California Governor Jerry Brown has signed into law a number of employee-friendly laws that are summarized below. As these laws take effect on January 1, 2012, employers with operations in California need to make sure their policies and practices are in compliance with the new laws.

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AB 22 – Limitations on the Use of Consumer Credit Reports in Employment

AB 22 prohibits employers and prospective employers, with the exception of certain financial institutions, from obtaining or relying on consumer credit reports for employees or job applicants, unless the position held or sought is:

  • A position within the California Department of Justice;
  • An exempt managerial position;
  • A sworn peace officer or other law enforcement position;
  • A position for which the information contained in the report is required by law to be disclosed or obtained;
  • A position that involves regular access to specified personal information for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment;
  • A position in which the person is or would be a named signatory on the employer's bank or credit card account, or authorized to transfer money or enter into financial contracts on the employer's behalf;
  • A position that involves access to confidential or proprietary information, as specified; or
  • A position that involves regular access to $10,000 or more in cash of the employer, a customer or a client during a workday.  

Where an employee or applicant falls within one of the above-listed categories, before obtaining a credit report, an employer must provide written notice to the person involved that a credit report is being sought, identify the specific basis for use of the report and allow the involved person to receive a copy of the credit report.

By enacting AB 22, California joins Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington as states that restrict the use of credit checks by most employers for employment decisions.

SB 459 – Misclassification of Employees as Independent Contractors

SB 459 is designed to crack down on employers who voluntarily and knowingly misclassify an individual as an independent contractor instead of an employee to avoid employee status for that individual. It prohibits the practice of charging an individual who has been willfully misclassified as an independent contractor a fee or making any deductions from compensation for any purpose, including for goods, materials, space rental, services, government licenses, repairs, equipment maintenance or fines arising from the individual's employment where any of the acts would have violated the law if the individual had not been misclassified. Whether a worker is an employee or independent contractor depends upon how much control the employer maintains over the worker and the specific details of the work, as well as a number of other factors.

This law imposes joint and several liability upon both the employer and any person, excepting an attorney or an employee providing advice to his or her employer, who knowingly advises an employer to treat an individual as an independent contractor to avoid employee status for that individual if the individual is found subsequently not to be an independent contractor.

SB 459 provides for the assessment of civil penalties in the range of $5,000 to $15,000 for each violation. For individuals found guilty of a "repeated pattern or practice" of such violations, the penalty may increase to between $10,000 and $25,000 per violation. Additionally, an employer in violation may be ordered to display a notice prominently on its website (or other area accessible to employees and the general public) that states that the employer has been found guilty of committing a serious violation of the law by willfully misclassifying employees as independent contractors and other prescribed information.

AB 469 – New Wage Theft Prevention Law

AB 469, referred to as the Wage Theft Prevention Act of 2011, adds Section 2810.5 to the California Labor Code and requires employers to provide each non-exempt employee at the time of hire with a "Notice of Pay Details" that specifies:

  • The rate or rates of pay and the basis on which the employee's wages are to calculated, e.g. hourly, daily, piece, salary, commission or some other method, including any rates for overtime, as applicable;
  • Allowances, if any, claimed as part of minimum wage, including meal or lodging allowances;
  • The regular payday designated by the employer;
  • The name of the employer, including any fictitious names under which the business operates;
  • The physical address of the employer's main office or principal place of business and a mailing address, if different;
  • The telephone number of the employer; and
  • The name, address and telephone number of the employer's workers' compensation insurance carrier.  

Furthermore, an employer must notify each employee in writing, in the form of a new or amended notice, of any changes made to this information within seven calendar days, unless such changes are reflected on a timely wage statement or another writing required to be provided by law. No notice would be required for an employee who is employed by the state or any subdivision thereof, exempt from the payment of overtime or covered by a collective bargaining agreement containing specified information.

The law also clarifies existing law to expressly require that employers pay, in addition to applicable civil penalties, restitution to any employee who has been paid a wage less than the minimum fixed by the Industrial Welfare Commission wage orders.

AB 469 also criminalizes certain wage violations by providing that any employer who willfully violates specified wage statutes or orders, or who willfully fails to pay wages due under a final court judgment or final order of the Labor Commissioner, to be guilty of a misdemeanor. Additionally, beginning January 1, 2012, the statute of limitations for the Division of Labor Standards Enforcement to collect statutory penalties increases from one year to three years.

AB 887 – Gender Identity and Expression

AB 887 amends the Fair Employment and Housing Act and prohibits discrimination in the workplace on the basis of gender identity and "gender expression." Gender expression refers to a person's "gender-related appearance and behavior," "whether or not stereotypically associated" with the sex assigned to the person at birth. The new law also requires employers to allow an employee to appear or dress consistently with the employee's gender expression.

SB 299 – Additional Pregnancy Disability Leave Protections

SB 299 requires employers with five or more employees to maintain and pay for coverage under a group health plan for any eligible employee who takes up to four months of leave due to pregnancy, childbirth or a related medical condition in a 12-month period. The employee's benefits must be maintained at the same level and under the same conditions as coverage would have been provided had the employee continued in employment continuously for the duration of the leave.