Almost all of the new employment laws enacted by California Governor Jerry Brown in 2012 will become effective on January 1, 2013.  CA employers will need to take prompt action to ensure compliance.  The following is a partial list summarizing the most important employment-related changes that will affect employers’ day-to-day operations.

New law limits employer access to personal social media accounts.

CA AB 1844 enacts CA Labor Code Section 980, which prohibits CA employers from requesting or requiring employees or applicants to provide their personal social media account access information.  Employers are also prohibited from asking employees or applicants to access their personal social media accounts in the employer’s presence.  An exception permits an employer to request an employee’s personal social media information if it is reasonably believed to be relevant to an investigation of allegations of employee misconduct or violations of law or regulations.  In addition, an employer may request or require an employee to disclose a username, password, or “other method” of log-in for the purpose of accessing employer-issued electronic devices. 

Employee rights to inspect personnel files are clarified.

CA AB 2674 amends Labor Code 1198.5 to impose new and detailed employment record keeping requirements.  Employers should pay special attention to these new rules because failure to comply could be considered an infraction and could result in a $750 penalty per employee.

Currently, an employee has a right to inspect his/her personnel file containing any employee performance records or any grievances relating to the employee.  Employers are required to make the records available to an employee at “reasonable intervals” and at “reasonable times.”  The new law expands employees’ rights regarding access to personnel files such that an employee will be able to request a copy of his/her personnel records, in addition to inspecting them.  Further, former employees and representatives of current or former employees (i.e., unions and lawyers) will be able to request copies or an inspection of the records.

As of January 1, if an employee has to leave his/her place of work to inspect or receive a copy of the records, there can be no loss of compensation for the required travel time.  A current employee may request inspection or a copy of the records at his/her place of employment.  A former employee may request inspection or a copy of the records at the location where the employer stores them, at a mutually agreed-upon place, or by mail (with reimbursement to the employer for actual postal expenses).  If the former employee was terminated for violating a law or a workplace harassment or violence policy, the employer can comply with the request by bringing the records to a nonworkplace location or by mailing them.

This law also creates other obligations for employers.  Employers will have to keep personnel records for three years and make those records available for inspection or provide a copy on request no later than 30 calendar days from the date the employer received the written request.  If the employee requests a copy, the employer may charge the employee the actual cost of reproduction of the records.  Further, employers must also create and provide, if asked, a request form for employees to use when requesting inspection or a copy of their personnel records.

FEHA definition of “sex” is expanded to protect breastfeeding.

The CA Legislature has expanded the definition of “sex” in the California Fair Employment and Housing Act (FEHA), which prohibits specified discriminatory practices in employment, to include breastfeeding and medical conditions relating to breastfeeding.

Religious accommodation under FEHA is enhanced.

Under the FEHA, employers must reasonably accommodate religious beliefs and observances of their employees unless the accommodation would create an undue hardship for the employer.  AB 1964 clarifies that religious dress and grooming practices are covered “beliefs and observances.”  AB 1964 also specifies that segregation, such as assigning an employee to a stock room out of public view, will no longer be an acceptable religious accommodation.

DLSE revises WTPA notice template and FAQs.

AB 469, the CA Wage Theft Prevention Act (WTPA) of 2011, enacted Labor Code Section 2810.5 which requires employers to provide a written wage notice “at the time of hiring” to nonexempt employees.  In April 2012, the Division of Labor Standards Enforcement (DLSE) revised its original notice template and issued revised and expanded FAQs for the second time since the WTPA went into effect.  DLSE requires employers to provide the newly revised notice to employees hired after April 12, 2012.  However, employees who received the prior version do not need to be provided with the revised notice until there is a substantive change in the information provided on the prior version of the notice.  The revised notice and FAQs are available on the DLSE website: http://www.dir.ca.gov/dlse/Governor_signs_Wage_Theft_Protection_Act_of_2011.html.

