2013 – 2014 THE CALIFORNIA EMPLOYER CHAPTER 3 Statutory Rights Under California Law CHAPTER 3 STATUTORY RIGHTS UNDER CALIFORNIA LAW § 3.1 I. CALIFORNIA COMPENSATION LAW UPDATE § 3.1.1 A. INTRODUCTION Legislative changes continued for California private-sector employers through 2012, with new provisions affecting earnings statements, personnel records, and commission agreements. Significant court decisions were rendered regarding meal and rest periods, maintaining and pursuing class actions, and overtime exemptions. § 3.1.2 B. RECENT DEVELOPMENTS § 3.1.2(a) Statutory Developments The following statutes took effect on January 1, 2013, unless otherwise noted. § 3.1.2(a)(i) Wage Statement Requirements An employee is now presumed to have suffered injury if the employer provided a wage statement that did not fully comply with all of the requirements of Labor Code section 226(a). Section 226(a) requires employers to furnish each employee with an accurate, itemized statement showing such information as the gross wages earned, all deductions, net wages earned, hours worked at each hourly rate and the hourly rate, and the inclusive dates of the pay period. Section 226(a) imposes penalties and other remedies where employees are injured as a result of an employer’s willful intentional failure to provide the required information. Prior to this amendment, the injury requirement was not met solely because a wage statement failed to include some of the itemized requirements.1 In order to suffer injury, a plaintiff had 1 See, e.g., Elliot v. Spherion Pacific Work, L.L.C., 572 F. Supp. 2d 1169, 1181 (C.D. Cal. 2008); Price v. Starbucks Corp., 192 Cal. App. 4th 1136, 1141-42 (2011). © 2013 LITTLER MENDELSON, P.C. ALL RIGHTS RESERVED. All material contained within this publication is protected by copyright law and may not be reproduced without the express written consent of Littler Mendelson. Published by LexisNexis. 71 § 3.1.2(a) CHAPTER 3—STATUTORY RIGHTS UNDER CALIFORNIA LAW to suffer at least a “mathematical injury,” whereby he or she had to engage in computations to analyze whether he or she was correctly paid.2 The amendment shifts to an employer the challenging burden of showing no injury if a wage statement does not fully comply with the requirements of section 226(a). § 3.1.2(a)(ii) Temporary Service Employers Reporting Requirements Effective July 1, 2013, itemized paycheck stubs statements must, under section 226(a) of the Labor Code, include the rate of pay and the total hours worked for each temporary worker’s assignment or date.3 The same bill codifies the Labor Commissioner’s requirement that the Wage Theft Notice Act notice by temporary services employers include the name, physical address of the main office, mailing address (if different from physical address), telephone number of the legal entity for whom the employee will perform work, and any other material that the Labor Commissioner deems material and necessary.4 § 3.1.2(a)(iii) Limitations on Contracting for Warehouse Services Warehouse contractors have been added to the list of service providers with which a business cannot contract if the business knows or should know that the contract does not include funds sufficient to allow the warehouse contractor to comply with all applicable local, state, and federal laws or regulations governing the labor or services to be provided.5 § 3.1.2(a)(iv) Personnel File Inspection Broadened Current and former employees and their representatives have a right to inspect and obtain copies of the personnel records that the employer maintains relating to the employee’s performance or to any grievance concerning the employee.6 Certain public employees are excluded from the right to inspect and copy personnel records. An employer must make the records available no later than 30 calendar days from the date the employer receives a request to inspect or copy.7 The current or former employee, or his or her representative, and the employer can agree in writing to a date beyond 30 calendar days, but the agreed-upon date cannot extend past 35 calendar days from the employer’s receipt of the written request. The employer must make a current employee’s records available either at the place where the employee reports to work or at a different, mutually agreeable location. Additional alternatives for making the records or copies available exist for former employees who engaged in violations of law or harassment or workplace violence. 2 See, e.g., Wang v. Chinese Daily News, Inc., 435 F. Supp. 2d 1042, 1050 (C.D. Cal. 2006); Jaimez v. Daiohs USA, Inc., 181 Cal. App. 4th 1286, 1305-06 (2010); Cicairos v. Summit Logistics, Inc., 133 Cal. App. 4th 949, 956 (2005). 3 CAL. LAB. CODE § 226 (as amended by A.B. 1744, ch. 844 (Sept. 30, 2012)). This takes effect July 1, 2013. 4 CAL. LAB. CODE § 2810.5 (as amended by A.B. 1744, ch. 844 (Sept. 30, 2012)). 