Effective January 1, 2013, new employment laws will affect both public and private employers with employees working in California. While only a few of these new laws require immediate attention from most employers, the other changes should still be digested to foster a general awareness of California’s stringent — and ever evolving — employment laws and regulations. Several proposed bills that were expected to pass were not signed into law, including AB 889, which would have required overtime pay and meal and rest break protections for domestic workers, and AB 1450, which would have prohibited “discrimination” based on unemployment status. Although Governor Jerry Brown vetoed some of the more controversial bills, employers should continue to expect a pro-employee climate in Sacramento.

IMMEDIATE ATTENTION

COMMISSIONS

New Requirements For “Commissions” (AB 1396, AB 2675)

Enacted in 2011, but effective January 1, 2013, AB 1396 requires that all in-state and out-ofstate employers paying commissions to employees working in California provide them with written “contracts” setting forth both the formula for calculating commissions as well as the method of payment; employers must also retain signed receipts of such agreements from employees. Under Labor Code §204.1, “[c]ommission wages are compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount or value thereof.” An amendment to this not-yet-effective law was passed in September 2012 to clarify that “commissions” do not include shortterm productivity bonuses or profit-sharing plans, unless an employer offers to pay a fixed percentage of sales or profits as compensation. AB 1396 provides that if the commissions contract expires and the parties continue to perform without change, its terms will remain in full force and effect. Although neither AB 1396 nor AB 2675 expressly provides for any statutory liability, employers may still face penalties under California’s Private Attorneys General Act (PAGA) in the amount of US$100 for each affected employee for an initial violation, and US$200 per employee for each period thereafter.  

ACTION ITEMS: Review variable compensation plans to determine if they qualify as commission plans; and if so, begin preparing commission plans to be effective no later than January 1, 2013. Provide and retain signed agreements for all employees receiving any kind of proportional performance-based compensation. (Such agreements should also clearly set forth, where applicable, that the employees are “at will.”)

OVERTIME

Non-Exempt Salaried Employees Entitled To Overtime Pay (AB 2103)

AB 2103 provides that payment of a fixed salary to a non-exempt employee only compensates his or her regular non-overtime hours, even if an agreement provides otherwise. This law overturns a recent California Court of Appeals decision that had found an employer and a janitor entered into a valid “explicit mutual wage agreement” that provided for a weekly salary covering both regular work hours and some overtime hours. Arechiga v. Dolores Press, Inc., 192 Cal. App. 4th 567 (2011). For purposes of calculating overtime, a non-exempt full-time employee’s regular hourly rate is 1/40th of the employee’s weekly salary under Labor Code §515(d).  

ACTION ITEM: Ensure that all non-exempt employees, salaried or hourly, complete time sheets. Ensure that any non-exempt salaried employees receive hourly overtime pay for any overtime hours. Additionally, consider converting non-exempt salaried employees to an hourly wage rate.

SOCIAL MEDIA

California Joins Growing Number of States That Prohibit Employers From Requiring or Requesting Applicants/Employees To Divulge “Social Media” (AB 1844)

AB 1844 prohibits employers from requiring or even requesting employees or applicants to disclose usernames or passwords for purposes of accessing personal social media or to access their personal social media while an employer representative watches. In 2012, fourteen states have considered similar legislation, while only two other states have enacted such laws. Under AB 1844, “social media” is expansively defined by the new law to include electronic content containing videos, still photographs, blogs, podcasts, text messages, email, or internet website profiles. Despite this law’s wide reach, employers may still require current employees to reveal passwords or usernames if necessary to access an employer-provided electronic device, or if relevant to investigate misconduct and/or legal violations.  

