5 compliance issues California employers need to audit at least once a year

Your company has updated its employee handbook, but the work is not over in California. Here are a few reminders of additional steps employers should review after conducting a handbook update and on a periodic basis. Of course this list is not comprehensive, but it comprises of a few items that sometimes take a backseat to the employee handbook update.

1. Ensure wage notice statements are issued and are correct.

Labor Code section 2810.5 requires employers to provide written notice to employees about specific employment items. For example, the law requires that employers provide notice to employees of their rate(s) of pay, designated pay day, the employer’s intent to claim allowances (meal or lodging allowances) as part of the minimum wage, and the basis of wage payment (whether paying by hour, shift, day, week, piece, etc.), including any applicable rates for overtime. The notice must also contain the employer's "doing business as" names, and that it be provided at the time of hiring and within 7 days of a change if the change is not listed on the employee’s pay stub for the following pay period.  The recommended notice published by the Division of Labor Standards Enforcement can be downloaded here.  Also the DLSE publishes frequently asked questions that address many issues regarding the notice here

2. Start Using New Form I-9 By May 7, 2013.

By May 7, 2013, employers will be required to use the new I-9 Form. The new Form I-9 can be downloaded from the U.S. Citizenship and Immigration Services website here. It would be a good time to review the “Handbook for Employers, Guidance for Completing Form I-9” published by the USCIS.

3. Place all commission agreements in writing.

Beginning January 1, 2013, when an employee is paid commissions, the employer must provide a written contract setting forth the method the commissions will be computed and paid. The written agreement must be signed by both the employer and employee. Commission wages are “compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount or value thereof.” Commissions do not include (1) short-term productivity bonuses, (2) temporary, variable incentive payment that increase, but do not decrease, payment under the written contract, and (3) bonus and profit-sharing plans, unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed.

4. Conduct pay stub audit.

Under Labor Code 226, employers must keep copies of employees’ itemized pay statements for at least three years, at the site of employment or at a central location within the state of California. The law was amended, and as January 1, 2013 it clarifies that the term “copy” means either a duplicate of the statements provided to employees, or a computer generated record that shows all information required under Labor Code 226. In addition, the law sets a new deadline for employers to either provide a copy or permit the employee to inspect the personnel file within 30 days after the employer receives the request.

5. Ensure all personnel records are maintained properly.

When reviewing which records should be maintained in an employee’s personnel file, it is important to keep in mind why an employer would ever have to produce a personnel file – to support its employment based decisions. Therefore, employers should typically maintain personnel files with the following documents: signed arbitration agreements, sexual harassment compliance records for supervisors, sign acknowledgements of policy by employee (for example, confidentiality/proprietary information agreements, meal and rest break acknowledgments, handbook acknowledgments), Wage Theft Protection Act notice, commission agreements signed by both the employer and employee, warnings and disciplinary action documents, performance reviews, documents of any grievance concerning the employee, documents pertaining to when the employee was hired, records pertaining to last day of work and documenting reason for departure from employment.

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New Laws Facing California Employers In 2013

There are some significant changes regarding California employers’ duties in 2013. This list is an overview of the major changes that employers should consider and be aware of at the beginning of 2013.  

Employers Cannot Ask Applicants Or Employees For Social Media Passwords – AB 1844
This law created Labor Code section 980, which is effective 1/1/2013. The law prohibits employers from asking employees or applicants for passwords to their social media accounts, accessing their accounts in the presence of the employer, or divulging any personal social media. There are two exceptions to this: (1) if the request is made to a current employee as part of an investigation of allegations of employee misconduct or violation of law, and the request is based upon a reasonable belief that the information is relevant, and (2) to devices issued by the employer.

Commission Agreements Must Be In Writing – AB 1396 and 2675
Beginning 1/1/2013, when an employee is paid commissions, the employer must provide a written contract setting forth the method the commissions will be computed and paid. The written agreement must be signed by both the employer and employee. Commission wages are “compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount or value thereof.” Commissions do not include (1) short-term productivity bonuses, (2) temporary, variable incentive payment that increase, but do not decrease, payment under the written contract, and (3) bonus and profit-sharing plans, unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed.

