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On Behalf of | Dec 15, 2011 | in Uncategorized

The California Legislature employment laws that go into effect on January 1, 2012, as failure to implement policies and procedures for complying with these statues could lead to hefty penalties.

Misclassification of Independent Contractors

Under newly added Labor Code Sections 226.8 and 2753, employers who have willfully misclassified independent contractors will be required to publicize findings of their violations on their company websites for a year. The notice, which must be signed by a corporate officer, must include a statement that the employer has committed a serious violation by willfully misclassifying employees, the employer changed its business practice to prevent future violations of section 226.8 (a) and any employee who believes he or she is misclassified may contact the Labor and Workforce Development Agency.

The punishment for the violation is vicious. Any “person” (not just those statutorily defined as “employers”) who willfully (voluntarily and knowingly) misclassifies an employee as an independent contractor may be liable for penalties ranging from $5,000 to $25,000 for each incident of willful misclassification.

The new laws also forbid an employer who has willfully misclassified an individual from charging that individual a fee or making any deductions from the individual’s compensations (e.g., for goods, materials space rental, services, licenses, repairs and maintenance) where such fee or deduction would have been illegal if the individual were not an independent contractor. Under this new legislation, there is still an open legal question whether every improper deduction or fee charged to a willfully misclassified independent contractor could give rise to a separate penalty of up to $25,000.

Wage Theft Prevention Act of 2011

Pay notices must be provided to new employees under the new Wage Theft Prevention Act of 2011 which will require employers to provide all newly hired, non-exempt employees with a written notice of certain wage information at the time of hire. The notice must contain the following information:

“The rate or rates of pay and basis therof, whether paid by the hour, shift, day, week, salary, piece, commission, or otherwise, including any rates for overtime, as applicable; allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances; the regular payday designated by the employer in accordance with the requirements of this code; the name of the employer, including any “doing business as” names used by the employer; the physical address of the employer’s main office or principal place of business, and a mailing address, if different; the telephone number of the employer; the name, address, and telephone number of the employer’s compensation insurance carrier; and any other information the Labor Commissioner deems material and necessary.”

This law will help identify “what” an employee is making “who is” the true employer and eliminate any issues from the onset of employment. If any of the above information changes, the employer must, within seven (7) days of any such change, provide the employees with notice in one of the manners set forth by the statute.

Update to the Genetic Information Nondiscrimination Act (“GINA”)

When we reported on this legislation we were interested to see any cases that might arise out of it. Thus far, litigation has been limited. Regardless, the legislature amended the GINA which applies to employers with 15 or more employees. GINA forbids discrimination on the basis of genetic Information when hiring or firing employees or making decision related to compensation, terms, condition, or privilege of employment it also bars employers from requesting requiring, or purchasing genetic information with certain limited exceptions and limits the disclosure of genetic information. Effective January 1, 2012 Senate Bill 559 extends prohibition of discrimination based on genetic information to California employers with five (5) or more employees. While under GINA, penalties for violations are capped between $50,000 and $300,000 (depending on the size of the employer), there is no statutory limit on the amount of damages that may be awarded to an employee who demonstrates discrimination under the amended state law. The irony is health care providers have a statutory damages cap for emotional distress at $250,000 (say for cutting off the wrong arm as an example) but small 5 person employers, with no lobbying front, can be subject to $300,000 in damages for genetic discrimination? Employers should make sure that policies and handbooks (including insurance and wellness program language and medical certification forms are updated and that supervisors are properly trained to comply with these laws. Quintilone & Associates can assist with handbooks and compliance review.

California law already prohibits employers from discriminating on the basis of a person’s medical condition, including genetic characteristics. GINA broadens the protection to employees by prohibiting employers from requesting, requiring, or purchasing genetic information about an employee or his/her family members, except under certain limited circumstances. As a result, employer-sponsored wellness programs that seek family medical history information in the course of risk assessments may implicate GINA. GINA also requires a modification of the Equal Employment Opportunity Commission (“EEOC”) employer posting requirement. Go to eeoc.gov to view the current posters.

Consumer Credit Reports

Employers are prohibited from obtaining a consumer credit report in connection with an employee or applicant background check unless the employee or applicant holds or would hold any one of the following positions.

(1) A managerial position which qualifies for the executive exemption from overtime pay requirements under the California wage orders.
(2) A position that affords regular access to bank or credit card account information, Social Security numbers, or dates of birth for any one person (as long as the access to this information does not merely involve routine solicitation and processing of credit card applications in retail establishment).
(3) A position for which the employer is required by law to consider credit history information.
(4) A position for which the information contained in the report is required by law to be disclosed or obtained.
(5) A position where the individual is or will be named signatory on the bank or credit card account of the employer and or authorized to transfer money or authorized to enter into financial contacts on the employer’s behalf.
(6) A position that affords access to confidential, proprietary, and or trade secret information.
(7) A position that affords regular access during the workday to the employer’s, a customer’s or client’s cash totaling at least $10,000.
(8) A position in the State Department of Justice or a sworn peace officer or law enforcement position.

Where an employee or applicant falls under on the exceptions, the employer should continue to provide the employee with appropriate written notice and an opportunity to receive a free copy of any credit report the employer runs. Additionally, the employer must now also provide the employee/ applicant with advance written notice identifying the applicable exception that applies.

Despite these new restrictions, employers may still obtain income or employment verification reports that do not contain credit-related information and may further obtain “investigative consumer reports,” provided they comply with any other consent, disclosure and notification requirements. Since almost every employee has “A position that affords access to confidential, proprietary, and or trade secret information,” we see no real change or purpose of the law other than to add an additional layer of legislation. In other words, any employee could be subject to Consumer Credit report under this standard.

New Notification Requirement for Background Checks

Labor Code Section 1786.22 will require employers that order background reports other than consumer credit reports (such as criminal background reports or motor vehicle reports) to provide the subjects of the report with the website address of the consumer reporting agency. If there is no website address, the employer must provide the telephone number of the agency where the individual can find information about its privacy practices.

Changes in Health Benefit Contribution Requirements


There are changes for employers with health plans to employees on pregnancy disability leave: while employers with five or more employees are already required to permit employees disable by pregnancy to take a leave of absence of up to four (4) months, they will now be required, effective January 1, 2012, to continue to provide up to four (4) months of group health coverage to those employees on pregnancy disability leave on the same terms and conditions as if the employee continued actively reporting to work.


If an employee disable by pregnancy fails to return to work, the employer may be able to recover from the employee the premium that the employer paid under the group health plan under limited circumstances provided under the law.

Employers should note that the requirement to continue health insurance for employees on pregnancy disability leave is in addition to the requirement that employers with 50 or more employees continue to provide medical benefits to an employee who takes time off post-delivery to bond with the baby under the Family Medical Leave Act and California Family Rights Act.

Employers, both large and small, should update their policies and make sure that their employees’ rights notices and postings are up to date and review all independent contractor agreements to remain in compliance. To comply with the substantive requirements of GINA, employers should train supervisors to avoid discussing medical issues with employees that may implicate GINA. Employers should also review their wellness programs to ensure that they comply with GINA. Please contact Richard E. Quintilone II, Esq. at Quintilone & Associates if you have any questions about the GINA and your business.