Thirteen New California Laws Will Affect Employers With Operations In The State - Employee Rights/ Labour Relations

Throughout September, California Governor Jerry Brown signed hundreds of bills amending existing laws or enacting new laws. Thirteen of these new laws amend the wage and hour and other provisions of the California Labor Code, the California Fair Employment and Housing Act, and other California laws relevant to employers. Although accomplished with little fanfare and publicity, these new laws significantly expand certain employee rights. Most of these new provisions take effect on January 1, 2013. Employers with operations in California should take note.

Assembly Bill 1844 (Prevention of Access to Employee Personal Social Media)

AB 1844 adds a new section 980 to the California Labor Code. The law prohibits an employer from requiring or requesting that an applicant or employee:

disclose a username or password to personal social media;
access his or her personal social media in the presence of the employer so the employer can view it; or
"divulge" personal social media to the employer.

The law provides just two exceptions to these prohibitions: (1) an employer may request (but not require) an existing employee to divulge personal social media if the employer reasonably believes the disclosure would be relevant in an investigation of suspected misconduct by the employee, but only if the social media is used solely for purposes of that investigation or a related proceeding; and (2) an employee may be required to disclose a username, password, or other security setting needed to access an electronic device (e.g., laptop computer, iPad or cell phone) provided to the employee by the employer.

The law broadly defines "social media" as meaning any electronic service or account, or electronic content. This specifically includes, but is not limited to "videos, still photographs, blogs, video blogs, podcasts, instant and text messages, email, online services or accounts, or Internet Web site profiles or locations."

AB 1844 makes it unlawful for an employer to discharge, discipline, threaten to discharge or discipline, or retaliate against an applicant or employee for not complying with a request or demand that violates the law. However, the law does not prohibit an employer from taking an adverse employment action against an applicant or employee based on information it was lawfully permitted to obtain. Presumably this would allow an employer to conduct a search of publicly available information on websites, such as Facebook and LinkedIn, to obtain information about an applicant or employee.

Employers should audit their existing recruiting and investigation practices to ensure compliance with the requirements of this new law.

Senate Bill 1255 (Remedies for Failure to Provide Required Wage Statements)

Current law provides for the recovery of actual damages or statutory penalties up to an aggregate penalty of $4,000 in connection with any "injury" resulting from an employer's "knowing and intentional" failure to provide a wage statement (paystub) that complies with the requirements of Labor Code section 226(a). However, the law does not define the terms "injury" and "knowing and intentional," and this has led to a rash of class action lawsuits based on allegedly deficient paystubs.

SB 1255 provides that an employee is deemed to have suffered an "injury" for purposes of Labor Code section 226 when either "the employer fails to provide a wage statement" or "the employer fails to provide accurate or complete information as required by any one or more of [the nine items listed in Labor Code 226(a)] and the employee cannot promptly and easily determine from the wage statement alone" one or more of those nine items. With respect to deductions, the statement must show which deductions the employer made to determine the net wage, although an employer retains the ability to aggregate deductions "consistent with" 226(a)(4) which allows employers to aggregate and show as one item "all deductions made on written orders of [an] employee." With respect to the employer name and address requirement, if the employer is a farm labor contractor, the statement must show legal entity that secured the contractor. The bill now expressly requires that the statement may contain only the last four digits of an employee's social security number, although an employer may still show "an employee identification number other than a social security number."

"Promptly and easily" as used in the new law is defined to mean that "a reasonable person would be able to readily ascertain the information without reference to other documents or information."

The law states that a "knowing and intentional failure" does not include "isolated and unintentional payroll errors due to a clerical or inadvertent mistake." It also provides that in determining whether a violation has occurred, the fact finder may consider whether the employer adopted policies, procedures and practices to insure compliance with Labor Code section 226.

Employers should have their wage statements and related policies, procedures, and practices audited to insure compliance with the law.

Assembly Bill 1744 (Wage Statements and Employment Notices for Employees of Temporary Labor Providers)

AB 1744 adds a paystub information requirement for temporary labor employers. In addition to the nine other items of information required on a paystub under Labor Code section 226(a), for temporary workers the paystub must include (1) the rate of pay for each temporary assignment during the pay period, and (2) the total hours worked for each legal entity to which the temporary worker was assigned.

AB 1744 also amends Labor Code section 2810.5 (Wage Theft Prevention Act), which took effect earlier this year, requiring temporary worker employers to provide the following additional information in their notices to employees: the name, the physical address of the main office, the mailing address if different from the physical address of the main office, and the telephone number of the legal entity to which the temporary worker will be assigned. Security services providers are exempt from this requirement.

To give temporary labor employers providers time to modify their paystubs, unlike most of the new laws, this amendment to Labor Code 226 does not take effect until July 1, 2013.

