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New California Laws Covering Credit Reports, Pay Notices and Independent Contractors
Practical Law Legal Update 8-509-1166 (Approx. 6 pages)
New California Laws Covering Credit Reports, Pay Notices and Independent Contractors
by PLC Labor & Employment
| Published on 11 Oct 2011 • California |
New employment laws cover areas such as consumer credit reports, penalties for willful independent contractor misclassification, written commission agreements and pay information notices for newly hired employees, among other areas.
On October 7 and 9, 2011, California Governor Jerry Brown signed several employment-related bills into law addressing credit reports, pay notices and independent contractor classifications, among a number of other areas.
Credit Reports No Longer Allowed for Employment Purposes
On October 9, 2011, Governor Brown signed A.B. 22 into law, a bill prohibiting employers from using consumer credit reports for employment purposes except in limited, specific circumstances. The new law takes effect January 1, 2012.
Under the new law, employers and prospective employers, with the exception of certain financial institutions, are prohibited from obtaining a consumer credit report of an employee or job applicant, unless the position of the person for whom the report is requested is one of the following:
- A position in the California Department of Justice.
- A managerial position covered under the executive exemption.
- A sworn peace officer or other law enforcement position.
- A position for which the information contained in the report is required by law to be disclosed or obtained.
- A position that involves regular access, for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment, to an individual's:
- bank or credit card account information;
- social security number; or
- date of birth.
- A position in which the person is, or would be, either:
- a named signatory on the employer’s bank or credit card account;
- authorized to transfer money on the employer's behalf; or
- authorized to enter into financial contracts on the employer's behalf.
- A position that involves access to confidential or proprietary information, including trade secrets.
- A position that involves regular access, during the workday, to $10,000 or more of cash belonging to the employer, a customer or client.
California employers still must give written notice to any consumer before requesting a consumer credit report for employment purposes. When doing so, employers must give the specific exception used for obtaining the report.
Written Commission Contracts Required
On October 7, 2011, Governor Brown signed A.B. 1396, requiring employers to have written contracts with any employee paid by commission. In addition, California employers must:
- Include the method for calculating the commission.
- Require each employee to sign a receipt for a signed copy of the contract.
Where work continues after a contract expires, the terms of the contract remain effective until the contract is replaced or employment ends. These requirements go into effect on January 1, 2013.
Penalties for Willful Independent Contractor Misclassification
On October 9, 2011, Governor Brown signed S.B. 459 creating penalties for willful misclassification of individuals as independent contractors. "Willful" is statutorily defined as "voluntarily and knowingly" misclassifying an individual as an independent contractor to avoid employee status.
This new law imposes fines ranging from $5,000 for a single violation up to $25,000 for a pattern or practice of willful misclassification. California employers will also be held liable for deductions from misclassified individuals' pay if those deductions would be barred for correctly classified employees.
The law also makes paid advisors, except attorneys, who recommend willful misclassification of individuals as independent contractors jointly liable with the employer. It takes effect on January 1, 2012.
For more information on independent contractors in California, see State Q&A, Independent Contractors: California.
Pay Information Notice Required
On October 9, 2011, Governor Brown approved A.B. 469 which, among other things, requires employers to provide each employee with a written notice of certain pay information at the time of hire. Under the new Section 2810.5 of the Labor Code, the notice must include:
- The pay rate and the basis, whether hourly, salary, commission or otherwise, including any overtime rate.
- Allowances, if any, claimed as part of the minimum wage, including meals or lodging.
- The regular payday.
- The employer's name.
- The employer's physical address 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 as determined by the Labor Commissioner.
California employers must notify employees, in writing, of any changes to the bulleted items above within seven days of the changes, unless those changes are outlined in a regular wage statement or other written notice required by law. This law takes effect January 1, 2012.
Update: As required by the new statute, the Labor Commissioner has issued a template notice that employers may use that complies with the requirements of this new law, including any exceptions under the law. The notice must written in the language the employer normally uses to communicate employment-related information.
Additional Laws Passed
Governor Brown signed several other laws including:
- A.B. 592, adding an express prohibition of "interference" with California Family Rights Act leave, similar to language in the federal Family and Medical Leave Act.
- S.B. 299, prohibiting an employer from refusing to maintain and pay for group health coverage for an employee taking statutorily provided pregnancy disability leave for the entire four-month leave period.
- A.B. 887, clarifying the gender definition to include gender identity and gender expression in numerous laws including the Fair Employment and Housing Act which covers gender harassment and discrimination.
- S.B. 757, prohibiting discrimination between different sex spouses or domestic partners and same sex spouses or domestic partners for health insurance coverage.