Many employers routinely obtain consumer credit reports on prospective employees. Labor Code §1024.5 now prohibits employers or employment agencies from using such credit reports as part of employee background checks except in the following circumstances:

• When the prospective employee is a management employee;
• When the position for which the prospective employee has applied is with the California Department of Justice, That of a sworn peace officer or other law enforcement position;
• When credit information is required by law to be disclosed or maintained;
• A position that involves regular access, for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment, to all of the following types of information of any one person:
  (1) Bank or credit card account information,
  (2) Social security number and
  (3) Date of birth.
• A position in which the person is, or would be, any of the following:
  (1) A named signatory on the bank or credit card account of the employer,
  (2) Authorized to transfer money on behalf of the employer, or
  (3) Authorized to enter into financial contracts on behalf of the employer.
• A position that involves access to trade secrets, confidential or proprietary information.
• A position that involves regular access to cash totaling $10,000 or more of the employer, a customer, or client, during the workday.

Even where a consumer credit report is authorized, Civil Code §1785.20.5 requires an employer to inform the employee or prospective employee in writing that a report will be used, and identify the specific basis under subdivision Labor Code §1024.5 for use of the report. The notice also must inform the employee or prospective employee of the source of the report, and must contain a box that the employee or prospective employee may check off to receive a copy of the credit report, which must be provided contemporaneously and at no charge to the employee or prospective employee.

The Bottom Line:
You should consider carefully whether an employee or prospective employee falls into one or more of the exclusions before deciding to request a consumer credit report. If you anticipate requesting credit reports because of the nature of your business you may want to develop a form to use to comply with Civil Code §1785.20.5.

Labor Code §1510 requires employers of 15 or more employees to provide paid leave of absence not exceeding 30 business days to an employee who is an organ donor in any one-year period and paid leave of absence not exceeding 5 business days to an employee who is a bone marrow donor in any one-year period. The leave is required on receipt of verification from an employee that he or she is an organ or bone marrow donor and that there is a medical necessity for the donation of the organ or bone marrow. This law also requires an employer to maintain and pay for coverage under a group health plan for the full duration of the leave, in the same manner the coverage would have been maintained if the employee had been actively at work during the leave period.

The leave required by this law cannot be treated as a break in the employee’s continuous service for the purpose of his or her right to salary adjustments, sick leave, vacation, paid time off, annual leave, or seniority. An employer may require, as a condition of an employee’s initial receipt of bone marrow or organ donation leave, that an employee take up to five days of earned but unused sick leave, vacation, or paid time off for bone marrow donation and up to two weeks of earned but unused sick leave, vacation, or paid time off for organ donation, unless doing so would violate the provisions of any applicable collective bargaining agreement. Donor leave may be taken in one or more periods, but cannot exceed the total amount of 30 days for an organ donor or 5 days for a bone marrow donor. An employer cannot require an employee to take FMLA or CFRA leave concurrently with this leave.

The Bottom Line:
It is important to understand that unlike FMLA and CFRA leave, Donor leave applies to employers of 15 or more employees, not just employers with at least 50 employees.

Labor Code §226 authorizes the Department of Standards Enforcement (DLSE) to assess penalties ranging from $5,000 to $15,000 for the willful misclassification of independent contractors in addition to any other penalties or fines permitted by law. Willful misclassification is defined as “avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.”

Fines may also be levied against an employer for charging an individual who has been willfully misclassified as an independent contractor a fee, or making any deductions from compensation, for any purpose, including for goods, materials, space rental, services, government licenses, repairs, equipment maintenance, or fines arising from the individual’s employment where any of the acts described in this paragraph would have violated the law if the individual had not been misclassified.

If the DLSE or a court finds that the employer has engaged in a pattern and practice of willfully misclassifying employees as independent contractors, the fines can be as high as $25,000 in addition to any other penalties or fines permitted by law.

If the employer engaged in willful misclassification is also a licensed contractor the statute requires DLSE to send a copy of the order to the Contractors’ State License Board, which must, in turn, initiate disciplinary proceedings against the contractor within 30 days.

In addition to fines and any other penalties DLSE or a court must order the employer to post a notice on its website about the violation.

The Bottom Line:
Misclassification of employees is a perennial problem. Many employers do not understand the law regarding independent contractors and routinely treat employees as independent contractors. Think carefully before classifying a worker as an independent contractor. There are a number of factors to be considered in this determination; however, if someone works in your business on a regular basis and is under your control they are more than likely an employee rather than an independent contractor. There are no penalties for classifying an independent contractor as an employee!

At the time of hiring, employers must now provide each non-exempt employee with a notice that specifies the rate of pay, the basis for payments, whether hourly, salary, commission or otherwise of the employee’s wages and notify each employee in writing of any changes within 7 days unless the changes are reflected on a timely wage statement or another writing. We have a form available developed by the DLSE that complies with Labor Code §2810.5.