Assembly Bill 2674 (Entitlement to Copy of Wage Statements and Certain Personnel Records)

Labor Code section 226(a) currently requires an employer to keep a "copy" of itemized employee wage statements containing specified information for a minimum of three years. AB 2674 amends the law to provide that the term "copy" means a duplicate of the itemized wage statement or a computer generated record that accurately shows all required information.

More importantly, AB 2674 also makes significant changes to Labor Code section 1198.5, which governs the right of a current or former employee to inspect certain personnel records relating to them.

Specifically, the new law:

Requires employers to provide the current or former employee with a copy of the specified personnel records, though it can require reimbursement of the actual copying costs. Current law only requires that the records be made available for inspection, i.e., review.
Allows a request for a copy of the personnel records to come from a "representative" of the current or former employee.
Establishes a time frame for the inspection and providing of a copy of the personnel records: the inspection must be allowed and copy provided within 30 calendar days after the employer receives the written request, unless the parties agree to an extension that does not extend the date of inspection/providing of the copy to more than 35 calendar days after the employer's receipt of the written request.
Allows the employer to create and provide a form to request the inspection and a copy of the personnel record, but if it creates a form, it must allow the current or former employee or representative to verbally request a copy from the employee's supervisor or a person designated by the employer to receive such requests.
Requires retention of the specified personnel records for a minimum of three years after termination of employment.
Requires that the personnel records be made available for inspection by a current employee at his or her work location or another location agreeable to the parties, but if it occurs at another location, the employee's time travel to and from that location is compensable.
Allows the employer to make the personnel records available for inspection by a former employee at the place where the records are stored, unless the parties agree to another location, or the former employee can obtain a copy by mail if he or she reimburses the employer for the actual postage expenses, and if the employee was terminated for a violation of law or employment policy involving harassment or workplace violence, the employer can make the records available at a location other than one of the company's offices as long as the location is a "reasonable" driving distance from the former employee's residence or the employer can mail a copy but not charge for the mailing expenses.
Limits such requests to once per year.
Allows the employer to verify that a "representative" in fact has been authorized by the current or former employee to make the request.
Allows the employer to designate a person to whom such requests are to be made.
Allows the employer to redact the name of any non-supervisorial employee contained in the personnel records prior to allowing the inspection or providing a copy.
Suspends the right of a current or former employee to obtain a copy of his or her personnel records pursuant to Labor Code section 1198.5 during the period any employment related lawsuit is pending.

The law provides a civil penalty of $750 for violations. It also authorizes the current or former employee to bring a civil action for injunctive relief to obtain compliance and allows for the recovery costs and reasonable attorneys' fees in connection with such an action. Current law makes violation of Labor Code section 1198.5 a criminal misdemeanor. Under the new law, the criminal penalty is reduced to an infraction.

Assembly Bills 1964 and 2386 (Discrimination Based on Religious Dress or Grooming Practices and Breast Feeding)

California's Fair Employment and Housing Act (FEHA), which is the most expansive employment discrimination law in the nation, has been expanded again.

Under current law, employers are required to reasonably accommodate bona fide religious beliefs, observances and practices of employees, unless doing so would present an undue hardship. AB 1964 expands the definition of a "belief, observance, or practice" to include "religious dress practices" and "religious grooming standards." These terms are broadly defined as including the wearing or carrying of religious clothing, head or face coverings, jewelry, and the wearing of all forms of head, facial and body hair in observance of the employee's religion.

AB 1964 provides two limited exceptions. An employer is not required to accommodate an employee's religious dress or grooming practice if doing so would (1) require the employee to be segregated from the public or other employees, or (2) constitute a violation of some other law prohibiting discrimination or protecting civil rights.

AB 2386 expands the prohibition of discrimination based on "sex" to include discrimination against a female employee who is breastfeeding or has a medical condition related to breast feeding.

Assembly Bill 2103 (Fixed Salaries to Nonexempt Employees)

Labor Code section 515(d) provides that for the purpose of computing the overtime rate of pay to a nonexempt full-time salaried employee, the employee's regular hourly rate shall be 1/40th of the employee's weekly salary. However, under the so called explicit mutual wage agreement doctrine, a creature of California case law, an employer and a nonexempt employee may enter an explicit agreement for a fixed salary that covers both the basic hourly rate of compensation for all straight-time hours and an amount to cover expected overtime hours. The seeming conflict between Labor Code section 515(d) and the explicit mutual wage agreement doctrine was addressed in Arechiga v. Dolores Press, 192 Cal. App. 4th 567 (2011), and the California Court of Appeal ruled that Labor Code section 515(d) does not prevent an explicit mutual wage agreement that provides for base compensation and overtime in one lump sum.

