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New California Employment Laws for 2012

  • December 8, 2011

A number of new employment bills making significant changes in California employment law and requiring review of employer human resources policies and employee handbooks has been signed by California Governor Jerry Brown. The new laws are effective January 1, 2012, unless otherwise indicated. We highlight what we believe to be the most significant below.

Pregnancy Disability Leave (SB 299)

SB 299 prohibits employers from refusing to maintain and pay for group health insurance coverage for the duration of pregnancy disability leave, up to four months in a 12-month period.

The law also authorizes employers to recover insurance premiums from the employee if the employee fails to return from pregnancy disability leave, provided that the employee’s failure is not due to leave taken under the state Moore-Brown-Roberti Family Rights Act (CFRA), for a health condition that entitles the employee to pregnancy disability leave, or other circumstances beyond the employee’s control.

This bill requires that collective bargaining agreements of state agencies provide for continued insurance coverage for state workers on pregnancy disability leave.

This law will have a significant impact on employers because employees who are not eligible for federal Family and Medical Leave Act leave are eligible for pregnancy disability leave. Further, continued insurance coverage provided for pregnancy disability leave will not count against an employee’s right to continued benefits under the FMLA if she subsequently becomes FMLA eligible. The statute also invites possible legal challenges based on ERISA preemption. The affect of the federal Health Reform Law on the new law is unclear at this time.

Organ and Bone Marrow Donor Leave (SB 272)

Under existing law, an employer must grant a leave of absence of up to 30 days in a one-year period to an employee who is an organ donor and up to five days in a one-year period to an employee who is a bone marrow donor. SB 272 provides that the days of leave are business days, rather than calendar days, and that the one-year period is measured from the date the employee’s leave begins and consists of 12 consecutive months.

This law clarifies that the leave of absence is not a break in the employee’s continuous service for the purpose of his or her right to paid time off. It provides that employers may condition the initial receipt of leave upon the employee’s use of a specified number of earned but unused days for paid time off, as well as upon a specified number of days of earned but unused sick or vacation leave, as under existing law.

Credit Reports (AB 22)

AB 22 imposes significant restrictions on an employer’s ability to obtain a credit report for employment purposes. It generally permits employers that are seeking to fill only specific, identified exempt positions to obtain and use credit reports to screen applicants or current employees. The use of the credit reports in other occupations generally is prohibited.

Further, employers will be required to provide the employee or applicant with a disclosure statement setting forth the specific basis permitting the employer to obtain a credit report.

Credit reports may be obtained only if the position to be filled falls into one of eight exempt categories:

  • Positions with the state Department of Justice
  • Sworn peace officers or other law enforcement personnel
  • Managerial positions, i.e., employees who qualify for the executive exemption under California wage and hour law
  • Positions where the information sought in the credit report must be revealed by law
  • Positions (other than the regular solicitation of credit card applications at a retail establishment) that involve regular access to all of the following personal information of any one person:  bank or credit card account information, Social Security number, and date of birth
  • Positions requiring the employee to be a named signatory on the employer’s bank or credit card, transfer money on the employer’s behalf or be authorized to enter into financial contracts on behalf of the employer
  • Positions involving access to trade secrets, as defined
  • Positions that involve regular access to $10,000 or more in cash of the employer, a client or a customer

Credit reports also may be obtained for employees of financial institutions subject to Sections 6801-6809 of the United States Code. Technically, such businesses are not required to disclose the statutory support for obtaining a credit report.

California employers should ensure that their practices for obtaining and using credit reports comply with this new enactment. If use of a credit report is permitted, the employer must provide the applicant or employee with a disclosure form that states the permitted basis for the credit check. Employers also should modify forms to ensure compliance with SB 909 (requiring background screening firms to provide subjects of their reports with a Disclosure and Request for Consent before a subject’s data can be sent outside the United States). Multistate employers should ensure compliance with the requirements of the federal Fair Credit Reporting Act and applicable state laws.

Willful Misclassification of Independent Contractors (SB 459)

SB 459 imposes a civil penalty of between $5,000 and $15,000 for each violation on a person or employer that willfully misclassifies an individual as an independent contractor. Willful misclassification is defined as avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor. The penalty increases to between $10,000 and $25,000 for each violation if the person or employer has engaged in a “pattern or practice” of willful misclassification.

The law also subjects paid, non-attorney advisors to joint and several liabilities with the employer if they knowingly advise the employer to treat an individual as an independent contractor and the individual is not found to be an independent contractor.

Wage Payment Details (AB 469)

AB 469 requires employers to provide to nonexempt employees, at the time of hire, a written notice indicating the following:

  • The rate and basis of pay, whether hourly, shift, day, week, salary, piece, commission, or otherwise, including any rates for overtime
  • Any allowances claimed as part of the minimum wage, including meal or lodging allowances
  • The regular payday designated by the employer
  • The name of the employer, including any “doing business as” names
  • The physical address of the employer’s main office or principal place of business, and a mailing address, if different
  • The employer’s telephone number
  • The name, address, and telephone number of the employer’s workers’ compensation insurance carrier
  • Any other information the Labor Commissioner deems material and necessary


The law also requires employers to notify employees in writing of any changes to the information in the notice, within seven calendar days after the time of the changes, unless the changes are reflected on a timely wage statement or other writing required by law.

The law increases penalties for wage violations, provides for employer restitution of certain wages to employees, and extends from one to three years the statute of limitations on collection actions by the state Division of Labor Standards Enforcement.

Employer Contract Requirements (AB 1396)

AB 1396 requires an employer that enters into an employment contract involving commission payments for services to be rendered within California to put the contract in writing and specify the method by which the commissions are to be computed and paid. The employer must give a signed copy of the contract to every employee who is a party thereto and obtain a signed receipt for the contract from each employee. The law also repeals existing law making an employer that violates this requirement liable in a civil action for triple damages.

The law is effective January 1, 2013, giving employers a full year to assure their commission agreements comply with the new law.

Use of E-Verify System (AB 1236)

AB 1236 provides that state agencies, cities, and counties cannot require private employers to use the federal E-Verify system to confirm the legal immigration status of workers they hire, except when required by federal law or as a condition of receiving federal funds.

E-Verify is a computerized system maintained and operated by the U.S. Department of Homeland Security, in partnership with the Social Security Administration. E-Verify allows employers to use the program, on a voluntary basis, to verify that the employees they hire are authorized to work in the United States.

Genetic Information (SB 559)

SB 559 amends the California Fair Employment and Housing Act (FEHA) to prohibit discrimination on the basis of genetic information. Genetic information is defined by the new law to mean information about any of the following:

  • The individual’s genetic tests
  • The genetic tests of family members of the individual
  • The manifestation of a disease or disorder in family members of the individual
  • Any request for, or receipt of, genetic services, or participation in clinical research that includes genetic services, by an individual or any family member of the individual

The law similarly expands the categories prohibited under other antidiscrimination provisions in the California Unruh Civil Rights Act to include genetic information.

Gender Expression (AB 887)

AB 887 amends California FEHA to clarify that prohibited discrimination in employment and housing on the basis of sex or gender includes discrimination on the basis of a person’s gender identity and gender expression. The law defines gender expression as meaning a person’s gender-related appearance and behavior, whether or not stereotypically associated with the person’s assigned sex at birth.

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If you have any questions regarding any of these new laws and their implications, please contact the Jackson Lewis attorney with whom you regularly work.

©2011 Jackson Lewis P.C. This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Jackson Lewis and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome.

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