In October 2011, Governor Jerry Brown signed into law 22 employment-related bills that will affect businesses employing workers in California. Most of these new laws will go into effect on January 1, 2012. The most significant are summarized below.

Starting in 2013, Commission Agreements Must Be in Writing

A.B. 1396 requires that all employment relationships that involve payment of commissions “shall be in writing and shall set forth the method by which the commissions shall be computed and paid.” Employees must be provided a signed copy of the commission agreement, and employers must obtain a signed receipt from each employee. Commission agreements and their terms “are presumed to remain in full force and effect until the contract is superseded or the employment is terminated by either party.” Unlike most of the other new employment laws, A.B. 1396 was meant to provide employers with a “safe harbor” period, and employers have until January 1, 2013, to bring their policies into compliance. 

New Penalties for Willful Misclassification of Employees as Independent Contractors

S.B. 459 prohibits employers from willfully classifying an employee as an independent contractor. The new law imposes penalties of between $5,000 and $25,000 per violation and also requires employers to publish findings of violations of the new law prominently on company Web sites. If the company does not have a Web site, the notice must be posted prominently in an area accessible to all employees and the general public at the location where the violation occurred. With this law, the California legislature is sending a strong message to employers to scrutinize their independent contractor classifications.

Domestic Partners of California Employees Must Be Covered Under Health Insurance Plans Issued to Out-Of-State Employers

California’s Insurance Equality Act already required that insurance policies marketed, issued, or delivered to California residents provide the same coverage for registered domestic partners as for spouses. However, up until the passage of the new S.B. 757, out-of-state policies issued to employers who maintain their principal place of business and a majority of their employees outside the state were able to limit benefits to spouses. Under the new law, all group health insurance policies provided to California residents, regardless of the situs of the contract, must offer the same coverage for registered domestic partners as for spouses.

Prohibition on Discrimination Based on Gender Identity and Expression

A.B. 887 amends the Fair Employment and Housing Act to define the word “gender” as encompassing both gender identity and gender expression. Gender expression, under the statute, is a person’s “gender-related appearance and behavior,” “whether or not stereotypically associated” with the sex assigned to the person at birth. Under the new law, an employee must be permitted to dress in a manner consistent with his or her gender identity and expression. In light of this new law, trainings, updates to employee handbooks, and newly issued handbooks should state explicitly that California law does not tolerate any type of gender discrimination, including discrimination based on gender identity and gender expression. 

New "Wage Theft Prevention" Law

A.B. 469, the Wage Theft Prevention Act of 2011, requires employers to furnish non-exempt new hires with a notice stating the employee's rate or rates of pay; the basis on which wages will be calculated (hourly, daily, salary, commission, piece, etc.); allowances claimed as part of the minimum wage, if any; the employer's designated payday; overtime rates; the name of the employer, including any fictitious business names; the employer's physical and mailing addresses and phone number; and the name and contact information of the employer's worker's compensation carrier. The Labor Commissioner will provide a template that employers can use for this notice. Under the new law, employers must also notify each employee in writing of any changes made to this information within seven calendar days of the changes, unless the changes are reflected in another writing. A.B. 469, which will be codified in Section 2810.5 of the Labor Code, also imposes stricter penalties on employers for wage violations.

New Pregnancy Leave Requirements

Two new bills add additional pregnancy leave protection under California law. A.B. 592 clarifies that it is an unlawful employment practice for an employer to interfere with, restrain, or deny the exercise of any right provided under the California Family Rights Act or due to disability by pregnancy, childbirth, or related medical conditions. Under current law, female employees working for an employer with five or more employees may take up to four months of pregnancy disability leave. Under S.B. 299, employers with five or more employees must maintain and pay for health coverage under a group health plan for any eligible female employee who takes up to four months of pregnancy disability leave in a 12-month period. The employer must maintain the benefits at the same level and conditions as if the employee had worked continuously during the leave.

Employer Reliance on Consumer Credit Information Limited

Under A.B. 22, employers may not use consumer credit reports to screen applicants or employees, unless one of the exceptions set forth in the law applies. The list of exceptions includes, among others, a managerial position (defined as a position that qualifies for the executive exemption under California wage laws), a position for which credit information is required by law to be disclosed or obtained, a position that involves regular access to specified personal information, a position in which the person would be a named signatory on the employer's bank or credit card account (or given authority to transfer money or enter financial contracts on the employer's behalf), a position that involves access to confidential or proprietary information defined as a trade secret under the California Civil Code, and a position that involves regular access to cash totaling $10,000 or more that belongs to the employer or a client/customer. Employers must also provide advance written notice to applicants or employees stating the applicable exception, informing them of the source of the report, and providing a box to check for them to request a free copy of the report.

Restrictions on Governmental Ability To Require Use of E-Verify

Many employers have become familiar with E-Verify, a Web-based system that allows employers to verify the work authorization of new employees by checking information on the Employment Eligibility Verification Form I-9 with Department of Homeland Security and Social Security Administration databases . A.B. 1236, referred to as the “Employment Acceleration Act of 2011,” opposes E-Verify mandates and prohibits – except as required by federal law or as a condition of receiving federal funds – cities, counties, and special districts in California from requiring employers to use E-Verify or other electronic employment eligibility verification systems.

Organ and Bone Marrow Donor Leave Clarified

California law already required that employers with 15 or more employees permit employees to take a protected, paid leave for the purposes of bone marrow or organ donation. The recently passed S.B. 272 clarifies the current leave rules for organ and bone marrow donation by amending California Labor Code Section 1510 to make clear that both the 30-day leave it provides for organ donation and the five-day leave it provides for bone marrow donation are measured in terms of business days, not calendar days. In addition, S.B. 272 further makes clear that the one-year period within which the leave is guaranteed is a rolling 12-month period that runs from the first day of the employee’s leave.