California
The California legislative forecast continues to come into focus. The August 31st deadline for bills to pass the second legislative chamber has now expired and a number of employment bills have been sent to the Governor for signature or veto. The Governor has until September 30th to sign or veto the following bills, which unless otherwise indicate would take effect on January 1, 2013:
Presumed Damages Proposed for Wage Statement Violations (SB 1255)
Labor Code section 226 requires employers to provide itemized wage statements containing statutorily-enumerated categories of information, and provides that an employee suffering injury as a result of a knowing and intentional failure by the employer to provide this information is entitled to the greater of all actual damages or a specified statutory damages (e.g., $50 for initial violation and $100 for per employee for each subsequent violation) not to exceed $4,000. This bill responds to several conflicting court opinions on the definition of injury, and provides a statutory definition of what constitutes “suffering injury” for purposes of recovering damages for wage statement violations.
For instance, these amendments specify that an employee will be deemed to “suffer injury” if the employer fails to provide a wage statement, and employee will also be deemed to suffer injury if the employer fails to provide accurate or complete information regarding the other specified items on the itemized wage statement and the employee cannot “promptly and easily” determine from the wage statement one or more of the following: (a) the amount of gross wages or net wages paid to the employee during the pay period or any of the other information required to be provided on the itemized wage statement; (b) which deductions the employer made from gross wages to determine the net wages paid to the employee during the pay period (although the employer would still be able to aggregate deductions where permitted); (c) the name and address of the employer and, if a farm labor contractor, the name and address of the legal entity that secured the services of the employer during the pay period; or (d) the name of the employee and only the last four digits of his or her social security number or an employee identification number.
The bill defines “promptly and easily” as meaning a “reasonable person would be able to ascertain the information without reference to other documents or information.” The amendments clarify that a “knowing and intentional failure” does not include an isolated and unintentional payroll error due to a clerical or inadvertent mistake. This bill would also provide that the reviewing hearing officer or fact finder may consider as a relevant factor whether the employer, prior to the alleged violation, has adopted and is in compliance with a set of policies, procedures and practices which fully comply with Labor Code section 226.
The final version of the bill includes language to incorporate other proposed amendments to Labor Code section 226 (e.g., AB 1744 [wage statement requirements for temporary service providers] and AB 2674 [employee inspection rights]) that would become effective only if either or both of those two bills were also signed into law.
New Wage Statement Requirement for Temporary Services Employers (AB 1744)
This bill would also amend Labor Code section 226 and require, on or after July 1, 2013, that if the employer is a “temporary services employer” (as defined in Labor Code section 201.3(a)(1)), the statement must also contain the rate of pay and total hours worked for each temporary services assignment.
This bill also slightly amends the Wage Theft Prevention Act (AB 469) enacted in 2011, which required employers to provide to non-exempt employees at the time of hire a written notice containing specifically-enumerated information (e.g., rate of pay, etc.). This bill would additionally require that temporary services employers ensure this notice include the name, the physical address of the main office, the mailing office if different from the physical address of the main office and the telephone number of the legal entity for whom the employee will perform work, and any other information the Labor Commissioner deems material and necessary. According to the author, this notice requirement was included already under existing law but had not been explicitly included in new Labor Code section 2810.5 (added as part of the Wage Theft Prevention Act), thus creating some confusion. This amendment clarifies the notice requirement as it relates to providing basic information to employees of temporary services employers.
This bill would take effect July 1, 2013.
Explicit Mutual Wage Agreements that Predetermine Overtime Compensation Prohibited (AB 2103)
Labor Code section 510 establishes an 8-hour workday and a 40-hour workweek and requires payment of overtime (as specified) for non-exempt employees who work beyond these timeframes. In Arechiga v Delores Press, Inc. (2011) 192 Cal.App.4th 567, a California court of appeal upheld an explicit written mutual wage agreement that pre-determined a non-exempt employee’s overtime compensation and included it as part of the employee’s salary. The Arechiga court concluded Labor Code section 515 did not specifically invalidate such agreements and declined to enforce the DLSE’s Enforcement Manual that held such agreements were impermissible following the enactment of Labor Code section 515 in 2000.
As expected, the Legislature has overwhelmingly passed a bill to nullifyArechiga. This bill would amend Labor Code section 515 by adding new subsection (d)(2) to provide that “payment of a fixed salary to a nonexempt employee shall be deemed to provide compensation only for the employee’s regular, non-overtime hours, notwithstanding any private agreement to the contrary.”
