New California Employment Laws 2012 pt.1

A new tidal wave of employment laws is about to flood the shores of California. On January 1, 2012, multiple new laws will take effect in California, and they will have a significant impact on the employment practices of companies with California operations.

California employers will need to take prompt action to ensure compliance, including revising employment policies and practices such as hiring and compensation practices, employee handbooks, posters, leave of absence administration, and healthcare coverage.

Credit Check

AB 22 prohibits employers and prospective employers, not including certain financial institutions, from obtaining and using consumer credit reports (credit information) about applicants or employees.

The prohibition does not apply to “managerial positions,” defined as those who qualify for the executive exemption from overtime. This exception reinforces the need to make the correct exempt/nonexempt classification at the time you decide to recruit for an open position.

The prohibition against obtaining and using credit reports also does not apply to the following:

Law enforcement positions and positions for which the information is required by law
Positions that involve regular access (other than in connection with routine solicitation and processing of credit card applications in a retail establishment) to bank or credit card information, Social Security numbers, and date of birth
Positions in which the person is, or would be, a named signatory on the employer’s bank or credit card account, or authorized to transfer money or enter into financial contracts on behalf of the employer
Positions that involve access to confidential or proprietary information, as defined
Positions that involve regular access to cash totaling $10,000 or more of the employer, a customer, or client during the workday

Pregnancy Disability Leave

SB 299 requires all employers with five or more employees 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. The benefits are at the same level and under the same conditions as if the employee had continued working during the leave period.

Under current law, employers were only required to provide benefits for pregnancy leave to the same extent and for the same length of time as they would for other temporary disability leaves. If the employer was covered by the federal Family and Medical Leave Act, it had to provide continuing coverage during the twelve weeks of FMLA leave.

The new law requires group health insurance continuation coverage for all employers with five or more employees regardless of how they treat other temporary disability leaves and regardless of FMLA coverage. Employers should review their policies to ensure compliance with this new law.

Willful Misclassification of Independent Contractors

SB 459 provides new penalties of between $5,000 to $25,000 for the “willful misclassification” of independent contractors. Willful misclassification is defined as: “avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.”

The law also imposes joint liability on non-attorney outside consultants who knowingly advise an employer to treat an individual as an independent contractor to avoid employee status.

Written Commission Agreement

AB 1396 requires employers who have commission pay arrangements to put those agreements into a signed written contract. The written contract must set forth the method by which the commissions will be computed and paid. If the contract expires but the parties keep working under the expired contract, the contract terms are presumed to remain in effect unless superseded by a new contract or the employment relationship is terminated. The bill is effective January 1, 2013. Employers have the entirety of 2012 to bring their commission agreements into compliance.

Notice of Pay Details

AB 469 requires employers to provide nonexempt employees, at the time of hire, a notice that specifies:

The rate of pay and the basis, 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 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 name, address and telephone number of the employer’s workers’ compensation carrier

The law also requires notice of any other information the Labor Commissioner deems material and necessary. The Labor Commissioner is to provide a template.

If there is any change to the information in the notice, the employer must notify each 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.

The new law only applies to nonexempt employees, which again highlights the need for properly classifying employees at the time of hire.

This legislation also increases penalties for wage violations and makes further changes regarding collection of such penalties, including an increase in the statute of limitations.

Organ and Bone Marrow Donor Leave

SB 272 clarifies the implementation of California’s organ and bone marrow donor leave law (Labor Code sections 1508-1512). Existing law provides up to 30 days of leave in a one-year period for organ donation and up to five days of 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 from the date the employee’s leave begins. Existing law states that employers can require use of sick and vacation leave, but does not mention PTO. The new legislation clarifies that employers can require the use of a specified number of earned but unused days for paid time off (PTO).

Genetic Information

SB 559 amends the Fair Employment and Housing Act (FEHA) to state that employers are prohibited from discriminating against employees on the basis of genetic information. The legislature noted that the range of protection provided by the federal Genetic Information Nondiscrimination Act (GINA) is not complete for California.

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 includes: any request for, or receipt of, genetic services, or participation in clinical research that includes genetic services, by an individual or any family member of the individual. Genetic information does not include information about the sex or age of any individual.

This 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.

Gender Expression

AB 887 amends the Fair Employment and Housing Act to further define “gender” to include both gender identity and “gender expression” and to make clear that discrimination on either basis is prohibited. Current law only uses the term gender identity. AB 887 also amends Government Code section 12949 relating to dress codes to include that an employee must be allowed to dress consistently with both the employee’s gender identity and gender expression.

“Gender expression” is defined as “a person’s gender-related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth.” This definition is not a change from existing law relating to gender identity.