Employers should closely review their employee release agreements, time recording documents and processes in light of a new California law, AB 2075, which goes into effect on January 1, 2009. Earlier this month the California Governor signed AB 2075 into law amending California Labor Code Section 206.5 and potentially exposing some employers to new liability.

Currently, Labor Code Section 206.5 prohibits an employer from requiring the “execution of a release” of a claim or right on account of wages due, or to become due, or made as an advance on wages to be earned unless payment of those wages has been made. In other words, an employer cannot condition payment of earned wages on an employee’s execution of a release, and an employee cannot waive wages owed by an employer, unless all wages have already been paid. Under existing law, a violation of this provision invalidates the release agreement and is deemed a misdemeanor. In addition, there are can be also civil ramifications.

AB 2075 amends Labor Code Section 206.5 to include a subsection (b), which redefines “execution of a release” as follows:

“For the purpose of this section, “execution of a release” includes requiring an employee, as a condition of being paid, to execute a statement of hours he or she worked during a pay period which the employer knows to be false.”

Therefore, requiring and employee to execute a false statement of hours as a condition of pay, can qualify as an execution of release subject to the existing provisions of Section 206.5. The Legislative Counsel’s Digest for AB 2075 explains the purpose of the bill as follows:

This bill would define execution of a release to include requiring an employee, as a condition of being paid, to execute a statement of the hours he or she worked during a pay period which the employer knows to be false and would make additional technical, nonsubstantive changes. By adding to what is included within the prohibition of an execution of a release, the bill would expand the crime resulting from a violation of that prohibition, thereby imposing a state-mandated local program.

Employers should review their release agreements and time keeping records for compliance with new Section 206.5(b), prior to its implementation on January 1, 2009. Please contact your California Dorsey & Whitney Labor and Employment counsel for additional information and best practices with respect to releases and wage statement certifications.