use up to five day of accrued PTO, sick or vacation time for bone marrow leave and up to two weeks of accrued PTO, sick or vacation for organ donation leave.
What Should I do? Include in your employee handbook a policy outlining the new law putting employees on notice of their legal entitlement. organ donation leave
Genetic Information
Under recent amendments to Fair Employment and Housing Act (FEHA) employers are prohibited from discriminating against employees on the basis of genetic information. The amendments expand the protections provided under federal law (Genetic Information Nondiscrimination Act -GINA) (SB 559)
This new prohibition against discrimination on the basis of genetic information is in addition to the existing state law prohibiting discrimination based on a medical condition, including a genetic characteristic.
Genetic information is defined as information about any of the following:
The individual’s genetic tests;
The genetic tests of family members of the individual;
The manifestation of a disease or disorder in family members of the individual.
Genetic information does not include information about the sex or age of any individual.
What Should I do? Ensure that any pre-hire physical examinations do not include any type of genetic testing and do not inquire about any genetic information in any employment related inquiry.
Gender Expression & Identify
The Fair Employment and Housing Act (FEHA) has been amended to further define the term “gender” to include both gender identity and gender expression. Discrimination on either basis is prohibited. (AB 887)
“Gender expression” is defined as “a person’s gender-related appearance and behavior whether or not stereo typically associated with the person’s assigned sex at birth.”
The law has also been amended relating to dress codes to include that an employee must be allowed to dress consistently with both their gender identity and gender expression.
What Should I do? Review your employee handbook to ensure that gender identity and gender expression are included in the policies prohibiting discrimination, harassment and retaliation.
E-Verify
Under the federally created E-verify program, an employer can use an Internet-based system to electronically verify the employment eligibility of newly hired employees.
E-Verify compares Form I-9 documentation against federal government databases to verify employees’ employment eligibility.
The new law allows employers to continue to choose to use E-Verify, but prohibits California state agencies and local governments from passing mandates that require employers to use E-Verify.
California Family Rights Act
Non Interference
Currently, the California Family Rights Act (CFRA) and the Pregnancy Disability Leave (PDL) laws provide that an employer is prohibited from denying an eligible employee’s request for leave to care for a family member with a serious health condition, to bond with a child, to attend to the employee’s own serious health condition or for disability due to pregnancy or childbirth.
The new law makes it unlawful for an employer to interfere with or restrain the exercise or attempted exercise of any right provided to an employee under CFRA or PDL.(AB 592)
What Should I do? Ensure that all employees are aware of their rights under CFRA and PDL. These policies should be included in employee handbooks and all leave of absence forms. Any request for leave under CFRA and/or PDL should be considered and nothing should be done to dissuade the employee from taking time off under these legally entitled leaves.
Recovery of Damages – Administrative Penalties
An employee is now permitted to recover liquidated damages in a complaint brought before the Labor Commissioner where it is alleged that the employee was paid less than minium wage. (AB 240)
Under current California law, an employee who filed a claim alleging payment of less than the minimum wage has a choice of filing either in Court or before the Division of Labor Standards Enforcement (DLSE or commonly known as the Labor Commissioner or Labor Board). A compelling difference for employees in determining where the claim is filed is the remedy available to the employees.
If the claim is filed in court, a judge could award “liquidated damages” equal to the amount of the wages unlawfully unpaid and the interest on that sum to the successful employee. However, if the claim is filed before the DLSE, the Labor Commissioner had no authority to award the same liquidated damages as a remedy to a successful claimant.
The amended statute will allow the Labor Commissioner to award liquidated damages to a successful employee, the same as if in court. The Labor Commissioner will also have the discretion, as the court now does, to award reduced or no liquidated damages if the employer proves that it acted in good faith and that it had reasonable grounds for believing that its act or omission was not a violation of any provision of the Labor Code relating to the minimum wage, or an order of the commission.