It is widely expected that Governor Brown will sign this bill into law.
Legislature Passes Bill Altering Wage Garnishment Amounts (AB 1775)
This bill makes several changes to the Wage Garnishment Law in order to essentially raise the so-called “garnishment floor” to increase the minimum amount of an employee’s (a.k.a. “judgment debtor’s”) weekly earnings that are exempt from wage garnishment. Presently, a levy of execution upon the earnings of a judgment debtor is made by service of an earnings withholding order upon the debtor’s employer, with federal law limiting the amount of an employee’s earnings subject to such withholding orders. This bill would amend California’s Code of Civil Procedure sections 706.011 and 706.050 to increase the amount of a judgment debtor’s weekly earnings that are exempt from levy under an earnings withholding order from 30-times the federal minimum wage to 40-times the California minimum wage.
Specifically, this bill would provide that the maximum amount of disposable earnings of a judgment debtor for any workweek that is subject to levy under an earning withholdings order shall not exceed the lesser of the following amounts: (a) twenty-five percent of the individual’s “disposable earnings” for that week; or (b) the amount by which the individual’s “disposable earnings” for that week exceeds 40-times the state’s minimum hourly wage in effect at the time the earnings are payable. The proposed bill also enumerates the various multipliers to be used to determine the maximum amounts of disposable earnings subject to garments that are proportionately equivalent for pay periods of different intervals. This bill would define “disposable earnings” as the portion of an individual’s earnings that remain after deducting all amounts required to be withheld by law.
This bill does not appear to face much opposition and it seems likely that Governor Brown will sign it.
Proposed Bill Requires DIR to Publicize Prevailing Wage Laws (SB 1370)
California law requires that workers employed on a public work, as defined, be paid not less than the general “prevailing rate” of per diem wages, as specified. This bill responds to criticisms that there is no single location where employers can identify all projects subject to state mandated prevailing wage requirements. Accordingly, this bill would require the Director of Industrial Relations (DIR) to post on its website a list of every California code section and the language of those sections that relate to the prevailing wage rate requirements for workers employed on a public work projects. The DIR would be required to post this information on its website on or before June 1, 2013, and to update that list each February 1st thereafter.
This bill overwhelmingly passed the Legislature and it is anticipated Governor Brown will sign it into law.
Bill Requires DIR to Adopt Future Regulations Regarding “Domestic Work Employees” (AB 889)
California law authorizes the Industrial Welfare Commission (IWC) within the Department of Industrial Relations (DIR) to adopt rules, regulations and orders to ensure employers comply with laws regulating the wages, hours and working conditions in various occupations. This bill would require the DIR by January 1, 2014, to adopt regulations governing the working conditions of “domestic work employees.” Amongst other things, the required DIR-proposed regulations shall provide for all of the following: (a) overtime compensation, (b) meal and rest periods, and (c) uninterrupted sleep periods and compensation for interruptions. This bill also specifies that the DIR may apply the provisions of IWC Wage Order 15 to “domestic work employees.” As part of this process, the bill directs the DIR to study the economic impact of the regulations and to review and consider federal policies regarding domestic work employees. (NOTE: as originally introduced by the Assembly, this bill would have adopted specific regulations concerning each of these items, but the recently-agreed-to Senate amendments instead simply direct the DIR to adopt such regulations to be effective by January 2014.)
This bill defines “domestic work” to mean services related to care of persons in private households or maintenance of private households or their premises, including childcare providers, caregivers of sick, convalescing, or elderly persons, house cleaners, house keepers, maids and other household occupations. It defines “domestic work employee” to mean an individual who performs domestic work and includes live-in domestic work employees and personal attendants, but does not include specific individuals, including family members or babysitters under the age of 18.
This bill passed both chambers largely on party-line votes, and there appears to be both considerable support for and opposition to this bill.
Exemption from Written Commission Requirements for Certain Temporary Variable Incentive Payments Proposed (AB 2675)
As a reminder, last year California enacted AB 1396 which amended Labor Code sections 2751 and 2752 and required that all employers by January 1, 2013, provide a written contract containing specified information to employees who are paid commissions. As enacted, AB 1396 excludes from this writing requirement specified short-term productivity bonuses or bonus and profit sharing plans.
This new bill responds to employer criticisms that these written contractual requirements are unduly burdensome in the temporary incentive context (e.g., car salesman) where employers might briefly provide increased commission levels to increase productivity during a specific period. Accordingly, this bill would amend Labor Code section 2751 and specify that “commission” for purposes of the written contractual requirement does not apply to “temporary, variable incentive payments that increase, but do not decrease, payment under the written contract.”
