A number of new laws have been recently enacted. California employers will need to take prompt action to review and revise certain of their employment policies and practices. The following is a summary of the new laws that will have the greatest impact on California employers.

A New Contract Requirement for Employees Who Receive Commissions 

AB 1396, enacted in 2011, goes into effect on January 1, 2013. This law requires employers who pay employees via commission to memorialize the commission arrangement in a written contract that:

  1. Includes the method for calculating the commissions;
  2. Includes a description of when the commissions will be deemed earned and how they will be paid; and
  3. Requires the employee to sign a "receipt" retained by the employer.

The commission contract remains in effect until a new commission plan has superseded it or employment terminates, even if the old plan expires.

Out-of-state companies that have no physical facilities in California will be subject to this requirement with respect to any commissioned employees who work in California.

What types of payments are considered commissions under the new law?

“Commission 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.” Excluded are short term productivity bonuses such as those paid to retail clerks or bonus and profit sharing plans, unless the employer has offered to pay a fixed percentage of sales or profits as compensation but language is imprecise.

A 2012 amendment provides that the term "commissions" does not include "[t]emporary, variable incentive payments that increase, but do not decrease, payment under the written contract."

What To Do

Employers should begin preparing written agreements so that they can be in place by January 2013. Even though some bonus plans may not come within the general requirements, it is best to treat all non-discretionary commission and bonus plans as coming within the statute and to confirm the specifics of these arrangements in signed written agreements.

Providing Personnel Records Under Labor Code § 1198.5

Under current law, Labor Code § 1198.5 provides employees the right to inspect, "within a reasonable time." AB 2674 imposes specific requirements on how and when employers respond to employees' requests for inspection and copying of their personnel files:

  • The request may be made by an employee's "representative.
  • Employers must provide a copy of personnel records or make them available for inspection within 30 calendar days of a written request.
  • The request must be in writing. Employers also must provide a request form for employees' use,
  • Inspection by current employees must be provided at the place where the employee reports to work
  • For former employees, inspection must be provided at the location where the employer stores the records, unless the parties mutually agree to a different location.
  • For former employees terminated for a violation of law or policy ,harassment or workplace violence, employers may make the personnel records available at a location other than the workplace or provide a copy by mail.
  • Employers must maintain copies of personnel records for a minimum of three years after termination.
  • Employers may redact the names of any nonsupervisory employees.

The requirements do not apply to:

  1. Records relating to the investigation of a possible criminal offense;
  2. Letters of reference;
  3. Ratings, reports, or records obtained prior to the employee's employment, or obtained in connection with a promotional examination.

When an employee requests a copy of the itemized wage statements, the employer must produce a copy that is actually a duplicate of the original itemized statements or a computer-generated record that contains all of the same information

An employer that fails to comply is liable to the employee or the Labor Commissioner for a penalty of $750, plus injunctive relief and attorneys' fees.

What To Do

Human Resource personnel should be trained regarding the new requirements. A request form to obtain inspection or a copy of personnel records should be created. Requests should be tracked to insure compliance with time limits.

Religious Dress and Grooming Practices 

AB 1964 amends the Fair Employment and Housing Act (FEHA) providing changes related to religious dress and grooming practices:

  1. Expands the definition of "religion" and "religious creed" to include "religious dress practice" and "religious grooming practice." Included would be wearing or carrying of religious clothing, head or face coverings, jewelry, artifacts, etc. "Religious grooming practice" would include all forms of head, facial, and body hair that are part of the religious observance.
  2. Requires employers to accommodate employees' religious dress and grooming practices unless the employer can show an "undue hardship." The bill incorporates the "undue hardship" standard.
  3. Contains a specific proviso: "An accommodation of an individual's religious dress practice or religious grooming practice is not reasonable if the accommodation requires segregation of the individual from other employees or the public."

What To Do

While the bill is meant to preempt other preexisting health and safety requirements or to exempt employees from such local, state, and federal regulations, employers should focus on policies regarding uniforms and standards of appearance. Careful consideration should be given to any request for accommodation of religious clothing, piercings, and jewelry or grooming.

Restriction on Employer Requests for Access to Social Media

AB 1844 provides that employers may not do the following:

  1. Require or request that an employee or job applicant disclose a username or password;
  2. Require employees to access personal social media in the employer's presence;
  3. Require employees to divulge personal social media.

Employers still may do the following:

  1. Request access to social media that may be relevant to an investigation of employee misconduct or violations of law—but the social media can be used solely for those purposes;
  2. Request disclosure of an employee's username or password for the purpose of accessing an electronic device that was issued by the employer.

The new law also contains an anti-retaliation provision.

What To Do

Employers should understand the limitations imposed under this new law. At the same time employers need to provide employees with specific guidance on permissible social media use.

Also employers need to be mindful of their employees' right to engage in concerted activities under Section 7 of the National Labor Relations Act (NLRA). The NLRB has found that employers have violated the NLRA by disciplining or terminating employees based on online activity that is deemed to be "concerted" and protected by Section 7.