Breastfeeding is added to definition of “sex” under the Fair Employment and Housing Act - AB 2386
The new law clarifies that the definition of sex under the FEHA includes breastfeeding and any medical conditions relating to breastfeeding. This amendment makes breastfeeding and the related medical conditions, a protected activity and therefore employers cannot discriminate or retaliate against employees on this basis under California law. While the amendment is effective 1/1/13, the law states that the amendment simply is a statement of existing law, and therefore employers should treat this amendment as existing law immediately.

New Religious and Dress Standards – AB 1964
The new law clarifies that religious dress and grooming practices are protected under FEHA. The law explains that “religious dress practice” is “shall be construed broadly to include the wearing or carrying of religious clothing, head or face coverings, jewelry, artifacts, and any other item that is part of the observance by an individual of his or her religious creed.” The law continues in defining religious grooming as: “Religious grooming practice shall be construed broadly to include all forms of head, facial, and body hair that are part of the observance by an individual of his or her religious creed.” The law also states that it is not a reasonable accommodation it the action requires segregation of the individual from the public or other employees.

Changes in Calculating Employees’ Regular Rate of Pay – AB 2103
The new law revises Labor Code 515(d) to clarify that “payment of a fixed salary to a nonexempt employee shall be deemed to provide compensation only for the employee's regular, nonovertime hours, notwithstanding any private agreement to the contrary.” Therefore, overtime must be paid above any nonexempt employee’s agreed upon salary. This law was in response to the court opinion in Arechiga v. Dolores Press. The legislature history described the opinion in Arechiga as follows:

In the Arechiga case, a janitor and his employer agreed that payment of a fixed salary of $880 a week would provide compensation for 66 hours of work each week. The Court of Appeal held that this method of payment comported with California overtime law, and that no additional overtime compensation was owed. The Court rejected the employee's contention that existing Labor Code Section 515(d) prohibits any sort of agreement that would allow a fixed salary to serve as a non-exempt employee’s compensation for anything more than a 40 hour workweek.

New Penalties For Violations On Itemized Wages Statements – SB 1255
The new law provides that employees are deemed to have suffered injury for purposes of assessing penalties pursuant to Labor Code 226(a), if the employer fails to provide accurate and complete information. Furthermore, a violation occurs if the employee cannot easily determine from the wage statement alone the amount of the gross or net wages earned, the deductions the employer made from the gross wages to determine the net wages paid, the name and address of the employer or legal entity employing the employee, and the name and only the last 4 digits of the employee.

New Requirements On Retention And Inspection of Itemized Wage Statements and Personnel Files– AB 2674
Under Labor Code 226, employers must keep copies of employees’ itemized pay statements for at least three years, at the site of employment or at a central location within the state of California. The new law, effective 1/1/13, clarifies that the term “copy” means either a duplicate of the statements provided to employees, or a computer generated record that shows all information required under Labor Code 226. In addition, the law sets a new deadline for employers to either provide a copy or permit the employee to inspect the personnel file within 30 days after the employer receives the request. The employer and employee may only agree to extend this time period out to 35 days. The employer may also redact the names of any non-supervisory employees in the file. It is important to note, this requirement does not change the 21 day time period to produce or make available for inspection an employee’s itemized wage statements under Labor Code 226(c).

Itemized Wage Statements And Wage Theft Notices For Temporary Service Employers – AB 1744
This new law requires temporary service employers to provide wage statements that list the rate of pay and total hours worked for each temporary assignment. A “temporary service employer” is defined in Labor Code 201.3(a)(1) as a company that contracts with customers to supply workers to perform services for the customer. This is effective 7/1/2013. Furthermore, the law requires temporary services employer to provide Wage Theft Notices required under 2810.5 and include additional information regarding the name, the physical address of the main office, the mailing address if different from the physical address of the main office, and the telephone number of the legal entity for whom the employee will perform work, and any other information the Labor Commissioner deems material and necessary. This requirement is effective on 1/1/2013.

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