Recently, Governor Brown signed into law a few key bills that mark significant changes for California employers. Employers should prepare now to comply with these new laws (most of which become effective January 1, 2012) and adjust their practices accordingly. Full texts of each of these laws can be found at: http://leginfo.legislature.ca.gov/faces/homeTemplate.xhtml.

“Wage Theft Prevention Act” – Assembly Bill 469

This law creates Labor Code section 2810.5, requiring private employers to provide new hires with written notice of various information about their pay, including: (1) rates of pay, whether paid by hour, shift, day, week, salary, piece commission or otherwise, including overtime rates; (2) any allowances claimed as part of minimum wage; (3) payday information; and (4) information about the employer, including its name, any “doing business as” names, address, telephone number, and the address and telephone number of its workers’ compensation insurance carrier. Employers must then provide employees with notice of any changes to this information within seven days. The notice is not required for exempt and/or public employees.

AB 469 also increases the statute of limitations for the DLSE to collect penalties for non-compliance with employers’ wage obligations from one to three years.

Commission Agreements – Assembly Bill 1396

AB 1396 requires employers who pay employees commissions to: (1) have a written contract with the employee regarding commissions; (2) include the method for calculating the commissions; and (3) require the employee sign a “receipt” retained by the employer. The commission contract remains in effect until it is superseded by a new agreement or employment terminates, even if the old plan expires. “Commissions” is defined to include employee bonuses that are factored as fixed percentages of sales or profits. This law takes effect in January 2013.

Employer Credit Checks – Assembly Bill 22

This new law bans most employers (other than financial institutions or businesses required by law to perform credit checks) from obtaining credit information about applicants or employees, except in limited circumstances. The law does not preclude criminal background checks, references, etc.äóîonly obtaining credit information. It does not apply to managers covered by the executive exemption (potentially creating another basis for liability where there is a dispute over misclassification), to law enforcement positions, and to positions involving access to confidential or proprietary “trade secret” information. There are a few other exceptions as well.

Independent Contractor Misclassification – Senate Bill 459

SB 459 imposes a fine of between $5000 and $25,000 for “willfully” misclassifying workers as an independent contractor. It also makes it a crime and imposes joint liability for a non-attorney consultant to advise an employer to do so. Employers also will no longer be permitted to make deductions from contractors’ pay that could not be made if the contractors were employees. The law defines “willful misclassification” as “avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.”

“E-Verify” – Assembly Bill 1236

This new law allows employers to use “E-Verify” to confirm employees’ work eligibility, but prohibits cities or counties from requiring private employers to do so.

Employee Medical Leave – Assembly Bill 592 and Senate Bill 299

These new laws make it unlawful for employers to interfere with employees’ rights under the California Family Rights Act (“CFRA”) and California’s Pregnancy Disability Leave (“PDL”) law. SB 299 also requires employers to extend group health coverage to employees taking PDL for the entire four month duration of PDL. The extension of health coverage will apply even if there is no CFRA entitlement. So, it appears that the 12-week cap on employer-paid health insurance benefits that previously applied to employees on combined PDL/CFRA leave no longer applies.

Definition of “Gender” – Assembly Bill 887

AB 887 further defines the term “gender” in a variety of existing laws, including for purposes of employee discrimination and harassment claims under the California Fair Employment and Housing Act (“FEHA”). The new law makes clear that discrimination on the basis of gender identity and gender expression is illegal. “Gender expression” means a person’s gender-related appearance and behavior, whether or not stereotypically associated with the person’s assigned sex at birth. This means that employees must be permitted to dress and act at work in a manner consistent with their gender expression, even if not associated with their biological sex.

Vetoed Legislation

In addition to passing the above laws, the Governor also vetoed several employment-related bills, including legislation that would have:

  • Guaranteed employee bereavement leave (AB 325)
  • Invalidated forum selection and choice of law provisions in employment contracts (AB 267)
  • Restricted employer’s ability to use debit cards to pay employee wages (SB 931)
  • Limited judicial discretion to reduce or deny attorneys fee awards for FEHA claims (AB 559); and
  • Reformed various aspects of the California workers’ compensation system (AB 211, 584, 947 and 1155)

Many of these bills may resurface in the next legislative session.

Employers with California operations should pay close attention to these new developments, and update applicable policies and procedures as needed

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