This bill passed with overwhelming support and is expected to be signed into law.
Bill Would Prohibit Job Postings Suggesting Unemployed Applicants Need Not Apply (AB 1450)
In response to media reports of so-called “unemployment discrimination” (i.e., employers refusing to consider unemployed applicants for available positions), this bill would prohibit an employer, employment agency or person who operates an Internet Web site for posting jobs in this state, unless based upon a bona fide occupational qualification, from publishing an advertisement or job announcement that includes either of the following: (a) provision stating that or indicating that an individual’s current employment is a requirement for a job; or (b) a provision stating or indicating that an employer will not consider an applicant for employment based on that individual’s employment status.
The amended version of the bill defines “employment status” to mean an individual’s present unemployment, regardless of the length of time that the individual has been unemployed. The bill also clarifies that employers, employment agencies and Internet Web site operators would not be prohibited from either (a) publishing job advertisements enumerating the lawful requirements for a job, including the holding of a current license or a minimum level of education or experience; or (b) printing job advertisements that limit applicants to individuals currently employed by that employer.
Notably, this bill originally contained language prohibiting employers from making hiring decisions based on an individual’s “employment status” but these provisions were deleted by the Senate and the current version focuses only on job postings, rather than actual hiring decisions, involving an individual’s “employment status”. This bill also proposes a new Labor Code provision (section 1048) that makes clear that employers are not prohibited from (a) obtaining information regarding an individual’s employment, the dates of employment, or the reasons for the separation from employment; (b) having knowledge of an employee’s employment status; (c) considering an employee’s employment history (as opposed to status) or the reasons underlying an employee’s employment status; (d) refusing to offer employment to a person because of the reasons underlying an individual’s employment status; or (e) otherwise making employment decisions pertaining to that individual.
The final bill also contains statutorily enumerated penalties (e.g., $1,000 for the first violation, $5,000 for a second violation, and $10,000 for each subsequent violation), but eliminates the previously proposed language authorizing the Labor Commissioner to enforce these penalties.
Lastly, “state contracts” entered into after January 1, 2013, shall require compliance with these requirements, and failure to do so would be grounds for canceling, terminating, or suspending the contract and debarring the contractor from eligibility for future state contracts, as specified.
Even with these amendments, this bill still faces considerable opposition so it remains unclear whether Governor Brown will sign it.
Religious Accommodation Clarifications Proposed for FEHA (AB 1964)
California’s Fair Employment and Housing Act (FEHA) precludes discrimination based on religion, and requires employers to reasonably accommodate “religious beliefs or observances,” which is presently defined to include observance of the Sabbath or holy days and reasonable travel time prior to and subsequent to a religious observance. As recently amended in the Senate, this bill would amend FEHA’s religious accommodation provisions to include “religious dress and grooming practices” (as defined) as a belief or observance requiring potential accommodation. The bill specifies that “religious dress practice” shall be construed broadly to include the wearing or carrying of religious clothing, head or face coverings, jewelry, artifacts, and any other item that is part of the observance by an individual of his or her religious creed. “Religious grooming practice” shall also be construed broadly to include all forms of head, facial, and body hair that are part of the observance by an individual of his or her religious creed.
This bill would specify that an accommodation is not reasonable if the accommodation requires segregation of an employee from customers or the general public.
The final version of the bill also replaces the term “mental retardation” with “intellectual disability” in FEHA’s definition of “mental disability” (Gov. Code section 12926(j)(1). It also incorporates additional changes to section 12926 proposed by AB 2386 regarding breastfeeding (discussed below) to be operative only if both AB 1964 and AB 2386 are chaptered to be effective January 1, 2013 and AB 1964 is chaptered last.
This bill passed both chambers by large margins and appears to have significant support and likely will be signed into law.
Bill Would Add “Breastfeeding” to FEHA’s Protections Against Sex Discrimination (AB 2386)
The FEHA precludes discrimination based on sex, which is presently defined to include gender, pregnancy, childbirth and medical conditions related to pregnancy or childbirth. This bill would add “breastfeeding and related medical conditions” to the FEHA’s definition of “sex” as protected categories for unlawful employment discrimination under state law. In effect, this bill would supplement the lactation accommodation requirements contained in Labor Code sections 1030 through 1033, by prohibiting employers from discriminating or retaliating against female employees who express milk at work after they return from pregnancy disability or CFRA baby-bonding leave.
