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Employment Law Update: 2012 Brings New Laws for California Employers
By Teresa R. Tracy
As they ring in the New Year, employers who have employees in California must also comply with several new laws, effective January 1, 2012.
Increased Minimum Salary for Exempt Computer Professionals
Employers who have exempt employees under the California computer professional exemption must pay a 2.5% increase beginning January 1, 2012 in order to maintain the exemption. This means that in order to maintain the exemption,
- the minimum hourly rate will increase from $37.94 to $38.89
- the minimum monthly salary will increase from $6,587.50 to $6,752.19
- the minimum annual salary will increase from $79,050.00 to $81,026.25
In addition, employers must continue to meet a narrowly-defined duties test in order to qualify for the exemption.
Increased Minimum Hourly Rate for Licensed Physicians
Employers who have licensed physicians paid on an hourly basis face an increase in the minimum hourly rate to $70.86.
New Health Care Requirements for Pregnancy Disability Leave
Employers who are covered by California's pregnancy disability leave requirements must now maintain and pay for group health insurance coverage for the duration of pregnancy disability leave, up to four months in a 12-month period.
An employer is authorized to recover insurance premiums from the employee if the employee fails to return to pregnancy disability leave, provided that the employee's failure to return is not due to leave taken under the California Family Rights Act (CFRA), for a health condition that entitles the employee to pregnancy disability leave, or for other circumstances beyond the employee's control.
State agencies that have collective bargaining agreements must provide for continued insurance coverage for state employees on pregnancy disability leave.
Employers are reminded that an employee may be entitled to pregnancy disability leave even if the employee is not eligible for a leave of absence under the federal Family and Medical Leave Act (FMLA) or the state's CFRA. Furthermore, continued insurance coverage while on a pregnancy disability leave will not count against an employee's right to continued benefits under the FMLA if she subsequently becomes eligible for FMLA leave.
It is unclear what effect the federal Health Reform Law will have on the state's new law, and the new law may also be subject to legal challenges based on ERISA preemption. However, the conservative approach is always to comply with the new law in order to avoid litigation.
Use of Credit Reports Limited
The ability of an employer to obtain a credit report for employment purposes is being severely restricted. Except for a short list of positions for which a credit report may be sought to screen applicants or current employees, the use of credit reports generally is prohibited. In addition, an employer will be required to provide the applicant or employee with a disclosure statement setting forth the specific basis permitting the employer to obtain a credit report.
The eight categories of jobs for which a credit report can be obtained are:
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positions with the California Department of Justice
- sworn peace officers or other law enforcement personnel
- employees who qualify for the executive exemption under California wage and hour law
- positions where the information sought on the credit report must be revealed by law
- positions that involve regular access to all of the following personal information of any one person (other than the regular solicitation of credit card applications at a retail establishment): bank or credit card account information, Social Security number, and date of birth
- positions requiring the employee to be a named signatory on the employer's bank or credit card, transfer money on the employer's behalf or be authorized to enter into financial contracts on behalf of the employer
- positions involving access to trade secrets, as defined
- positions that involve regular access to $10,000 or more in cash of the employer, or a client or customer of the employer
Credit reports may also be obtained for employees of financial institutions that are subject to United States Code sections 6801-6809, and technically such businesses are not required to disclose the statutory support for obtaining a credit report.
Even if the use of a credit report is allowed, the employer must provide the applicant or employee with a disclosure form that states the permitted basis for the credit check. This means that existing forms should be replaced or modified to comply with the new requirement. Multistate employers must still comply with the federal Fair Credit Report Act as well as the new California restrictions for applicants or employees in California.
Wage Payment Details
Nonexempt employees must now be provided with a written notice at the time of hire, indicating the following:
- the rate and basis of pay (hourly, shift, day, week, salary, piece, commission, or otherwise) including any rates for overtime
- any allowances claimed as part of the minimum wage (e.g., meal or lodging allowances)
- the regular payday designated by the employer
- the name of the employer, including any "doing business as" names
- the physical address of the employer's main office or principal place of business, and a mailing address, if different
- the employer's telephone number
- the name, address, and telephone number of the employer's workers' compensation carrier
- any other information the Labor Commissioner deems material and necessary
An employer must also notify employees in writing of any changes in the information in the notice, within seven (7) calendar days after the time of the change, unless the changes are reflected on a timely wage statement or other writing required by law.
In addition, the law increases the penalties for wage violations, provides for employer restitution of certain wages to employees, and extends the statute of limitations for collection actions by the state Division of Labor Standards Enforcement from one year to three years.
Discrimination on the Basis of Genetic Information Restricted
California's Fair Employment and Housing Act (FEHA) has been amended to prohibit discrimination on the basis of genetic information, defined by the new law as information about any of the following:
the individual's genetic tests
- the genetic tests of family members of the individual
- the manifestation of a disease or disorder in family members of the individual
- any request for, or receipt of, genetic services, or participation in clinical research that includes genetic services, by an individual or any family member of the individual
California's Unruh Civil Rights Act has also been amended to include genetic information in its list of protected categories.
