1. Limitations on Employee Credit Checks.

California employers have long enjoyed the right to conduct background checks that involved reviewing applicants’ credit reports before extending job offers. This practice, as of January 1, 2012, will cease to be — without very specific conditions. This is because a new law has been enacted to prevent the exclusion of applicants based on derogatory reports.

Specifically, the Consumer Credit Reporting Agency Act has been amended to prohibit all employers review consumer reports unless an employer is a financial institution or reviewing an application/promotion for an exempt management position. If that employer is hiring a person to fill certain positions for the California Department of Justice, holding a law enforcement position, or a position where such investigation is required by law (i.e., teaching, etc.), credit checks will be allowed. Disclosure and consent to obtain such information is still required, and failure to do so could result in civil penalties and fines.

2. Written Commission Agreements.

Employers who offer commission incentives in California can only do so if these agreements have been recorded in a writing signed by an employee. Failure to put commission agreements in writing can expose an employer to penalties of up to $100 per day.

3. Qualify as exempt or not?

Employee misclassification continues to be a hotbed of litigation, and the 2012 legal changes reflected in federal and state law will likely raise more concerns than 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 approximately $25,000 for willful misclassifications. If evidence shows that an employer should have known that an employer was not an independent contractor and/or “exempt” instead of “non-exempt”, the business may be required to post a public notice publicizing the willful violation for up to one (1) year. In addition, any and all employees found to have jointly participated in any employee misclassification 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. Certainly, at MMC we continue to stress the importance of getting it right when it comes to identifying who in her 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 with the Right to Equal Protection – For Benefits.

The California Equal Benefits Act stands out as one of the most significant changes to state law regarding obtaining benefits for same-sex couples. In the past, some employers limited benefits to only those spouses who were in a recognized legal marriage. This meant that for those partners who were in unions teetering on Proposition 8 legal status, they might not be eligible for insurance benefits if they were tied to a partner’s employment. This will no longer be the case on January 1, 2012. Statutory amendments to state benefit laws now require that coverage extended to any spouse or partner also be extended to all spouses/partners of workers, regardless of gender.

5. Bone Marrow and Organ Donors with the Right to 30 Days of Unpaid Leave.

Organ and bone marrow donor license laws also have specialized legislation in 2012. Pursuant to AB 272, organ donors in California have up to 30 business days of leave, and bone marrow donors may have up to five (5) business days of leave within a 12-month period.

6. Pregnancy Disability Insurance Benefits with the Right to Special Protection.

Prior to January 1, 2012, the law provided women who had taken pregnancy disability leave to enjoy the same level of benefits as all employees with similar disabilities. However, after the enactment of [arguably] Greater protections for this class of women, California employers in 2012 are now required to sponsor health care benefits for women on pregnancy leave. In other words, if employees on non-pregnancy related leave are entitled to employer-sponsored benefits only for up to 12 weeks and must bear all costs to continue benefits through week 13, this rule will no longer apply to women on maternity leave. Regardless of the week of leave in connection with the childbirth, employers must maintain the level of contribution to health care benefits until the employee returns from an approved leave.

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 based on 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 comprehensive for California and may result in job loss or refusal to hire based on a person’s genetic testing, 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. Regulation of Procedure of the DFEH Advance.

Effective October 7, 2011, the Department of Fair Employment and Housing (DFEH) has instituted new rules regarding the procedures for filing, investigating, and processing discrimination and harassment complaints. DFEH is the state agency charged with enforcing the state’s Fair Employment and Housing Act and handling complaints of discrimination and harassment. In general, the regulations make it easier for claimants to file their complaints and initiate a DFEH investigation. This is because the Department must apply a liberal interpretation to complaints and an employer can no longer argue that an Open Door Policy never resulted in the employee filing the claims alleged in the complaint and therefore disregard the validity of the employee’s claims. The result may be positive in that fewer plaintiffs’ attorneys may seek automatic letters of right to sue, leading to lawsuits, and the Department’s mediation services may make informal resolution more of an option than ever before. Let’s cross our fingers with optimism that this is the final result.

9. Newsflash: The case of Brinker’s meal and rest periods is being reviewed.

On November 11, 2011, the California Supreme Court heard the long-awaited drinker matter that has kept plaintiff and defense employment lawyers alike on pins and needles. Briefly, the case raises the question of whether an employer is required to “police” the workplace to ensure that meal and rest periods are actually taken. Interestingly, the Court’s investigation into whether employees maintain more control over their workday when they choose to work alone during lunch or meal periods may indicate that the Court is unwilling to accept that employers have a duty to force employees to take their lunch and meal periods. In other words, the suggestion that an employer should force an employee to clock out and eat lunch, to avoid penalties and fines, undermines workers’ control over their workday. The Court is not expected to publish its decision until February 2012. This decision is definitely something to watch out for.

10. Update to the exemption for IT employees.

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

• The application of systems analysis techniques and procedures, including consultation with users, to determine the functional specifications of the hardware, software or system;
• 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; gold
• A combination of the aforementioned functions, the performance of which requires the same level of skills.

In practice, the exemption for IT employees does not reflect the evolution of IT and IT occupations. To remedy the lapse of coverage, 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 like is considered exempt as long as they earn $27.63 per hour. This bill is also one to watch for passage.