This bill is intended to address several recent federal court decisions suggesting that discrimination for breastfeeding at work does not constitute sex or gender discrimination.
This bill enjoys overwhelming bi-partisan support and is expected to be signed into law.
Legislature Passes Amendments Regarding Employee Rights to Inspect Personnel Files (AB 2674)
Labor Code section 1198.5 presently provides that an employee has the right to inspect the personnel records the employer maintains relating to the employee’s performance or to any grievance concerning the employee. As employers are aware, a number of practical questions exist concerning these rights, which AB 2674 is intended to address by establishing “minimum standards” for the inspection and receipt of a copy of personnel records. For instance, current section 1198.5 requires the employer to permit inspection at “reasonable intervals” but does not specify whether former employees have inspection rights, and does not identify a particular time limit to comply or enumerate a specific penalty for non-compliance. This bill would specify that both current and former employees have inspection rights, as do their representatives, and require an employer to permit inspection no later than 30 days after receiving a written request (unless mutually extended to 35 days from the original request).
This bill would also require employers, upon an employee’s request, to provide copies of these records at a charge not to exceed the actual cost of reproduction within these same time frames. For former employees, the employer may mail a copy of the records if the employee reimburses the employer for actual postal expenses.
This bill also outlines the procedures for inspecting or copying personnel files, and requires employers to develop a form that shall be made available upon verbal request to the employee’s supervisor or employer’s representative. This bill also specifies that current employees will generally be permitted to inspect records where the employee works, whereas former employees may inspect at the location where the records are stored. This bill also specifies that employers will be required to maintain personnel records for a period of not less than three years after termination of employment.
This bill specifies that these inspection rights would cease during the pendency of any litigation by a current or former employee relating to a personnel matter. This bill would also provide alternative inspection/copying mechanisms involving former employees terminated for violations of law, or an employment-related policy involving harassment or workplace violence.
As to former employees, an employer would only be required to comply with one request per year to inspect or copy their personnel records. A recent Senate amendment provides that employers will not be required to comply with more than 50 requests in one calendar month for inspection or copying made by a representative or representative of employees. Another recent Senate amendment clarifies that section 1198.5 does not apply to employees covered by a collective bargaining agreement if the agreement expressly provides for all of the following: (a) the wages, hours of work and working conditions of employees; (b) a procedure for the inspection and copying of personnel records; (c) premium wage rates for all overtime hours worked; and (d) a regular rate of pay of not less than 30 percent more than the state minimum wage rate.
This bill would also permit a current or former employee or the Labor Commissioner to recover a penalty of $750 from the employer, and would further permit a current or former employee to obtain injunctive relief and attorneys’ fees.
This bill would also amend Labor Code section 226(a), which requires employers to maintain a “copy” of wage statements, to clarify that “copy” includes computer-generated statements.
This bill passed the Legislature along essentially party-line votes notwithstanding several amendments to a prior version of this bill. It is not presently clear if Governor Brown will sign this bill.
Bill Limiting Employer Access to Personal Social Media Sent to Governor (AB 1844)
Consistent with the legislative trend at both the federal and state level, the legislature has overwhelmingly passed a bill limiting an employer’s access to an employee’s or applicant’s personal social media. Specifically, under new Labor Code section 980, an employer would be prohibited from requiring or requesting an employee or applicant from doing any of the following: (a) disclose a username or password for the purpose of accessing personal social media; (b) access personal social media in the presence of the employer; or (c) divulge any personal media, except as part of employer investigation (discussed below). For purposes of this bill “social media” means an electronic service or account, or electronic content, including, but not limited to, videos, still photographs, blogs, video blogs, podcasts, instant and text messages, e-mail, online services or accounts, or Internet Web site profiles or locations.
This bill would also prohibit an employer from discharging, disciplining, threatening to discharge or discipline, or otherwise retaliating against an employee or applicant for not complying with a request or demand by the employer that violates these provisions. However, while California law generally authorizes the Labor Commissioner to investigate Labor Code violations, a recent Senate amendment specifies that the Labor Commissioner would not be required to investigate or determine any violation of this new law.
