California Governor Enacts Special Paycheck Rules For Temporary Workers And Criminal Penalties For Falsified Timesheets

Although Governor Schwarzenegger had vowed not to sign any new legislation until a budget agreement is reached, two new wage and hour laws will take effect on January 1, 2009.

Paycheck Rules for Temporary Workers

As most employers are aware, when an employee is involuntarily terminated, California law requires that their final paycheck be issued on their last day of work.  The California Supreme Court had held that this rule could be imposed when a temporary worker completed a single-day assignment, even if the worker might receive intermittent future assignments.  (Smith v. L'Oreal, 39 Cal. 4th 77 (2006)).  Senate Bill 940, signed earlier this session, effectively reverses that Court decision, clarifying that the end of a temporary assignment for such workers does not qualify as a termination or "discharge," and thus the payment of final wages is not required.  At the same time, the law imposes certain protections for the benefit of temp workers:  they must be paid weekly, and no later than the regular payday of the calendar week following the performance of services.  If non-clerical temp workers are assigned to a client on a "day-to-day" basis, meaning that they either report to the agency in the morning before traveling to the client, or report back to the agency at the end of the day, the worker must be paid on a daily basis.  Temporary workers assigned to a client in a trade dispute must also be paid on a daily basis.   The law makes clear, however, that when temp workers are permanently "discharged" from their employer, rather than simply in-between projects, they must be paid in the same timetable as other workers.  If involuntarily terminated, final wages are due on their last day of work and, likewise, if they resign, they must be paid within 72 hours of their final day or on the last day of work, whichever is later.  Failure to provide finial wages in accordance with the statute continues to expose the employer to liability for up to 30 days of continued wages.

Temporary/contract staffing companies should examine their payroll practice and the new amendment to Labor Code section 201.3, to assure they are in compliance by January 1, 2009.  In fact, any employers using occasional or temporary workers should re-examine the scheduling and payment methods for these employees so as to avoid inadvertent violation of this new law, and consult counsel with any questions on how the new law may apply to their workforce.

Legal Penalties for Falsified Timesheets

In a second bill signed into law this session, California has strengthened the legal penalties for timesheet falsification by employers.  Although we typically associate timesheet fraud with unscrupulous employees, recent high profile cases have exposed employers that have attempted to avoid wage claims by requiring their employees to sign timecards which allegedly under-reported their hours worked, or which falsely stated that employees had been provided with required meal and rest breaks.  Under A. B. 2075, which amends Labor Code Section 206.5, it will become illegal on January 1, 2009 for an employer to require an employee, as a condition of being paid, to sign a false statement of hours worked. Violation of the law is a misdemeanor, and employers would remain potentially liable for penalties relating to unpaid overtime or missed breaks.

While this new law may prove to be a strong weapon against dishonest operators, it also presents a potential trap for unwary employers.  Any employer that requires employees to verify and affirm their hours worked through an automated timekeeping system should be certain that its managers and Human Resources professionals are trained on the need to verify those time sheets, and are aware of the need to investigate any claim by an employee that the timesheet is inaccurate.  Failure to do so could now lead to criminal accusations since many automated timekeeping systems will not process a time sheet until an employee has verified the hours worked.  In sum, this new law presents a good reason for employers to review their time keeping and pay systems to be sure that employees do not feel coerced into signing false time cards in order to be paid wages due.