Sharpen your blue pencils — changes coming to California employment laws

The California legislative calendar is officially closed for 2011. And just as predicted, it was an active one, with both houses of the legislature and the Governor’s office controlled by Democrats. I wrote about some of the earlier-approved new laws here. Here’s the lowdown on the rest of the bills that made it all the way through the sausage maker, and what they mean for California employers.

Credit reports:  AB 22 prohibits employers from using employee or applicant credit reports for most purposes. Exceptions apply to certain jobs, generally limited to those which (1) are managers; (2) have access to the employer’s or clients’ money; (3) have access to personal information of others; or (4) have access to proprietary information. The law specifies that employers who request credit reports must tell the candidate or employee the specific reason the report was requested. Employers who rely on credit inquiries in hiring or promotion will need to revise their policies accordingly.

Wage order compliance, penalties, and information for employees:  AB 469, aka the Wage Theft Prevention Act of 2011, does a number of things, none pleasant for employers. First, it imposes a restitution obligation on an employer (in addition to already existing civil penalties) who pays less than required under any commission order, and criminalizes (as a misdemeanor) willful violation of the commissioner’s orders. Second, it extends from one year to three years the statute of limitations on claims by the Labor Commissioner for statutory penalties. (Can a similar extension of private litigants’ claims be far behind?) Third, it requires employers to provide specific wage-related information to non-exempt employees at the time of hire, including the rate and the basis (i.e., hourly, salary, commission, piecework, etc.) of the employee’s wages, and to provide written notice of any changes to that information within 7 days of the change occurring. Employers will need to work fast to come up with new procedures to comply with these notice requirements for new hires as well as existing hourly employees whose rates change.

Gender expression a protected class:  AB 887 expands the definition of “gender” in California’s anti-discrimination laws to include “gender expression,” a person’s gender-related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth. This new law adds to the already long list of protected classes under California law, and expands the potential victims of unlawful discrimination and harassment accordingly. Employers will need to include this new class in anti-discrimination and anti-harassment policies, and train supervisors and HR accordingly.

No mandatory E-Verify:  AB 1236 prohibits the state or any city or county from mandating use of federal E-Verify program, except when federal law requires its use.  California employers may still use E-Verify voluntarily.

Benefits during pregnancy leave:  SB 299 requires employers to maintain health plan coverage for an employee who takes pregnancy disability leave.  Women disabled as a result of pregnancy are entitled to up to four months of unpaid leave. (It’s California; we do things different here.) The new law makes clear employers will need to keep paying premiums during this period. Employers will need to amend their policies to include this new provision in their handbooks’ (mandatory) description of pregnancy disability leave, and ensure compliance through appropriate internal procedures.

Misclassification of employees as independent contractors:  SB 459 prohibits willful misclassification (“avoiding employee status . . . by voluntarily and knowingly misclassifying [an] individual as an independent contractor” — not much help in that definition) of individuals as independent contractors (ICs). It also prohibits deducting from a misclassified individual’s compensation deductions that couldn’t be taken from an employee’s wages. The law authorizes civil penalties between $10,000 and $25,000 for each violation. Finally, it imposes joint and several liability with the employer of anyone who knowingly advises the employer to misclassify an employee as an IC. (Wait a minute — what?! Oh, whew, lawyers are exempt.) Call it another reason for employers — and now their payroll and HR consultants — to err on the side of caution in the IC/employee debate.

The governor did nix a few troublesome bills (including one attempting to mandate bereavement leave described here), but by and large this session was a pretty employee- and labor-friendly affair.

All of these laws become effective on January 1, 2012. That’s a lot of handbook revision, policy and procedure review, and training in the next two and a half months. And with Harris v. Superior Court under submission and Brinker Restaurant Corp. v. Superior Court set for hearing in early November, it’s going to be Easter before anyone in HR or the employment bar gets any rest.