California Employment Law Updates

In his first legislative season, California Governor Jerry Brown has signed into law 22 employment-related bills. All but one go into effect on January 1, 2012. The most significant changes are summarized as follows.

Effective January 1, 2012

Wage Theft Prevention Act – AB 469

AB 469 (the Wage Theft Prevention Act) requires that employers provide each non-exempt employee, at the time of hiring, with a written notice specifying the employee's wage rate and the basis of calculation, whether hourly, salary, commission, or otherwise. If any of this information changes during the course of employment, the employer must notify each affected employee in writing within 7 calendar days of the changes unless such changes are reflected on a timely wage statement. No notice is required for an employee who either is exempt from the payment of overtime or is covered by a collective bargaining agreement containing the specified information. Employers should examine their offer letter forms and payroll practices to assure compliance with these notice requirements, and retain copies of the mandated notice in the subject employee's personnel file.

AB 469 also extends to three years (previously two) the period that employers are required to retain payroll records. It directs that employers may not prohibit employees from keeping personal records of their time worked or piece-rate units earned. The statute provides that employers violating minimum wage may be subject to actions for restitution of wages to the employee. This bill also criminalizes the willful violation of certain wage statutes or orders, or willful failure to pay a final court judgment or final order of the Labor Commissioner for wages due. The bill also extends the period for the Labor Commissioner to commence a collective action for penalties or fees from one year to three years.

Fines for Incorrect Use of the Independent Contractor Classification – SB 459

The California Legislature has significantly increased potential exposure for companies who engage independent contractors to provide services. SB 459 - codified as Section 226.8 in the California Labor Code - levies additional civil fines against employers who are deemed to have "willfully" misclassified any employees as independent contractors. Under Section 226.8, an entity found to have willfully misclassified an employee as an independent contractor will be subject to a minimum civil penalty of $5,000 up to a maximum of $15,000 per violation. An entity found to have engaged in a pattern of willfully misclassifying employees is subject to a minimum fine of $10,000 and not more than $25,000 per violation. These penalties are in addition to back taxes, wages, benefits and other civil penalties. Although Section 226.8 does not create a private right of action, plaintiffs may seek these penalties in a civil action under the California Private Attorney General Act.

The law defines willful misclassification as "avoiding...

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