The original notice required that employers specify whether the “employment agreement” was oral or written.  The revised notice will now require only that the employer indicate whether a written agreement providing the rates of pay exists and, if so, whether all rates and bases of pay are contained in the written agreement.  If there is a written employment agreement but it does not specify the rates and bases of pay, then the employer should indicate “no” on the notice.

The revised notice also makes the “Acknowledgment of Receipt” portion of the notice optional.  If an employee refuses to sign the notice, the employer should indicate the refusal on the employer’s file copy of the notice provided to the employee.

In the revised version of the FAQs, the DLSE explained that “time of hire” for purposes of providing the notice means the employer may provide the notice on any date that both the employer and employee agree is the “time of hire,” as long as it is not after the employee’s start date.

New law exempts variable incentive payments that increase, but do not decrease, from written agreement requirement.

AB 2675 will amend Labor Code Section 2751, which, starting January 1, 2013, requires any agreement involving certain sales commissions to be in writing and to set forth how the commissions are to be calculated and paid.  Currently, this requirement does not apply to short-term productivity bonuses (such as those paid to retail clerks) and certain bonus and profit-sharing plans.  AB 2675 adds a third exemption for temporary variable incentive payments that increase — but do not decrease — payment “under the written contract.”  While not entirely clear, this new exemption appears to address temporary additional “spiffs” that some employers use to motivate their commissioned salespeople to move particular merchandise in a designated time period, for example, an extra commission of $350 for each sale of 2012 merchandise in the month before the new merchandise appears.

Wage agreements to pay a fixed amount as compensation for both straight time and overtime hours are unenforceable.

CA AB 2103 amends the Labor Code and states that payment of a fixed salary to a nonexempt employee will be deemed to be payment only for the employee’s regular nonovertime hours, notwithstanding any private agreement or “explicit mutual wage agreement” to the contrary.  The legislative history of AB 2103 makes clear that its express intent is to overturn Arechiga v. Dolores Press, 192 Cal. App. 4th 567 (2011), in which a “mutual wage agreement” that specified a salary to be paid for a fixed number of regular and overtime hours per week was held enforceable under CA law.  AB 2103 adopts the CA Division of Labor Standards Enforcement position that any agreement to pay a fixed amount as compensation for both straight time and overtime hours is unenforceable and, where such an agreement exists, the fixed amount would be deemed to compensate the employee only for the first forty (40) hours of work each week.

New law seeks to establish a state-created retirement savings account.

CA SB 1234, called the CA Secure Choice Retirement Savings Trust Act (the “Act”), if/when implemented, will require private nonunionized employers without a retirement or 401(k) plan to offer eligible employees the option to contribute a portion of their salary or wages to a state-created retirement savings account.  Unless they opt out, eligible employees will be required to participate by contributing three percent of their wages to this program.  If the employer fails to enroll eligible employees, there will be a $250 penalty per employee.  The Act exposes employers to significant liability for penalties and other responsibilities associated with administering these retirement savings accounts, while forcing employees who do not opt out to divert some of their wages for retirement.

However, there are several preconditions that must be met before the Act gets off the ground.  First, a separately appointed board must conclude that this program would be legally and financially possible.  Legally, the individual employee retirement accounts would have to receive the equivalent of IRA treatment from the IRS, so the compulsory contributions would not be subject to immediate income tax.  Also, the entire program would have to receive an exemption from ERISA’s detailed regulation of retirement plans, which might not happen since this program is clearly intended to be a retirement plan.  Finally, the Legislature later would have to authorize actual commencement of this program.

While this law will not go into effect for a while and might never do so because of its threshold hurdles, employers who do not have their own retirement or 401(k) plan might want to start one in order to avoid the Act’s impact.  Labor unions supported this legislation, perhaps because they know that employees who lose two to four percent of their pay to this compulsory program might become more receptive to union organizing, which is another reason employers might want to start their own retirement plan now.