AB 2103 legislatively overturns Arechiga. The law amends Labor Code section 515(d) to provide that a fixed salary to a nonexempt employee is for the employee's non-overtime hours only, "notwithstanding any private agreement to the contrary."

Senate Bill 1234 (State-Run Employee Retirement Savings Program)

Dubbed the California Secure Choice Retirement Savings Trust Act, SB 1234 would create the nation's first mandatory state-run retirement savings program for private sector workers. Though signed by the governor, the law will only become operative if the board of the retirement program created by the law determines based on a market analysis that the program will be self-sustaining, and that enough money is initially provided by private entities, federal funding, or state funding to allow it to be fully implemented. And the board cannot implement the program if the employee accounts fail to qualify for favorable tax treatment as Individual Retirement Accounts under the federal tax code or it is determined that the program is an "employee benefit plan" under ERISA.

If the law takes effect, it will apply to all employers with five or more employees and who are "engaged in a business . . . in the state," and requires these employers to have a payroll deposit program that directly deposits 3% of an eligible employee's pay into a portable employee retirement investment account established by the California Secure Choice Retirement Savings Investment Board, unless the employer already offers an employer-sponsored retirement plan or automatic enrollment payroll deduction IRA (but even then, the employer can choose to allow its eligible employees to participate in the state-run plan as well). Employees of covered employers are eligible to participate in the retirement program unless they are: (1) covered under the federal Railway Labor Act, (2) covered by a collective bargaining agreement that provides for participation in a multi-employer pension plan, or (3) are employed in a position in interstate commerce that is not subject to state regulation.

Once the retirement fund is established by the state, employers who are not exempt from the law will need to establish arrangements for employee participation within a set time period of time based on the size of the employer: three months for employers with more than 100 eligible employees, six months for those with more than 50 and up to 100 eligible employees, and nine months for those with five and up to 50 eligible employees.

Employers will retain the option of setting up an employer sponsored retirement plan and not participating in the program.

If an employer chooses or is required to participate in the plan, all of its eligible employees must participate in the program unless they submit an opt-out form. A participating employer must designate a biannual open enrollment period during which employees who initially elected to opt out will be enrolled unless they opt out again. Employees who have opted out can only enroll during the open enrollment period. However, participating employees will be allowed to terminate their participation in the program at any time by submitting a completed opt-out form.

Participating employers will be allowed to make contributions to their employees' accounts in addition to the mandatory employee-funded contributions, provided that the contributions would be permitted under the Internal Revenue Code and not cause the program to be subject to jurisdiction under ERISA.

The law shields employers from liability for employees' decisions to participate in or opt out of the program, or for the investment decisions of employees who participate in the retirement program.

Employers who fail to have a required direct deposit arrangement in place for employee contributions are subject to civil penalties in the amount of $500 per eligible employee, unless they establish "good cause" for the failure to have the arrangements in place.

Assembly Bill 1817 (Mandatory Child Abuse Reporting Extended To Computer Technicians)

California's Child Abuse and Neglect Reporting Act makes it a crime for a "mandated reporter" to fail to report to law enforcement any instance when the person knows or reasonably suspects a child has been the victim of abuse or neglect as a result of some observation or information learned as a result of the person's professional capacity or employment. AB 1817 adds "commercial computer technicians" to the list of mandated reporters. A "commercial computer technician" is broadly defined as a person who works for a company that charges a fee for "repairing, installing, or otherwise servicing a computer or computer component, including, but not limited to, a computer part, device, memory storage or recording mechanism, auxiliary storage recording or memory capacity, or any other material relating to the operation of a computer or computer network system . . . ."

To encourage reporting, the law immunizes a covered computer technician form civil or criminal liability if he or she provides a computer or computer component to an investigating law enforcement agency pursuant to a warrant.

An employer of covered computer technicians may establish a reporting program to facilitate reporting to law enforcement. If such a program is established, a single employee must be designated to receive the reports from the computer technicians, and that person then has the obligation to notify law enforcement of suspected child abuse and is subject to prosecution if he or she fails to do so. If such a program is established and a covered computer technician has followed the employer's reporting procedure, the employee is deemed to have satisfied his or her obligations under the law.