When initially introduced, some employers complained these prohibitions were too broad and may preclude employers from properly investigating allegations of employee misconduct. As amended, this bill specifies these prohibitions would not affect an employer’s existing rights and obligations to request an employee to divulge personal social medial reasonably believed to be relevant to an investigation of allegations of employee misconduct or employee violation of applicable laws and regulations, provided that the social medial is used solely for purposes of that investigation or a related proceeding. This new law would also not prohibit an employer from requiring or requesting an employee to disclose a username, password, or other method for the purpose of accessing an employer-issued electronic device. Similarly, while an employer cannot retaliate against an employee for not complying with an employer request that violates this new law, the bill also specifies that employers are not prohibited from terminating or otherwise taking an adverse action against an employee or applicant if otherwise permitted by law.
Lastly, while the bill clearly prohibits employers from requiring employees to divulge passwords, etc. it does not contain any specific provisions precluding employers from accessing publicly-available social media (although employers should still consider other generally-applicable considerations in that context).
It is widely expected that Governor Brown will sign this bill, in which case California will join Maryland as states prohibiting employers from requiring employees divulge such social media access information [Maryland’s version (S.B. 433)], takes effect October 1, 2012). Other states are expected to similarly pass such bills shortly, and the Social Networking Online Protection Act (SNOPA) remains pending at the federal level.
Bill Would Allow EDD to Share New Hire Information With Joint Enforcement Strike Force (AB 1794)
Existing law presently requires employers to file with the Employment Development Department (EDD) specified information on new employees, and authorizes the use of that information for specified purposes, including the administration of the law regarding unemployment insurance benefits. This bill would amend Unemployment Insurance Code section 1088.5 and until January 1, 2019, authorize the EDD to provide the specified new employee information to the Joint Enforcement Strike Force on the Underground Economy, the Contractors’ State License Board, and the State Compensation Insurance Fund. The bills’ proponents state this information sharing is intended to target employers and contractors who fail to properly pay employees or fail to obtain the legally-required workers’ compensation insurance.
Farm Worker Safety Act Proposes New Employer Requirements and Penalties to Combat Heat Illness in Agricultural Workers (AB 2346)
In 2005, California was the first state to adopt heat illness regulations and Cal-OSHA has subsequently worked with employers and employees on education and enforcement efforts. Citing a concern that regulations by themselves are insufficient, this bill (known as the Farm Worker Safety Act) would enact various provisions in the California Labor Code relating to these heat illness protections.
As originally passed by the Assembly, this bill prescribed very specific duties on employers, including regarding the provision of shade and water. As amended by the Senate (and concurred in by the Assembly), the bill eliminates these very specific requirements, but imposes a more general duty upon employers to comply with existing heat illness standard regulations and with other existing requirements related to the prevention of heat illness.
This bill also prohibits discrimination or retaliation against an employee who attempts to secure his or her employer’s compliance with these heat illness prevention requirements. Employers will also be required to certify by January 31st of each year, or on the first day of operation in any calendar year if the employer begins an employment relationship after January 31, that the employer has adopted written procedures for complying with these requirements. This bill also authorizes civil actions for injuries resulting from “repeat offender’s” (as defined) failure to abide by these heat illness regulations.
This bill passed along party lines and it is not clear if Governor Brown will sign it.
Governor Considering Bill Targeting ADA Access Abuses (SB 1186)
Although well-intentioned, the California and federal laws ensuring individuals with disabilities equal access to public facilities has resulted in claims of litigation abuse. The Legislature has passed a bill intended to curb some of these abuses by reducing statutory damages and providing statutory protections for defendants who timely correct construction-related accessibility violations of the Unruh Civil Rights Act. For example, this bill would cap statutory damages at $1,000 rather than $4,000 for any defendant who corrected all violations in the claim within 60 days of being served with the complaint provided the defendant satisfied several other conditions. Similarly, small business defendants (as defined) would be entitled to have statutory damages reduced to $2,000 when that defendant corrects the violation with 30 days of being served with the complaint. The bill would also allow defendants to seek a stay of proceedings pending an early evaluation conference, and allow the court, when assessing an attorneys’ fees award, to consider the reasonableness of plaintiff’s conduct in light of their obligation to mitigate damages.
This bill passed with overwhelming bi-partisan support and likely will be signed by the Governor.
Bills That Did Not Move Forward This Year
As always, there were also a number of significant employment-related bills that did not pass this year, but may resurface in the future, including bills proposing to:
JUDICIAL
California
Court Strikes Down Covenant Not to Compete in Connection With Sale of Business
California law has a strong public policy against restricting lawful competition. Under the general rule in California, covenants not to compete are unenforceable. Business and Professions Code section 16601 provides an exception to this rule where the covenant is made in connection with the sale of a business. The purpose of this exception is to protect the value of the acquired business by preventin
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