Once again, Governor Schwarzenegger vetoed a majority of the workplace-related bills passed by the Legislature. Only a handful of new laws will directly affect employers. We summarize those laws, various bills that may reappear in the next legislative session, and a few additional developments below.

New California Laws for 2009

Computer Exemption – Assembly Bill 10

This laws amends Labor Code section 515.5, which exempts certain employees in the computer software field from the state’s overtime laws. Prior to the amendment, only employees paid $36 per hour for every hour worked could qualify for the exemption. The new law provides that employees who meet the other requirements for the exemption may be paid an annual salary of not less than $75,000 (paid at least once a month in a monthly amount of not less than $6,250) rather than by the hour. The minimum compensation requirements will continue to be adjusted annually based on the Consumer Price Index. Employers who believe their employees may qualify for the exemption should carefully review the requirements detailed in section 515.5. As with all other overtime exemptions, the liability for misclassification is substantial and may include various penalties, interest and attorneys’ fees. This laws becomes effective immediately.

Wage Claim Releases – Assembly Bill 2075

This law modifies California Labor Code section 206.5, which already prohibits releases of any claim for wages unless payment has been made. Assembly Bill 2075 adds subsection (b), which defines “release” to include “requiring an employee, as a condition of being paid, to execute a statement of the hours he or she worked during a pay period which the employer knows to be false.” This is an important development for employers that require employees to certify their hours worked before receiving their paychecks. Employers that have adopted such a practice must ensure the reported hours are accurate and that employees the opportunity to correct their time when appropriate. This law becomes effective on January 1, 2009.

Text Messaging – Senate Bill 28

As part of a continued focus on public safety, the Governor signed this new law, which prohibits drivers from using any electronic communications device to write, send, or read any “text-based communication,” including text messages, e-mails, instant messages, etc. (You know who you are!) The fine is $20 for the first offense, and $50 for repeat offenders. Employers should update their handbooks to reflect this new law, which becomes effective on January 1, 2009.

Temporary Service Employees – Senate Bill 940

This new law modifies Labor Code section 201.3, and changes payroll practices applicable to “temporary service workers.”

As modified, section 201. 3 defines a “temporary services employer” as “an employing unit that contracts with clients or customers to supply workers to perform services for the clients or customers” and performs all of the following functions:

1. Negotiates with clients and customers for matters such as the time and place where the services are to be provided, the type of work, the working conditions, and the quality and price of the services.
2. Determines assignments or reassignments of workers, even if workers retain the right to refuse specific assignments.
3. Retains the authority to assign or reassign a worker to another client or customer when the worker is determined unacceptable by a specific client or customer.
4. Assigns or reassigns workers to perform services for clients or customers.
5. Sets the rate of pay of workers, whether or not through negotiation.
6. Pays workers from its own account or accounts.
7. Retains the right to hire and terminate workers.

However, the term “temporary services employer” does not include any of the following: (a) a bona fide nonprofit organization that provides temporary service employees to its clients; (b) a farm labor contractor, as defined in subdivision (b) of Labor Code section 1682; or (c) a garment manufacturing employer.

Employers that fit the definition of “temporary services employer” or that contract with such entities should familiarize themselves with the following new rules:

1. Unless an exception applies below, covered temporary workers must be paid on a weekly basis. Wages for the current week’s work are due on the payday of the following calendar week.
2. When an assignment is completed, the final wages for the assignment may be paid on the regular payday in the week following the completion of the assignment (not on the final day of the assignment).
3. If a temporary employee is assigned to work “day to day” from a centralized pool of workers, the employee’s wages are due at the end of each day, if (1) the employee reports to or assembles at the office of the temporary services employer or other location; (2) the employee is dispatched to a client’s worksite each day and returns to or reports to the office of the temporary services employer or other location upon completion of the assignment; (3) the employee’s work is not executive, administrative, or professional, as defined in the wage orders of the Industrial Welfare Commission;and (4) the employee’s work is not clerical.
4. Temporary employees hired as strike replacements must be paid at the end of each day of work.
5. Except as stated above, temporary services employees who are fired by a temporary agency or who quit must be paid just as any other employees (pursuant to Labor Code sections 201 and 202).
6. None of the above rules apply if the employee is assigned to a client for more than 90 days, unless the temporary agency pays the employee weekly in accordance with this new law.

Employers that use temporary agencies should ensure their vendors comply with these sections, as employees have been known to assert “joint employer” wage claims against employer and the temporary agency.

New Public Sector Legislation

In addition to the laws discussed above, the Governor signed various bills that affect the retirement and other benefits offered to public employees. Those bills may be reviewed at www.leginfo.ca.gov.

The Governor also signed Assembly Bill 3065, which permits any individual who is retired, honorably discharged from active duty because of a service related disability, or honorably discharged from active duty in the U.S. military to apply for promotional civil service examinations, including examinations for career executive assignments, if they meet the minimum qualifications. Individuals covered by the new law need not be actively employed by the state or the Legislature before applying for such examinations.