Gender Expression and Identity Protected
FEHA has also been amended to make it clear that a covered employer cannot discriminate against an applicant or employee on the basis of gender identity or gender expression. The law defines "gender expression" as meaning a person's gender-related appearance and behavior, whether or not stereotypically associated with the person's assigned gender at birth.
Organ and Bone Marrow Donor Leave Clarified
Existing law requires an employer to grant a leave of absence of up to 30 days in a one-year period to an employee who is an organ donor and up to 5 days in a one-year period to an employee who is a bone marrow donor.
The new law clarifies that the specified number of days are business days, not calendar days, and that the one-year period is measured from the date the employee's leave begins and consists of 12 consecutive months.
The new law also makes it clear that the leave of absence is not a break in the employee's continuous service for the purpose of the right to paid time off. It also allows employers to condition the initial receipt of leave upon the employee's use of up to 5 days of earned but unused sick leave, vacation, or paid time off for organ donation, and up to 2 weeks of earned but unused sick leave, vacation or paid time off for organ donation.
E-Verify Use Restricted In State Contracts
State agencies, cities and counties can no longer require private employers to use the federal E-Verify system to confirm the legal right to work of employees they hire, except when required by federal law or as a condition of receiving federal monies. (E-Verify is a federally-maintained and operated computer system that allows employers to verify that the individual has the right to work in the United States.)
Penalties for Willful Misclassification of Independent Contractors
There is a new civil penalty of between $5,000 and $15,000 for each violation on a person or employer that willfully misclassifies an individual as an independent contractor. The penalty increases to between $10,000 and $25,000 for each violation if the person or employer has engaged in a "pattern or practice" of willful misclassification.
"Willful misclassification" is defined as avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.
The new law also subjects paid, non-attorney advisors to joint and several liability with the employer if they knowingly advise the employer to treat an individual as an independent contractor and the individual is found to have been misclassified.
San Francisco's Minimum Wage and Health Benefits Increase
Employers subject to San Francisco's minimum wage for non-exempt employees face an increase to $10.24 per hour, the highest in the nation.
In addition, the San Francisco Health Care Security Ordinance has been amended to require more of certain employers with workers in the City and County of San Francisco, starting January 1, 2012.
Key changes include a provision that a contribution (employer payment) to an HRA or HSA that is not paid irrevocably to a third party will not qualify as a health care expenditure under the Ordinance unless:
- the contribution is reasonably calculated to benefit the employee
- the contribution remains available to the employee for reimbursement for at least two years after the employer funds the contribution
- any unused balance from the 2011 account carries over to the 2012 account
- the employee receives a notice within 15 days after the contribution is made that provides (a) name, address and telephone number of any third party to whom the contribution was made; (b) the date and amount of the contribution; (c) changes to the account balance since the last account summary was provided; (d) the current balance in the account; and (e) the applicable expiration dates of the funds in the account
In addition, if an employee voluntarily or involuntarily terminates employment and has a positive balance in his/her account, (a) any balance available for reimbursement must remain available for at least 90 days after termination, and (b) within three (3) days after termination, the employer must notify the employee of the current account balance and the applicable expiration dates of the funds in the account.
If a covered employer uses an HRA to comply with the compensation and benefits requirements of the Ordinance, the employer must report the terms of the HRA (including the expenses eligible for reimbursement) to the San Francisco Office of Labor Standards Enforcement (OLSE).
Covered employers must also post a notice in a conspicuous place for employees regarding the employees' rights and employer's obligations under the Ordinance; the notice must be available in English, Spanish, Chinese, or any other language spoken by at least 5% of the employee's at the worksite.
If the employer imposes a surcharge on customers to cover any part of the health care expenditures under the Ordinance, the employer must file an annual report with the OLSE; if the amount of the surcharge that is collected exceeds the amount spent on health care, the employer must pay or designate the difference for health care expenditures for its covered employees and this payment or designation is irrevocable.
Various enforcement and penalty provisions were also amended.
New Poster Regarding Employee Rights to Unionize Postponed To April 30, 2012
The National Labor Relations Board (NLRB) has postponed the date by which virtually every private employer who is covered by the National Labor Relations Act must post a notice advising employees of their right to unionize, as well as posting it on the company's intranet or internet site if the employer customarily communicates with its employees about personnel rules or policies by intranet or internet. The rule, which would require employers to notify their employees of their rights to start a union, will take effect on April 30, 2012.
Commission Payment Written Agreements - Starting January 1, 2013
An employer that enters into an employment agreement involving commission payments for services performed in California must put the contract in writing and specify the method by which the commissioners are to be computed and paid. The employer must give a signed copy of the contract to every employee who is a party to such a payment arrangement and obtain a signed receipt for the contract from each employee.
The law also repeals existing law making an employer that violates this requirement liable in a civil action for triple damages.
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