NEW CALIFORNIA EMPLOYMENT LAWS: HOW TO REDUCE RISK

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by Stuart Miller and Elizabeth Staggs-Wilson

A host of new California employment laws have taken effect in the last six months. Below is a quick summary of a few that are most likely to concern employers and suggestions on how to minimize risk.

• Any business that has independent contractors must take note of a new filing requirement. In addition to filing a federal Form 1099-MISC with the IRS, the employer must also file a Form DE-542 (Report of Independent Contractor(s)) with the California Employment Development Department (EDD). The Form DE-542 must be filed within 20 days after any agreement is entered into to provide services for more than $600 in any year or $600 has been paid to the contractor in any year. The Form DE-542 is available on the EDD's website at www.edd.ca.gov/txicr.htm.
  • Because this form will likely increase efforts by the EDD to investigate alleged misclassification of employees as independent contractors, employers should check with counsel to confirm that they are properly characterizing individuals as independent contractors, not employees.
• Requirements for pursuing claims of disability discrimination and failure to reasonably accommodate disabilities under the Fair Employment and Housing Act (FEHA) have been substantially relaxed. First, the determination of whether an individual is "disabled," and therefore eligible to sue, is made without taking into account measures such as eyeglasses and contact lenses that diminish the person's impairment. Second, the physical or mental impairment need only "limit" and make "difficult," rather than "substantially limit," a "major life activity." Third, when the major life activity is "working," the impairment need only limit the individual's ability to perform a single job rather than a class of jobs or a broad range of jobs in various classes. These changes significantly increase the number of employees and applicants who are eligible to sue for disability discrimination under FEHA.
  • Consult with counsel to ensure that your treatment of disabled employees and applicants fully complies with FEHA and the ADA.
  • Issue a personnel policy regarding reasonable accommodation, which directs employees to advise the employer if they believe they have an impairment that limits their job performance.
• Overturning a recent California Supreme Court decision, an amendment to the FEHA makes a non-supervisory co-employee personally liable for acts of harassment. This includes harassment based on gender, age, race, religion, color, national origin, sexual orientation and disability.
  • Make sure your anti-harassment policy is comprehensive and legally compliant, and conduct anti-harassment training for management and employees. Requiring employees to come forward with their complaints and properly addressing them is the best defense against harassment and discrimination claims.
• The minimum wage in California increased as of January 1 by fifty cents. This means that all employees, except "learners" and minors as specified in Wage Orders of the Industrial Welfare Commission, must be paid no less than $6.25 per hour. It also means that for purposes of qualifying for administrative, executive and professional exemptions, employees must be paid a salary of no less than $26,000 per year. Also, effective September 16, 2000, computer software professionals earning at least $41 per hour (an equivalent of $82,500 per year if the employee works 40 hours per week) as well as salaried certified nurse midwives, certified nurse anesthetists and certified nurse practitioners, became exempt from overtime pay.
  • Determining the exempt status of employees under California's rapidly changing wage and hour law is very difficult - do not assume high-income workers are automatically exempt. For example, computer professionals earning as much as $75,000 per year may not be. Lay-offs resulting from a slower economy will increase the risk of wage claims for employers -- as terminated employees are the most likely group to sue for misclassification and unpaid overtime. Check with your counsel to confirm exempt status.
• If an employer fails to provide a nonexempt employee a meal period or rest period in accordance with the IWC Wage Orders, the employer must pay the employee one additional hour of pay for each workday that the meal or rest period is not provided. The Wage Orders generally require employers to provide a meal period of 30 minutes for a work period of more than five hours, and rest periods of 10 minutes per four hours of work or major fraction thereof.
  • Design a time card/sheet where nonexempt employees acknowledge taking their breaks and meal period - limiting the risk of claims under this new provision.
• Employees now have the right to inspect "personnel records" that the employer maintains relating "to any grievance concerning the employee." This may mean that an employee who files a grievance, and the employee who is the subject of the grievance, are entitled to review not just their own personnel files but all of the "personnel records" relating to the grievance. This excludes records protected by the attorney-client privilege or attorney work product doctrine. We await how courts and the Labor Commissioner interpret this law.
  • Employers should implement policies that address how and by whom grievances should be documented. Care in crafting those documents is critical.