2013 Legislative Update

California Employment Law Developments

The following is a synopsis of notable changes in California employment laws that take effect on January 1, 2013, unless otherwise noted.

AB 1744 & SB 1255 – Employee Compensation: Itemized Statements.

Under existing law, employers must provide itemized wage statements to employees on a semi-monthly basis, or when employees are otherwise paid. Employees who are injured by a knowing and intentional failure to provide the requisite information on the itemized statements may recover damages no greater than a $4,000 penalty and costs and attorney fees.

AB 1744 requires that temporary services employers provide additional information on the itemized wage statement, including the rate of pay and total hours worked for each temporary services assignment, and additional information in the notice given to the employee at the time of hire.

SB 1255 provides that employees have suffered “injury” as a matter of law where employers fail to provide a wage statement. Furthermore, employees are deemed to have suffered “injury” where the information on the itemized statement is not accurate and complete, and employees cannot promptly and accurately determine specified information from the wage statement alone.

AB 1775 – Wage Garnishment: Exempt Earnings.

The California Wage Garnishment Law limits the amount of earnings that may be subject to withholding for employees who are judgment debtors. AB 1775 increases the amount of wages exempt from garnishment to the lesser of 25 percent of the individual’s weekly disposable earnings or the amount by which the individual’s disposable earnings for the week exceed 40 times the state minimum hourly wage (currently $8 per hour) in effect at the time the earnings are payable, unless an exception applies. Disposable earnings are defined as the portion of an individual’s earnings that remains after all amounts required to be withheld by law have been deducted. AB 1775 becomes effective July 1, 2013.

AB 1844 – Employer use of Social Media.

AB 1844 prohibits employers from either requiring or requesting social media usernames or passwords from employees and applicants if the purpose is to access personal social media, access personal social media in the employer’s presence, or to divulge personal social media. However, the law does not affect employers’ rights to request that employees divulge personal social media to investigate employee misconduct, or to access employer-issued electronic devices.

AB 1844 also prohibits retaliation, or threats of retaliation, against employees who refuse to comply with an illegal request or demand to divulge social media usernames or passwords.

AB 1964 – Discrimination in Employment: Reasonable Accommodations.

The California Fair Employment and Housing Act (FEHA) requires employers to make reasonable accommodations for religious beliefs or observances as long as such accommodations do not impose undue hardships on employers. AB 1964 adds religious dress and grooming practices as covered beliefs or observances under FEHA. It further provides that segregating the religious employee from the public or other employees on account of their religious dress or grooming practices is not a reasonable accommodation.

AB 2103 – Employment: Wages and Hours: Overtime.

Existing California law sets the full-time workday at eight hours and the full-time workweek at 40 hours for non-exempt employees. Overtime is required for hours worked by nonexempt employees in excess of the daily and hourly limits. AB 2103 provides that, notwithstanding any private agreement to the contrary, the payment of a fixed salary to a nonexempt employee is considered compensation only for the employee’s regular, non-overtime hours.

AB 2386 – Employment and Housing Discrimination: Sex: Breastfeeding.

FEHA prohibits employers from discriminating against employees on the basis of sex. AB 2386 defines “sex” to include breastfeeding and related medical conditions.

AB 2674 – Employment Records: Right to Inspect.

Under existing law, an employee has the right to inspect the employer’s personnel records pertaining to his/her performance or to any grievance regarding the employee. AB 2674 requires employers to maintain these personnel records for at least three years after the termination of the employee. Additionally, employers must, within 30 calendar days of receiving a request, provide both current and former employees, or their representatives, with the opportunity to inspect and receive a copy of their records, except while a lawsuit relating to a personnel matter is pending. However, these requirements do not apply to employees covered by a valid collective bargaining agreement that already provides an inspection and copy procedure for personnel records.

AB 2675 – Employment Contract Requirements.

Existing California law requires employers to enter into written employment contracts with employees who are compensated on a commission basis. The contracts must specify how the commissions will be calculated and paid to the employees. AB 2675 exempts certain types of commissioned employees from this requirement. Specifically, a separate written contract is not required for: 1) short term productivity bonuses; 2) temporary variable incentive payments that increase, but do not decrease, under a written contract; or 3) bonus and profit sharing plans when the employer has not offered to pay a fixed percentage of sales or profits as compensation for work to be performed.

SB 863 – Workers’ Compensation.