PERSONNEL RECORDS

New Requirements for Inspection of Personnel Records (AB 2674)

AB 2674 expands existing law allowing employee inspection of personnel records to include new copying requirements, updated timelines for employer compliance, and revised penalty provisions. Existing law requires that employers keep a copy of all itemized statements showing payment of wages to all employees for at least three years, but under AB 2674, employers can maintain a computer-generated record that includes accurate itemized statement information rather than a photocopy of the statement. The new law now requires employers to provide a copy of a current or former employee’s personnel file or make the entire file available within 30 days (or 35 days upon agreement) of receipt of such request from the employee or her representative, except if a related lawsuit is pending. Employers may redact the names of any non-supervisory employees before making the records available. The statute contains only limited protection from harassing or duplicative requests, stating that employers need not respond to more than fifty requests per month from employee “representatives.”  

PLANNING TIP: Ensure that personnel file records are in order, and respond to requests within the statutory time limit to avoid paying a US$750 penalty and facing potential claims for injunctive relief and attorney’s fees.

WAGE STATEMENTS

Up to US$4,000 “Gotcha!” Penalty Per Employee For Incomplete or Inaccurate Wage Statements; New Information Requirements For Temporary Service Employers (AB 1744, SB 1255)

Apparently effective July 1, 2013 (the drafting leaves this unclear), SB 1255 provides that an employee suffers an “injury” — and is thereby entitled to a statutorily-established penalty — if (1) an employer fails to provide a wage statement, or (2) the provided wage statement is not complete and accurate, and the employee cannot easily determine gross or net wages, deductions, the name and address of the employer, and other identifying information as further detailed in Labor Code §226. Under prior case law, an employee did not definitively suffer an “injury” if only one of the nine itemized requirements in Labor Code §226 was not included on the pay statement. However, now an employee showing that any of the nine categories of information was omitted from a pay statement will be entitled to recover US$50 for the initial pay period in which a violation occurs and US$100 for each subsequent pay period, up to US$4,000 plus costs and attorney’s fees. In conjunction with SB 1255, AB 1744 amends Labor Code §226 to add a new requirement that temporary service employers now include the name, physical address of the main office, and telephone number of the legal entity for whom the employee will perform work. This adds new pressure on employers using contingent workforces to make sure their temporary service provider is complying with wage and hour and insurance requirements.  

ACTION ITEM: Ensure that pay statements include all of the following information, as required by Labor Code §226: (1) gross wages earned; (2) total hours worked (except for salaried or exempt employees); (3) applicable piece rate units and piece rates; (4) all deductions (which may be aggregated); (5) net wages earned; (6) inclusive pay period; (7) employee name and last four digits of SSN or employee ID; (8) name and address of the legal entity serving as employer; (9) all applicable hourly rates in effect during the pay period and corresponding number of hours worked; and (10) for temporary service employers: the name, address, and telephone number of the entity (client company) where the employee will provide services.  

GENERAL AWARENESS

AGENCY REORG.

FEHA Transformed by Elimination of FEHC and Transfer of Duties to DFEH (SB 1038)

SB 1038 reconfigures enforcement of the California Fair Employment and Housing Act (FEHA) by eliminating the Fair Employment and Housing Commission effective January 1, 2013. This law creates a new Fair Employment and Housing Council within the California Department of Fair Employment and Housing (DFEH) consisting of seven members appointed by the Governor and confirmed by the Senate to promulgate regulations under FEHA. SB 1038 also allows DFEH to file cases directly in court, and parties to all cases will be required to undergo free-of-charge mandatory dispute resolution prior to filing a civil action. DFEH will also be awarded reasonable attorney’s fees and costs, including expert fees, if successful in its litigation.

PUBLIC EMPLOYER BARGAINING

New Hurdles To Clear Before Declaring Impasse Under Meyers- Milias-Brown Act (AB 1606)

AB 1606 permits public employee unions to demand that collective bargaining disputes with public employers subject to the Meyers-Milias-Brown Act (MMBA) be submitted to a fact-finding panel established by the Public Employment Relations Board (PERB). Under existing MMBA law, parties may voluntarily agree to submit bargaining disputes to mediation. As of January 1, 2012, if mediation was unsuccessful, the employee organization was able to request that the dispute be reviewed by a three-person fact-finding panel, with each party selecting one member and PERB selecting the chairperson. AB 1606 now authorizes unions to unilaterally request that a dispute be submitted to a fact-finding panel 30 to 45 days following the appointment of a mediator, or to unilaterally request that a dispute be evaluated by the panel no later than 30 days after an employer’s declaration of impasse regardless of whether a mediator was appointed. The panel’s determination is technically only “advisory,” but it will probably heavily influence any later evaluations of impasse, for example if a union challenges an employer’s decision to unilaterally implement a last, best, and final offer after reaching deadlock.  