The Wage Theft Prevention Act of 2011 is a far reaching piece of legislation that affects nearly all employers. The Act gives the Labor Commissioner the right to collect penalties from an employer for up to 3 years. Under the Act an employer who willfully violates an order of the Labor Commissioner or fails to pay a final court judgment or final order issued by the Labor Commissioner for all wages due to an employee within 90 days of the judgment the order is guilty of a misdemeanor. In addition to imprisonment in the county jail, conviction of this misdemeanor carries mandatory fines ranging from $1,000 to $20,000 depending on the amount of wages owed.

An employer convicted of subsequent wage violations or who fails to satisfy a judgment must post a bond with the Labor Commissioner for a 2 year period in order to continue business operations and must account for assets to the Labor Commissioner.

The Act also extends to three years the time during which an employer must keep payroll records.

The Bottom Line:
Take a little time to review, and if necessary, update your payroll policies and procedures.

All businesses that pay commissions are required to enter into written agreements with commissioned employees by January 1, 2013. The written agreement must establish the method of computation and payment. An employer must give a signed copy of the contract to every employee who is a party thereto and get a signed receipt for the contract from each employee. In the case of a contract that expires and the parties nevertheless continue to work under the terms of the expired contract, the contract terms are presumed to remain in full force and effect until the contract is superseded or employment is terminated by either party.

The Bottom Line:
This is just a good business practice. Why wait until the end of the year?

It is now an unlawful employment practice for an employer of at least 5 employees to refuse to allow a female employee disabled by pregnancy, childbirth, or a related medical condition to take a leave for a reasonable period of time (up to 4 months) and thereafter return to work. In addition, the employer must pay up to 4 months of group health insurance during the pregnancy disability leave.

The Bottom Line:
Pregnancy itself is not a disability. The legislature has not specifically defined the phrase, “disabled by pregnancy, childbirth, or a related medical condition.” Err on the side of caution if an employee requests pregnancy disability leave. You have the right to reasonable notice of pregnancy disability leave and the estimated duration. You can require medical documentation of the employee’s disability.

The protected category of gender has now been expanded to include gender identity and gender expression. Gender expression is defined as “a person’s gender related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth.” The opportunity to seek, obtain, and hold employment without discrimination because of gender, gender identity, gender expression is now recognized as a civil right.

An employer may require an employee to adhere to reasonable workplace appearance, grooming, and dress standards not precluded by other provisions of state or federal law, however an employer must allow an employee to appear or dress consistently with the employee’s gender identity or gender expression.

The Bottom Line:
As an employer you have an obligation to prevent discrimination and harassment in the workplace as to all protected categories, including gender, gender identity and gender expression. You should revise your Employee handbook and/or EEO policies to include gender identity and gender expression among the protected categories along with race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex, sexual identity and genetic information. You may want to provide some training for your managers and supervisors on all of the protected categories.

Genetic Information has now been added to the list of categories protected under various codes and affects all laws regarding employment.

The Bottom Line:
In general an employer cannot make employment decisions based upon an employee’s or applicant’s genetic information. This is of particular concern when requesting medical documentation for purposes of reasonable accommodation or family/medical leave. You should take care to tailor such requests to information actually needed to avoid receiving information regarding family genetic traits, genetic counseling or services.

Two new categories have been added to the definition of “public works” for the purpose of payment of prevailing wages only.

Employees hauling any refuse (including, but not limited to, soil, sand, gravel, rocks, concrete, asphalt, excavation materials, and construction debris) other than certain recyclable metals, from a public works site to an outside disposal location must now be paid prevailing wages.

Similarly “public works” now include any construction, alteration, demolition, installation, or repair work done under private contract where work is performed in connection with the construction or maintenance of renewable energy generating capacity or energy efficiency improvements on the property of the state or a political subdivision of the state and more than 50 percent of the energy generated is purchased or will be purchased by the state or a political subdivision of the state or the energy efficiency improvements are primarily intended to reduce energy costs that would otherwise be incurred by the state or a political subdivision of the state.

The maximum penalties for violation of the prevailing wage laws have increased from $50 to $200 per calendar day for each worker paid less than the determined prevailing wage. The minimum penalties have also increased from $10 to $40 per day. The penalties for failure to provide records to the DLSE have increased from $25 to $100 for each calendar date for each worker.

The Bottom Line:
Those of you who bid on public works jobs should review your policies and procedures regarding prevailing wages and the production of certified payroll to make sure you are complying with the law.

I hope this information will be of value to you. If you have any questions, or need further information, please do not hesitate to contact me. Best regards for the New Year!