Governor Brown Signs Several Bills that Impact Employers

Governor Jerry Brown recently signed bills enacting several new employment statutes. Below are brief explanations of these new laws that affect employers in California. It should be noted that the Governor vetoed AB 1450, which would have made it unlawful to discriminate against applicants for employment based on their status as unemployed.

AB 1844—Limiting Access to Employee Social Media Accounts

On September 27, 2012, Governor Brown signed into law AB 1844, which prohibits employers from requiring or requesting the social media username or password of an employee or applicant. AB 1844 will be codified in the California Labor Code, starting in section 980, entitled “Employer Use of Social Media.”

Although not initially apparent, employers will greatly benefit from the new law. Because employers are prohibited from requesting access to their employees’ social media accounts, employers have a defense to potential allegations that an employer has a legal duty to monitor its employees’ social media content or is responsible for its employees’ online conduct.

Also applauded as a significant triumph for the privacy of employees and job applicants, the law protects these individuals from being forced to provide access to their social media accounts to their employers. The law also prohibits employers from discharging or disciplining employees for refusing to comply with a demand for access to their social media accounts.

Notably, the law does not preclude employers from requiring or requesting an employee’s username or password in order to access an employer-issued electronic device.

The Governor also signed SB 1349, which prohibits California public and private postsecondary educational institutions and their employees and representatives from requesting access to the social media accounts of a “student, prospective student, or student group.” 

Although several states have passed social media privacy laws for either the workplace or secondary educational institutions, California is the first state to pass a comprehensive social media privacy law that covers the workplace as well as universities and colleges.

SB 863—Workers’ Compensation Reform Bill

On September 18, 2012, Governor Brown signed into law a bipartisan bill (SB 863) to reform California’s workers’ compensation law. The new law promises to reduce costs to employers, which have been seeing sharp increases in insurance rates over the past four years, while providing faster and increased benefits to injured workers.

The new law, which will be effective for injuries occurring on or after January 1, 2013, will provide injured workers with an increase of nearly 30 percent in permanent disability rates.

The reforms dramatically affect medical providers by changing how medical bills will be handled. Disputed medical bills will be resolved by an independent bill reviewer whose decision will be final, similar to binding arbitration, as opposed to being litigated before the Workers’ Compensation Appeals Board.

Under the new law, compensation for permanent impairment for injuries like insomnia and mental health problems that arise as the result of a physical injury has been eliminated. With regard to treatment, the new law places limits on chiropractors who will not be able to act as an injured worker’s treating physician once the maximum number (24 visits per year) of chiropractic treatments has been exhausted. 

By establishing a binding, independent review system to resolve medical treatment and billing disputes, the timeline for injured workers to receive treatment and final adjudication of their claims is expected to move much faster—from years to months.

For California employers, which have seen workers’ compensation insurance rates increase in the past two years from $14.8 billion to $19 billion, a reduction in rates is a welcomed relief.

AB 1964—Religious Clothing and Grooming Practices Are Protected from Discrimination

On September 8, 2012, Governor Brown signed into law AB 1964, the Religious Freedom Act of 2012, which amends Section 12926 of the California Government Code. This new law enhances the protections for employees against religious discrimination by, among other things, strengthening the definition of what constitutes an undue hardship.

The existing law protects individuals from employment discrimination based on race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, and sexual orientation.

The new law, which will take effect on January 1, 2013, expands the definition of “religious creed” to include religious dress and grooming practices as part of an individual’s religious observance or belief. “Religious dress practice” will be construed broadly to include “wearing or carrying of religious clothing, head or face covering, jewelry, artifacts, and any other item that is part of the observance by an individual of his or her religious creed.” Religious grooming practice includes all forms of head, facial, and body hair that is likewise part of observing an individual’s religious creed.

Employers have been required to reasonably accommodate the religious belief or observance of an individual unless the accommodation would be an undue hardship on the conduct of business of the employer. AB 1964 provides that an undue hardship requires a “significant difficulty or expense” as opposed to the “de minimis” standard under federal law. Under AB 1964, for an employer to show it is unable to reasonably accommodate the religious belief or observance without undue hardship on the conduct of its business, the employer must demonstrate that it has explored any available reasonable means of accommodating the religious belief or observance such as excusing the employee from the duties that conflict with his or her religious belief or permitting those duties to be performed at another time or by another person. Additionally, the law makes it clear that an accommodation that would require the individual to be segregated from the public or other employees would not be considered reasonable.