Assembly Bill 2492 (California False Claims Act)

The California False Claims Act (the "FCA") prohibits the submission of "false claims" for money, property, or services to the state by a government contractor or vendor, and subjects a violator to claims for damages and civil penalties. Existing law authorizes a current or former employee or other person who has direct and independent knowledge of the fraud to bring or assist the government in bringing a false claims action, and to receive or share in any recovery. AB 2492 expands who can bring claims under the FCA and gives monetary incentives to current and former employees and others to make reports of false claims to the state. Specifically:

Under the current law, a court has no jurisdiction over a claim under the FCA unless it is brought by the Attorney General (or other government prosecutorial authority) or the person who was the "original source" of the information. However, the new law allows individuals other than the "original source" (i.e., individuals without direct knowledge) to bring such claims by prohibiting a court from dismissing these claims based on a lack of jurisdiction if the Attorney General (or other government prosecutorial authority) opposes the dismissal of the action.
Under existing law, no portion of the minimum monetary penalty may be given to the "whistleblower" if the person "actively participated" in the fraud. However, under AB 2492, this limitation applies only to those who "planned and initiated" the fraud, and even then, the court has discretion to award something.
To deter frivolous accusations, under existing law, a prevailing defendant may be awarded attorney fees even when the state has brought the action. However, under the new law, a prevailing defendant may only recover its attorney's fees if the government has declined to participate in the action.
The current employee anti-retaliation provisions of the FCA do not include the possibility of reinstatement of employment and are limited to adverse actions taken against employees for acts specifically "in furtherance of a false claims action." The new law includes reinstatement as a remedy and expands the protections to anyone who has engaged in any "efforts to stop one or more violations."
The new law also increases the range of monetary civil penalties by $500 on both ends of the range. The new range is $5,500 - $11,000 per violation.

Assembly Bill 1875 (Limitation on Length of Depositions in Civil Court Cases)

Currently depositions in civil cases filed in California state courts are not subject to any time limits, but in cases filed in federal court there is a seven hour limit unless the parties agree to or the court approves a longer deposition. AB 1875 establishes a similar seven hour limit for depositions in California state court cases, which, as in federal court cases, can be extended by agreement of the parties or court order. Significant to employers, the new law exempts depositions of "witnesses in cases brought by an employee or applicant for employment against an employer for acts or omissions arising out of or relating to the employment relationship." Exemptions also are provided for depositions of expert witnesses, witnesses in complex cases, and witnesses designated by a company as the person most knowledgeable to testify on specified topics.

Assembly Bill 1775 (Employee Wage Garnishment)

Currently California ties amount of an employee's wages that may be garnished to federal law, which limits a garnishment to the lesser of 25% of an individual's weekly disposable earnings (the amount left after legally required tax withholdings) and the amount by which the individual's disposable earnings for the week exceed 30 times the federal minimum hourly wage in effect at the time the earnings are payable. AB 1775 changes this and limits garnishments to the lesser of 25% of the individual's weekly disposable earnings and the amount by which the individual's disposable earnings for the week exceed 40 times the state minimum hourly wage in effect at the time the earnings are payable. Additionally, for any pay period other than weekly (such as daily, biweekly semi-monthly or monthly), the new law requires the use of certain multipliers to determine a maximum amount subject to garnishment that is proportional in effect to a calculation based on the amount by which the individual's earnings for a workweek exceed 40 times the state minimum wage.

Assembly Bill 2274 (Vexatious Pro Per Litigants)

Employers are sometimes subjected to frivolous lawsuits by disgruntled former employees who represent themselves or continue on their own after a lawyer who initially represented the plaintiff withdraws. Current law allows a defendant to request that the court order a vexatious plaintiff (defined as a plaintiff who filed the action himself or herself, i.e., "pro per") to post a bond or other security to cover a potential cost award against the pro per plaintiff. The defendant must show that there is not a reasonable probability that the pro per plaintiff will prevail in the lawsuit. However, this does not end the case, and the defendant must continue incurring attorneys' fees and other expenses that may not be recoverable after prevailing, and it is not available if the pro per plaintiff was initially represented by a lawyer. AB 2274 changes this by authorizing a court to dismiss a lawsuit by a pro per plaintiff (even if the pro per plaintiff was represented by counsel at the time the lawsuit was filed) where it is shown that the action has no merit and has been filed for the purposes of harassment or delay.

Reminder

Assembly Bill 1396 (Written Contracts Required For Commission-Paid Employees)

Former Labor Code section 2751 required out-of-state employers to have written contracts with their California employees "where the contemplated method of payment of the employee[s] involves commissions," including "the method by which the commissions shall be computed and paid." The law was held to violate the Commerce Clause of the United States Constitution in Lett v. Paymentech, Inc., 81 F. Supp. 2d 992 (N.D. Cal. 1999), because it treated California-based companies more favorably than employers who had no fixed place of business in California. AB 1396, which was signed into law by Governor Brown, last year corrected this defect in the law by imposing the same requirements on California employers.

Effective January 1, 2013, both California and non-California-based employers must have written contracts with employees in California who are paid in whole or in part on a commission basis.

Employers should review all employee commission arrangements to insure compliance with the law.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

United States: Thirteen New California Laws Will Affect Employers With Operations In The State