Wednesday, February 1, 2012

New Labor Laws for the New Year

imageThis article was written by Robin Noah, SCORE Orange County Management Counselor

California Governor Jerry Brown has signed a number of new employment bills making significant changes in California employment law, requiring reviews of employer human resources policies and employee handbooks. The new laws are effective January 1, 2012, unless otherwise indicated. The three discussed in this article are considered the most significant for small employers.

Pay Notice: AB 469, the Wage Theft Protection Act of 2011, amends the Labor Code to add Section 2810.5, which requires employers to provide a written notice to nonexempt employees with specific wage information at the time of hire.

The law also requires employers to notify employees in writing of any changes to the information in the notice, within seven calendar days after the time of the changes, unless the changes are reflected on a timely wage statement or other writing required by law.

The written notice includes the rate of pay, the amount of allowances (such as meals or lodging), the designated payday, the employer’s name and any fictitious business names, the physical address and telephone number of the employer's main office, information regarding the employer's workers' compensation insurance carrier and any other information the California labor commissioner might determine is necessary. This law also increases penalties for wage violations

The Notice to Employee form can be found at www.dir.ca.gov/DLSE.

Public employers need not worry about this - they are exempt from the requirement! Most employees covered by a valid collective bargaining agreement also are not entitled to the notice (if they make more than 30% more than minimum wage).

Pregnancy Leaves: California will require more employers to continue health care coverage for women on pregnancy disability leave under a new law.

Senate Bill 299: the mandate for this bill is that group health coverage is extended for pregnancy leaves. It requires an employer to maintain and pay for coverage under a group health plan for an employee who takes Pregnancy Disability Leave, up to the entire four month duration of the leave, and under the condition that coverage would have been provided had the employee remained continuously employed.

The extension of health coverage will apply even if there is not entitlement under the federal Family Medical Leave Act.

This subject is lengthy and has many variables. It is recommended that you access the text of the bill for complete knowledge and understanding regarding compliance. Insurance Providers will be a great resource with the new mandates.

Independent Contractors: Another issue that has endlessly vexed employers, and more than a few lawyers, is whether a worker should be treated as an employee or an “independent contractor.”

Currently California uses the "California common law" test for Independent Contractor income tax withholding, unemployment insurance and disability insurance. With this test, "the most important factor in determining the correct classification is the right of the principal to control the manner and means of accomplishing a desired result". Basically, the more control the employer has, the more likely the worker is liable to be classified an employee. The www.IRS.gov web site has information regarding the process for determining if the individual is correctly classified as an IC.

The new bill SB 459 imposes a civil penalty of between $5,000 and $15,000 for each violation on a person or employer that willfully misclassifies an individual as an independent contractor. Willful misclassification is defined as avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor. The penalty increases to between $10,000 and $25,000 for each violation if the person or employer has engaged in a “pattern or practice” of willful misclassification.

The law also subjects paid, non-attorney advisors to joint and several liabilities with the employer if they knowingly advise the employer to treat an individual as an independent contractor and the individual is not found to be an independent contractor.

Extra Construction Industry Penalty: California’s licensed contractors are in for extra pressure.  Any final determination of misclassification must be sent to the Contractors’ State License Board which “shall” initiate disciplinary action against the contractor within 30 days.

Employers can improve their position and protect themselves financially by acquiring information on the new laws and the relevant compliance issues. It is recommended that employers seek legal counsel as needed.