New Laws Provide Additional Protections to Employees

Winter 2011Newsletters California Update

Several employment-related bills were signed into law by Gov. Jerry Brown, all of which provide additional protections for employees. Many place new requirements on California employers, so it is important to understand how to comply with these new requirements.

AB 22: Additional Restrictions on Use of Consumer Credit Reports
This new law limits employers in how they may use consumer credit reports. The regulated consumer credit reports are those that contain any information about an individual’s credit worthiness, credit standing, or credit capacity, when they are used for employment purposes. Specifically, employers must explain the reason for the credit check in their notice and authorization form, and they may not get a credit report unless the position sought or occupied is:

  • A position in management.
  • A position in the State Department of Justice, a sworn peace officer or law enforcement.
  • A job that affords access to confidential or proprietary information.
    A job that affords regular access during the workday to the employer’s, a customer’s or a client’s cash totaling at least $10,000.
  • The employer is required by law to consider credit history information.
  • A position that requires regular access to bank or credit card account information, Social Security numbers, or dates of birth (but not if access to such information merely involves routine solicitation and processing of credit card applications in a retail establishment).
  • A position in which the employee will be a named signatory on the bank or credit card account of the employer.
  • A position in which the employee will be authorized to transfer money or authorized to enter into financial contracts on the employer’s behalf.

There are penalties for employers that fail to follow these requirements. For employers who do not run consumer credit reports, and only run criminal background checks and/or reference checks from previous employers, this new law requires only that the employer now add the reporting agency’s website to the information the employer is already required provide to the employee.

SB 459: A Prohibition on Misclassification of Independent Contractors
With increasing agency enforcement and civil suits claiming misclassification on the rise, it is important for employers to ensure that they have not misclassified employees as independent contractors. SB 459 adds additional incentive to employers to ensure proper classification. Specifically, this bill provides for the following:

  • A prohibition on “willful” misclassification of employees as independent contractors.
  • Civil penalties in the amount of $5,000 to $15,000 ($10,000 to $25,000 for an established pattern or practice) for violations of the law.
  • Labor Commissioner may assess additional civil and liquidated damages.
  • Joint and several liability for a consultant that incorrectly advises an employer to treat an employee as an independent contractor.
  • Reporting to the State Contractor's Licensing Board for contractor employers, and a requirement that the Board initiate disciplinary procedures for violators.
  • Posting of a notice on the website or in a public area of the employer for one year if found to be in violation.

Proponents of the bill praised it as a deterrent to employers intentionally misclassifying employees and as a way of leveling the playing field for those employers following the rules. Opponents cited the difficulty in properly classifying employees, and pointed to the different standards used by various state agencies as proof that properly classifying employees can be tricky. This bill, authored and promoted by labor unions, raises the penalties for employers that do not classify their employees properly, but does not give any additional guidance on how to properly classify employees.

AB 887: Gender Identity and Expression
This new law amends the Fair Employment and Housing Act (as well as various other laws) to define gender as including both 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. The law makes it clear that discrimination on the basis of gender identity and “gender expression” is prohibited. The new law also requires employers to allow an employee to appear or dress consistently with the employee’s gender expression.

AB 1396: Commission Agreements Must Be in Writing
By 2013, employers must provide a written contract when the “contemplated method of payment” will include commissions. This writing must include the method by which the commissions are to be calculated and paid, and applies only when the services will be rendered within California.

AB 469: The Wage Theft Protection Act
In October 2011, Governor Brown signed AB 469, requiring employers to provide their non-exempt employees with a notice of their pay at the time of hire and any time their pay changes. Some employees are excepted from this requirement, including exempt employees and employees covered by certain collective bargaining agreements. The law becomes effective on January 1, 2012.

The law specifically requires an employer, at the time of hiring, to provide an employee with a notice that states:

  1. The rate and the basis, whether hourly, salary, commission, or otherwise, including overtime, of the employee’s wages
  2. Allowances if any (meal/lodging allowances)
  3. Regular payday
  4. Names of the employer including any “doing business as”
  5. Address of the employer’s main office or principal place of business, and a mailing address
  6. Employer’s telephone number
  7. Name, address, and telephone number of the employer’s worker’s compensation insurance carrier and
  8. Any other information the Labor Commissioner deems material and necessary.”

Additionally, if there is a change to any of the above stated items during the employee’s employment, the employer must notify the employee in writing within 7 calendar days of the date of the change unless the change is reflected on a timely wage statement or another writing.

To comply with this law, California employers should consider:

  • amending offer letters to include the required information
  • creating new pay notice forms for new hires
  • creating new pay notices forms for any time such pay information changes, and
  • changing pay procedures to ensure employees are promptly notified when changes are made.

New penalties were enacted under this law as well, including increasing the statute of limitations for the DLSE to collect statutory penalties from one to three years. The Labor Commissioner expects to draft a template for these notice requirements. The template should ultimately be available at http://www.dir.ca.gov/dlse.

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