PLANNING TIP: Expect contentious negotiations to be prolonged as unions invoke PERB fact-finding panels to conduct mini-trials on bargaining disputes, which may last up to a month or longer. In preparation, be sure to meticulously preserve all bargaining notes, proposals, and away-from-table communications. Public employers should factor these extended timeframes into their bargaining strategy, particularly for deadlocked negotiations that appear headed to impasse.  

DISCRIMINATION

Religious Dress and Grooming Now Expressly Protected (AB 1964)

AB 1964 amends FEHA to expressly protect employees’ religious dress and grooming practices as covered beliefs and observances. FEHA already required accommodation of employees’ religious expression, except in cases of undue hardship. AB 1964 is in part a reaction to recent highly-publicized cases against retailers that allegedly refused to hire employees in religious garb for customer-facing positions. AB 1964 now expressly protects religious dress, which includes the wearing or carrying of religious clothing, head or face coverings, jewelry, artifacts, and any other item that is part of the religious observance, as well as religious grooming, which broadly includes all forms of head, facial, or body hair related to a religious observance or creed. AB 1964 specifies that an accommodation may not include segregating an employee from the public or other employees. Employers seeking an exemption from these requirements—still technically available—will face an uphill battle in demonstrating an “undue hardship,” defined as one entailing “significant difficulty or expense.”  

ACTION ITEMS: Review uniform policies to ensure that there are sufficient accommodations for religious dress and grooming. Update handbooks and manager and sensitivity training materials accordingly.

DISCRIMINATION

Prohibition Against Breastfeeding Discrimination Clarified (AB 2386)

AB 2386 prohibits discrimination in employment and housing accommodations on the basis of breastfeeding by expanding FEHA’s definition of discrimination based on “sex.” Prior to this amendment, the definition of “sex” under the Act included gender, pregnancy, childbirth, and medical conditions related to pregnancy or childbirth. AB 2386 amends the definition of “sex” to include “breastfeeding and conditions related to breastfeeding.”  

ACTION ITEM: AB 2386 states that its changes are declaratory of existing law, which means that even though this amendment is technically effective January 1, 2013, employers should treat this change as effective immediately.  

CRIMINAL HISTORY INFO

New Notice Required When Taking Adverse Actions Against Applicants or Employees Based on DOJ Criminal History Reports (AB 2343)

AB 2343 now requires agencies, organizations, and individuals, such as certain healthcare institutions, that received criminal history information from the California Department of Justice to give notice to an applicant or employee who is the subject of an adverse employment, licensing, or certification decision. This new reporting requirement models those already found in the Fair Credit Reporting Act and the California Investigative Consumer Reporting Agencies Act.  

RETIREMENT

Private Pension Mandate To Be Studied and Will Go Into Effect If Subsequent Authorizing Statute is Enacted (SB 1234, SB 923)

SB 1234 was drafted to enact the California Secure Choice Retirement Savings Trust Act, which would create the California Secure Choice Retirement Savings Trust under which eligible employers would be required to offer employees the option to contribute a portion of their salary or wages to a retirement account in the California Secure Choice Retirement Savings Program. However, on the final day of the legislative session, SB 923 was amended to institute a study of the ramifications of the private pension mandate under SB 1234 and to require that any program developed under the new law not go into effect unless subsequent authorizing legislation is enacted.  

PLANNING TIP: Employers do not need to take any action at this time, but watch for new legislation authorizing SB 1234 during the next session.