5 CAL. LAB. CODE § 2810 (as amended by A.B. 1855, ch. 813 (Sept. 20, 2012)). 6 CAL. LAB. CODE § 1198.5(a) (as amended by A.B. 2674, ch. 842 (Sept. 30, 2012)). 7 CAL. LAB. CODE § 1198.5(b)(1). 72 THE CALIFORNIA EMPLOYER—2013/2014 EDITION B. RECENT DEVELOPMENTS § 3.1.2(a) A request to inspect or obtain copies of personnel records must be made in writing. An employer can, within limits, require an employee to use an employer-provided form for requesting the inspection or copying of records. An employer can take reasonable steps to verify the identity of a current or former employee or his or her authorized representative. An employer may redact the names of nonsupervisory employees from the records made available for inspection or copying. An employer is not obligated to provide records relating to a possible criminal offense, letters of reference, or certain promotional examination records. An employer need only respond once per year to the request of an employee to copy or inspect records. An employer is not required to comply with more than 50 requests per month to inspect or copy records when the requests are received from employees’ representatives. An employer can charge the actual cost of duplication for making copies. The right to inspect and make copies of personnel records ceases if an employee has filed a lawsuit to which the records are relevant. The obligation to make records available for inspection and copying does not apply if a collective bargaining agreement provides a procedure for inspecting and copying records and the collective bargaining agreement provides premium wage rates for all overtime hours worked and a regular rate of pay that is not less than 30% more than the state minimum wage rate. Personnel records must be maintained for at least three years following termination of employment. A violation of the right to inspect or copy records is an infraction, and a failure to timely respond to a request is subject to a penalty of $750. § 3.1.2(a)(v) Fine for Failure to Pay Wage Judgments Existing law requires that, if an employer willfully fails to pay a final court judgment or final order issued by the Labor Commissioner, it will be subject to a fine of not less than $1,000 and not more than $10,000 for each offense if the total amount of wages due is less than $1,000, and a fine of not less than $10,000 and not more than $20,000 if the total amount of wages due is more than $1,000. The California legislature has now clarified that, if an employer willfully fails to pay a final court judgment or final order issued by the Labor Commissioner and the total amount of wages due is exactly $1,000, the required fine is not less than $1,000 and not more than $10,000 for each offense.8 § 3.1.2(a)(vi) Commission Agreements Required Effective January 1, 2013, Labor Code section 2751 requires all commission contracts to be in writing and to expressly set forth the method by which the commissions will be computed and paid.9 A commission-paid employee must receive a signed copy of the contract, and the employer must obtain a signed receipt for the contract. The statute covers all employers who pay commissions for services performed within California. 8 CAL. LAB. CODE § 1197.2 (as amended by S.B. 1144, ch. 867 (Sept. 30, 2012)). 9 CAL. LAB. CODE § 2751 (as amended by A.B. 1396, ch. 556 (Oct. 7, 2011)). Section 2751 was amended in 2011, but is effective January 1, 2013. © 2013 LITTLER MENDELSON, P.C. ALL RIGHTS RESERVED. 73 § 3.1.2(a) CHAPTER 3—STATUTORY RIGHTS UNDER CALIFORNIA LAW The Labor Code defines a commission as “compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount or value thereof.”10 Commissions must be a payment for the sale of goods or services, not for actually making a product or rendering a service.11 There is some uncertainty as to what forms of compensation comprise a commission, as opposed to a “bonus” or “piece-rate” plan. The Division of Labor Standards Enforcement defines a piece-rate plan as a plan that “simply relies upon a ‘percentage’ of some sum such as the cost of the goods sold or the services rendered by an establishment.”12 However, a commission can be calculated based on net profit rather than the percentage price of a product or services.13 And, a commission may include a fixed amount that is paid for each car sold by an employee.14 The following are specifically excluded from “commissions” for the purposes of section 2751: (1) short-term productivity bonuses such as paid to retail clerks; (2) temporary, variable incentive payments that increase, but do not decrease, payment under the written contract; and (3) bonus and profit-sharing plans, unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed.15 Section 2751 does not include a specific penalty for a failure to comply with its provisions, but there are potential consequences.