New Laws Impacting Employers With California Employees in 2013

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[authors: Judith Droz Keyes, Kiko Ochoa, Evelyn Wang]

Several news laws that expand the rights of California employees take effect in 2013. Key areas include: the reasonable accommodation of religious attire and grooming; the penalty for inaccurate wage statements; the payment of overtime to salaried nonexempt employees; and the right of former and current employees to receive a copy of their personnel files. The new laws take effect on Jan. 1, 2013, unless otherwise noted.

Accommodation of religious dress and grooming – AB 1964
Existing protection against discrimination on the basis of religion has been expanded specifically to provide that employers (having five or more employees) cannot discriminate against, and must accommodate, employees’ religion-based dress and grooming requirements. Protected religious dress includes the wearing or carrying of head or face coverings, jewelry, artifacts, and any other item that is part of an individual’s observance of his or her religion. Protected grooming practices include all forms of head, facial, and body hair so long as they are part of an individual’s religious observance. Employers are obligated to reasonably accommodate such dress and grooming (just as other religious practices must be accommodated), unless it would create an undue hardship. The new law specifically provides that segregating an employee from other employees or the public due to protected religious attire or grooming is not a reasonable accommodation.

Salaries for nonexempt employees – AB 2103
This new law provides that fixed salaries paid to nonexempt employees will be deemed limited to compensation for regular, non-overtime hours, up to eight in the day and 40 in the week. Private agreements to the contrary will not be recognized, and may constitute a crime for which community service would be the penalty.

Penalty for wage statement violations – SB 1255
For several years, California has required that employers provide employees with wage statements that provide nine specific categories of information. Previously, however, an employee had to show some injury in order for the employer to have monetary liability for violation of the requirement. Now, under the new law, an employee will be deemed to suffer injury if an employer fails to provide a wage statement, or if the employer provides inaccurate or incomplete information in any of the nine categories, and the employee cannot “promptly and easily determine” from the wage statement one or more of the following:

  • For the pay period, the amount of gross or net wages paid to the employee, total hours worked, piece-rate units earned, deductions taken, inclusive dates, and all applicable hourly rates in effect and the corresponding number of hours worked at each rate;
  • The specific deductions that were taken from gross wages to generate the net wages paid during the pay period;
  • The name and address of the employer; and
  • The name of the employee and the employee identification number or the last four digits of his or her social security number.

Penalties for violation remain the greater of actual damages or $50 for the initial pay period, and $100 for each pay period thereafter, up to $4,000.

Copy of wage statements and personnel records – AB 2674
This law does two distinct things: (1) it requires employers to create and maintain either a duplicate copy of employee wage statements or a computer-generated record that accurately shows all of the information required to be on the wage statement; and (2) it significantly expands the obligation of employers to permit inspection of personnel records.

With respect to wage statements, it is no longer enough to maintain payroll information. Employers now are required either to keep copies of actual wage statements reflecting the nine categories of required information, or to create a computer-generated record that accurately shows all of that information. Employees and former employees have the right to inspect or receive a copy of this information within 21 days of the request.

With respect to personnel records, the law is expanded in a variety of ways:

  • To make clear that the right applies to former employees as well as current employees;
  • To provide for the right to receive a copy of personnel records in addition to the right to inspect them;
  • To permit employee representatives to make the request on behalf of employees (and former employees) unless there is an existing lawsuit; and
  • With some exceptions, to mandate fulfillment of a request within 30 days.

In addition, employers must create a form that current and former employees can use to request inspection or copying of their files. Note: DWT has developed a template form that will be provided upon request.

Commission pay arrangements – AB 1396, AB 2675
Starting Jan. 1, 2013, all employers with California employees who are paid a commission must have a written, signed agreement reflecting the precise method by which commissions will be computed and paid. These two new bills clarify that the requirement applies with equal force to all employers with California employees regardless of whether the employer has a fixed place of business in California and that, in addition to not including bonus and profit-sharing plans, the term “commissions” does not include variable incentive payments—such as short-term bonuses or temporary incentives—that increase, but do not decrease, payment under the written commission contract. By this exclusion, employers need not provide a new written commission plan every time the employer wishes to provide a short-term bonus or special incentive to their commissioned employees.

State agency access to employee information - AB 1794, SB 691
This bill directs the California Employment Development Department (EDD) to share information it obtains from employers about new employees, and information it obtains in other ways, with various other state agencies, including the Joint Enforcement Strike Force on the Underground Economy, the Contractors’ State License Board, and the State Compensation Insurance Fund. These agencies are expected to use this information for purposes of auditing, investigating, and prosecuting tax and cash-pay reporting violations, and for purposes of workers’ compensation payroll reporting. In addition, the Contractors’ State License Board will qualify as an “authorized governmental agency” permitted to receive employee information related to any workers’ compensation insurance fraud investigation.

Increase in garnishment limit – AB 1775
This law, which becomes effective on July 1, 2013, increases the amount of a judgment debtor’s earnings that are exempt from wage garnishment. Prior law conformed to federal law and limited garnishment to 25 percent of the employee’s weekly disposable earnings, or the amount by which the employee’s disposable earnings exceed 30 times the federal minimum wage. Under the new law, the exempted amount will be the lesser of 25 percent of the employee’s weekly disposable earnings or the amount by which the employee’s disposable earnings for the week exceed 40 times the California minimum wage, effectively increasing the garnishment floor from $217.50 per week to $320 per week. “Disposable earnings” is defined as the portion of an employee’s earnings that remains after deducting all amounts required to be withheld by law.

Notice and statement requirements for temporary services employers – AB 1744, AB 2674
This law requires that temporary services employers include in the Wage Theft Protection Act (“WTPA”) notice they provide to new hires additional information concerning the legal entity of the employer, specifically, the name of the legal entity, the physical address of that entity’s main office, and the entity’s mailing address (if different) and telephone number.

Effective July 1, 2013, temporary services employers also must ensure that each employee’s itemized statement includes the rate of pay and total hours worked for each assignment. An accurate itemized statement showing this information must be provided in writing to each employee semimonthly or at the time wages are paid.

Per diem wages for workers on public works projects – AB 2677
Currently, employer payments provided as part of per diem wages paid to employees working on public works projects do not reduce the employer’s obligation to pay the prevailing hourly straight time and overtime wages. Under this new law, an employer payment that results in a lower hourly straight time or overtime wage will count toward satisfaction of the prevailing wage requirement so long as:

  • the payment is made under a collective bargaining agreement;
  • the basic hourly rate and employer payment are at least equal to the general prevailing rate; and
  • the payment is irrevocable unless made in error.

In addition, employer payments meeting these criteria that result in a lower taxable wage will not violate the prevailing wage determination.