Legislative and Other Developments Affecting California Employers in 2013

by Greenberg Glusker Fields Claman & Machtinger LLP

Employment Bulletin

We wish all of our clients and friends a happy and prosperous New Year.  This annual report from Greenberg Glusker’s Employment Department summarizes the new laws that will affect California employers in the upcoming year.  We look forward to working with you in 2013!

Written Commission Agreements

Most employers are already aware of this law, which was signed into law in 2011 but takes effect on January 1, 2013.  This law states that whenever an employee’s pay includes commissions, there must be a written agreement that sets forth the method by which the commissions will be calculated and paid.  The employee must be provided with a signed copy of the agreement, and the employer must obtain a signed receipt from the employee.

The definition of “commissions” does not include any of the following:  (1) short-term productivity bonuses; (2) bonus and profit-sharing plans, unless the employer offers to pay a fixed percentage of sales or profits as compensation for work; and (3) temporary, variable incentive payments that increase, but do not decrease, payment under the written contract.

If the term of a written commission agreement expires but the employee continues to work under the same terms, those terms will be considered to remain in effect unless and until there is a new agreement between the parties or the employment relationship is terminated by either party.

Although putting the agreements in place may seem daunting, we view having written commission agreements as a best practice in any event, since it will reduce claims by employees that they were orally promised some other commission arrangement and make clear what is owed to the employee upon the employee’s separation from his or her employment. 

Social Media and Personal Passwords

Many employees now have social media accounts such as Facebook or Twitter.  This new law specifies that an employer may not require an employee or job applicant to: (1) disclose a user name or password for the purpose of accessing personal social media; (2) access personal social media in the presence of the employer; or (3) divulge any personal social media, except in connection with an employer investigation.  An employer likewise may not terminate or discipline an employee who refuses to provide personal social media information.

This law does not prohibit an employer from requesting access to personal social media in connection with an investigation into allegations of employee misconduct or a violation of law, but the request must be based on a reasonable belief that the access will result in the disclosure of relevant information—it cannot be used as a fishing expedition.  Any social media information obtained during an investigation may only be used for purposes of that investigation or a related proceeding.

This law also does not restrict employers’ rights with respect to employer-issued electronic devices—an employer still may request a password needed to access such a device.

Religious Dress and Grooming Standards

The Fair Employment and Housing Act (FEHA) states that “an employer or other covered entity is required to reasonably accommodate the religious belief or observance of an individual unless the accommodation would be an undue hardship on the conduct of the business of the employer or other entity.”   This new law clarifies that the protections of FEHA apply to religious dress practices and religious grooming practices.   

“Religious dress practice” includes the wearing or carrying of religious clothing, head or face coverings, jewelry, artifacts, and any other item that is part of religious observation.   “Religious grooming practice” includes all forms of head, facial and body hair that are part of religious observation.  Employers need to be careful not to run afoul of these provisions when drafting and enforcing dress code policies for employees.

As with other sections of FEHA, an employer claiming undue hardship must show that accommodation of an employee’s religious dress or grooming practices would cause “significant difficulty or expense.”  Importantly, the law states that an accommodation is not reasonable if it requires segregation of an individual from his or her colleagues or the public. 

Criminal Background Checks

New legislation attempts to clarify existing law regarding criminal history that is furnished by the California Department of Justice in connection with employment and other inquiries.  The new law requires the provision of certain follow-up information, including information regarding the subsequent arrest of a person about whom information was already requested.  If any of the information results in an adverse action involving employment, it must be promptly provided to the individual.  To that end, the new law is very similar to the current requirements of the federal Fair Credit Reporting Act and the California Investigative Consumer Reporting Agencies Act.

Access to Prevailing Wage Laws

Starting June 1, 2013, the Department of Industrial Relations will be required to list on its website all California statutes dealing with prevailing wage requirements, and update the list by February 1 of each subsequent calendar year.  This will not only make it easier for employers to check the rules regarding prevailing wages, but it will also make it easier for employees to investigate whether their employer is in compliance.

Inspection of Personnel Records

This law expands upon employers’ obligations to permit employees to inspect their personnel records.  Employers must retain personnel records for three years after termination of employment (the same length of time as itemized wage statements) and make them available to current and former employees within 30 calendar days of the employer’s receipt of a written request.  If the employee requests a copy (as opposed to just inspecting them on the premises), the employer must provide one, and may charge the copying costs to the employee.  The employer may redact the names of any nonsupervisory employees referenced in the personnel records. In the case of a former employee, an employer must only comply with one request per individual per year. 

If a current or former employee initiates a lawsuit against the employer, that individual’s right to inspect and copy personnel records is suspended during the pendency of the lawsuit.  

