New California Employment Laws for the New Year

New California Employment Laws for the New Year

For the first time in years, California employers have witnessed significant changes to employment laws, most of which took effect on January 1, 2012. Colleges and universities with operations in California must ensure compliance with these laws. Those that are not already prepared have a short amount of time to understand the new laws, train managers, and update policies and procedures.


Employee Credit Reports Prohibited, Except in Limited Circumstances


Under federal law, subject to certain exceptions, an employer may not obtain a credit report for employment purposes unless prior disclosure of the procurement is made to the job applicant or employee and the individual consents. Similar to laws in six other states (Hawai’i, Washington, Oregon, Illinois, Maryland, and Connecticut), California has enacted a new Labor Code chapter that prohibits an employer or prospective employer, with the exception of certain financial institutions, from obtaining a consumer credit report for employment purposes unless the position of the person for whom the credit report will be obtained falls into one of the following eight categories:



  • A position in the state Department of Justice

  • A managerial position that is covered by California’s executive exemption

  • 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, for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment, to bank or credit card account information, Social Security number, and date of birth for any one person

  • 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; or

  • A position that involves regular access to cash totaling $10,000 or more of the employer, a customer, or a client during the workday

Additionally, the Consumer Credit Reporting Agencies Act (“CCRAA”), as amended, requires employers to give written notice to the employee or applicant that a consumer credit report will be used, as well as the specific basis under California Labor Code section 1024.5 that supports the use of the report.


Moreover, an earlier statute, also effective January 1, 2012, requires employers that order background reports other than consumer credit reports to notify job applicants and employees of the Internet website address of the consumer reporting agency or, if the agency has no Internet website address, the telephone number of the agency where the individual can find information about the agency’s privacy practices.


 


Steps to Consider Immediately: Colleges and universities with California employees should evaluate whether they are subject to Labor Code section 1024.5. If so, officials should determine which provisions, if any, their school can invoke to justify a credit report for existing employees and job applicants. In addition, they should evaluate whether their disclosure and authorization forms and other paperwork used comply with the new law, and add the mandatory notice now required by section 1024.5. Finally, colleges and universities that order background reports other than consumer credit reports should modify forms to notify job applicants and employees of the Internet website where the reporting agency’s privacy practices can be found.


 Mandatory Notice of Pay to New Nonexempt Employees


 A new California law requires employers to provide to each nonexempt employee, at the time of hire, a written notice that specifies: (1) the pay rate and the basis, whether hourly, salary, commission or otherwise, as well as any overtime rate; (2) allowances, if any, claimed as part of the minimum wage, including meals or lodging; (3) the regular payday; (4) the name of the employer, including any “doing business as” names used by the employer; (5) the physical address and telephone number of the employer’s main office or principal place of business, and a mailing address, if different; and (6) the name, address and telephone number of the employer’s workers’ compensation carrier. The notice requirements do not apply to public employees or to employees covered by collective bargaining agreements who earn at least 30% more than the state minimum wage.


California employers will be required to notify each employee in writing of any changes to the information set forth in the notice within seven days after the time of the changes, unless such changes are elsewhere reflected on a timely wage statement or other writing required by law to be provided.


Steps to Consider Immediately: Colleges and universities with California operations should create a template for newly hired employees that complies with the new laws. Although the notice requirements apply to nonexempt employees only, consider providing the notice to all new employees in the event employees later allege they were misclassified. In addition, it will be important to train staff to give timely notice if an employee’s terms of employment or other content in the notice changes.


In states such as Connecticut, New Hampshire, New York and Pennsylvania, remember that employers must provide advance written notice to employees before modifying a pay practice or term.


Gender Identity, Gender Expression, and Genetic Information Protected Against Workplace Discrimination


California law already requires equal rights and opportunities in education, housing, and employment, regardless of gender. These laws also prohibit discrimination based on specified characteristics, including sex and gender. The California State Legislature made technical changes to these laws by including gender identity and gender expression among the enumerated characteristics. These amendments are similar to a new law passed in Massachusetts, which impacts employers with six or more employees and takes effect on July 1, 2012, to outlaw employment discrimination on the basis of gender identity.


Separately, the new California Genetic Information Nondiscrimination Act (“CalGINA”) adds “genetic information” as a prohibited basis for discrimination. “Genetic information” means, with respect to any individual, information about: (1) the individual’s genetic tests; (2) the genetic tests of family members of the individual; or (3) the manifestation of a disease or disorder in family members of the individual.


Steps to Consider Immediately: Colleges and universities should consider revising policies and procedures to include gender identity, gender expression, and genetic information as prohibited basis for discrimination, harassment and retaliation. Medical leave certifications and other employment-related forms and questionnaires that seek genetic information may need to be revised to ensure that the specific “safe harbor” language stated in the GINA regulations—which cautions healthcare providers not to provide a company with genetic information—is included on all lawful requests for medical information. Colleges and universities should also think about implementing procedures to prevent the disclosure of genetic information.


Employers Required to Provide Group Health Benefits Coverage During Pregnancy Disability Leave


California employers with five or more employees are already required to permit employees disabled by pregnancy to take a leave of absence for the period of disability up to four months. This pregnancy disability leave (“PDL”) is in addition to the 12 workweeks of leave for baby bonding under the California Family Rights Act (“CFRA”). Beginning January 1, 2012, California employees taking PDL are entitled to continuation of their group health benefits on the same basis as when they were actively working. Thus, benefits continuation may extend up to four months if the employee is disabled by pregnancy for the maximum period of PDL.


As a practical matter, many employees using PDL are also eligible for leave under the federal Family and Medical Leave Act (“FMLA”), which runs concurrently with PDL. FMLA already requires group health benefits to be continued for the 12 workweeks of FMLA. This new law is meant to bridge the gap in coverage where an employee’s pregnancy disability leave exceeds the time available under FMLA or where the employee is not otherwise eligible for FMLA. Therefore, if an employee disabled by pregnancy exhausts her FMLA but is still using PDL, she would be entitled to benefits continuation for the remainder of PDL up to the four-month maximum.


Similar to FMLA, if the employee fails to return from pregnancy disability leave, the employer may recoup from the employee the premiums the employer paid to continue the employee’s coverage during the leave, unless the reason the employee did not return is because of a continuing disability or because the employee is taking the separate baby-bonding leave provided under CFRA. 


Employment Contracts Required Beginning Next Year for All Commissioned Employees


Currently, an employer who has no permanent and fixed place of business in California, and who enters into a contract of employment involving commissions as a method of payment with an employee for services to be rendered within California, is required to put the contract in writing and describe the method by which the commissions will be computed and paid.


As of January 1, 2013, this contract requirement is expanded to apply to all employers entering into a contract of employment with a commissioned employee for services to be rendered in California. Thus, all employers who pay employees via commission must (1) have a written contract with the employee regarding commissions; (2) include the method for calculating the commissions; and (3) require the employee to sign a “receipt” retained by the employer. Also, the contract remains in effect until a new commission plan has superseded it or employment terminates, even if the old plan expires. Finally, the law attempts to define commission and excludes bonuses, but then includes bonuses that are a percentage of sales or profits. 


Lisa Hird Chung is an associate in the Employment, Labor, Benefits and Immigration Practice Group of Duane Morris LLP in San Diego. She practices in the area of employment law and litigation, defending employers in single-plaintiff, representative and class-action lawsuits involving claims such as discrimination, wrongful termination, retaliation, harassment, wage and hour, and trade secret violations. She can be reached at LChung@duanemorris.com.


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