Labor and Employment Law: What to Expect in 2012

1. Limitations on Employee Credit Checks.

California employers have long enjoyed the right to conduct background checks that involved reviewing applicant credit reports prior to extending employment offers. This practice, as of January 1, 2012, will no longer be the case — without very specific conditions. This is because new law has been enacted to prevent exclusion of applicants based on derogatory reports.

Specifically, the Consumer Credit Reporting Agency Act has been amended to prohibit all employers from reviewing consumer reports unless an employer is a financial institution or reviewing an application/promotion for an exempt managerial position. If that employer is hiring a person to fill certain posts for the California Department of Justice, filling a law enforcement position, or a position in which the law requires such inquiry (i.e., teaching, etc.), credit checks will be permissible. Disclosures and consent to obtain such information continue to be required and a failure to do so could result in civil penalties and fines.

2. Written Commission Agreements.

Employers offering commission incentives in California may only do so if these agreements have been memorialized in a writing that has been signed by an employee. A failure to establish commission agreements in writing can expose an employer to penalties of up to $100 a day.

3. To classify as exempt or not?

Misclassification of employees continues to be a hotbed of litigation and the 2012 legal changes reflected in federal and state law will likely fuel more concerns then employers have seen in the past. Specifically, SB 459 proposes that California employers be penalized for misclassifying the status of employees to the tune of some $25,000 for willful misclassifications. If evidence proves that an employer should have known that an employer was not an independent contractor and/or “exempt” rather than “non-exempt,” the business may be required to post a public notice publishing the willful violation for up to one (1) year. Moreover, any and all employees who are shown to have jointly participated in any employee misclassifications may also be subject to fines and penalties. Federal regulatory agencies like the IRS have agreed to work with local government to help identify employers who may be subject to penalties for irregular practices. Without a doubt, we at MMC continue to underscore the importance of getting it right when it comes to identifying who in your workforce is an employee and whether he or she is exempt or non-exempt. Now, more than ever, may be the time for a compensation audit.

4. Domestic Partners/Spouses Entitled to Equal Protection – For Benefits.

The Equal Benefits Law in California is being put forth as one of the most significant changes in the state laws with regards to obtaining benefits for same sex partners. In the past, some employers limited benefits only to those spouses who were in a recognized legal marriage. This meant for those partners who were in unions that teetered on Proposition 8’s legal status, it was possible that they were not eligible for insurance benefits if tied to a partner’s employment. This will no longer be the case on January 1, 2012. Legal amendments to state benefit laws now require coverage extended to any spouse or partner to also be extended to all spouses/partners of workers, regardless of sex.

5. Bone Marrow and Organ Donors Entitled to 30 Days of Unpaid Leave.

The leave laws for organ or bone marrow donor also have a specialized legislation in 2012. According to AB 272, organ donors in California have up to 30 business days of leave, and bone marrow donors can enjoy a leave of up to five (5) business days within a 12-month period.

6. Pregnancy Disability Insurance Benefits Entitled to Special Protection.

Prior to January 1, 2012, the law afforded women who went out on a pregnancy disability leave to enjoy the same level of benefits all similarly disabled employees received. However, following the enactment of [arguably] greater protections to this class of women, California employers in 2012 must now sponsor health care benefits to women out on a pregnancy leave. In other words, if employees on a leave of absence unrelated to pregnancy are entitled to employer-sponsored benefits for only up to 12 weeks and must assume all costs to continue benefits on week 13, this rule will no longer apply to females on maternity leave. Despite which week of leave they are on in connection to giving birth, employers must maintain the level of contributing to healthcare benefits until the employee returns from an approved leave of absence.

7. FEHA Expanded To Provide More Protections.

Recently signed SB 559 and AB 887 have been amended to reflect changes to California’s Fair Employment and Housing Act (FEHA) in 2012. FEHA will now prohibit employers in this state from discriminating against employees on the basis of genetic information and “gender expression,” in addition to prohibiting discrimination on the bases of race, religion, [apparent] gender, sex, sexual orientation, perceived medical condition, and marital status, among others. The Legislature noted that the range of protection provided by the federal Genetic Information Nondiscrimination Act (GINA) is not complete for California and can result in a loss of job or refusal to hire based on an individual’s genetic tests, biological disposition to certain genetic conditions, a person’s gender-related appearance, or behavior, whether stereotypically associated with a person’s assigned sex or not.

8. DFEH Procedural Regulations Anticipated.

Effective October 7, 2011, the Department of Fair Employment and Housing (DFEH) has instituted new regulations relating to procedures for filing, investigating and processing discrimination and harassment claims. DFEH is the state agency charged with enforcing the state Fair Employment and Housing Act and handling complaints of discrimination and harassment. Overall, the regulations make it easier for claimants to file their complaints and initiate a DFEH investigation. This is because the Department is to apply a liberal construction to complaints and an employer may no longer argue that an Open Door Policy never resulted in the employee raising the claims alleged in the complaint, and thus discounting the validity of the employee’s claims. The result may be positive in that less plaintiff’s attorneys may seek automatic Right to Sue letters, which usher in lawsuits, and the Department’s mediation services may make informal resolution more likely to serve as an option than before. Let’s keep our fingers optimistically crossed that this is the end result.

9. Newsflash: Brinker Meal & Rest Periods Case Reviewed.

On November 11, 2011, the California Supreme Court heard the long awaited Brinker matter which has kept plaintiff and defense labor law attorneys alike on pins and needles. Briefly, the case raises the issue as to whether an employer is required to “police” the workplace to make sure meal and rest periods are actually taken. Interestingly, the Court’s inquiry as to whether employees maintain more control over their workday when they alone decide to work through lunches or meal periods could signal that the Court is unwilling to agree that employers have a duty to force employees to take their lunches and meal periods. In other words, the suggestion that an employer must force an employee to clock out and take a lunch, lest they be subject to penalties and fines, undermines a workers’ control over his or her workday. The Court is not expected to publish its decision until February 2012. This decision is definitely one to watch.

10. Computer Employee Exemption Updated.

Bipartisan legislation introduced in the U.S. Senate in November could update the Fair Labor Standards Act’s (FLSA) treatment of computer employee exemptions. Section 13(a)(17) of the FLSA establishes minimum wage and overtime exemptions for computer systems analysts, computer programmers, software engineers, or other similarly skilled workers provided that these employees’ specific job duties and compensation meet certain requirements. Specifically, to qualify for a computer employee exemption under current law the employee’s “primary duty” must consist of:

• The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
• The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;
• The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or
• A combination of the aforementioned duties, the performance of which requires the same level of skills.

In practice, the computer employee exemption does not reflect the evolution of computer and information technology occupations. To remedy the coverage lapse, new legislation has been introduced so that any employee working in a computer or information technology occupation (including, but not limited to, work related to computers, information systems, components, networks, or websites) as an analyst, programmer, and the kind would be considered exempt so long as he or she is making $27.63 per hour. This bill is also one to stay tuned for passing.