Sex Discrimination and Breastfeeding

Under FEHA, it is unlawful for employers to discriminate on the basis of sex.  The term “sex” now explicitly includes breastfeeding or medical conditions relating to breastfeeding, in addition to the existing categories of pregnancy, childbirth, gender, gender identity, and gender expression.  Employers are advised to make sure that they are not undertaking actions to discriminate against employees who are breastfeeding.  Employers should also update their postings, notices, and employee handbook policies relating to discrimination and harassment to reflect this change.

Itemized Wage Statements / Temporary Service Employees

Employers are already required to provide each employee with a written itemized wage statement at the time wages are paid, and to provide non-exempt employees with a wage and employment notice at the time of hire.  Now, beginning July 1, 2013, temporary services employers must include the rate of pay and total hours worked for each temporary services assignment in the itemized wage statement.  The wage and employment notice issued by temporary services employers must include the name, physical address of the main office, and the telephone number of the legal entity for whom the employee will perform work. 

Federal Credit Reporting Act Notices

The Fair Credit Reporting Act (FRCA) is the federal law regulating the collection, dissemination and use of consumer information, including consumer credit information.   Employers seeking an investigative report on an applicant or employee must provide that individual with the federal Summary of Your Rights Under the Fair Credit and Reporting Act (Summary of Rights).  Investigative consumer reports contain “information about a consumer’s character, general reputation, personal characteristics, or mode of living obtained in whole or in part through personal interviews with neighbors, friends, or associates of the consumer.”

As of January 1, 2013, the Summary of Rights notice will be updated to specify that the agency enforcing the FRCA is now the Consumer Financial Protection Bureau (CFRB) instead of the Federal Trade Commission (FTC).  Employers should make sure they are using the updated version of the notice.

Expanded Protection for Whistleblowers

Various provisions of California’s False Claim Act (CFCA) have been amended to conform with the federal False Claim Act.  The CFCA provides protection and financial incentives for employees who oppose or report fraudulent claims made by their employers in connection with work performed for the state or its political subdivisions. 

Elimination of Fair Employment and Housing Commission

Budget cuts have resulted in elimination of the Fair Employment and Housing Commission, the administrative agency created under FEHA.  Now, the Fair Employment and Housing Council’s seven members, appointed by the governor, will conduct public hearings and take regulatory action when necessary.  The new law allows the Department of Fair Employment and Housing (DFEH) to file cases directly in court.  However, before instituting any civil action, the DFEH will require all parties to undergo pre-dispute resolution through its in-house dispute resolution division.  The law also authorizes the court to award reasonable attorneys’ fees and costs to the DFEH. 

Fixed Salaries for Non-Exempt Employees

Current law provides that non-exempt employees are entitled to overtime pay for hours worked over eight in a day and 40 in a week.  Existing law also provides that employers who satisfy certain conditions can pay fixed salaries to non-exempt employees that address both straight time and overtime obligations.

A new law provides that payment of a fixed salary to non-exempt employees shall be deemed to provide compensation only for the employee's regular, non-overtime hours, notwithstanding any private agreement to the contrary between the employer and employee.   This specifically overrules a 2011 California court decision which upheld an agreement to pay an employee a fixed salary for 66 hours of work each week, and held that the employee was not owed any further overtime.  Under the law, that employee’s fixed salary would be deemed to compensate the employee for only 40 hours of work, and overtime would still be owed for the remaining 26 weekly hours.

Intellectual Disabilities

The term “intellectual disability” replaces the term “mental retardation” in all state statutes using the term.

Penalties for Wage Statement Violations

The California Labor Code has been amended to enhance circumstances when employees may recover penalties for the failure of their employers to provide them itemized wage statements.  Under current law, itemized wage statements must show:  (1) gross wages earned; (2) total hours worked by non-exempt employees; (3) the number of piece-rate units earned and any applicable piece-rate; (4) all deductions taken; (5) net wages earned; (6) the inclusive dates of the period for which the employee has been paid; (7) the name of the employee and the last four digits of his or her social security or employee identification number; (8) the name and address of the legal entity that is the employer and, if the employer is a farm labor contractor, the name and address of the legal entity that secured the services of the employer; and (9) all applicable hourly rates and the corresponding number of hours worked at each hourly rate.

Current law enables employees “suffering harm” as a result of their employers’ knowing and intentional failure to comply with these Labor Code provisions to recover actual damages or a penalty of $4,000, whichever is greater, plus costs and attorneys’ fees.  The new law provides that an employee is deemed to suffer harm for purposes of the penalty if his or her employer fails to (1) provide a wage statement, or (2) provides inaccurate or incomplete information for any of the required items and the employee therefore cannot promptly and easily determine the information from the wage statement alone.  Upon such a showing, the employee will be entitled to collect full penalties without a showing that he or she has suffered any harm.

Members of Greenberg Glusker’s Employment Department are available to answer any questions you may have regarding these important legal developments.  Your questions may be directed to Nancy Bertrando, Olivia Goodkin, Wendy Lane or Rachel Wilkes Barchie at (310) 553-3610.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Greenberg Glusker Fields Claman & Machtinger LLP | Attorney Advertising

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