New California Employment Laws Effective January 1, 2013

This fall, the California Legislature and Governor passed a number of changes to California employment laws, most of which take effect on Jan. 1. Below is a summary of the changes most likely to have a practical impact on employers.

Contractual Salaries for Non-Exempt Employees. On occasion, employers with workers who regularly work a fixed number of overtime hours have opted to pay non-exempt employees a set salary that was intended to cover the workers' pre-agreed overtime hours in addition to standard pay for eight hours. In 2011, a California court of appeal approved just such a written contract, which paid a non-exempt employee a fixed salary that included a certain number of overtime hours built in at a time-and-a-half rate. AB 2103 ends that practice by mandating that, where an employer pays a non-exempt employee a fixed salary, that salary shall constitute compensation for no more than eight hours in a work day and 40 hours in a work week, notwithstanding any agreement to the contrary. Any time worked beyond those periods must be additionally compensated at overtime premium rates. Under California Law, employers must pay non-exempt employees overtime premiums for work exceeding eight hours in a work day or 40 hours in a work week.

Exceptions to Commission Contract Requirement. In 2011, the Legislature passed a bill requiring a written contract any time an employee is to be compensated, in whole or in part, by commissions. The law is set to take effect on January 1, 2013. With the amendments made this year by AB 2675, the statute now provides three exceptions to that rule: (1) short-term productivity bonuses such as are paid to retail clerks; (2) temporary incentives that increase commissions already stated in a written contract (for example, temporary increases to commission rates based on sales promotions at car dealerships); and (3) bonus and profit-sharing plans, as long as they are not a fixed percentage of sales or profits.

Personnel File Inspection. Currently, California law requires that employers provide employees an opportunity to inspect their personnel file within a reasonable period of the employees' request. AB 2674 expands that right in two ways: (1) it clarifies that the inspection right applies to former as well as current employees; and (2) it requires employers to provide a copy of the file rather than simply an opportunity to inspect. Previously, employers needed only to provide copies of documents signed by the employee. Employees must make their requests in writing; employers have 30 days to comply.

Religious Dress and Grooming Practices. AB 1964 requires employers to accommodate religious dress and grooming practices (e.g., head scarves, religious jewelry, beards, etc.), but also clarifies that segregating an employee from other employees or the public is not a reasonable religious accommodation.

Breastfeeding Protected From Discrimination. Under the Labor Code, employers are already obligated to accommodate lactating mothers with break time and a private area for expressing milk. AB 2386 expands the Fair Employment and Housing Act's definition of "sex" for purposes of discrimination protections to include "breastfeeding or medical conditions related to breastfeeding."

Protection of Social Media Passwords. AB 1844 prohibits employers from requesting user names, passwords or other information regarding social media accounts from employees or applicants. The law expressly does not prohibit an employer from inquiring into an employee's use of social media in the context of investigations into "workplace misconduct," though it does not define that term. It also permits employers to require that employees divulge passwords and other information regarding employer-owned equipment and accounts, though again that ownership issue is likely to be complex. Employers should note that the new statute's definition of "social media" is quite broad and includes text messages, email, blogs, photo accounts and online services such as Facebook and Twitter.

Local Minimum Wage Requirements. San Jose recently became the second city in California – and only the fifth in the nation — to set its own minimum wage. Beginning 90 days after the election results are certified (most likely March 2013), employers who maintain a facility in San Jose or who have a business license from the city must pay employees working in San Jose no less than $10 per hour. San Francisco's minimum wage will go up to $10.55 per hour on Jan. 1. Both cities require employers to post a notice of the current wage rate.