What Should I do? Ensure that all employees are paid at least minimum wage so that this issue does not arise.
Insurance Non-Discrimination Act
Existing California law requires health care service plans and health insurance policies to provide group coverage to the registered domestic partner of the employee equal to the coverage provided to the spouses of employees. This new legislation provides that a plan or policy may not discriminate in coverage between spouses or domestic partners of a different sex and spouses or domestic partners of the same sex.
This law also prevents employers that operate in multiple states from discriminating against same-sex couples by not providing the same insurance coverage for domestic partners as they do for spouses. (SB 757)
Under the new law, even if the employer’s principal place of business and majority of employees are located outside of California, no policy or certificate of health insurance marketed, issued or delivered to a California resident shall discriminate between spouses or domestic partners of a different sex and spouses or domestic partners of a same sex.
A willful violation of this provision by a health care service plan is a crime.
What Should I Do? Contact the company’s insurance carrier, agent or broker to ensure that any health insurance coverage that is provided to employees conforms to this new legislation.
DFEH Procedural Regulations
The Department of Fair Employment and Housing (DFEH) has instituted new regulations relating to the procedures for filing, investigating and processing discrimination and harassment claims, which will now make it easier for claimants to file their complaints and initiate a DFEH investigation.
Currently the law requires that a complaint filed with the DFEH be “verified” which means that the employee filing the complaint must sign under penalty of perjury that the allegations are true and correct. Under the revisions, the claimant is no longer required to sign the complaint personally. Instead, the complaint can be signed by the claimant’s attorney or other designated representative.
The DFEH will also accept an unsigned complaint if neither the claimant nor an authorized representative can sign it before the statute of limitations expires.
The revisions to the law also permit a more liberal interpretation of the claims so that the DFEH has discretion to expand the scope of their investigation beyond the specific allegations asserted.
For example, if complaint only alleges discrimination, but based on the facts stated, the DFEH believes that the facts support a claim of retaliation, the DFEH will interpret the complaint to allege both discrimination and retaliation. As a result, it will be more difficult for employers to dismiss claims on the ground that the employee never raised the claim before the DFEH.
Computer Software Employee –
New Wage Rate for Exemption
Effective January 1, 2012, the DLSE announced a $.95 increase in the hourly rate for computer professionals, from $37.94 to $38.89 per hour. The monthly rate increases $164.69, from $6,587.50 to $6,752.19 per month. Finally, the annual salary increases $1,976.25, from $79,050 to $81,026.25 per year.
Supply Chain Security Law
for Retailers and Manufacturers
The California State Legislature enacted California law S657, entitled Supply Chain Security Law which requires California retailers and manufacturers to inform the public about their efforts to combat slavery and human trafficking which is a component of the C-TPAT (Customs Trade Partnership Against Terrorism ) program.
If you have operations or in any manner are doing business within the state of California, your Company must comply with the new C-TPAT Supply Chain Security Law which covers not only California retailers and manufacturers, but also all vendors, agents, warehouses who store good and transportation carriers transporting goods within or through California.
The requirements of the new law encompass two steps:
a) Post information on the home page of the company’s website which states how the company is combating human trafficking. The home page may provide a link to another portion of your website where the details are located, but the initial link must be on the home page.
If your company does not have a website, then you must comply within 30 days of receipt of any request for this information.
b) Establish a compliance program that meets the specific mandates of the law. The required details of the program must identify what your company is doing with its supply chain to “evaluate and address risks of human trafficking and slavery”. Any of your suppliers must be “audited” to evaluate their compliance efforts to conform to company standards to combat human trafficking and slavery. Direct suppliers (domestic and International) must “certify” that materials incorporated into their product comply with their local laws.
Any violation of the law will be enforced by the California Attorney General. Enforcement may be in the form of an injunction along with other potential remedies. The Franchise Tax Board will be providing a list of retailers and manufacturers who must comply to the Attorney General’s office on an annual basis.