While employers have always needed to take requests for religious accommodation seriously, they will want to ensure that they carefully consider each request in light of the new heightened standards.

AB 340—Pension Reform for Public Employees

AB 340 is a bipartisan bill that aims to end pension abuses such as “double-dipping” and “spiking” of retirement rates. It will also require public employees to contribute more and retire later.

Although many of the provisions will only affect newly-hired employees, some of the provisions will affect all employees regardless of their hire or retirement date. One such provision relates to the purchase of Additional Retirement Credit (ARC), which will be prohibited as or January 1, 2013.

AB 1775—Wage Garnishment

Under federal law, the amount of earnings that may be subject to garnishment cannot exceed 25 percent of the individual’s weekly disposable earnings or the amount by which the individual’s disposable earnings for the week exceed 30 times the federal minimum hourly wage (currently $7.25).

AB 1775 both defines disposable income as the portion of an individual’s income that remains after deducting all amounts required to be withheld by law and reduces the amount that can be garnished by prohibiting the amount of the garnishment from exceeding the lesser of 25 percent of weekly disposable income or the amount in excess of 40 times the state minimum hourly wage (currently $8.00).

AB 2386—Breastfeeding

AB 2386 amends the California Fair Employment and Housing Act’s (FEHA) protection against sex discrimination to include breastfeeding and medical conditions related to breastfeeding. Under FEHA, “sex” was defined as gender, pregnancy, childbirth, and medical conditions related to pregnancy or childbirth. This law supplements Labor Code sections 1030 through 1033, which require accommodation of lactating employees by prohibiting discrimination or retaliation against employees who express milk at work.

AB 1744—Temporary Services Employers—New Itemized Wage Statement and Written Notice Requirements

AB 1744 amends the law regarding employers providing wage statements to employees to specify that temporary services employers provide itemized statements that include the rate of pay and total hours worked for each assignment. The wage statement must also include the name, address, and telephone number of the entity for whom the employee will perform work.

AB 1794—Information Sharing Under the Unemployment Insurance Code

Under AB 1794, the Employment Development Department (EDD) will be authorized to share new employee information that it requires from employers, with the Joint Enforcement Strike Taskforce on the Underground Economy, the Contractors’ State License Board, and the State Compensation Insurance Fund, to ensure that employers and contractors are obtaining adequate workers’ compensation insurance coverage for their employees.

AB 2103—Employers and Nonexempt Employees Cannot Agree to a Fixed Salary that Includes Overtime

The California Labor Code requires the payment of overtime to nonexempt employees who work over eight hours per day or 40 hours per week. However, in 2011 a California court of appeal upheld an explicit mutual wage agreement, which established in advance, a nonexempt employee’s overtime compensation and included it in the employee’s salary. Under AB 2103, such agreements would be invalid and any salary paid to nonexempt employees would be considered payment only for non-overtime hours.

SB 1255—Wage Statement Violations, Injury Defined

SB 1255 defines what constitutes injury for the purpose of a violation of Labor Code section 226, which requires employers to provide itemized wage statements and allows employees who suffer injury as a result of a knowing and intentional failure of the employer to recover damages. The employee is deemed to have suffered injury if the employer fails to provide a wage statement or fails to provide accurate and complete information such that the employee cannot promptly determine from the wage statement the following: (a) the amount of gross or net wages paid during the pay period; (b) the deduction that the employer made from gross wages to determine net wages paid during that pay period; (c) the name and address of the employer; (d) the employee’s name; and (e) the employee identification number or only the last four digits of the employee’s social security number.

The law also clarifies that an isolated or unintentional payroll error due to clerical or inadvertent mistake does not constitute a “knowing and intentional failure” on the part of the employer.

AB 2675—Exemption from Written Commission Contracts

California Labor Code sections 2751 and 2752 require that, as of January 1, 2013, employers provide written contracts containing specific information to employees who are paid commissions. AB 2675, which responds to concerns that such contracts are overly burdensome in temporary incentive programs (like those used for car dealerships), creates an exemption in Labor Code section 2751 for “temporary, variable incentive payments that increase, but do not decrease, payment under the written contract.”

