New 2012 Employment Laws
Seven New Laws in 2012 That Will Change How Employers Hire and Retain Employees
We want to give you a brief update on new laws impacting California employers.
Governor Brown recently signed several new laws that can significantly
alter how our clients and colleagues hire and retain employees. The bottom
line is this information will help you avoid getting sued.
1. Increased penalties for willfully misclassifying employees as Independent
Contractors (SB 459)
New Labor Code §226.8 imposes a fine of between $5,000 and $25,000,
for "willfully" misclassifying someone as an independent contractor.
It is also a crime for a non-attorney consultant to advise an employer
to misclassify an employee. The consultant is jointly liable with the
employer for all penalties and unpaid wages. Individuals can file a complaint
with the Labor Commissioner to determine their employee status. The Labor
Commissioner, the Employment Development Department and even the Internal
Revenue Service are all cracking down on misclassification issues. If
you employ independent contractors have the classification reviewed by
an attorney familiar with the various tests employed by the different agencies.
2. No More Credit Checks on Employees or Applicants (AB 22)
New Labor Code §1024.5 prohibits most employers from obtaining credit
information about non-managerial applicants or employees except in limited
circumstances. There is a specific exemption for financial institutions,
businesses required by law to perform credit checks, or if the applicant/employee
will have regular access to specified information. The law does not prevent
an employer from conducting other types of background checks, such as
criminal history, references, etc. If you use credit information in your
hiring decisions, review Labor Code §1024.5 to be sure one of the
3. Employers Must Continue Health Insurance Benefits During Pregnancy Disability
Leave (SB 299)
Most employers are not currently required to provide health insurance benefits.
Employers that do are now required to continue the group health coverage
to employees taking Pregnancy Disability Leave (PDL).. Employers subject
to the Family Medical Leave Act (e.g., companies with 50 or more employees
within a 75-mile radius) were, and still are, required to maintain health
insurance benefits for employees taking FMLA. Since the 12-week FMLA leave
runs concurrently with PDL leave, employers subject to FMLA were always
required to maintain health benefits at least during the first 12-weeks
of the PDL. Now all employers subject to the PDL are required to maintain
health insurance benefits during the PDL at the same levels as if the
employee were still employed. If your employee handbook discusses health
insurance, you will likely need to update your handbook. Make sure your
benefits administrator is familiar with the new law and how it applies to you.
4. Wage Theft Prevention Act Requires Written Offer Letters and Provides
for Increased Penalties (AB 469)
Some employers provide written offer letters. Now, all employers must provide
new hires with the following information:
- The employee's rate or rates of pay;
- Any applicable overtime rates;
- Meal, lodging or other lawful allowances to be used against minimum wage;
- The regular paydays;
- The employer's name and/or DBA's used by the employer;
- The employer's main office or principal place of business address,
and a mailing address, if different;
- The employer's telephone number;
- The name, address and telephone number of the employer's workers'
compensation insurance carrier;
- Any other information the labor commissioner deems material and necessary.
Employers could be required to provide the same notice to existing employees
if there is a change to any of the required policies. With the exception
of the workers' compensation insurance carrier, most of this information
is typically included in a standard offer letter (something that we think
is always a good idea). The difference is that now all employers must
provide the information in writing before the work is commenced. The Labor
Commissioner is devising a template employers can use, but we don't
know when the Labor Commissioner will make the template available or if
the particular template will be required. In the meantime, your attorney
or HR counselor can help you draft an appropriate notice.
The Wage Theft Prevention Act of 2011 also:
Permits the Labor Commissioner to recover "liquidated damages"
for the failure to pay minimum wage (previously, employees could pursue
liquidated damages in court, but they were not available through a Labor
Extends the statute of limitations for the DLSE to seek penalties under
the Labor Code from one year to three years.
Requires employers to retain pay stub and other payroll records for three years.
Requires farm labor contractors to list the name and address of the legal
entity that secured the services of the employer on every pay stub.
Extends the Labor Commissioner's power to require specific employers to post a
bond from six months to two years if they are guilty of prior offenses.
Allows a court grant an order prohibiting the employer from conducting
business if the employer has been twice convicted of wage violations or
failed to satisfy a judgment for the nonpayment of wages within a 10-year period.
Allows for additional fines between $1,000.00 and $20,000.00 plus possible
imprisonment if an employer willfully refuses to pay a final court judgment
or order for wages due within 90 days of its becoming final.
Make sure your current practices comply with the law. If an attorney has
not reviewed your payroll practices , we encourage you to contact our
office or your HR consultant as soon as practical.
5. Commission Agreements Must Be in Writing (AB 1396)
By January 1, 2013, whenever an employer contemplates paying part of the
wages through a commission, the employer must have a written contract
setting forth "the method by which the commissions shall be computed
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. Under the modified statute "Commissions"
does not include short-term productivity bonuses such as are paid to retail
clerks; and it does not include bonus and profit-sharing plans, unless
there has been an offer by the employer to pay a fixed percentage of sales
or profits as compensation for work to be performed.
Commission plans can be simple or complicated, but many employers forget
to include provisions in the commission agreement regarding when the commission
is earned (versus when it is paid out), what conditions have to be met
to earn the commission, and what happens to unpaid and/or unearned commissions
when the employment is terminated. Employers also neglect to consider
the effect of a commission on overtime wages (inside salespeople are entitled
to overtime under most wage orders). Failure to consider and include such
provisions can lead to costly litigation.
If you pay your employees a commission, you must have the commission plan
reduced to writing by January 1, 2013. The contract must state the method
of calculating the commission and how it is paid. Employees must also
receive a copy of the executed commission agreement.
6. & 7. Expanded Anti-Discrimination Laws Prohibit Discrimination Based
on "Gender Expression" and "Genetic Information"
(AB 887 & SB 559)
Anti-discrimination laws prohibit discrimination based on specifically
delineated protected characteristics. Beginning January 1, 2012, "Gender
Expression" and "Genetic Information" are two additional
Gender expression is a person's gender-related appearance and behavior
whether or not expressing the person's sex at birth. The intent is
to protect individuals that do not act in a stereotypical gender-related
manner. For example: a male carrying himself in a
stereotypically female manner, or vice versa. The definition includes
whether or not a person's appearance and behavior fits within unstated
stereotypes. It's not clear how this new law will be interpreted.
If your employees have not received sexual harassment prevention training
recently, we recommend any future training include a discussion about
Genetic information includes information about a person's genetic tests,
the genetic tests of a person's family members, the manifestations
of a disease in a person's family, or the receipt of genetic services
by a person or family member.
Be sure to add "gender expression" and "genetic information"
to the list of prohibited discrimination in your employee handbook.
Feel free to distribute copies of this letter to friends and colleagues
that might be interested in these new developments. If you have any questions
regarding theses changes, or any other matter related to employment or
business law in California, please give us a call. Thank you for taking
the time to prepare yourself.
Phillip J. Griego
Robert E. Nuddleman