SB 863 increases permanent disability benefits for employees by 30 percent, phased in over a two year period. It adjusts the formula for calculating the benefits amount, thereby making compensation amounts more accurately reflect the loss of future earnings. When determining the extent of permanent disability, only the nature of the physical injury or disfigurement, the injured employee’s occupation, and his or her age when injured can be considered. SB 863 also prohibits, with some limitations, increases in permanent disability ratings for sleep dysfunction, sexual dysfunction, and psychiatric disorders. Additionally, it creates a mandatory Independent Medical Review Process for medical treatment disputes. Finally, SB 863 makes a number of changes affecting Medical Provider Networks including streamlining the approval process, limiting the grounds that employees can use to avoid obtaining treatment with a Medical Provider Network and eliminating a number of other requirements that applied to such networks.

Minimum Wage.

Certain computer software employees and licensed physicians and surgeons are exempt from overtime requirements if they receive certain minimum rates, which have now increased.

Computer professionals: Hourly rate increase from $38.89 to $39.90; monthly rate increase from $6,752.19 to $6,927.75; annual rate increase from $81,026.25 to $83,132.93.

Licensed Physicians or Surgeons: Hourly rate increase from $70.86 to $72.70 per hour.

Federal Employment Law Developments

There were no significant employment laws enacted by the U.S. Congress during 2012. However, there were a number of other federal developments that may affect some California employers.

DOL and California Join Forces to Target Employee Misclassification as Independent Contractors

The United States Department of Labor (DOL) and the California Secretary of Labor and Workforce Development announced that they have entered into a memorandum of understanding regarding the improper classification of employees as independent contractors. This memorandum is a part of the DOL’s Misclassification Initiative, which aims to prevent, detect and remedy employee misclassification as independent contractors. The memorandum states that the DOL and the California Labor and Workforce Development Agency will share information, coordinate enforcement efforts and develop a procedure for exchanging investigative leads, complaints and referrals of possible violations. The memorandum also states that the agencies can conduct joint investigations.

EEOC Provides Additional Guidance on Employers’ Use of Criminal Records

The EEOC updated its enforcement guidelines relating to the consideration of arrest and conviction records in employment decisions. The EEOC identified two scenarios in which it believes that employers can successfully claim that their criminal conduct screen is acceptable: 1) when the employer utilizes the EEOC’s Uniform Guidelines on Employee Selection Procedures to validate their criminal conduct screen for the position; and 2) when the employer utilizes a targeted screen which considers certain specified factors, and then provides an opportunity for an individualized assessment for people who are excluded by the screen to determine whether the policy, as applied to them, is job related and consistent with business necessity. The EEOC emphasized that employers can avoid liability for disparate impact discrimination by utilizing individualized assessments and considering more complete information on individual applicants or employees. In its guidance, the EEOC stressed that a screening policy that contains an automatic exclusion of all applicants with criminal conduct is flawed because it does not focus on the dangers of particular crimes and the risks in particular positions. The EEOC also stated that, unlike a conviction, a mere arrest does not establish criminal conduct. Therefore, an arrest alone cannot be used to deny an employment opportunity. However, an employer can make an employment decision based on the underlying conduct of the arrest.

NLRB Continues to Scrutinize Employer Social Media Policies

The National Labor Relations Board (NLRB) released a report focusing on employer use of social media policies. The report laid out the framework that the NLRB uses to determine if a work rule violates a workers’ rights under Section 7 of the National Labor Relations Act (NLRA). Section 7 states that “employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection….” Therefore, a work rule that bars any of the above activities is unlawful. Additionally, a work rule violates the NLRA if employees would reasonably interpret the rule as prohibiting protected activity, the rule was formulated in response to union activity or the rule has been applied to restrict the exercise of Section 7 rights. The report states that utilizing ambiguous social media rules which lack limiting language informing the employees that the rule does not restrict Section 7 right violates the NLRA. The NLRB stated that rules are less likely to be unlawful if they clarify and restrict their scope by including examples of unprotected conduct. Additionally, the NLRB stated that a “savings clause” stating that the social media policy will be in compliance with the NLRA does not save an otherwise unlawful work rule.

NLRB Issues Opinion Relating to Mandatory Arbitration Clauses

In D.R. Horton and Machael Cuda, the NLRB held that Section 7 activities include the pursuit of a workplace grievance either through litigation or arbitration. Therefore, an arbitration clause that requires employees to waive their right to pursue class litigation of claims in any forum violates Section 7. However, the NLRB held that a mandatory arbitration clause does not violate Section 7 if it requires arbitration of individual claims but allows employees to pursue class action claims through litigation. It is worth noting that since this opinion was issued the California Court of Appeals has declined on multiple occasions to apple this reasoning to cases.