AB 2674—Inspection of Employee Personnel Files

Currently, Labor Code section 1198.5 provides that an employee has the right to inspect the personnel records that his or her employer maintains related to the employee’s performance or any grievance involving the employee. Some of the logistical issues regarding inspection of personnel records are addressed by AB 2674.

Under the new law, both current and former employees have the right to inspect their personnel files. Also, the employer must permit the inspection no later than 30 days after receiving a written request. If requested, the employer is required to provide copies of the records at a charge not to exceed the actual cost of reproduction (and postage, if requested by a former employee). The law specifies that current employees are to be permitted to inspect the records where the employee works, while former employees may inspect the records at the site where the records are stored.

The law also requires that personnel records be maintained for a minimum of three years after termination of the employment. The law requires that employers comply with one request per year for former employees and no more than 50 requests per month for current employees. The right to inspect is suspended if the employee has brought a lawsuit against the employer related to personnel matters. The law does not apply if the employee is covered by a collective bargaining agreement that provides for hours, wages, and working conditions, a procedure for copying and inspection of personnel records, and a regular rate of pay not less than 30 percent more than the state minimum wage.

Employers that do not timely comply with the provisions of this law are liable to the employee or the Labor Commissioner for a penalty of $750, and injunctive relief and attorneys’ fees to the employee. The law also amends the requirements of Labor Code section 226(a) to allow for computer-generated wage statements to suffice as a “copy” of the wage statement that the employer must maintain for a minimum of three years.

AB 2492—Changes to California False Claims Act Expand Whistleblower Protections

On September 27, 2012, Governor Brown signed AB 2492 amending the California False Claims Act (CFCA) to align with the federal False Claims Act. The CFCA applies to persons who knowingly make false claims for money, property, or services to the state.

The bill adds whistleblower protections that are expanded to include not only employees but also contractors and agents. It also increases civil penalties for false claims against the state from a range of $5,000-$10,500 to $5,500-$11,000. Whistleblowers can recover legal fees and costs. The amended statute now allows for the potential recovery of a reduced award even if the whistleblower planned or initiated the violation.

Under the new law, which goes into effect on January 1, 2013, defendants can recover attorneys’ fees if the defendant prevails and the court finds that the case was clearly frivolous.

AB 2396—Infants in the Entertainment Industry

It is prohibited to employ infants younger than one month on a motion picture set or on location unless a prescribed certification is made by a physician and surgeon who is board certified in pediatrics. AB 2396 provides that the requirement of medical certification must be met before a temporary permit for employment may be issued for the infant.

SB 1381—Change of Term from “Mental Retardation” to “Intellectual Disability”

SB 1381 changes the term “mental retardation” to “intellectual disability” in various California statutes, including under the definition of “mental disability” in the Fair Employment and Housing Act.

SB 1370—Prevailing Wage Rate Requirements To Be Posted on the Department of Industrial Relations Website

SB 1370 requires the Director of Industrial Relations (DIR) to post a list of every California Code section and the language therein that relates to prevailing wage rate requirements for workers employed in a public work project on the DIR’s website on or before June 1, 2013. The DIR will update the list on February 1, annually.

SB 1186—Access Lawsuits Under the Americans with Disabilities Act

SB 1186, signed by Governor Brown on September 19, 2012, seeks to limit frivolous Americans with Disabilities Act (ADA) access lawsuits in California and expand access to businesses for those with disabilities. The new law requires that at least 30 days prior to filing a lawsuit for lack of access, a notice be sent to the business, alerting the owner of a potential violation or infraction. The new law also prohibits “demand for money” letters that propose to drop the lawsuit in exchange for a monetary payment. 

In addition, the law requires landlords to disclose whether their buildings or properties are state certified and in compliance with ADA laws. The new law also significantly reduces damages against business owners who correct alleged violations within 30 to 60 days of receiving a complaint.

SB 1038—Elimination of the Fair Employment and Housing Commission

SB 1038 eliminates the Fair Employment and Housing Commission and transfers its duties to a new Fair Employment and Housing Council within the Department of Fair Employment and Housing (DFEH). It also allows the DFEH to file cases directly in court, after requiring all parties to undergo free mandatory dispute resolution. Further, it authorizes courts to award the DFEH reasonable attorneys’ fees and costs if successful, to be put into a special fund to offset costs of the department.