Employment-Related Legislation Vetoed in 2008

The Governor vetoed several bills this year. We summarize a few of the most significant and/or interesting ones below.

Rejection of Ledbetter v. Goodyear – Assembly Bill 437

This bill would have rejected the United States Supreme Court’s decision in Ledbetter v. Goodyear Tire and Rubber Co., Inc. regarding the statute of limitations in discrimination cases. Specifically, it would have limited the liability of employers for discriminatory pay decisions to decisions made 180 days prior to the filing of a complaint with the Department of Fair Employment and Housing.

Accommodation for Medical Marijuana Use – Assembly Bill 2279

This bill would have overturned the California Supreme Court’s decision in Ross v. RagingWire Telecommunications, Inc., in which the Court ruled that there is no duty under the Fair Employment and Housing Act to “reasonably accommodate” medical marijuana use as treatment for a “disability.” Based on that decision, employers may deny employment based on positive drug tests for marijuana, medical or otherwise. Employers should expect future challenges to the RagingWire decision.

Fair Employment and Housing Commission Damages Cap – Assembly Bill 2874

This bill would have eliminated the $150,000 damages cap for a violation of the California Civil Rights Act of 2005 asserted in an administrative hearing before the Fair Employment and Housing Commission.

Employer Restrictions on Obtaining Credit Reports – Assembly Bill 2918

This bill would have prohibited employers from requiring applicants or employees to submit to “credit checks” except in very limited circumstances.

Restrictions on Pre-employment Inquiries – Assembly Bill 3063

This bill would have would have codified additional restrictions on pre-employment inquiries regarding criminal convictions.

Independent Contractors – Senate Bill 1583

This bill would have imposed substantial penalties on consultants (but not attorneysäó_) who knowingly advise an employer to treat an individual as an independent contractor to avoid employee status.

Dead Legislation We May See Again

A number of employment-related bills never made it to the Governor’s desk this year. We may see them again, however. This includes a number of proposals relating to California’s rest break and meal period requirements; an increase in the civil penalties that may be assessed against employers that fail to comply with the lay-off notice requirements under the Cal-WARN law; and a requirement that employers provide paid sick leave to their employees. Stay tuned.

Other Developments for 2009

ADA Amendments

President Bush recently signed into law the ADA Amendments Act of 2008 (“ADAAA”), which expands the protections of the Americans with Disabilities Act (“ADA”). In short, the ADAAA is intended overturn a series of United States Supreme Court decisions that limited the scope of the ADA’s coverage. (We discussed the ADAAA in our September 24, 2008, column.)

California employers generally will not be affected by the ADAAA, because the Fair Employment and Housing Act remains more protective of employees than even the amended ADA. However, for employers with operations in other states, the passage of the ADAAA is a significant development.

San Francisco Healthcare Ordinance

In 2006, the San Francisco Board of Supervisors unanimously passed the San Francisco Health Care Security Ordinance, which contains two key components related to the regulation of health care in San Francisco: an employer health spending requirement and a government health care program funded in part by employer contributions. The employer spending requirement did become effective until January 1, 2008. That requirement has been the subject of several legal challenges since late 2007.

The Ninth Circuit Court of Appeals recently ruled that the ordinance was not preempted by ERISA, a federal law regarding employee benefits (in other words, it’s legal). Unless or until the United States Supreme Court overrules the decision (Golden Gate Restaurant Association v. San Francisco), it will probably result in more local ordinances establishing mandatory health care systems. Basically, employers will have to have different benefits coverage in different jurisdictions, pay the higher taxes, or increase coverage to the highest common denominator.

San Francisco Transportation Assistance Ordinance

In another San Francisco development, employers with 20 or more employees (regardless of location) must provide certain commuter benefits to non-exempt employees who perform at least 10 hours of work in the City each week. Employers have the following options to comply with the ordinance: (1) enroll in a pre-tax election program that allows employees to elect to have pre-taxed funds taken out of their paychecks to purchase transportation with pre-tax dollars; (2) establish an employer paid benefit program to supply employees with a transit pass for the public transit system or reimburse an employee for the equivalent amount in vanpool charges; or (3) furnish free transportation to employees in a vanpool, bus or similar multi-passenger vehicle. This law takes effect on or about December 8, 2008.

The Employee Free Choice Act

Under current law, the National Labor Relations Board will certify a union as the exclusive representative of employees under certain circumstances. However, an employer has the right to demand a secret ballot election before the union is certified. The Employee Free Choice Act would amend the National Labor Relations Act to, among other things, eliminate an employer’s right to demand a secret ballot election when a majority of employees have signed union cards (that is, cards stating that they want to join the union).

Although this bill was blocked by the Senate in 2007, depending on the outcome of the presidential election, it very likely could be become law. Non-union employers should focus now on solidifying employee relations and enhancing workplace morale. They should also consider offering union-free training for management, as well as non-supervisory staff.